Dell Inc. pioneered the Direct Model of selling PCs directly to the consumers. How it enabled Dell to manage its supply chain efficiently is discussed in this case study.
Dell Computer Corporation a leading direct computer systems company was founded in 1984. Dell sells its computer systems directly to end customers, bypassing distributors and retailers (resellers). Dell’s supply chain consists of only three stages— the suppliers, the manufacturer (Dell), and end users.
Dell’s direct contact with customers allows it to:
- properly identify market segments,
- analyze the requirements and profitability of each segment, and
- develop more accurate demand forecasts.
Dell matches supply and demand because its customers order computer configurations over the phone or online (Internet). These computer configurations are built up from components that are available. Dell’s strategy is to provide customised, low cost, and quality computers that are delivered on time. Dell successfully implemented this strategy through its efficient manufacturing operations, better supply chain management and direct sales model. Dell takes orders directly from its customers; either on phone or online. Thus, Dell reduces the cost of intermediaries that would otherwise add up to the total cost of PC for the customer. Dell also saves time on processing orders that other companies normally incur in their sales and distribution system. Moreover, by directly dealing with the customer Dell gets a clearer indication of market trends. This helps Dell to plan for future besides better managing its supply chain.
Another advantage Dell gets by directly dealing with the customer is that it is able to get the customers requirements regarding software to be loaded. Dell loads the ordered software in its plant itself before dispatching it. By eliminating the need of a PC support engineer to load software, the customers gain both in time and cost. They can use the PC’s the moment they arrive. More soon….
Click to download full text of this Case Study in PDF format: Dell’s Supply Chain Management Strategy