dell biz mod kshitij

7/30/2019 Dell BiZ Mod Kshitij

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Dell Business Model analysis

Kshitij Gondhalekar


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Intrinsic Mission and Strategies Adopted in business

Dell leverages its efficient business processes to directly reach out the

customers. It avoids layering of margins by reducing brokerage and

reliance on middlemen.

Zero inventory costing mechanism No requirements on shelf space

It better channelizes resources to optimize procurement, manufacture and

distribution, thereby shunting product obsolescence

Real time feedback mechanism to augment CRM.


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Dells Direct-to-customer approach

Suppliers DELL Consumer

Critical direct path leads to Value for money.Built to order systemMass Customization leading to increased perception of valueBetter designed tailor made service and support systemsStandardized quality metrics with fairly recent technology implemented.


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Product Development

Initial Product Development Process:

Before The New Prod Dev. Process was implemented Dell followed the ad hocmethod. This was characterized by:

Lack of predictability in results

Teams led and guided by programmers with experience.

Loosely defined goals and objectives.

Inadequate funds and inconsistent budgeting practices.

Lack of focus on quality.

New Product Development Process:

Clear definition of Product development goals

Monetary aspects involving the new project are taken into consideration,unless there is strong reason to believe that a business would create value andpass the profitability test, it is not allowed to commence forward


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Product Development ..contd

Adapted from

http://www.oocities.org/mileni

opro/Dell.htm

Build a sample/ working model of the proposed product and put it through rigorous testing.

Prepare manufacture level plans. Document and prepare plans for servicing the same.

Test market or Beta testing initiated. Sales employees are educated on the nuances of the same.

User feedback is used as one of the yardstick of qualifying the product.

Customer experience is gauged and tested. Production is initiated

Acceptance report is prepared based on customer satisfaction to give a viability estimate of the

product


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Order Placed

Order is

Processed

Financial

legitimacy and

credit

Checking whether it

is possible to

assemble the model

according to the

requirements

Sends the order

to assembly

plant

(any one in Austin, or

any other)

Product is test, built

from the parts

which are

manufactured

separately, and

then is Packaged

Shipping of the

orders

(no later than five days

after receipt)

DELLS Supply Chain

www.a2zmba.com

Proctime

through

Follows the FIFO model

SUPPLIERS REVOLVERS

Delivery


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Inventorying Mechanisms

www.a2zmba.com

Build-To-OrderModel

ValueChain

Program

Revolver

or SLCs (SupplierLogistics Centers)


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Management of Dells inventory

Built to order:

Dell follows mass customization, i.e. The customer decides the configuration

required, there is no pre-made product.

This kind of a model very accurately meets customer expectations

Revolving inventory (SLCs):

To reduce the effect of variability in demand Dell mandates the suppliers to

keep some amount of inventory at their warehouses or supplier logistics

centres.

Multiple suppliers share a revolver and also pay a small fee for using the same The inventory in these centres is owned by and charged for by the suppliers to

Dell, charging it by price.

The lean inventory management scenario is shown in the figure that follows


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Local Suppliers

Dell FactoryRevolvers

(SLCs)

Suppliers

3 days of inventory - Inventory turns of 122 per year

Delivery

Supplier Owned Dell Owned


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More about inventory

Dell has vendor managed inventory

Suppliers choose the estimated amount they think they would order. Dell

sets target inventory levels and notes suppliers deviations from targets

Suppliers choose when to restock their revolvers

Dell transfers out inventory on a need basis, on an average every twohours.

It prepares a scorecard to evaluate the management of inventory by a

supplier and reinforces required actions and renews agreements.


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Value chain program

Value chain program reintegrates Dells direct to customer approach back

into the value chain

The primary goal is to increase the speed and information quality back and

forth between Dell and the supply base

It also has a secure extranet for Dell suppliers to co-ordinate and managethe supply chain.


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Supplier metrics

Selection basis:

Quality

Price

On time supply

Feedback reported

Evaluation:

Cost

Delivery time and quality Technology available

Inventory movement rate

Successful use of online and other channels


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Distinct Advantages:

Dell slashes inventory management overheads

Inventory maintenance is reduced to nearly zero

Obsolete material is avoided and transportation costs go down with

numbers Drop in component prices due to large numbers with discounts

Handling cost is slashed down.


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References:

http://www.osnews.com/story/14763/Apple_and_Dell_Business_Models/

www.hindustantimes.com/news/.../Dells_Business_Model.pdf

http://tech.fortune.cnn.com/2011/02/10/how-dell-conquered-india/

http://content.dell.com/in/en/corp/d/corp-comm/cr-ca-business-model

http://www.osnews.com/story/14763/Apple_and_Dell_Business_Models/

http://www.dellogistics.com/why_dell.html

http://usatoday30.usatoday.com/money/smallbusiness/columnist/abrams/2010-12-10-dell-it_n.htm

http://www.authorstream.com/Presentation/aSGuest66690-519583-reverse-logistics/

http://content.dell.com/uk/en/enterprise/by-service-type-business-consulting-operational-strategy

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