This report evaluates the supply chain strategy of Dell and explores logistics management strategies to address issues and sustain growth. It discusses the key factors that provide a competitive advantage to the company.
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P a g e|0 Logistics and Supply Chain Management
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P a g e|1 Executive Summary The aim of this report is to evaluate the supply chain strategy of Dell in order to understand the key factors that provide a competitive advantage to the company. Dell effectively controls its supply chain, and it offers configure-to-order services to its customer which allows them to customise their personal computers through the website of the company. Specific issues faced by Dell in its supply chain include high shipping costs, complex operations and low quality of products. In order to address these issues, different logistics management strategies are given in this report such as enlarging source relationship, designinganddeliveringsuperiorandefficientqualityproducts,improvingthe customisation model and expanding aboard. Lastly, a conclusion is drawn based on the above analysis and recommendations are given for Dell to effectively implement logistics management strategies in the organisation.
P a g e|2 Table of Contents Introduction...............................................................................................................................3 Fundament reasons for Dell’s success.......................................................................................4 Issues in the case........................................................................................................................5 Logistics management strategies...............................................................................................6 Conclusion..................................................................................................................................8 Recommendations.....................................................................................................................8 References..................................................................................................................................9
P a g e|3 Introduction In today’s competitive business world, corporations are struggling to stay relevant in the market by focusing on generating a competitive advantage in the industry that enables them to stay agile to address the changes in the market conditions. Effective control over the supply chain operations provides a competitive advantage to companies which enable them to reduce their operating costs and improve the quality of their products (Barney, 2012). In this report, the case study of Dell will be evaluated in order to understand how the company has generated a competitive advantage in the industry through its effective control over the supply chain operations. The objective of this report is to understand the fundament reasons due to which Dell has generated a competitive advantage in the industry which is the key to the success of the enterprise. This report will evaluate the key factors that lead to the effectiveness of the supply chain of Dell by evaluating the case study and understand the key issues which are presented in the case. This report will also evaluate logistics management strategies which assist the company in addressing these issues to make sure that the company is able to sustain its growth in the market.
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P a g e|4 Fundament reasons for Dell’s success Dell is an American multinational corporation that operates in computer hardware and computer software industry; it is one of the largest technological corporations across the globe which has hired over 145,000 people worldwide to manage its operations (Forbes, 2019). The product range of the company includes personal computers, software, HDTVs, servers, network switches, data storage devices, printers, cameras and other electronic devices. The company has created a positive brand image in the market due to innovations in supply chain management which enable it to offer the service of ‘configure-to-order’ (CTO) or ‘build-to-order’ (Mangan, Lalwani and Lalwani, 2016). This approach enables customerstoconfigurethespecificationsoftheirpersonalcomputersthroughthe manufacturing process. Previously, the company was a pure hardware vendor; however, it entered into the IT services market in 2009. The company has been very successful when it comes to cutting cost in their operations and delivering exactly what the customer wants which assisted them in building strong relationship with their customers. The company has achieved this success due to its direct sales system which enables them to minimise inventory cost and increase inventory velocity. Through its supply chain, the company is able to offer the option to its customers to select each and every part of their personal computer and the company also deliver the product with efficiency (Mansouri, Gallear and Askariazad, 2012). Due to these factors, the company has built a strong market reputation which enables it to gain a competitive advantage over its competitors. Thecompanyisabletobringproductstoitscustomersfasterthancomparedto competitors, and it also focuses on direct sales through the internet rather than offering assembled computers that are ready to purchase. Due to the use of the internet, the company has been able to quickly respond to its customers and give them the option to customise their products which attracts them to the company (Martin et al., 2014). The supply chain of the company enables the customers to click and assemble their product piece by piece while limiting under their budget which enable them to choose Dell over its competitors. Therefore, the implementation of real distribution strategy enables Dell to sell and deliver its products which enable the company to invest in customer relationship management. It assisted the company in creating a loyal customer base (Hofmann, Beck and
