Business Operation of Dell Incorporated - Essay Example

Dell Incorporated: A brief introduction to its competitive advantage This paper highlights information prior to the assessment of supply chain activities and its support to business operation of Dell Incorporated. Dell, a US$60 billion high-tech giant company establishes its competitive edge in the personal computer market by being able to rely on its unique supply chain strategy. This unique supply activity allows gathering of customer information using direct-sales model and sharing with the concerned internal departments such as the procurement and sales, then finally to the external suppliers. The ultimate justification of Dell in using this strategy is for them to be able to generate close relationships with customers and suppliers. Furthermore, this would also allow them to supply to the market as quickly and precisely as possible in order to meet the actual demand without being able to consider maintaining a high inventory level. When there is high inventory, there is also high linked up cost with it. Thus, the prevailing structural program of Dell with respect to its recent supply chain strategy ensures a great way of generation of profit as the entire activity minimizes the loss of market opportunity. In other words, the ability of Dell to forecast demand allows it to provide the essential supply to its target marketplace. In order to do this, the company relies heavily on information by maintaining constant flow of data through two information loops (Oracle, 2013). This means that the flow of information should take place between customers and Dell sales team and the other one takes place among sales, procurement and suppliers (Oracle, 2013). Literature review of relevant theory In this section, the proponent elaborates the relevant related literature associated with supply chains and networks and its impact on competitive advantage. What is supply chain theory? Supply chain could be defined as a set of two or more entities involved in the upstream and downstream flow of products, services, finances and information from the source to a consumer (Overbeck, 2009, p.17). It is upstream from the point of view of consumer and the other way around for the source. This definition gives us the idea that the flow of products, services and information is sequential, which means that the output of the first level is the input of the next level. However, due to the existing complexity of relationships involved in the supply chain today, ‘supply network’ was coined (Overbeck, 2009, p.17). According to Hieber (2002), the nature of supply chain is unique (p.130). This is because there is complexity involved within the flow of goods and information between the linked entities in the supply chain. This according to him would require a changing set of priorities from time to time, requiring a high level of responsiveness on the part of the organisation. Hieber (2002) added that the network on the other hand should maximize collaborative planning and execution of support prior to the achievement of successful supply chain management (p.130). As implied in the previous discussion, cost, quality, delivery, relationship, competitive advantage and complexities could be vital key issues involved in the supply chain management. Supply chains and competitive advantage According to Jones and Tilley (2007), supply chains and management have become potential source of competitive advantage (p.202). Porter defined competitive advantage leading to the idea of value creation from formulating relevant competitive strategies (Porter, 1980). Considering that supply chains include cost, quality and delivery of purchases, the ability to provide value for the customer and create actual value could therefore originate from within its actual implementation in the organisation. In fact, on the part of purchasing managers, quality should be synonymous to cost (Hansen and Mowen, 2010, p.385). Costs encourages purchasing managers to choose suppliers with performance that are acceptable especially on the quality of purchases. In fact, quality and price are some of the traditional top essential components of a purchase (Monczka et al., 2010, p.40). In 1980s, corporate executives realized that in the midst of tough global competition, manufacturing cost and quality became two of the most essential considerations in the need to acquire large quantity of purchased materials and work-in-process inventories (Wisner, 2011, p.40). On the other hand, aside from service performance, cost and quality, delivery is also another essential consideration for the evaluation of suppliers and purchasing activity (Wisner and Stanley, 2007 p.454). Quality management is within the domain of supply chain management (SCM) as far as internal and external practices are concerned and as long as competition gets tougher (Kaynak and Hartley, 2008). Therefore, quality management surfaces due to the existence of competition. Integrating quality management in the context of SCM could help advance the firm in the midst of tough competition (Robinson and Malhotra, 2005). Thus, it would make sense to integrate customer focus, quality practices, supplier’s relations and other key quality management content variables into the context of SCM (Foster, 2008). Analysis of the Supply Chain Characteristics Porter’s idea of competitive advantage, as mentioned, lies at the heart of the implementation of competitive strategies that would eventually result to the creation of value. The implementation of competitive strategies is necessary due to the advent of intense competition and the participation of key players in an upward spiral. Competitive strategies are proven effective in the context of supply chain management, which could be illustrated further in the domain of quality management (Kaynak and Hartley, 