Perfecting the Supply Chain

Listen to this postInventory management and the difference between good and bad performances are some of the principles that being lectured to Dell’s employees through multiple presentations (Stewart & O’Brien, 2005). Reword and punishment are some of the performance techniques used by most of Dell’s rivals, but Dell’s employees set the rewards and punishment for themselves to drive their performance. Dell Inc. has the “no excuse” culture since the management will not accept excuses for low performance or the failure to make money. Dell’s top management believe that if the expectation are set high enough then the performance will be high and the opposite is true. Dell’s General Managers have to find the reason for their poor performance and fix it, or the General Manager will be blamed for the failure (Stewart & O’Brien, 2005).

Dell Inc. became famous for its innovative supply chain model that allowed Dell to carry out successful mass customization. Dell is using Build-to-Order model to cut off the dealers’ fees and the inventory cost (Magretta, 1998). The computers are built according to the end user’s specifications which are placed in the company’s portal. Dell’s innovative supply chain insures the required parts availability when needed for the right assembly point at the exact time and place. Kumar and Craig (2007) state that Dell’s success is not only fueled by its supply chain but other processes made it more competitive than its rivals. The following are the main four processes that made Dell Inc. competitive:

  1. Postponement: Dell will postpone assembling the computer until the order is placed and customer credit is cleared. This postponement enables Dell to decrease its inventory and use the latest products from its suppliers. Dell’s rivals have to push their finished product inventory before marketing the new parts for their customers (Kumar & Craig, 2007).
  2. Modularity: means that each part of the computer is managed separately which allow the assembler to connect different parts together. This flexibility allowed Dell to excel in mass customization and overcome the last-minute changes (Kumar & Craig, 2007).
  3. Vendor Managed Inventory: Dell does not stock the required inventory in its stores. The suppliers manage the inventory in small warehouses, called revolvers, near Dell’s plants. This technique help Dell focus on the customers and the suppliers focus on innovation (Kumar & Craig, 2007).
  4. Supply chain partners: Dell sign contracts with the suppliers and service providers and share with them the available information to guarantee future order volumes.

Dell’s innovative supply chain and unique culture will keep it competitive as long as it can keep up the low production cost. Dell will lose its competitive edge once its rivals perfect their supply chain management and start to offer innovative computers at the same price.
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References:

Dell Inc. (2009). Dell Worldwide. Retrieved August 29, 2009, from http://www1.euro.dell.com/content/topics/global.aspx/about_dell/company/dell_worldwide/index?c=ae&l=en&s=corp

Kumar, S., & Craig, S. (2007). Dell, Inc.’s closed loop supply chain for computer assembly plants. Information Knowledge Systems Management, 6(3), 197-214.

Magretta, J. (1998). The power of virtual integration: an interview with Dell Computer’s Michael Dell. Harvard Business Review, 76(2), 73-84.

Stewart, A., & O’Brien, L. (2005). Execution without excuses. Harvard Business Review, 83(3), 102-111.

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About Sami Malallah
My thoughts and ideas are without politics, sarcasm or negativity. Please comment on them and share them with others.

2 Responses to Perfecting the Supply Chain

  1. Bu Yousef says:

    In our company, we do the same: We wait for everything to clear before we start manufacturing. In a way, we actually have to – as each order is slightly different.

    What’s impressive about Dell is that they changed their approach way ahead of everyone. They were also successful in removing themselves from the shops and going almost exclusively online (at least in Europe and USA).

    Good post.

    • Thanks BuYousef for the informative addition to the post.

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