P a g e|5 Fuger, 2012). Since the internet is a key part of the business strategy of Dell, it is able to drive its sales and production system directly through the online platform while also ensuring that it communicates with its customers.The company also conducts an awards program for its suppliers that also assisted the company in building strong relationships with its customers. The company also focuses on controlling the operations of manufacturing and developing its products through its CTO supply chain which enable the company to fulfil customer demands (Elbert, Pontow and Benlian, 2017). Through ‘single person build’ and use of internet the company has eliminated ‘middlemen’ which improved the quality of its products while reducing its operations costs. Issues in the case Although Dell has implemented an effective CTO supply chain strategy for managing its operations; however, there are still many areas in which the company can work in order to ensure that it remains agile to address challenges in the rapidly changing market. One of the key issues faced by Dell is that it relies on long term demand sensing in order to continually refine its portfolio. Without these practices, it becomes difficult for the company to forecast the demand of its customers or their change in demand. Another issue is that the shipping costs of Dell configured products are considerably high which affects the sales of the company in the foreign market (Qrunfleh and Tarafdar, 2013). The company is a global brand, and it offers its services in different countries; however, due to high shipping costs, it has become difficult for the company to expand its operations in developing or emerging markets which is crucial for the company to sustain its future growth. The CTO supply chain of the company is highly complex as well, and it has to hire a single person to handle one order which resulted in making it difficult for the company to track its operations. Moreover, many customers have complained that the quality of Dell products is not always high especially its batteries (Mangan, Lalwani and Lalwani, 2016). There are a number of factors that contribute to this issue which includes the fact that it has adopted ‘single person build’ strategy in which a single employee is responsible for building the personal computer of the customers as per their order, and many times, they made a mistake which goes unnoticed and it adversely affects the quality of Dell’s products.
P a g e|6 Logistics management strategies There are different logistics management strategies which can assist Dell in addressing its key challenges in the supply chain in order to ensure that the company is able to maintain its success in the future. Superior and efficient Service The market for personal computers is changing rapidly as the demand increases and technology progresses due to which Dell should focus on designing and delivering superior and more efficient services to its customers so that it is able to stay relevant in adverse market condition (Zhu et al., 2014). The demand for high-quality computer products is increasing on a global stage, and customers prefer those brands that stay true to them and deliver the best services to them. Dell should also focus on the demand of its customers to make sure that it is focused on designing new policies in order to improve its services. The company should improve its customer care services to make sure that consumers are able to share their feedback and queries with the company and they are resolved within a reasonable timeframe (Kozlenkova et al., 2015). The company should also focus on improving the quality of its products by controlling more aspects of its supply chain such as battery manufacturing to increase the quality of its products. Improving the customisation model The customisation model of Dell makes it unique, and it also attracts many customers towards the company who wanted to build their own personal computer. This model is also suitable for customers who are living in developing countries and who have a set budget to build their own personal computer. This model enables them to carefully choose a computer which fulfils their requirements without going overboard on their budget (Holweg and Helo, 2014). The company should further make improvements in its customisation model by offering new customisation option for its customers which enable them to customise even further options in their computers. The company should improve the quality of its products including batteries in order to make sure that its customers did not choose the products of its competitors due to a single issue. Along with the internet, the company should also offer the service of configuring the personal computer of its customers directly through local stores to increase its customer base (Qrunfleh and Tarafdar, 2013). These
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P a g e|7 operations will reduce the complexity of the supply chain of the company which will improve its control on the operations. Enlarging source relationship The company can enter into an agreement with third party companies that offer cheaper and high quality computer products to give a wide variety of customisation options to its customers to make sure that they are able to choose what they want. Currently, the company only allows customers to choose between Dell parts; however, the agreement will third party companies will enable Dell to increase its customer base and it will also increase the profits of the company since it will receive a share of profit for the sale of third party products (Hofmann, Beck and Fuger, 2012). This will also assist customers to choose the batteries of third party brands rather than Dell if they did not prefer its quality (Mansouri, Gallear and Askariazad, 2012). This strategy will be beneficial for the company in foreign markets since it will be able to build a trading relationship with local, already established brands that customers prefer to make sure that their products are used in its computers. Expand abroad and develop showrooms Dell should expand its operations on an international level in order to ensure that it enlarge its customer base. Currently, the products of the company are available on a global scale; however, the company has not effectively established its operations in many emerging markets such as Indonesia, India and Thailand. The company should expand its operations in these markets by locally manufacturing its products which will result in increasing the efficiency of its supply chain (Tsay, 2014). By manufacturing products locally, the company will be able to eliminate its shipping costs which are a key reason due to which many customers in developing countries are not able to purchase its products. Therefore, it will resultinincreasingthecustomerbaseofthecompany.Dellshouldalsofocuson establishing brick and motor stores in some emerging markets in order to expand its operations by building trust among customers (Mansouri, Gallear and Askariazad, 2012). Customers are more likely to purchase its products through stores since they will receive better customer services which will increase the profits of the company.
