Table of Contents
Group Report
Executive Summary 3
Focus of the Proposal 4
Research and Analysis:
Dell*ƒ*…½*ƒ”€¡s Competitive Advantage 6
Dell*ƒ*…½*ƒ”€¡s IT Tools 9
Dell*ƒ*…½*ƒ”€¡s Business Model 14
Dell*ƒ*…½*ƒ”€¡s IT Infrastructure 18
Our Recommendations 22
Resources 26
Executive Summary
Constantly changing technology directly impacts Dell*ƒ*…½*ƒ”€¡s success and future.
Although Dell is an extremely successful company, there are areas of improvement and
enhancement that should be considered. After a thorough analysis of Dell*ƒ*…½*ƒ”€¡s IT
tools, business model, IT infrastructure and competitive advantage, we have developed
seven key suggestions. By implementing these recommendations, Dell can keep its high
ranking in the competitive computer industry by increasing customer satisfaction,
competitive advantage and superior value chain, without changing its principal operations
to achieve these goals.
Our recommendations allow Dell to enhance their supply chain management system,
increase customer service, gain market share, and increase revenue.
1. Consider selectively adding other vendors to its supply chain management system.
2. Initiate a program to use *ƒ*…½*ƒ‚°Customer Surveys*ƒ*…½*ƒ‚± to gain market
share.
3. Invest more in their Research and Development to develop new products and services.
4. Consider offering online data back-up capabilities.
5. Implement a program to reduce errors in their direct Internet ordering system and create
a *ƒ*…½*ƒ‚°Clearance*ƒ*…½*ƒ‚± area on its website for systems produced in error.
6. Enhance Dell*ƒ*…½*ƒ”€¡s customer support services.
7. Increase their company recognition through a national advertising campaign.
Focus of the Proposal
Dell Computer is a leader in the e-commerce computer hardware market. It is an
established brand that leads personal computer manufacturers both in U.S. sales and
overall online sales. Its trademark method of selling products to customers, corporate and
individual consumers, emanates from the Dell Direct model, a Web-enabled infrastructure
that allows customers to customize their PCs and order other products they need or desire.
This virtual integration structure eliminates the need to manufacture everything, and
instead uses the power of the Internet to share and exchange information with suppliers
and vendors to build a truly superior supply chain that keeps inventory turnover low and
costs to a minimum.
The primary method Dell uses in order to achieve and sustain their competitive advantage
is a unique, direct to customer business model. The model is known as Dell Direct,
referring to their relations with their customers as being *ƒ*…½*ƒ‚°direct.*ƒ*…½*ƒ‚±
This model helps Dell focus on price for performance, customization, service and support,
latest technology and superior shareholder value. Additionally, Dell is able to distinguish
itself from its competitors with its customized on- demand manufacturing. With this
customization, Dell is able to offer customers more value for their money by eliminating
intermediaries in their procurement, manufacturing and distribution processes.
Dell*ƒ*…½*ƒ”€¡s primary resources include the most up-to-date technology and IT tools
that allow it to successfully move along their superior supply chain and achieve the value
they strive for. Dell*ƒ*…½*ƒ”€¡s value chain allows Dell and its suppliers to exchange
information and interact with each other. The Internet, Dell*ƒ*…½*ƒ”€¡s key IT factor in
its success, results in lower costs to customers than other retailers because customers tell
Dell exactly what they want and Dell creates products for the consumer without
experiencing wasteful resources in production.
Overall, it is evident that Dell*ƒ*…½*ƒ”€¡s competitive advantage lies in its Direct model
success. Through Dell*ƒ*…½*ƒ”€¡s IT performance, which combines its resources, its
relationship with suppliers and its consumer communication capabilities, Dell has
developed one big advantage over its competitors.
Research and Analysis
Analysis of Dell*ƒ*…½*ƒ”€¡s Competitive Advantage:
Dell is officially the No. 1 computer systems company in the world. Dell is able to sustain
a competitive advantage over competitors in the computer industry because of an
extremely efficient supply chain/distribution system. Dell is able to achieve superior
profits in the industry because they are a knowledgeable user of information,
communication, e-commerce, e-business, internet, and web technologies.
Michael Dell states that Dell is so successful because of *ƒ*…½*ƒ‚°Knowledge
Management*ƒ*…½*ƒ‚±. Mr. Dell defines that term by saying *ƒ*…½*ƒ‚°physical assets
are being replaced by intellectual assets.*ƒ*…½*ƒ‚± This relates to Dell*ƒ*…½*ƒ”€¡s
inventory system. Dell implements a Just-In-Time inventory system which operates on
only 6 days of inventory. Dell is able to achieve greater profit margins and increased
profits because of their inventory system. Inventory and labor are the highest liabilities of a
firm. Since Dell only operates with 6 days worth of inventory, they are able to cut costs on
warehousing, hiring people to track and maintain inventory, and avoid holding on to
obsolete technology. This allows Dell to free up cash flow to invest in other value adding
activities.
