...sDell Case Study 1. Taking the case of computer products, identify the supply chain for the distribution of these products and explain the channel service needs of customers. To what extent are store- and non-store-based distribution channels alike or different in terms of the channel functions they perform? Many computers are brought through three different supply chain methods: Although Dell is different as they sell straight to the direct customer. Store and non store based distribution are different because of the better personal service received in store. Distribution is all to do with the placement of the product, being online to product is available to a mass market therefore no matter where in the world the customer is they can order a pc. Whereas when the product is in store it is only available to those near the store, and they may have a much limited stock than what an online distributor is. 2. What are the advantages and disadvantages of the ‘Dell model’ of sales, manufacturing and distribution? Dell distinguish themselves to other computer manufacturers, as Dell sell direct to the final customer. Dell decided to do this as they believed they were providing a better service to the customer and they will grow rapport with that customer who will come directly back to them. This is an advantage as the are getting great service and Dell can rely on repeat service. Another advantage of the Dell model is that they allow customers to build to order...
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...Background of the company In 1983, 18-year-old Michael Dell left college to work full-time for the company he founded as a freshman, providing hard-drive upgrades to corporate customers. In a year’s time, Dell’s venture had $6 million in annual sales. In 1985, Dell changed his strategy to begin offering built-to-order computers. That year, the company generated $70 million in sales. Five years later, revenues had climbed to $500 million, and by the end of 2000, Dell’s revenues had topped an astounding $25 billion. The meteoric rise of Dell Computers was largely due to innovations in supply chain and manufacturing, but also due to the implementation of a novel distribution strategy. By carefully analyzing and making strategic changes in the personal computer value chain, and by seizing on emerging market trends, Dell Inc. grew to dominate the PC market in less time than it takes many companies to launch their first product I. Statement of the Problem Dell has been following its unique ‘direct build-to-order’ sales model for more than 20 years. Customers can plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. II. Statement of Objectives * Examine and analyze Dell’s Direct model, its basic working, success and future challenges * Typical Working of Dell’s Supply Chain and future supply chain challenges * Highlights...
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...and Extending the Business Model With Information Technology: Dell Computer Corporation Kenneth L. Kraemer, Jason Dedrick, and Sandra Yamashiro Center for Research on Information Technology and Organizations (CRITO), Graduate School of Management, and Department of Information and Computer Science, University of California, Irvine, Irvine, California, USA Keywords The exceptional performance of Dell Computer in recent years illustratesan innovative response to a fundamental competitive factor in the personal computer industry—the value of time. This article shows how Dell’s strategies of direct sales and build-to-order production have proven successful in minimizing inventory and bringing new products to market quickly, enabling it to increase market share and achieve high returns on investment. The Dell case illustrates how one business model may have inherent advantages under particular market conditions, but it also shows the importance of execution in exploiting those advantages. In particular, Dell’s use of information technology (IT) has been vital to executing both elements of its business model—direct sales and build-to-order—and provides valuable insights into how IT can be applied to achieve speed and exibility in an industry in which time is critical. Many of the insights gained from this case can be applied more generally to other time-dependent industries, suggesting that the ndings from the Dell case will have implications for a growing number of companies and...
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...analyze the possible alternatives of Dell Computer Corporation in funding its future growth and expansion from the point of view of its top management. Given the company’s financial statements, projected growth in sales, and its working capital financial ratios, this paper forecasted Dell’s balance sheet and income statement for 1997 to trace the external fund needed, if any, and which type of funding is most optimal to fund its future operations and growth. The forecast used a set of assumptions based on the company’s historical data and company policies. After experiencing its first loss late 1993, the company dedicated itself to bringing back its efficient operations to keep up with the fast growing computer industry, minimizing middlemen retailers and shifting the company’s focus to the growth of their liquidity, profitability, and overall growth. The company eventually recovered through its new and improved internal systems of inventory control and vendor certification, ensuring that its products are always of the highest quality. Ensuring its foothold in the market, Dell was the pioneer in manufacturing Pentium-based products and transforming its major product line to Pentium technology. In 1995, Dell was able to ship its new system that was equipped with Microsoft’s Windows 95 on the same day that Microsoft released their operations system. Now, Dell is again atop the industry outpacing revenue growth and increasing its net income. Dell in the recent years has always financed...
