Dell Computer is a leader in the e-commerce computer hardware market. It is an established brand that leads personal computer manufacturers both in U. S. sales and overall online sales. Its trademark method of selling products to customers, corporate and individual consumers, emanates from the Dell Direct model, a Web-enabled infrastructure that allows customers to customize their PCs and order other products they need or desire.
This virtual integration structure eliminates the need to manufacture everything, and instead uses the power of the Internet to share and exchange information with suppliers and vendors to build a truly superior supply chain that keeps inventory turnover low and costs to a minimum. The primary method Dell uses in order to achieve and sustain their competitive advantage is a unique, direct to customer business model. The model is known as Dell Direct, referring to their relations with their customers as being direct.
This model helps Dell focus on price for performance, customization, service and support, latest technology and superior shareholder value. Additionally, Dell is able to distinguish itself from its competitors with its customized on- demand manufacturing. With this customization, Dell is able to offer customers more value for their money by eliminating intermediaries in their procurement, manufacturing and distribution processes. Dells primary resources include the most up-to-date technology and IT tools that allow it to successfully move along their superior supply chain and achieve the value they strive for.
Dells value chain allows Dell and its suppliers to exchange information and interact with each other. The Internet, Dells key IT factor in its success, results in lower costs to customers than other retailers because customers tell Dell exactly what they want and Dell creates products for the consumer without experiencing wasteful resources in production. Overall, it is evident that Dells competitive advantage lies in its Direct model success. Through Dells IT performance, which combines its resources, its relationship with suppliers and its consumer communication capabilities, Dell has developed one big advantage over its competitors.
Research and Analysis Analysis of Dells Competitive Advantage: Dell is officially the No. 1 computer systems company in the world. Dell is able to sustain a competitive advantage over competitors in the computer industry because of an extremely efficient supply chain/distribution system. Dell is able to achieve superior profits in the industry because they are a knowledgeable user of information, communication, e-commerce, e-business, internet, and web technologies. Michael Dell states that Dell is so successful because of Knowledge Management.
Mr. Dell defines that term by saying physical assets are being replaced by intellectual assets. This relates to Dells inventory system. Dell implements a Just-In-Time inventory system which operates on only 6 days of inventory. Dell is able to achieve greater profit margins and increased profits because of their inventory system. Inventory and labor are the highest liabilities of a firm. Since Dell only operates with 6 days worth of inventory, they are able to cut costs on warehousing, hiring people to track and maintain inventory, and avoid holding on to obsolete technology.
This allows Dell to free up cash flow to invest in other value adding activities. Dell uses a JIT inventory system because Dells customers can only order computers directly through Dell itself. Dell uses their website www. Dell. com to take customers orders. Dell focuses on direct sales, cutting out other distribution channels entirely. This allows for a deeper relationship with the customers whereby Dell can offer their customers better service, savings, convenience, and efficiency. A customer can order their own custom computer, have it built by Dell in three days and have it delivered to the customers doorstep within one week.
Dells use of the internet has revolutionized the company. Dell makes their website extremely consumer friendly to offer an easy order process to the customers. Dell has also created their Premier Page. This page was made for Dells larger accounts including corporations, the Government, and educational institutions (ie Syracuse University). This webpage includes dynamic price upgrades, easier navigability, and a greater range of available upgrades/options. Customer relationship management software keeps close tabs on the types of computers that customers are buying (Pizinger).
Not only does Dell use the internet to make the customer ordering process easier. They also use the internet to build better relationships with their suppliers. In order for Dell to work off of 6 days of inventory, their suppliers have to be very involved in the company to make sure superior service is met. Dell uses state of the art production planning programs that forecast the quantities of components needed to build the computers. After those forecasts are made, supply chain systems pass those forecasts to suppliers, who respond with cost estimates and plan their production as a result (Solis).
To achieve their supply chain superiority, Dell uses solutions from i2 Supply Chain Management. i2 streamlines the supply chain by providing component suppliers and Dell planners with global views of product demand and material requirements. It also provides real-time factory scheduling and inventory management, so employees can generate key reports based on accurate and timely data, pinpoint inventory on the factory floor, and receive supplier deliveries on a true just-in-time basis (i2 supply chain management systems).
