Managing a Global Supply Chain: An Examination of Dell’s Operational Strategies
1. Introduction
Dell is one of the well-regarded companies within the consumer electronics market. The decline of its market share does not undermine the quality and ease of use that its products present. Apple’s popularity in the market relates more to the societal factors of perceived value and exclusive branding than the product quality (Ulaga and Chacour, 2001). There are a lot of factors that reduce the market appeal for Dell. These factors are most prominently embodied by Apple products, which present an appealing exterior and restricted access at the cost of increased security. Despite its higher performance, reasonable pricing and inclination towards relatively better business practices, Dell is still outperformed by Apple financially. The brands do not operate on the same level, and Apple products cross sectors, but purely on the basis of merit and value for money, Dell could be considered a market leader in this regard (Sheffi and Rice, 2005).
This report aims to explore the various departments that collectively form Dell’s operation in this international business environment in order to understand why the mantle of the most successful consumer electronics company is not held by Dell. The study, to explore this content, will utilise an extensive research base along with the application of certain theories and frameworks as well. There are three factors being assessed selectively, and they are; the global supply chain of Dell, the CSR initiatives it has undertaken, and the international business environment it operates within (Joshi and Hanssens, 2004). The first topic will be concerned with assessing listing the risks associated and benefits being derived from its current value chain and the competitive adversities in this regard.
2. Global Supply Chain Management
As one of the most successful and surfaced companies producing in the consumer electronic market, Dell has a supply chain system that caters to the market in a highly mainstream manner. The supply chain implemented within Dell reflects an efficient relationship amongst the various supply chain actors. They incorporate their customer expectations into their operations by maintaining lower costs and keeping supplier standards up to the expected standards (Selladurai, 2004). This section will further analyse Dell’s supply chain system in the six categories presented below.
2.1. Target Market
Dell has a specific four-category target market, three sections following a B2B modal by targeting large, medium and small scale businesses and the B2C model by also incorporating households. The company produces efficient and cost-effective products, including laptops, scanners, cameras and PDAs, laptops being its strongest market. Dell utilised mass marketing strategies and followed a direct sales model (Armstrong et al., 2015). By keeping prices low and maintaining it provides its customers with a high level of value worldwide.
2.2. Performance Objectives and Market Position
Dell utilises the concept of economies of scale by setting objectives that of maintaining a lower raw material input cost and producing a large number, which further absorbs the average cost, in increasing the rate of output (Polkinghorn, 2016). The company employs the ‘Just in Time’ inventory management and practices lean management while reducing the transportation and movement-related cost by practising the direct sales model. Inventory shrinkage or pilferage rates are also reduced.
2.3. Performance Objectives Model
The performance objectives model at Dell is based on four distinct criteria: volume, variety, variation and visibility. Dell specialises in mass customisation production, allowing it to produce products in large volume at lower unit costs (Wild, 1977). This is enabled through its Direct Sales Model and Build-To-Order strategies. There is, however, a low variety of Dell products with less emphasis on new product development. Thus existing product line is being enhanced, saving Dell from the associated complexities of new products (Nahmias and Cheng, 2009). Similarly, adaptation to the Build-To-Order strategy means less variation provided few customers preferred customisable options. Finally, the internal operations are not visible to customers with standardised and centralised approaches at production.
2.3.3. Transformation Model
The transformation model comprises six stages from customer order section, kitting, build, software installation, final testing and boxing and shipping. The customer orders are managed through the Dell order management system and scheduling system. The necessary supplies to build products are made ready, known as kits. The components are put together with desired quality standards; the product is built (Wild, 1977). Then necessary software for customers is installed in the system, which makes it ready for labelling and final testing. The completion of this stage with respect to desired quality check makes the product ready for packaging and shipping with other adjoining components of the P.C. system such as monitors (Forza, 2002).
2.4. Risks and Benefits
The three supply chain strategies by Dell is considered to be its strength as it lowers the costs through optimised inventory levels, minimised mediators in distribution channels and customisable computers as per their preferences (Nahmias and Cheng, 2009). Dell computers are price competitive as their manufacturing and distribution processes is highly advantageous. Moreover, Dell integrates to latest technological advancements ensuring the most effective form of communication to its customers and suppliers at least time as possible to exchange the necessary demand information of components to be supplied.
However, the cost of maintenance to keep supply chain strategies optimal is high due to the specialised technology and workforce required who ensure the best maintenance possible (Simchi- Levi et al., 1999). Nevertheless, this adds more cost to the organisation. The problem also persists at the end of the supply chain, where customers are not able to customise products to the fullest while it takes four or five days to finish the overall order. And since there is no retailer to make any further changes, if necessary, it might question the credibility of Dell in managing customer satisfaction.
2.5. Competitive Plan
Dell has been performing exceptionally in a highly volatile technological market. The competitiveness at this stage is more related to the social aspects for improvement. Dell provides computers of similar efficiency and capability in comparison to companies like Apple at relatively lower costs (Nahmias and Cheng, 2009) since Apple is considered more for its status symbol than performance. Besides, Dell computers are considered to be expensive comfort goods than being classified as luxury goods such as Apple with greater cost. Similarly, Dell focuses more on processor capacity and accessibility rather than the physical appearance of its product. This feature is dominant to that of the competitors, which can considerably improve its approach to customers.
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