2008; Robinson and Malhotra, 2005; Foster, 2008). As already stated, the output of the first level could be the input of the next level in the supply chain (Overbeck, 2009), which means that the creation of value is necessary in order to provide substantial benefit for the next participating entities. The case of Dell is simply about creation of value as it tries to understand the actual nature of demand in the supply chain. In doing so, the company would have a great opportunity to provide the necessary information and response to its actual suppliers and participating customers. At this point, Dell is trying to play an essential role with the key players within its value chain. For this reason, the quality of its actual service and the value of its product offerings depend entirely on its ability to rely on information. Understanding the appropriate information would help Dell determine the prevailing demand in the marketplace. For this reason, Dell is enjoying substantial opportunity for its ability to save on its inventory costs. Since as stated, the output of an entity could be the others’ input in the supply chain, the ability of Dell to provide low-cost product offerings due to further savings on its inventory costing would provide high value for the customers. A low inventory cost would help Dell adjust the price of its offerings in the midst of a tough competition. This eventually helps Dell achieve its temporary competitive advantage, knowing the fact that some other competitors in its industry are also looking for ways to create competitive advantage by emancipating unique competitive strategies. In this illustration, it is clear that the way Dell manages supply chain would be to create value, by which a low inventory cost for instance would help Dell ensure considerable revenue and profit even if it would lower the final price of its product offering. In addition, Dell’s ability to consider customer focus, quality practices, supplier’s relations are integral components of the success of its supply chain management. As already stated, these moves are parts of quality management in the supply chain (Foster, 2008). Thus, Dell is not only trying to provide value through providing lower cost for its product offerings, but also above all, employing the actual quality management in order to achieve its competitive advantage in its industry. Supply chain management is therefore a specific quality tool that could help provide an organisation the ability to compete and produce competitive advantage in its industry even in the midst of a tough competition. Conclusion This paper tries to provide a discussion concerning Dell’s prevailing move in its industry prior to the achievement of its competitive advantage in its specific industry and market niche. Furthermore, the idea and relevant concept involve in the supply chain are integrated. It is further shown that an effective supply chain management would result to the achievement of competitive advantage. In addition, quality management especially within the context of customer focus, quality practices and supplier’s relations, as stated on how Dell relies on information would significantly contribute to the creation of value and eventually competitive advantage. From the discussion, the ultimate sources of Dell’s competitive advantage are its ability to save on its inventory cost and its high quality of relations with the other entities in its supply chain. Effective supply chain management especially in the case of Dell would therefore help the organization achieve a remarkable saving on its actual production of the product offering. In addition, this would lead to sustainability of operation, as there is actual inclusion of quality relations that would help ensure spontaneity of the flow of the actual product or service offerings. For this reason, supply chain management would be a relevant organisational move in order to ensure achievement of competitive advantage as clearly observed in the case of Dell. Supply chain’s major characteristics would therefore include as being enhancer of quality output of an entity in the supply chain model, a participating aid for competitive advantage and a competitive strategy by itself. References Foster, S. T. Jr. (2008) Towards an understanding of supply chain quality management. Journal of Operations Management, 26(4): 461-467. Kaynak, H., and Hartley, J. L. (2008) A replication and extension of quality management into the supply chain. Journal of Operations Management, 26(4): 468-489. Hansen, D. R., and Mowen, M. M. (2010) Cornerstones of cost accounting. Mason, OH: Cengage Learning. Hieber, R. (2002) Supply chain management: A collaborative performance measurement approach. Zurich: vdf Hochschulverlag AG. Jones, O., and Tilley, F. (2007) Competitive advantage in SMEs: Organising for innovation and change. West Sussex: John Wiley & Sons. Monczka, R. M., Handfield, R. B., Giunipero, L. C., and Patterson, J. L. (2010) Purchasing and supply chain management. 4th ed. Hampshire: Cengage Learning. Oracle (2008) Inside Dell: The secret of its supply chain success. Retrieved from: http://www.reliableplant.com/Read/7129/dell-supply-chain. [Accessed: 17 April 2013]. Overbeck, S. (2009) Supply chain management – a critical analysis. Norderstedt: GRIN Verlag. Porter, M. C. (1980) Competitive strategies. New York: Free Press. Robinson, C. J., and Malhotra, M. K. (2005) Defining the concept of supply chain quality management and its relevance to academic and industrial practice. International Journal of Production Economics, 96(3): 315-337. Wisner, J. D., and Stanley, L. L. (2007) Process management: Creating value along the supply chain: Text and Cases. Mason, OH: Cengage Learning. Wisner, J. D. (2011) Principles of supply chain management: A balanced approach. 3rd ed. Mason, OH: Cengage Learning. Read More