This allows Dell to change their manufacturing schedule every two hours to keep up with customer orders. Dells suppliers have access to this accurate, timely information. Since the suppliers work with facts instead of forecasts, this allows them to reduce waste and improve efficiency. Once suppliers receive this information, they are directed to deliver needed materials to a specific dock door for assembly for specific product manufacturing. Dell uses the Windows NT operating system and Intel-based servers for all of the i2 applications (Soral). Dells e-commerce is a huge part of their competitive advantage.
Their e-commerce internet infrastructure is so advanced and knowledgeable that by using it to determine trends and demands of their products, they have gained superiority over their competitors. Dell has set up strategic alliances with other companies to have their products sold on Dells direct selling distribution channel. Back in 2000, Palm, Inc. made an agreement with Dell to offer an expanded line of handheld Palm products and accessories. This agreement allowed Dell to drive momentum for the Palm operating system market (Dell: 2000, April 17).
Along with Palm, Xerox also partnered with Dell to take advantage of Dells e-commerce. Advantages to Xerox were increased profits by offering the printers with the Dell computers. Advantages to Dell include selling high quality printers along with their computers, but more importantly, it allowed Dell to be involved in the customer buying process for printers. Being involved in the decision making process is key to Dells success because they see directly what the customers want and determine their production schedule from that information (Dell: 2000, May 22).
Dell achieves its competitive advantage over other firms in the industry by having superior supply chain management. Dell utilizes technology to interpret information. By being involved in the customer buying process they are able to determine their customers needs. This allows Dell to streamline production and have close relationships with their suppliers which results in getting timely deliveries in order to mass customize customers computers. Analysis of Dells IT Tools: Dells supply chain management success can be summed up in one idea.
Supply chain management shortens the cycle between the component, the manufacturer and the end customer. We are allowing them to almost touch each other, (E-commerce) according to Michael Chong, e-business Technology Manager of Dell Computer Corporation. Supply chain management is the effective and efficient movement of materials from suppliers, through a company and into products, which eventually is received by consumers. An important goal for Dell is to enable customers to process their own transactions. Dell is known for their efficient and effective build-to-order business model.
This model allows customers around the globe to order customized systems from the dell. com website. Dells online supply management allows Dell, suppliers and customers to work together. As Michael Chong states, Because we work directly with customers, we have the ability to connect and understand what products will be required and when (E-Commerce). This helps Dell to inform their suppliers what supplies are needed based solely on customer demand. As a result, there is not an excess of supplies in warehouses that will decrease Dells efficiency.
As Dell is known for their exceptional service, ease in ordering and responsiveness to customers needs, their competitive advantage is easily distinguished. Dells internet presence through Dell. com, is an important factor in Dells success. By involving the customer from the beginning of the ordering process, Dell. com makes it easier to do business for both parties and initiates customer relationships while providing a means for ongoing customer service. With a number of links focused primarily on certain groups and customers, purchases can be made easily and efficiently.
No matter what you are purchasing, Dell. com can assist the customer in customizing and evaluating Dells offerings. Dell. com can help an individual consumer purchase a single notebook or can help larger companies purchase or lease products that will help them lower their costs. A new service, launched in the year 2000, made it possible for customers to purchase refurbished Dell PCs, notebook computers, digital cameras, scanners, printers and speakers online. The returned equipment comes from companies upgrading systems but wishing to continue using Dell gear, or from cancelled order (Kelsey, 2000).
Specifically, Dell has enhanced its supply chain by using i2 Supply Chain Management to plan orders and communicate with suppliers every two hours. This results in Dells efficiency in manufacturing and delivering exactly what its customers want. Time to deployment and overall cost of ownership can be achieved if i2 Pronto and/or i2 Solutions for Value Chain Management are utilized, along with Dell servers and storage. i2 Pronto is a rapidly deployed solution for factory planning and collaboration. Dell possesses a competitive advantage in that they are currently the only hardware platform certified for rapid deployment of i2 Pronto solutions.