P a g e|8 Conclusion Based on the above observations, it can be concluded that Dell has generated a competitive advantage in the personal computer industry through its CTO supply chain that enables its customers to configure their personal computers. Through this supply chain, the company has reduced its costs by offering its services through the internet and removing the middlemen which resulted in increasing its profits. The company is also able to ensure the quality of its services since it uses ‘single person build’ strategy. However, there are specific issues which are faced by Dell that are likely to affect its future success such as high shipping costs, complex operations, poor quality of products and others. In order to address these issues, the company can rely on different logistics management strategies such as designing and delivering superior and efficient services, enlarging source relationship, improving the customisation model and expanding aboard. Recommendations Following recommendations can assist Dell in addressing its key challenges relating to the supply chain that will assist the company in maintaining its success in the future. The company should focus on continuously making upgrades in its CTO supply chain so that it is able to stay relevant to the market without which it will be difficult for customers to choose Dell above its customers. The company should expand its operations in foreign markets such as Indonesia, Thailand and India where the demand of personal computers is increasing by establishing its operations locally which will improve quality, reduce labour costs and eliminate shipping costs.
P a g e|9 References Barney, J.B. (2012) Purchasing, supply chain management and sustained competitive advantage:Therelevanceofresource‐basedtheory.Journalofsupplychain management,48(2), pp.3-6. Elbert, R., Pontow, H. and Benlian, A. (2017) The role of inter-organizational information systems in maritime transport chains.Electronic Markets,27(2), pp.157-173. Forbes.(2019)DellTechnologies.[Online]Availableat: https://www.forbes.com/companies/dell-technologies/#928631694f26[Accessed 16/04/19]. Hofmann, E., Beck, P. and Fuger, E. (2012)The supply chain differentiation guide: a roadmap to operational excellence. New York: Springer Science & Business Media. Holweg, M. and Helo, P. (2014) Defining value chain architectures: Linking strategic value creationtooperationalsupplychaindesign.InternationalJournalofProduction Economics,147, pp.230-238. Kozlenkova, I.V., Hult, G.T.M., Lund, D.J., Mena, J.A. and Kekec, P. (2015) The role of marketing channels in supply chain management.Journal of Retailing,91(4), pp.586-609. Mangan,J.,Lalwani,C.andLalwani,C.L.(2016)Globallogisticsandsupplychain management. John Wiley & Sons. Mansouri, S.A., Gallear, D. and Askariazad, M.H. (2012) Decision support for build-to-order supply chain management through multiobjective optimization.International Journal of Production Economics,135(1), pp.24-36. Martin, K., Chitalia, P., Pugalenthi, M., Rau, K.R., Maity, S., Kumar, R., Saksena, R., Hebbar, R., Krishnan, M., Hegde, G. and Kesanapally, C. (2014) Dell’s channel transformation: Leveragingoperationsresearchtounleashpotentialacrossthevalue chain.Interfaces,44(1), pp.55-69.
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P a g e|10 Qrunfleh, S. and Tarafdar, M. (2013) Lean and agile supply chain strategies and supply chain responsiveness: the role of strategic supplier partnership and postponement.Supply Chain Management: An International Journal,18(6), pp.571-582. Tsay, A.A. (2014) Designing and controlling the outsourced supply chain.Foundations and Trends® in Technology, Information and Operations Management,7(1–2), pp.1-160. Zhou, H., Shou, Y., Zhai, X., Li, L., Wood, C. and Wu, X. (2014) Supply chain practice and information quality: A supply chain strategy study.International Journal of Production Economics,147, pp.624-633.