Post on Tuesday, December 4th, 2018 in Accounting
Dell entered the market in 1985, and evolved from a small, dorm-room based company in Texas to one of the world’s leading computer hardware manufacturers, with over 96,000 employees.
Among other things, the brand owes a lot of its success to its revolutionary supply chain strategy. Let’s take a look inside Dell’s supply chain and see how it helped the company grow at a rapid pace from the start, and reinvent itself later on.
Unfortunately, the company faced a series of challenges and disappointments after 2005, such as slow sales, losses to competitors and new technologies along with the decline of the PC industry. But despite these hardships, Dell Inc. still maintains a large market.
In other words, it’s still worth seeing how the Dell supply chain strategy keeps the company afloat.
The most remarkable feature of Dell’s supply chain management is its direct sales model, meaning that it accepts orders directly from the customers, without any resellers involved.
This model helped the company access its customers and study their needs directly. Based on this data, the brand implemented additional products and services according to customers’ preferences. This made it stand out among other computer hardware manufacturers early on.
Here’s a brief overview of how it works:
This model brought the retailer a range of competitive advantages, such as low inventory carrying costs and the ability to quickly replace defective components as they are detected.
However, due to the growth of innovative technologies and changes in the computer industry, the customers changed their needs as well. Customization was no longer crucial for them.
So in 2010, the company reinvented its supply chain and shifted to the segmented model that targeted several groups of customers with different needs and buying capacity.
The brand learned the following lessons:
The core of the brand’s success in its earlier years was its relationships with the customers and ability to hear their needs, and the reinvention of Dell’s supply chain was focused mostly on customer relationships.
To restructure its supply chain, the company implemented the following solutions:
Accordingly, the brand implemented different supply chains targeting these groups of customers. However, all of the chains were using the same tools, processes and suppliers.
Like other retail giants, Dell has long-term relationships with suppliers that help the brand streamline their inventory management as well. The company considers its vendors to be an integral part of its success.
The key objective of Dell’s inventory management is to minimize the inventory and optimize the production speed. As a result, the company does not hold inventory for more than 6 days and avoids unnecessary carrying costs.
The retail giant has got suppliers from all over the world, including major companies such as Motorola, Samsung, Sony and more. All of them supply the components – HDDs, cables, motherboards, etc. according to a set of rules provided by Dell.
For example, it is strongly advised that each supplier have a manufacturing plant near Dell’s plant. The suppliers should also cooperate with logistics companies that can both deliver the components and ship the customer orders. Finally, the company manages its inventory based on the VMI model, meaning the supplied components are kept on the truck only and taken as needed while the vendor manages the inventory.
Dell and its suppliers communicate with each other via an internal website called Value Chain. At this website, the companies can access information about the inventory status within the supply chain as well as get demand and production data.
To summarize, Dell has been a successful player in the computer hardware market since the very beginning because of its innovative supply chain strategies.
Despite the hard times in the early 2000s, its customer-centric model helped Dell remain afloat. In 2010, the retailer reinvented its supply chain according to the changing needs of its target audience. That just goes to show that renewing and improving your supply chain strategy continuously can go a long way.
If you want to use the lessons that Dell learned and lead your business to success, it is important that you efficiently manage your inventory. For that, Dynamic Inventory is ready to help by offering multifunctional but easy-to-use inventory management software. Contact us today and learn more about how we can help improve your supply chain.
Adam is the Assistant Director of Operations at Dynamic Inventory. He has experience working with retailers in various industries including sporting goods, automotive parts, outdoor equipment, and more. His background is in e-commerce internet marketing and he has helped design the requirements for many features in Dynamic Inventory based on his expertise managing and marketing products online.
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Tuesday, December 11th, 2018
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