Solutions enables Dell to reduce costs, lower total cost of ownership and establish a reliable, stable operating environment. Dells own implementation of i2 SCM solutions is known as the DSi2 system. DSi2 runs on 120 Dell servers and manages more than 250 suppliers delivering more than 3500 parts. As a result, Dell can deliver customized, replicable configurations, reducing time to deploy and cost of ownership. i2 solutions also enables customers to put Dells value chain to work in meeting company goals and attaining value (Jacobs, 2003).
SCM streamlines the supply chain by providing component suppliers and Dell planners with global views of product demand and material requirements. It also provides real-time factory scheduling and inventory management so employees can generate key reports based on accurate and timely data, pinpoint-inventory on the factory floor and receive supplier deliveries on a true just-in-time basis (Harrington, 2002). This system allows Dell to achieve a new manufacturing schedule every two hours which shows the latest customer orders, backlog numbers, stock status and supplier commitments.
Today, the supply chain of Dell not only runs on 120 Intel-based Dell servers running Microsoft Windows NT, but it also has four primary i2 software modules: i2 Collaboration Planner Demand Fulfillment, Global Supply Planning, Factory Planner and Supply Chain Planner (Harrington, 2002). This success proves that Dell has the best of both worlds. They achieve state-of-the-art performance at an economically attractive price. A competitive advantage is seen when a company, such as Dell, links supply chain management with customer relationship management and supplier relationship management.
This link is known as DVCM (Dynamic Value Chain Management). DVCM requires synchronized, multi-enterprise collaboration based on streamlined decision-making workflows across companies. It requires companies to push planning and execution toward real-time or near-real time. DVCM’s net result is a fundamental change in the relationship between companies and their trading partners–a change that creates tremendous value for companies, their trading partners and their customers (Harrington, 2002).
When Dell utilizes its i2 SCM strategy, Dell can model and monitor their business in real-time, and analyze issues such as sourcing, distribution, resource and capacity constraints (Harrington, 2002). Some of the capabilities of DVCM are collaborative demand planning with customers and suppliers, auto-replenishment of inventories, design information sharing with strategic partners, content management and distribution with management. After these are implemented, organizations are able to make decisions in a timely manner and implement those decisions for completion of the products.
Another important role for Dell is the use of the Internet. The Internet helps Dell to establish good relations with both their suppliers and their customers. Not only does Dells use of the Internet allows customers to customize and purchase Dell products online, the Internet also helps suppliers and Dell communicate and focus on improving their efficiency. This method began in mid-1999 when Dell introduced valuechain. dell. com. This website allows suppliers to follow their material as it as used throughout Dells operations.
Suppliers can log-on, drop off invoices, check engineering change orders, review negotiated and forecasted cost reports, and track their overall performances and progress. As a result of their successful Internet system, Dell purchases almost 90 percent of its direct material supplies online. Supplier hubs located near their manufacturing plants are used to deliver supplies to the Dell plants when they are only a few hours old. As said by Michael Chong, We are trying to draw more value out of our supplier relationship. Thats why the name value chain. The applications themselves are not replacing the business processes.
The business processes are already defined and well ingrained. It is just making the business processes more efficient (E-Commerce). By focusing on inventory control with their suppliers, Dell is able to use industry price declines to their advantage and deliver those savings on to the customers. This also gives Dell a competitive advantage. According to Michael Chong, Our competition has a hard time trying to manage that type of model because their inventory turns are fewer. They have more latent costs built into the components in terms of their inventory (E-Commerce).
An efficient supplier network is important to Dell. In order to increase efficiency between Dell and their suppliers, Dell has reduced the number of suppliers they do business with. Three years ago, Dell worked with more than 1,000 suppliers, but today they only work with 100 suppliers. Dell also uses supply chain management software to reduce inventories, improve material management and enhance relationships with suppliers. This also helps Dell and their suppliers connect to share information about inventory and improve efficiency, which gives Dell an additional competitive advantage.