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...1. Dell, Inc. rose above its competitors in the personal computer industry thanks to its “Direct Model” strategy. While other companies sold their products through their distributors, resellers, and retailers, Dell sold directly to customers and built their products based on their specifications. While the company directly dealt with the end-customers, it also focused a lot of its marketing and sales on large customers. Dell saw its customers as either a relationship buyer (large organizations that placed repeat orders for multiple PCs) or a transaction buyer (small businesses and home computer users that can purchase a PC online or through a sales rep). The company had outside sales reps court the customers and had the inside sales reps support each of their assigned customers when they called. In addition to the company’s “Direct Model” strategy, Dell also segregated its sales effort based on region and country. It helped identify the opportunities that were unique to each segment. It also made it easier to manage its business because it wasn’t too big to handle. On top of that Dell made sure its products would not stay long in inventory. The production of its computers only required a few hours and they only stayed in inventory for 4 days. Dell’s competitors normally kept their computers in inventory for 20 to 30 days. The company communicated efficiently with its suppliers so that it delivered the correct parts necessary only when they were needed. That way, the parts did...
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...increase from 1995 to 1996. This increase can be perceived as either a good or a bad thing depending on the situation at hand. On one hand, it shows a measure of the Dell’s efficiency and its short-term financial health is in a good place. One the other hand, it could indicate that there is too much inventory. In this case, the inventory is never kept at a high volume, so we can say that the increase in working capital is a good thing. Now, we need to look at the percentage change for each current asset and each current liability in comparison with the increase in the working capital trend. We may notice that each one plays a part in it. One asset that may stick out more than any of the others is the percentage change in inventory. If we take a look at Table 2, we will notice that, for the most part, the percentage change decreased from 1995 to 1996 compared to 1994 to 1995. For inventories, this percentage jumped from 33.18% to 46.42%. This big of a jump may send up some red flags since Dell does not want to hold too much inventory, but that is not want we want to take away from this. In this short time frame, Dell has grown significantly from the previous years. Since Dell is in the growth stage it is not something that should send up red flags. It should be looked at as a good thing because it means that the company is gaining...
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...Prelude case Dell Corporation FT What if a manufacturing company didn’t need to have any inventory? Imagine the reduction to cost structure that could be achieved by simply getting rid of the need to carry huge amounts of finished goods on its books – and eliminating the nail-biting stress of waiting until those goods are sold. For Michael Dell, founder and CEO of Austin, Texas-based Dell Corporation, very little imagination is required. He has built a company with annual revenues in excess of $40bn entirely around a vision whereby manufacturing of an individual item does not begin until it has been ordered by a customer. Every single Dell product has an end user’s name on it before it even leaves the factory. Visiting a Dell factory gives you an idea of just how effective Michael Dell has been in executing this supply chain management philosophy. At the company’s Irish factory near Limerick, for example, there are 40 doors at one end of the factory that deliver the parts needed to build a variety of products – including desktop computers and servers – and 40 doors at the other end of the factory where the finished goods are dispatched to be delivered to customers. The company never holds more than four hours’ worth of parts inventory at any time – and Dell is not even considered to have acquired the parts until the moment they are offloaded from a truck and brought into the factory. The same process is used in Dell operations throughout the world, including the company’s showcase...
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...1. How was Dell`s Working Capital Policy a Competitive Advantage? Dell used its working capital policy as a competitive advantage by reducing the amount of WIP and finished goods inventory in its system. As a result of maintaining a minimum amount of inventory, Dell reduced its need for inventory financing, warehousing and inventory control. Dell kept its accounts payable (A/P) account to a minimum volume by waiting until the customers order was received before placing the “release” order with their suppliers. Dell’s suppliers were all located very close to Dells manufacturing plants, and made daily deliveries to Dell based on just-in-time delivery. By not receiving the parts until the last minute, Dell kept both its inventory and its accounts payable to a minimum. On the sales side, Dell took orders directly from consumers who normally pay with a credit card online, or over the phone. Because Dell waited until they received the order from the customer to start building the computer, Dell kept the CCC (cash conversion cycle to a minimum). If Dell were to operate at Compaq’s DSI level, we estimate that Dell would have to increase its 1995 inventory from $293m to $668m, which is an increase of $375 million. This would mean that Dell would have needed to invest in $668 million in inventory. I believe that the main reason that Dell was able to maintain such a low level of inventory compared to their competition has a direct result of their competitive strategy to maintain a minimum...
