Gr 8 1

Dell Inc

By-Surbhi

SwarnimSwatiVivek

By- Group 8Surbhi

SwarnimSwatiVivek

Gr 8 2

Explain the direct model of Dell Inc. What was the problem the company was facing in mid-2005?

• Direct Model of Dell– Starts and Ends with the customer– Order online/phone (Customize his configuration)– Dell manufactures & ships directly to customers– Eliminating the retailers from the Sales Channel– Selling Directly to the Customers– Customized Products at Lower than average market price– 3 major manufacturing units in US

Gr 8 3

Problem in mid-2005

• Dell and its contract manufacturers (CMs) have had to adapt an increasing % of L5 manufacturing:

1. Empty chassis are shipped by ocean (L5) to Dell US & Europe first. Motherboards are then air-freighted to Dell US & Europe.

2. Dell incurs motherboard expedite/air-freight cost and 3rd-party integration cost.

3. CMs incur cost for idle labor dedicated for MB-chassis integration.

Gr 8 4

What is the importance of contract manufacturers in the PC supply chain?

• Importance of CM– Helps take advantage of Labor Cost Differences– Capacity

• OEM cnt make the item or easily acquire this capability and must seek a supplier

– Manufacturing competitiveness• The supplier has a low cost, faster availability and so forth.

– Technology• The supplier version of the item is better

Gr 8 5

Compare and contrast the role of contract manufacturers in the supply chain of Dell vis-à-vis other American PC makers.

• In Other American PC makers– Had become “FABLESS”

• Most CMs do everything from Manufacturing to shipping fully assembled pdts on behalf of OEMs

• DELL– CM is in ASIA– Ships half-assembled pdts to US– Factory at US performs further fulfillments– Ships it to customers directly

Gr 8 6

Why does L5 incur higher manufacturing and logistics costs than L6?

L6 L5

Integrated offshore & outside a Dell facility

Integrated motherboard-inside chassis shipped on water

Labor savings

MB air-freighting costs are eliminated

Reduced motherboard packaging costs

Integrated inside a Dell facility

Chassis shipped on water

Motherboards shipped by air

Increased motherboard air-freighting costs

3rd-party integration cost in US

Separate logistical costs for chassis and motherboards

Gr 8 7

What are some of the costs that are incurred in L5 but not in L6? Are there any costs that apply to only L6 but not L5?

• Cost incurred in L5– Motherboard packaging cost– Motherboard air freight/expedite cost– Chassis and motherboard US transportation cost– Local/regional integration cost– Motherboard rework cost at DELL

• Cost incurred in L6– China assembler’s cost (Foxconn performing

L6)

Gr 8 8

Explain the root causes of increasing L5 manufacturing.

• Dell’s inability to provide motherboards in a timely fashion to CMs– Chipset Supplier decommit or supply issues

• Creates a disruption in the desktop PC supply chain• Accounted for more than 60% of L5 manufacturing

– Quality/engineering issues• Leads to dysfunctional or problematic motherboards• Create additional demand for motherboards

– Dell forecast accuracy• Due to faulty forecast, Dell needs to source its extra chipsets or risk not

meeting the customer demand• Long Lead Time in chipset makes things difficult for the supplier

– New Pdt Introduction• Actual demand for new PC pdt is volatile, so need to air frieght extra

motherboards

Gr 8 9

Which of the six proposed manufacturing solutions should Dell implement, based on the survey result? Why? What are the pros and cons of this recommendation?

• Option 3A: Integration at SLC/Hub

• Advantages– Less Complex for Worldwide Procurement– Supplier quality engineering management is

reduced

• Disadvantages– Most Complex for Cost Accounting– Extra Production control & Inventory control

headcounts are required.

Gr 8 10

How easily sustainable is your recommendation for the previous question if the chipset supply shortage further deteriorates?

Gr 8 11

How good is the methodology employed by the BPI team to determine the optimal manufacturing option for Dell? Are there more effective approaches?

• Methodology of BPI team was GOOD– Process smoothness & sustainability– Cost per box– Pdt Quality– Capital Investment– Material Handling– Logistics

• Some other effective approaches can be– Push & Pull strategy– Geographical Location of suppliers

Gr 8 12

How can Dell effectively address the root causes contributing to the increase of L5 manufacturing?

• By providing motherboards in a timely fashion to CMs

• Ensuring that Chipset supplier dnt decommit or have other supply issues– Have Multiple Suppliers– Have some safety stock

• Reduce Quality/engineering issues– TQM– Benchmark Standard Operating procedures

• Forecast Accurately to avoid demand fluctuations

• Plan demand in a better way for New Product introduction

Gr 8 13

Thank You