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This also helps them to understand customer needs and expectations. They have an agile and efficient supply chain that further helped to bring down costs for the…
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Download file to see previous pages... However, as the industry grew the early manufacturers could not keep pace with the technology that advanced in so many directions all at the same time. Vertical integration in the industry became difficult as there were too many technologies and manufacturing intricacies. As a result specialist companies emerged that mass-produced specialized components and supply it to several computer manufacturers. This form of outsourcing worked cheaper for computer manufacturers and many such as IBM, Sony, HP and Compaq abandoned the vertical integration model. They preferred to concentrate on efficient assembly and marketing their own brand computers instead of developing and R&D base and investing in it. Dell, however, preferred to continue with the shorter-value chain model by selling directly to customers, avoiding the intermediary commissions and costs associated with distribution through independent retailers. Gradually, companies such as HP even started outsourcing the assembly to contractors, while focusing on product design and marketing. All the vendors tried to minimize the amount of finished goods in dealer inventories and shorten the time it took to replenish dealer stocks. Dell stuck to its own business model of Built-to-Order (BOT).
Dell’s supply chain efficiency had eroded between 2003 and 2006 when it peaked at five days on inventory supply. They found it difficult to get cooperation from other organizations and bureaucracy started prevailing within the organization. There was misalignment between its procurement and supply chain activities, and with its assembly line. Dell wanted to partner only with reputed suppliers rather than have 20 suppliers all supplying to all computers manufactures. They stuck to one or two suppliers and maintained long-term partnership with them. They however, brought down their inventory turn cycle from 32 days in 1995 to 7 days in 1998, and to four ...Download file to see next pagesRead More
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