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...Introduction Dell company was found in 1984 by Michael Dell at age 19, he was a student living in a dormitory at the university of local retailers, added features such as more memory and disk drivers , and sold them out of the trunk of his car He withdrew 1000$ from his personal savings, used his car as collateral for a bank loan, hired a few friends, and placed ads in the local newspaper offering computers at 10% -15% below retail price. Soon he was selling 50.000$ worth of PCs a month to local businesses. Sales during the first year reached up to 600,000$ and doubled almost every year thereafter. Dell left school in his freshman year to run the business in full time. Dell began assembling his own computers in 1985 and marketed them through ads in the computer trade publications. In 1987 his company witnessed tremendous change it launched its first catalog, initiated a field sales force to reach large corporate accounts, went public , changed its name from PCs limited to Dell Computer Corporate , and established its first international subsidiary in Britain . Dell was selected as the entrepreneur of the year by Inc. in 1989, man of the year in 1992 by PC Magazine, and CEO of the year by Financial World in 1993. In 1992 the company was included for the first time among the Fortune 500 roster of the world's largest companies. By 1995 with sales nearly 3.5billion dollars , the company was the world's leading direct marketer of personal computers and one of the top 5 PC...
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...Dell as the publicly traded company on PC industry, it used the direct-sells model by the network servers. Porter’s 5 forces gave the big helps on Dell’s strategy management. At the sight of relationship between supplier and buyer, Dell got the successful management method on supply-chain. On one hand, Dell company conformity the external resources by the supply-chain management, the direct operate model make Dell built a fictitious platform and provided the business flawless. On the other hand, Dell cored the optimizing of channel flows to help the operation of supply chain. And the competition advantage is also from the supply-chain strategy and that contain 3 aspects. First is direct business model principle, it showed on the customers’ final requirements and that is a channel between customer and company, it made the corporate efficiency higher than the competitors. Second is substitution the stock by information that means no stocks in trade on the sells and purchase. Dell make profit by the information managing, it’s also the reason of keeping high profit when the PC industry decline. Third is creating the whole values, make alliance with the customer and keeping interaction, do the order by customer’s need and feedback. PC is a high technology industry and it’s not very difficult to entry, the product process demand high exact buy the high profit attracted developer, Dell have the threat of potential new entrants but very small. And at present, there is no big threat...
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...1. Describe the “Direct Business Model.” The business model in which an organization sells their products by “cutting out the middle man” and selling their computers directly to the customers, away from a fixed retail location. Sales are typically made through one to one demonstrations and other personal contact arrangements. 2. How does it differ from traditional business models – e.g. Vertical Integration? In traditional business model like vertical integration, processes were vertically integrated with all the research, devel¬opment, manufacturing, and distribution capabilities in-house. This allowed for a high level of commu¬nication and ability to develop products based on the company's interaction with its clients. But in Direct business model organization treat suppliers and service providers as if they were inside the company. Their systems are linked in real time and their employees partici¬pate in design teams and product launches. Technol¬ogy enhances the economic incentives to collaborate because it makes it possible to share design databases and methodologies and speed the time to market. In this way it differs from traditional business model. 3. What are the advantages of direct business model from vertical integration? The advantages of direct...
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...University of Texas at Austin Graduate School of Business 3/3/99 Dell Computer Corporation: A Zero-Time Organization Deep in the heart of Texas lies a Fortune 500 company who exemplifies many of the principles of a Zero Time organization. Dell Computer Corporation has seen extraordinarily growth: a 58% revenue increase and an 82% profit increase in 1997, an equally extraordinary short period of time. Sales rose to $12.3 billion in 1997, profits to $944 million in 1997, and the stock split for the sixth time in 1998. Much of this success is due to management principles and a vision that we describe here. First we provide some background information on the company, and we describe the management principals and philosophies we think make Dell a success. Finally, we describe Dell using the lens of a Zero Time organization. Company Background Many know the story of Michael Dell, his college-based business of building personal computers with available parts, and his build to order strategy. Founded in 1984 as PC’s Limited, the name was officially changed worldwide to Dell Computer Corporation when the first stock offering took place, in June 1988. Other key turning points, according to Michael Dell, were in 1986, when Dell first went outside the US to Europe and hit $50 million in sales; 1989, when the company when from last to first place in their industry on the management of their inventory; and 1993 when the concept of segmenting took shape and allowed the ...
