Presentation Transcript

1. IST 415

   CASE ONE How Dell Reengineered Its Business Processes through Strategic Use of Information Technology & How Dell Faces Its Current Challenge By Dr. Stephen Shih

2. Background Information

3. There was a young genius named Dell Who broke from an academia cell. Both the bits and the bytes he assembled just right. Now this drop-out is doing just swell. A poem by Liz Carpender
4. Dell was founded in 1984 by Michael Dell. Uniquely enabled by its direct business model, Dell used to sell more systems globally than any computer company.
5. Somewhere in time … the “Dorm” age Dell Computer Corporation
6. Products & Services
7. STOCK PRICE PERFORMANCE COMPARISON (Dell, Apple, HP, and IBM)1988 – 2004
8. How didDELL do it?
9. Dell's Business Enablers The Direct Model Advanced Supply Chain Management Software (for Back-End Fulfillment Capability and Global Enterprise Operations Integration) BTO or ATO - JIT Manufacturing Integrated Network Standard-Based Technologies and Platforms …
10. Dell’s Direct Model
11. The Direct Model Suppliers Customer Cooperative R & D MassCustomization Customer Relationships Expert Services BE DIRECT - Eliminates intermediaries between Dell and its customers
12. The company is based on a simple concept: by selling standards-based computer systemsdirectly to customers, Dell could best understand their needs and efficiently provide the most effective computing solutions to meet those needs.
13. This direct business model eliminates retailers that add unnecessary time and cost, or can possibly diminish Dell's understanding of customer expectations. The direct model allows the company to build every system to order and offer customers powerful, richly-configured systems at competitive prices - BTO
14. Driving toward standards-based technologies and platforms has been the key to success within Dell IT
15. As proprietary systems and platforms have been eliminated from the environment over time, the ability of Dell’s IT organization to focus on delivering new projects and benefits has risen more than five fold. The Value of Standards
16. … And Dell’s operating costs as a percent of revenue have declined year over year. Leveraging standards-based technology enables Dell to respond at the speed of business … The Value of Standards
17. Increasing ability to leverage our IT workforce in much more efficient ways than ever before -- rather than spending time maintaining complex legacy systems, IT professionals can focus on delivering new and better solutions for Dell’s business partners and system users. The Value of Standards
18. Dell uses the Internet to achieve high degree of supply chain coordination. Suppliers are told exactly what the daily requirements are: suppliers have real time sales data and inventory data. Dell is an Integrated Web-BasedNetwork
19. Customer/Supplier Relationship Management: Dell works with customers and suppliers to determine the right levels of component inventory. Data on margins, selling price, and overhead can be tracked closely by customer segment, by product, and by geography (throughout the entire enterprise system). Dell is an Integrated Enterprise
20. Dell’s Supply Chain Management
21. Intelligent e-Business is front end e-Commerce plus back end Fulfillment “A front-end Web site is often the easiest and least differentiating section of an effective Web strategy … A little-discussed, not-so-pleasant fact is that many Web commerce transactions are unprofitable because of back-end fulfillment problems.” - Gartner Group eCommerce solutions EASY Hello there.. we need to a back-end fulfillment information system HARD Complex fulfillment solutions Source: Goldman Sachs
22. Synchronization and optimization of all supply chain activities Dell’s Supply Chain Synchronization Procurement Planning Manufacturing Planning Distribution Planning Forecasting Synchronized, Concurrent Planning Supply Chain Optimization Procurement Planning Manufacturing Planning Distribution Planning Demand Planning Synchronized, Sequential Planning To Balance Capacity Constraints and Material Constraints
23. What Information Systems to Build? The Dell Fulfillment Proposition Do we have the right inventory profile and info on the right replenishment levels in every stocking location throughout the supply chain? What is our real-time, total pipeline inventory (raw materials, work-in-process, and finished goods inventory) at every stocking location throughout the supply chain? What is the product demand? What is the level of customer service performance (e.g., order fill-rate, backorders, stockout occurrences)? The Target: Build and ship within 3 days Buy to Order … Assemble to Order Eliminate inventory  Replace inventory with INFORMATION
24. Design Purchase Manufacture Assemble Ship Inventory Manufacture Assemble Ship D Manufacture Inventory Assemble Ship Manufacture Assemble Inventory Ship What is ATO or BTO? Manufacturing Strategies & Delivery Lead Time ETO MTO ATO/ BTO MTS ETO: Engineer-To-Order; MTP: Manufacture-To-Order; ATO/BTO: Assembly/Build-To-Order; MTS: Make-To-Stock
25. Manufacturing Strategies What to Stock For Inventory? (raw materials, standard components, work-in-process, Or end products) Customer Involvement In Design & Production Design & Delivery Lead Time ETO ? High? Long? MTO ? ATO/ BTO ? MTS ?
26. Fundamental Advantages Better price, excellent quality, and … faster speed!!! Reduce delivery lead time Mass customization BTO/ATO: Fundamental Advantages
27. BTOBuild Your Own System
28. DELL’s SERVICES Words of Wisdom … Well studying your customers, not your competition, will give you a greater competitive advantage
29. 1QFY06 Results How Did Dell Do?
30. Dell's Midlife Crisis http://money.cnn.com/magazines/fortune/fortune_archive/2005/11/28/8361935/index.htm The powerhouse PC maker has hit A SUDDEN SPEED BUMP. Can the company get back on track?
31. STOCK PRICE PERFORMANCE COMPARISON1988 – January 2, 2009 Note: Monthly Closing Price 07/94 through 07/99, indexed to 100
32. DELL’S STOCK PRICE PERFORMANCE 2004 - 2009 Note: Monthly Closing Price 07/94 through 07/99, indexed to 100
33. Dell’s Challenge The witching hour came, fittingly enough, on Halloween: Dell chief executive Kevin Rollins issued an early warning about the company's third-quarter financial performance. He probably wished he could hide behind a mask. Earnings and sales would both be below expectations. The company would have to write off $450 million, the bulk of it because of an embarrassingly basic misstep for a firm that prides itself on operational efficiency: the installation of faulty capacitors in a large number of computers. Finally, the company hinted at layoffs--what it called a "workforce realignment"--a harbinger of retreat that the company had resorted to only once or twice before in its history. By ANDY SERWER November 28, 2005 (FORTUNE Magazine) –

