Dell Computer Corporation

.. n be made either by credit card or check. Credit card payments take less than 24 hours to approve and therefore are processed much quicker than other methods of payment. Any Correspondence regarding approved orders would be done either via e-mail/telephone. After the order has been processed, the configurations are sent to manufacturing where, a the list of necessary components is compiled. Each PC would then be linked by an electronic bar code to its individual order number.

This bar code facilitates a quick response to any enquiries made by customers regarding the status of any order. At this stage components would then be ordered from specialist suppliers. The lead-time would depend on the availability of parts and the configurations of individual orders. The customer would be informed of this in the order processing stage. When the parts are received they are separated according to the individual orders.

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Each order is place in a tote/ bin with the with a spec sheet. These totes are then carried along a conveyor belt to the building process. When the totes arrive, the assembly process commences. Each system starts with a chassis to which the parts specified by the customer are then added. Parts are also fed into the building process from suppliers as and when needed.

Computers are assembled within a cell, each specialist worker within that cell is accountable for the products quality. After the hardware has been fully installed at this point the components are tested on the basis of their individual functionality as well as their integration into the whole system. This stage also involves loading the software or operating system requested by the customer. The aim of the testing phase is to ensure that the end user of the product receives the highest quality and satisfaction. When the products have successfully gone through the testing process they are then boxed including any instruction manuals, these boxes are then placed on conveyor belts destined to be loaded onto delivery trucks.

Products, which are to be shipped out of the country, are prepared for delivery. The necessary paper work is filled out and the products sorted according to their individual destinations, delivery preparation normally takes one day after production. The computers are then shipped to customers, they are expected to reach the customer within 2-5 days of the shipped date. Dell has been able to improve the efficiency of the above processes by using the Internet. Dells use of Technology to make the logistics function more efficient and effective. “The internet is shrinking time and distance it is reducing cost and adding velocity to business. What we see with the Internet is a mode of business that we refer to as Virtual Integration, where suppliers and customers are linked together using information”.

(Michael Dell Speech Archive, The PC industry A Robust outlook). (1) The Dell philosophy is that to truly realise the economies and speed that the Internet provides the organisation needs a fundamentally different perspective on the nature of business relationships and on value created for customers. Therefore the aim of Virtual integration is to bridge the traditional gap between the firm and its stakeholders. The process of Virtual integration is a hybrid of information technology and Vertical integration. Virtual integration is essentially an information sharing process, which could be in relation to design databases or methodologies. The Internet has made it possible for Dell to work in real-time with suppliers and customers engaged in “collaborative research or product development”.

For example, Dell was able to introduce a new line of Notebook computers using the Internet to keep a common set of notes by engineers in the United States and Asia. These engineers were able to share their expertise, and therefore able to work together to develop this new product. In a traditional vertically integrated company months /years would be spent designing parts and building them. Dells success in utilising the Internet in its business model is regarded as a benchmark for other businesses. At least 50% of the total number of goods produced by Dell Computers are made as a result of being online.

In monetary terms an average of over US$40 million within a seven-day period. (1) Dells Premier pages To further personalise the relationship between the organisation and customers, using the Internet, Dell has created personalised WebPages called Premier Pages, which are tailored to customers needs. These pages are specifically designed for large corporate organisations containing information on accounts, procurement and purchase order processes unique to that customer. The WebPages allows Dell to deliver service and support information directly to the customer, relating to their specific products. Dell designed WebPages for suppliers, this allows the firm to provide them with information on customer feedback the quality of the product, forecast of current and future demand and special technical requirements and end user market pricing. Likewise Dell is able to receive feedback from suppliers concerning their capacity to produce certain quantities of components, information on inventories in their supply lines as well as their current cost structure.

Therefore assisting management in making decisions on effective resource planning strategies. Conclusions How effective is Dells resource planning procedures? Dells main resources are time and information, according to Michael Dell “The things we have learnt to value in the business and economic models of the 20th Century: ? the value of inventory is being replaced by the value of information ? physical assets are being traded for intellectual assets ? closed business systems are giving way to collaborative relationships”. Dells corporate culture is based on the points highlighted above, transmission of information internal and external to the organisation has gone from one extreme of being timely to being real-time. As highlighted earlier in this report, Dells Virtual Integration process has revolutionised the way manufacturer – supplier – and customer interact. Research and Development activities, which would normally take months or years, can now be done within a matter of days. This is best achieved by incorporating the efforts of engineers in different parts of the world. “Time is money”; this clich should be common knowledge to every businessperson. Dell awareness of the importance of reducing lead-time in its logistics process is one method of sustaining a competitive advantage.

Through the use of Just In Time, the firm continually eliminates time-consuming activities, which do not add value to the product. For Example, Dell at one point ordered components in bulk from one supplier as a means of receiving discounts. This process was regarded, as non-value added to the customer. Hence, Dell switched to three regional subcontractors, rather than using one main manufacturer. The trade-off of the cost and benefits in one area resulted in lower cost and significant improvements in service to customers, by reducing the lead-time. Another benefit of J.I.T to Dell is that the firm does not have to bear the risk or cost of components becoming obsolete.

Moreover, the same benefit is gained by building to order rather than building and then merchandising. Another effective Inventory Management Method used by Dell is in telephone sales suggested configurations might be altered to guide customers to PCs with widely available parts. Dell compared to Competitors – Competitors like IBM, Hewlett-Packard and Compaq have used Dell as a benchmark in analysing their own efficiencies and inefficiencies. They have also taken steps a developed their individual build – to – order processes and integrated supply chains in their efforts at reducing the lead-time of their products. The major difference between Dell and its competitors is that while their inventory remain on shelves for months they eventually become obsolete as the pace of technology rapidly changes.

Dell does not start ordering components and building computers until an order is booked. (3) Despite the numerous advantages of Dells logistics system highlighted above there are some shortcomings as highlighted below. Points of failure in Dells logistics process As a result of having such a timely and well planned logistic system, any interruption in the supply of components can have an impact on Dells short-term performance. Dell is primarily using some suppliers because of the unavailability of alternative sources. In the event these suppliers experience some difficulty, this would result in a domino effect on Dell. The firm’s production process requires a very high level of quality, in relation to components, which are received sometimes from third party suppliers.

There is a high level of risk involved in receiving components from in purchasing these parts, where the possibility exists of them being defective. This in turn would have a significant effect on the organisations corporate image. References (1) Michael Dell Speech Archives The PC Industry a Robust outlook 10/09/98 Leadership in the Internet Economy 7/4/00 Collaborating in a Connected Economy 24/6/98 Building a competitive advantage in an Internet Economy11/1/99 Maximum speed Lessons learned from managing Hypergrowth 9/10/98 orate/speech 1998-10-09-aus.000.htm (2) Case No. 598-116 ‘Dell Online’ Professor V. Kasturi and M. Bell Harvard Business School, April 1998. (3) Case study ‘Whirlwind on the Web Information Processing computers’, G. McWilliams ( (4) Operations Management (multimedia version) Russell., S.

R. and Taylor., W. B Third edition Prentice Hall, 2000. Business Reports.