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DELL Direct model

DELL Direct model. Price for Performance No resellers, retailers or other intermediary steps E fficient procurement, manufacturing and distribution process Customization Every Dell system is built to order Service and Support Dell provide s tailored customer service Latest Technology.

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DELL Direct model

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  1. MBA 642 / BIS Foundation

  2. DELL Direct model • Price for Performance • No resellers, retailers or other intermediary steps • Efficient procurement, manufacturing and distribution process • Customization • Every Dell system is built to order • Service and Support • Dell provides tailored customer service • Latest Technology. • Latest technology introduced quickly • Inventory is turned over every 10days MBA 642 / BIS Foundation

  3. Dell case study • A “mix” retailer (sells both on the web and via traditional channels) • $10 million worth of goods sold per day on their web site(from $1 million in 1997) • Dell will soon be selling more on their web site than through the normal distribution channels • Direct sales cut out a number of intermediaries (and the margin that they would normally add to the price of a PC) MBA 642 / BIS Foundation

  4. “It has never been so easy to buy a PC“ • Dell goal : quickly manufacture and deliver inexpensive, good quality PCs • Simplify and improve the customer’s experience of purchasing a computer • Dell also benefits from the increase in efficiency : • Built-to-Order (BTO) model of manufacturing whereby no goods are produced until there is a demand for them MBA 642 / BIS Foundation

  5. BTO model is difficult to maintain • Especially in industries where customers demand very short lead times… • …and where the goods manufactured require a complex assembly / testing process (eg. computers) • Most computer manufacturers must use planning and demand forecasting models for their production facilities • Computers are produced without specific knowledge of customer demand • There may be unexpected variations leading to excess production of some models and shortage of others Lost sales! Obsolete stocks! MBA 642 / BIS Foundation

  6. BTO model is difficult to maintain • Especially in industries where customers demand very short lead times… • …and where the goods manufactured require a complex assembly / testing process (eg. computers) • Most computer manufacturers must use planning and demand forecasting models for their production facilities • Computers are produced without specific knowledge of customer demand • There may be unexpected variations leading to excess production of some models and shortage of others Obsolete stocks! Eg. Boeing $2.6b in 1997 Lost sales! MBA 642 / BIS Foundation

  7. Ultra quick order processing • Wait until a PC is ordered before committing to production • All orders routed through 1 of 3 data centres (US, Europe and Asia) • Orders dispatched to nearest production facility • Just-in-Time factories (located very close to their suppliers) maintain no stocks • Trucks filled with components needed to produce PCs are permanently connected to special loading bays MBA 642 / BIS Foundation

  8. Ultra quick order processing • Contents of these trucks does not belong to Dell, but to their suppliers • Dell will only pay for this inventory when it is taken from the trucks and used on the assembly lines • As the PCs move along this line, a tag is attached to them: • who has purchased them and what else they have ordered (so that orders can be brought together) • A monitoring system tracks PCs, giving operators configuration info for the computer at each stage of the production process MBA 642 / BIS Foundation

  9. Ultra quick order processing • Within hours, the PC has been assembled and tested and rolls straight into waiting delivery truck • A scanner system ensures that the PCs are loaded in the truck that supplies the distribution centre nearest to the delivery address of the customer • For example, in Dell’s Limerick facilities in Ireland, some trucks are supplying the local market, while others go to Germany, France and to the Scandinavian countries MBA 642 / BIS Foundation

  10. Ultra quick order processing • Any PC sold by Dell is delivered to the final customer within a few days and always within a week • Dell never pays for any inventory before they need it to assemble a finished product • Dell get paid for the PCs they build even before they are assembled • Dell’s cash flow has been improved drastically and they can generate additional revenues from their positive cash flow situation MBA 642 / BIS Foundation

  11. Secret to Dell’s success? • Robust order acquisition and processing systems • Produce and ship the proper equipment (what was ordered) to the proper customer (the person who ordered it). • Dell can do this more efficiently than anybody else which enables them to produce cheaper PCs for a given specification MBA 642 / BIS Foundation

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