34. Case Assignments

35. To help resolve the recent challenges and crisis that Dell has faced, you are hired to assist its Information Systems Management team in: Reengineering and restructuring the IS organization at one of the Dell manufacturing plants in the U.S. for the purpose of improving the performance of people in Dell through the effective use of information technology Developing a framework for effective management of Dells’ information systems Developing a competitive force model Developing a value chain model
36. IS focuses will be shifted to reengineering business processes and working better with suppliers and customers. The IT group at Dell had undergone a dramatic change from a controlled, technology-centric environment to a much more participative, customer-focused environment. Another focus is to manage information as a resource and to coordinate all computing resources by putting them together in an enterprise-wide technology infrastructure. ERP is implemented as part of the infrastructure – focusing on seamless data and system integration. One other focus is on achieving the balance between the need for standardization and meeting local needs. IS’s organizational structured shifted to focusing on processes, and putting in a business-led governance structure. Addressing the recent challenges and crisis that Dell has faced, Dell’s executive team has shifted its strategic business and IS focuses for the new IS organization and computing environment for the entire company:
37. Dell’s strategic business and IS focuses for the new IS organization and computing environment for the entire company: Buy-to-order with virtual integration Suppliers must understand that Dell is demanding flexibility, not inventory Web-based technology integration – e-Commerce & e-Business
38. Inventory Physical Assets Closed Vertical Integration Value Shift Dell’s strategic business and IS focuses for the new IS organization and computing environment for the entire company: Information Intellectual Assets Collaboration Virtual Integration
39. Suppliers Dell Customers Integrated Electronic Commerce The Power of Virtual Integration Enhanced velocity throughout supply chain Advantaged relationships Trading inventory for information Cost reduction for all parties
40. Prospective Enterprise System Model (1)- e-Business
41. Access Dell’s internal information Configuration & Shopping Knowledge-enabled self support Explore Dell’s products & services Online quotes & order entry Productivity tools for helpdesks Prospective Enterprise System Model (2) – Customer Relationship Management Customer Relationships Information Sharing Internet Commerce Service & Support
42. What possible changes are taking place in the external business environment of the company like Dell? (15 points) What possible changes are occurring in the internal business environment of the company like Dell? (15 points) Addressing the internal and external environmental changes, define a set of business goals of the new work environment in Dell. (10 points) Case Assignment Questions Study Chapters 1, 3, and 4 as well as conduct research on the Web to address the following questions: To be in line with Dell’s new strategic business and IS focuses (see the four new focuses listed in Slide #41 and related information in Slides #42 - 46):
43. Based on (1) your defined goals of the new work environment, (2) strategic business/IS focuses, and (3) prospective enterprise system models mentioned before, state your view of the mission for Dell’s current information systems. (10 points) Case Assignment Questions
44. The following diagram shows the current IS organization structure. Discuss how and why this structure cannot fully address (1) the defined goals of the new work environment, (2) strategic business/IS focuses, and (3) prospective enterprise system models. Revise the current organizational structure and draw a new diagram accordingly. (15 points)
45. Explore the risks and competitive forces of Dell and discuss how you can use Porter’s competitive forces model to determine the company’s position within the computer industry and to discuss what specific actions that Dell has taken and needs to increase it competitive advantages. (15 points) Describe the value chain model and value system of Dell Computer. From the IT/IS point of view, identify and recommend what information systems/software to be used for different tasks in Dell’s value chain. (20 points)