DELL“Selling Directly, Globally”

By: Ravi Prakash Singh

Batch 18 (Operations)

ITM

Background Founded by Michel dell in 1984, headquarter in

Round Rock Austin, Texas. Was 2nd largest computer seller, behind Hewlett-

Packard(HP). (Fig as of Apr,2010) Currently 3rd largest, behind HP and Apple. (Fig as

of May, 2011) Ranked 38th in year 2010. Currently ranked 41th in Fortune 500 list of

companies.

Reasons for Dell’s Growth

Was a pioneer in “configure to order” approach to manufacturing.

Delivering individual PCs configured to customer specification.

In contrast, its competitors were delivering orders to intermediaries on a quarterly basis.

Reasons for Dell’s Growth

Implemented “JIT” (just in time) manufacturing approach.

To minimize the delay between purchase & delivery, it followed a strategy of manufacturing its products close to its customers.

This approach minimized the inventory costs.

Low inventory is another signature of the Dell Business Model- a critical consideration in an industry where components depreciate very rapidly.

Traditional Business Model

Used Direct Sales Model. What-the-customer-wants manufacturing Maintains a Negative cash conversion cycle. Lean Inventory Model. JIT helps in building the computers just after

the user places the order. Customized systems at affordable rate.

The Direct Sales Model

Dell’s model is based on build-to-order process, where company builds each PC on demand.

Customers can choose what components they want for their computer, Dell then assemble the order and ships it.

This strategy improves customer satisfaction and reduces costs and risks to the company.

Direct sales in conjunction with build-to-order is a powerful model for both Dell and its customers.

Customers get what they want, rather than be forced to choose among a fixed set of options.

The “Build To Order” Process

Dell’s Global Fulfillment Network 1) Manufacturing Centers 2) Fulfillment Centers for Delivery 3) Merge Centers

The “Build To Order” Process

Step 1: Customer Order PullOrders transferred from the Order Management System (Online) to the Manufacturing Scheduling system (Factory Planner Maintenance Online) every 2 hours. Orders are sequenced in a production schedule (QUEUE SYSTEM).Step 2: Kitting Protective Container components built. Unique software Images are stored for download. (Custom Factory Installation)Request generated for material required for customer orders every 2 hours.- -> Ensures Lean Inventory

The “Build To Order” Process Step 2: Kitting Service Tag No. (SAT), unique identifier, created for

every machine. Unique Serial No. for each hardware part. M-To-1 mapping of serial nos. with SAT. Step 3: Build Machine is assembled based on the user request. Requested parts/configuration is identified by the

SAT. Step 4: Software Installation & Testing CFI (already in progress ), ensures that required

software are ready to be installed (tracked using SAT) Final testing of the machine.(All components are

present (SAT) and are operating as expected.)

The “Build To Order” Process Step 5: Boxing After final testing, machines transferred to boxing

area. On basis of the SAT, boxes are ready. Machine with other additional required components

are packed. Sent to Order Accumulation. Step 6: Order Accumulation Until the complete order is accumulated at a

common location, the finished machine is not shipped.

Merge Centers.

Negative Cash Conversion Cycle

Dell has a negative 45 days CCC (Cash Conversion

Cycle), which means that their sales are converted in hard cash 45 days BEFORE

the sale.

The New Strategy

For 2 decades, Dell was known as a company who manufactures and sells hardware.

Took drastic measures to increase the profitability.

Masterminded the change in entire product line-up.

The New Strategy

The new Product lineup:Power Edge servers Power Vault and Dell storage products

Power Connect switchesOptiPlex desktopsLatitude notebooks Dell Precision workstations Inspiron notebooks Dimension desktops Dell monitors Software and Peripherals Premier Services 

The New Strategy

“Innovation is the key” Dell launched “all in one” printer, that

can scan, copy and fax are #2 (private label of Lexmark), behind Lexmark.

The Dell Printer software automatically detects when ink is running low and directs user to the Dell website.

Advertisement through its website http://www.dell.com providing offers like free shipping of orders.

The New Strategy

Simplify-IT strategy Educating the prospective customers about the

services which are provided by dell directly through its website http://www.dell.com

The New Strategy

Started extensive partnership with companies like Google.

Under the deal, millions of Dell PCs were loaded with the Google toolbar for Web and PC search, before they're shipped to consumers.

Changing its image from hardware manufacturer to a solutions sellers.

Replaced IBM in Q2(2008) to become a leader in storage and server segment.

The New Strategy

Dell has started CFI (Custom Factory Installation)

Under CFI, Dell custom installs software and hardware not generally available on the Dell’s sales shelf.

The New Strategy

Launched Premier.Dell.com

References

http://money.cnn.com/magazines/fortune/fortune500/2010/snapshots/1053.html

http://www.dell.com Direct from Dell: Strategies That

Revolutionized an Industry –By Michael Dell http://www.forbes.com http://moneycentral.msn.com http://news.cnet.com/Dells-new-goal-Double-in-

size/2100-1001_3-875117.html

Thank You !!!