The E-Business Model of Dell and its own effect on Company Logistics


Supply string management can be defined as the interconnectivity of components that are related to one another with up and down stream-links between a number of types of procedures that bring value in the shape of product and services wanted to the customers (Christopher, 2002). The recent innovative performance of Dell personal computers is in respond to the increasing competition occurring in the industry of Personal Computer in relation to time factor. The supply chain of Dell indicates how the company gets benefitted from the information technology to increase its delivery process (Sunil, 2010). Dell was founded in 1984 by Michael Dell. The company took effort as a phone sales brand for the "IBM-compatible" improved Personal Computers after which it defined its marketing portion by formulating its Computer brand (Kapuskinski et al, 2004).

Opportunities for reducing the lead times:

Michael Dell acquired rightfully proclaimed that "we are becoming the Laptop or computer outsourcing company, not just the PC distributor". Within the PC industry, product life cycles are being reduced from twenty calendar months in 1988 to about six months in the twentieth century. Together with this the purchase price factor continued to double after every eighteen months. This situation led to inventory depreciation to a great scope. To further add up, bringing the products in market promptly is crucial to remain competitive in the global world where clients are wanting to choose the latest systems and appreciate the quality constructs for repeated buying (Kraemer et al, 2000).

Dell excelled in the IT world, by gratifying business customers through adoption of softwares that helped to keep track of PC inventory of customers, allowing them the independence to straight make a purchase instead of moving through the source chain processes like heading to the central purchase office etc. The business offered clients to obtain computers on lease and preferred electronic obligations online (Kraemer et al, 2000).

Inventory management

Mainly two factors are involved in assessing a Computer industry's inventory management.

The modular, standardized product mother nature following architectural interfaces that are similar (either provided by Microsoft or Intel)

The differentiation factor i. e. the merchandise distribution composition.

Competitive advantage in supply string - product distribution structure:

With the starting point of 1990, Laptop or computer industry endured a backside lash with regard to creation and product design as the scientific development open to individuals were usually provided by the same resource platform. To fulfil their business targets, the conventional source chain distribution channel implemented by major Personal computer companies, helped these to sale their products to distributers who later purchase goods from a variety of manufacturers and then sell them to numerous suppliers, system integrators, resellers thus finally getting consumer. In the past decade, this business model was successful because of the fact that large amounts of computers were effectively sent out to a number of customer range, also providing them with manifold configurations. However the conventional model failed because of its comprehensive reliance on market forecast. This circulation channel was mainly constricted either due to short supply of product popular or high inventories posed by sluggish retailers. The indirect model also requires the inventory to be checked at every phase for filling requests (Sunil, 2010).

Dell is the company that pioneered innovative business model with the strategy of direct sales to the ultimate users and assembling your computer only when an order is positioned. Selling immediately helped Dell to minimize two steps mixed up in supply chain which could aid in building up the inventory and provide an opportunity to know the genuine and potential clients so that better services can be wanted to them in future either by promoting the most well-liked Dell model or causing further sales enlargement corresponding to demand (Kapuskinski et al, 2004).

Conventional Indirect distributional channel of personal pcs' production companies

Direct distribution route of Dell

Direct Sales:

This way is strengthened by two factors:

Target customer segmentation of products and services

Direct interactions with customers

The company will not make sales through any integrators or resellers, nor will it really utilize any channel service income. Sales are created by the collaborative attempts of the company's task force and by means of advertisement. Direct customer relationship really helps to develop a strong customer bottom as usually sellers that make sales through sellers and resellers don't realize the demands of final clients. This tendency aids Dell to recognize consumer developments so that product improvements can be made accordingly. One drawback of the direct selling method is the lack of channel's intensive reach to myriads of large marketing and sales companies which cater to all market needs. To beat this drawback, Dell did market segmentation based on size and targeted those large clients that may be easily reached through the sales team of the business (Bozarth and Handfield, 2006).

The extensively diffused customer orientation of low income group is also getting benefitted by the merchandise of Dell with the web infrastructure offered by the company. As well as regular sales, Dell caters markets by selling non-Dell products like softwares to the resellers e. g. the company is the second greatest reseller for the Horsepower printers around the globe. Such ease of gain access to allows Dell to see the market movements and competitor steps while maintain steadily its Direct selling strategy. The internet usage as a primary route for sales further aided Dell as direct sellers can certainly correspond and sell their products to a wide variety of clients at least marginal expenditures (Kapuskinski et al, 2006).

Process flow occurring through supply chain:

Build -to-Order Creation:

This approach is central to the "delivery, sales, logistics, procurement, and production". Build-to-order production helps Dell to mechanize new technology as soon as the clients show an inclination for change and also helps it be convenient for altering the production process so that requirements can be satisfied quickly. Another advantages associated with Dell source chain is the fact that the company does not have to buy components and develop products before customer has given repayment. Thus giving Dell a "negative cash change" cycle by which dues are received from customers prior to paying suppliers and vendors (Kraemer et al, 2000).

When customer places an order for the Dell product through internet, they are really backed with software for configuration management that helps them to choose from a variety of software and hardware alternatives. The vendor operator makes sure that all products are properly priced throughout the machine thus allowing customer to make a sensible choice (Wu et al, 2006).

Customers can also get benefitted by the Dell Customer Call Service that will immediately connect them to the inventory of Dell so that they can inquire whether the items they are trying to find is available or not. If this is not the truth than the sales person can offer the inventory offered by discount price or make the customer aware of the new components being launched by the business at high quality prices but to be offered to your client at normal price rate to finish the deal process. At the same time suppliers will be prepared of the element shortage so that they restock their inventory (Kraemer et al, 2000). (supply chain's construction details, component assembly, invoice of materials, role of employees and work circulation graph yet to be added).

The creation system of Dell implements the Just-in-time and trim manufacturing way. Both these principles help to reduce inventory parts by traveling the company to "restock parts" just in the way they can be required and typically to control the parts in possession till they are utilized (Kapuskinski et al, 2006)

The strategy of Dell will go beyond the realms of trim production but the major disadvantage linked with the process is the fact for achieving "mass product customization" Dell must make sure that the product part specs for the forthcoming order has already been available e. g. it might happen that vendors like IBM or Compaq order hard drives from Dell with different batch rules to be utilized in various developing process, Dell must be sure that the product variety to meet this demand is practical. This gives rise to the necessity that all source chain components of Dell like the manufacturing and sales hands, and its own suppliers should work in close cooperation which is often made possible by developing romantic relations with limited suppliers, enhancing business operations and facilitating it in the logistics (Bozarth and Handfield, 2006).

Process moves in the Dell Resource Chain Framework:

For curtailing costs, the business is continually revamping its products design, making, procurement and other processes related to logistics so supplying chain may become efficient.

Unlike other Laptop or computer companies Dell has till day remained loyal to its original business model. . The strategies used by Dell dealing with "build-to-order" production and "direct sales" helped the business to reduce inventory costs and also to develop new product range on the market. This method helped Dell to improve its market share and get significant investment profits (Gunasikaran and Ngai, 2005).

Although the model utilized by Dell for business techniques is simple the execution is complex. As other Laptop or computer manufacturers are reliant on the vendors, resellers and similar supply chain agents to carry out the majority of the sales and marketing work, Dell has to prolong its product reach to the actual customers through personal efforts. For its competitors, the methods chosen to accomplish economies of size is to operate "high volume assemblage lines" but Dell has to load every order for achieving the specifications put forwards by customers. This technique probes extra prospects from the business's shop floor employees, information systems, logistics and suppliers (Bozarth and Handfield, 2006).

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