Dell's Reinvented Supply chain strategy

Welcome back Readers I’m Sivakami - A final year MBA student from Amrita School Of Business majoring in Marketing and operations. I have found my space to explore on the various verticals in the area of  Logistics and supply chain and of course not limited to theories and  empirical studies 😅. So come lets discover on our never ending territory 😇 

As a Supply chain management student it is always fascinating to know how companies design their supply chain strategy to achieve a competitive edge over other rivalries. One such is Dell. Dell has transformed significantly since they pioneered the direct-to-customer model for PCs. So what made Dell achieve competitive advantage is their customer-centricity and lean approach to the supply chain despite threats from rivalries like Apple.

    The most remarkable feature of Dell’s supply chain management is its direct sales model. In fact, it accepts orders directly from the customers, without involving any retailers. Their model helped in accessing the customer needs directly. Based on this data, the brand implemented additional products and services according to customers’ preferences. This made it stand out among other computer hardware manufacturers early on.

    Second factor which led to the brand's success is the reinvention of the supply chain. The company implemented strategies like Global structure instead of regional structure, with three business units, Standardized offers including the most frequently purchased configurations, Segmented model instead of a one-size-fits-all model, Infrastructure that corresponds to the changing needs of the business. Standard yet flexible processes that leverage global partnerships, Customer priorities aligned according to speed, choice and cost. Ready-made, in-stock systems for quick delivery, Optimization of global IT infrastructure. All of these renovations that they made in their supply chain model helped them in segmenting their customers as well. 

Following are the key segments:

• Customers with specific needs – configurable products
• Customers that choose the company as a trusted advisor – preconfigured products
• Customers that value speed – finished goods purchased either directly or through the website

    Accordingly, the brand implemented different supply chains targeting these groups of customers. However, all of the chains were using the same tools, processes and suppliers.

    Dell made sure that each of their suppliers have a manufacturing plant near Dell’s plant. The suppliers should also cooperate with logistics companies that can both deliver the components and ship the customer orders. Finally, the company manages its inventory based on the VMI model, meaning the supplied components are kept on the truck only and taken as needed while the vendor manages the inventory. Dell and its suppliers communicate with each other via an internal website called Value Chain. At this website, the companies can access information about the inventory status within the supply chain as well as get demand and production data.

    To summarize, Dell has been a successful player in the computer hardware market since the very beginning because of its innovative supply chain strategies. Despite the hard times in the early 2000s, its customer-centric model helped Dell remain afloat. Dell reinvented its supply chain according to the changing needs of its target audience. That just goes to show that renewing and improving your supply chain strategy continuously can go a long way. 

Happy Reading from Sivakami :)