Dell uses a JIT inventory system because Dell*ƒ*…½*ƒ”€¡s customers can only order
computers directly through Dell itself. Dell uses their website www.Dell.com to take
customer*ƒ*…½*ƒ”€¡s orders. Dell focuses on direct sales, cutting out other distribution
channels entirely. This allows for a deeper relationship with the customers whereby Dell
can offer their customer*ƒ*…½*ƒ”€¡s better service, savings, convenience, and efficiency.
A customer can order their own custom computer, have it built by Dell in three days and
have it delivered to the customer*ƒ*…½*ƒ”€¡s doorstep within one week.
Dell*ƒ*…½*ƒ”€¡s use of the internet has revolutionized the company. Dell makes their
website extremely consumer friendly to offer an easy order process to the customers. Dell
has also created their *ƒ*…½*ƒ‚°Premier Page*ƒ*…½*ƒ‚±. This page was made for
Dell*ƒ*…½*ƒ”€¡s larger accounts including corporations, the Government, and
educational institutions (ie Syracuse University). This webpage includes dynamic price
upgrades, easier navigability, and a greater range of available upgrades/options. Customer
relationship management software keeps close tabs on the types of computers that
customers are buying (Pizinger).
Not only does Dell use the internet to make the customer ordering process easier. They
also use the internet to build better relationships with their suppliers. In order for Dell to
work off of 6 days of inventory, their suppliers have to be very involved in the company to
make sure superior service is met. Dell uses state of the art production planning programs
that forecast the quantities of components needed to build the computers. After those
forecasts are made, supply chain systems pass those forecasts to suppliers, who respond
with cost estimates and plan their production as a result (Solis).
To achieve their supply chain superiority, Dell uses solutions from i2 Supply Chain
Management. *ƒ*…½*ƒ‚°i2 streamlines the supply chain by providing component
suppliers and Dell planners with global views of product demand and material
requirements. It also provides real-time factory scheduling and inventory management, so
employees can generate key reports based on accurate and timely data, pinpoint inventory
on the factory floor, and receive supplier deliveries on a true just-in-time basis (i2 supply
chain management systems).*ƒ*…½*ƒ‚±
This allows Dell to change their manufacturing schedule every two hours to keep up with
customer orders. Dell*ƒ*…½*ƒ”€¡s suppliers have access to this accurate, timely
information. Since the suppliers work with facts instead of forecasts, this allows them to
reduce waste and improve efficiency. Once suppliers receive this information, they are
directed to deliver needed materials to a specific dock door for assembly for specific
product manufacturing. Dell uses the Windows NT operating system and Intel-based
servers for all of the i2 applications (Soral).
Dell*ƒ*…½*ƒ”€¡s e-commerce is a huge part of their competitive advantage. Their
e-commerce internet infrastructure is so advanced and knowledgeable that by using it to
determine trends and demands of their products, they have gained superiority over their
competitors.
Dell has set up strategic alliances with other companies to have their products sold on
Dell*ƒ*…½*ƒ”€¡s direct selling distribution channel. Back in 2000, Palm, Inc. made an
agreement with Dell to offer an expanded line of handheld Palm products and accessories.
This agreement allowed Dell to drive momentum for the Palm operating system market
(Dell: 2000, April 17). Along with Palm, Xerox also partnered with Dell to take advantage
of Dell*ƒ*…½*ƒ”€¡s e-commerce. Advantages to Xerox were increased profits by
offering the printers with the Dell computers. Advantages to Dell include selling high
quality printers along with their computers, but more importantly, it allowed Dell to be
involved in the customer buying process for printers. Being involved in the decision
making process is key to Dell*ƒ*…½*ƒ”€¡s success because they see directly what the
customers want and determine their production schedule from that information (Dell:
2000, May 22).
Dell achieves its competitive advantage over other firms in the industry by having superior
supply chain management. Dell utilizes technology to interpret information. By being
involved in the customer buying process they are able to determine their customers*ƒ*…
½*ƒ”€¡ needs. This allows Dell to streamline production and have close relationships with
their suppliers which results in getting timely deliveries in order to mass customize
customer*ƒ*…½*ƒ”€¡s computers.
Analysis of Dell*ƒ*…½*ƒ”€¡s IT Tools:
Dell*ƒ*…½*ƒ”€¡s supply chain management success can be summed up in one idea.
*ƒ*…½*ƒ‚°Supply chain management shortens the cycle between the component, the
manufacturer and the end customer. We are allowing them to almost touch each other,
(E-commerce)*ƒ*…½*ƒ‚± according to Michael Chong, e-business Technology Manager
of Dell Computer Corporation. Supply chain management is the effective and efficient
movement of materials from suppliers, through a company and into products, which
eventually is received by consumers.
An important goal for Dell is to enable customers to process their own transactions. Dell is
known for their efficient and effective build-to-order business model. This model allows
customers around the globe to order customized systems from the dell.com website.
Dell*ƒ*…½*ƒ”€¡s online supply management allows Dell, suppliers and customers to