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...Case Study of Dell : Inspiring the leadership In 1984, at the age of 19, Michael Dell founded Dell Computer with a simple vision and business concept—that personal computers could be built to order and sold directly to customers. Michael Dell believed his approach to the PC business had two advantages: (1) bypassing distributors and retail dealers eliminated the markups of resellers and (2) building to order greatly reduced the costs and risks associated with carrying large stocks of parts, components, and finished goods. While the company sometimes struggled during the 1986-1993 period trying to refine its strategy, build an adequate infrastructure, and establish market credibility against better-known rivals, Dell’s strategy started to click into full gear in the late 1990s. Going into 2003, Dell’s sell-direct and build-to-order business model and strategy had provided the company with the most efficient procurement, manufacturing, and distribution capabilities in the global PC industry and given Dell a substantial cost and profit margin advantage over rival PC vendors. Dell’s operating costs ran about 10 percent of revenues in 2002, compared to 21 percent of revenues at Hewlett Packard, 25 percent at Gateway, and 46 percent at Cisco Systems (considered the world’s most efficient producer of networking equipment). Dell’s low-cost provider status was powering its drive for market leadership in a growing number of product categories. Dell Computer was solidly entrenched...
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...1. Ststement of Problem Dell is anticipating growth of 50% in 1997 and expects to beat the industry growth forecast. With this in mind we need to analyse how best we can arrange funding to support this growth. 2. Statement of Facts and assumptions: A few facts - Dell has been successful in sustaining competitive advantage and maintaining profitability for the following reasons: 1. It maintains the lowest inventory of FGI and WIP as it makes computers only on order. 2. As a result of item 1) it has substantial cost savings in terms of low inventory stocking costs and the fact that it can adopt new technology a lot more rapidly with minimal wastage of redundant outdated stock. 3. Another advantage of manufacturing just in time computers (other than configuration flexibility to match customer needs) Dell could keep its working capital in check. As can be seen from exhibit 2 in the dells working capital financial ratio. There is a steady decline of "Days sales of inventory". 4. Dell has witnessed a growth of 52.4% in 95-96 and has a gross margin of 20.5 percent. Assumptions: 1. The gross margin on sales would continue to remain 20.5 percent. 2. Dell will continue to operate with same efficiencies in operation. 3. Inventory levels of wip and FGI will continue at 10 to 20 percent of sales. 4. The average CCC will be at 41 days. 5. AR remains at 14% of sales and AP at 9 percent of sales. 6. Cash and short term investment remains at 12...
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...INTRODUCTION: Although Dell (“Dell” or the “Company”) is one of the medium size players, the Company is one of the most profitable and fastest growing Companies in the industry. The industry is characterized by several different products such as computers, imaging, printing systems, information technology and services and solutions. The industry has seen double digit growth for the last 10 years but as 2001 came to an end, the industry is softening. Amongst its competitors, Dell has been very profitable with its 2001 ROE of 38.72% and growth in earnings of 31% compared to the next fasting growth Competitor, IBM with earnings growth of 5.0%. The rising ROE was driven by increased profitability, higher asset turnover and increased leverage in the business. Dells cash conversion ratio was also superior to its competitors allowing them to generate cash faster than their competitors to reinvest in the business. The Company has a healthy balance sheet with little debt and sizable cash amounts (largest % to assets in the industry with 40.48% in 2001). Dell is an outperformer in the industry due to its direct sales business model. This report will review the financials of Dell Computers in relation to its competitors and discuss the competitive position of Dell in the market place. It will also detail how the Company has changed from 2000 compared to 2013. As Dells most direct competitor IBM’s performance was compared to Dell to understand the reason for Dell’s outperformance....
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