Dell CTO Supply Chain Strategy

Dell CTO Supply Chain Strategy1
Dell CTO Supply Chain Strategy
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Dell CTO Supply Chain Strategy2
DELL CTO SUPPLY CHAIN STRATEGY
Executive Summary
Dell is a 60billion-dollar company that employs a system of chain supply like any other PC
producing company in the world. Statistically, Dell is considered as one of the few companies to
ever introduce the configure-to-order supply chain model. The CTO model is whereby clients are
given millions of configurations. With such configurations, they are able to customize their
computers according to what they require. By operating in an approach to direct sales, the
company has built systems ready for order. In this manner, Dell has the ability to introduce new
technologies and products faster than its competitors. Also, with this new, unique model, the
company has been shaped in a way that it is able to estimate the needs of the clients, forecast
demand, and provide low-cost products. However, this model some sort of challenges. First and
foremost, shipment takes between 7 to 14 days since the PCs are manufactured after an order is
placed. Also, because the market trends keep on changing, the PC business has experienced a
loss of shares time to time. As a way of curbing such situations, Dell has changed its principles
thereby, devising a new strategy (the end user computing) to ensure its growth. The plan deals
with simplifying the operations of Dell and also obtaining new market shares. Such would,
however, be achieved through the acquisition of new prospective customers, scaling alternative
solutions to computing, and employing solutions to computing that are end-user in nature.

Dell CTO Supply Chain Strategy3
Table of Content
Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Benefits Associated with using the CTO Model..........................................................................................5
Implementation of Supportive Systems.......................................................................................................7
1. Management of Configuration.........................................................................................................7
2. Procurement.....................................................................................................................................8
3. Cost.................................................................................................................................................8
4. Inventory.........................................................................................................................................8
5. Payable Accounts............................................................................................................................8
Conclusion.................................................................................................................................................10
Recommendation.......................................................................................................................................10

Dell CTO Supply Chain Strategy4
Introduction
Apart from the configure-to-order supply chain model, Dell uses a continuous-optimization
framework to ensure that its supply chain potential is fully enabled. However, the framework is
based on four operational steps. In the olden days, Dell was the poster child for the efficiency of
the supply chain through the use of its "direct model." With time, the model was changed to
make-to-stock after which the ultimate model became “make-to-order”. Such a transition was
vital because Dell was able to minimize its cycle times to unthinkable levels within the high-tech
industry. Through the use of such models, the company was able to carry inventory in a few days
instead of several weeks like other PC producing companies (Bala, 2017). As a result, other
companies that were quick to notice Dell's success shifted their supply chains to that of Dell.
However, such companies failed to realize that such best practices in chain supply are not stone-
etched and that such innovative spirit needed to be used several times to ensure that a company
stays relevant to its ever-changing customer demands. Therefore, most of such companies
dropped the use of the direct model. Regarding Dell, the same model worked appropriately when
the company needed a larger more mature base of customers. However, since time and
technology has changed the emerging markets require new business dynamics and innovation to
meet the need of customers. Such explains why Dell focuses on shifting innovation within its
supply chain from time to time. It is the performance of the supply chain that is the competitive
differentiator in the current market (Barbu, 2011, pg. 107).
The supply chain and logistics of Dell alone cost about $2 billion every year. The same serves
about 13 million customers. With the idea of expanding its global reach, the company intends to