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Dell New Model

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Submitted By yumiruru
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1. How might this new model have an effect on CMs’ relationships with their suppliers? (5 marks)
Dell aims to establish a new model for their netbook procurement. Dell wants to have a direct negotiation with components suppliers. The goal is to reduce the current pricing cutting competition among CM. That is because Dell noticed that direct contract manufacturer (CM) negotiations destroy the component price visibility and made them lose control on outsourcing procurement. The direct CM negotiation also has strains to component suppliers.
This new model impacts to CM’s relationships with their current suppliers. It destroys the relationship between CM and their current suppliers. New model make the CM needs to rebuild relationship with new components suppliers. When Dell gains a direct involvement with suppliers, it avoid CM use the alternative components for costs advantage. Dell will also have a strong relationship and effective communication with component suppliers. It can avoid Dell paying extra costs such as failure in quality standard or delivery delay. However, the CM might loses the negotiation terms and conditions with new component suppliers. CM also will not having a good harmony with new component suppliers compare to current component suppliers. When the CM cannot choose their specific suppliers which is allow CM to rebate for hidden price discount and charge Dell with market price, CM should pay the higher fees.
The new model also impact the component suppliers with destroy the long-term relationship with Dell and CM. Dell wants to choose the lowest prices and quality for the components they want and oversee delivery via bidding system. Some of the suppliers that having long-term relationship with Dell may feel betrayed because they need to offer a lower price to Dell to compete with others low price and provide quality component bidders. So, some

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