Supply Chain Management: Dell computer

Dell computer was founded in 1984 by Michael Dell and is today one of the most successful businesses. From the beginning, they integrated a new concept of a direct sales model which eliminated middlemen and sold directly to the consumer, and a build-to-order process of manufacturing which they named Dell direct. Dell computer is today said to have one of the most famous and functional business models by establishing a unique e-commerce model that embraces the internet in its supply chain (Dell Annual Report, 2007). This meant the extension of their direct sales model at low marginal cost and they did not face channel challenges as they initially did not use middlemen hence smooth transition.

This supply chain has been very beneficial to their business. One of the benefits is that Dell has a head start in the provision of products to the market faster than their competitors. This is made possible because they use direct sales through the internet while their competitors still rely on readying their products for sale at retail stores. Personal Computers have a short life cycle in the market and therefore Dell enjoys an early to market advantage over its competitors.

Another benefit to their business is the fact that it offers customization services and quick response. Dell sells their products through the internet and offers an unlimited variety of personal Computer configurations (Kapuscinski et al., 2004). This means that customers can make specifications on their desired product and based on their budget.

Dell attracts a large number of business customers with its supply chain. They facilitate business-to-business sales by offering their corporate customers an individualized interface in their site called the premier page which is customized according to the needs of the company in which purchasing managers of the companies can log in and place their orders. Business-to-business sales are the major revenue sources of 85% as compared to business-to-consumer sales at 15% of total revenue.

It also helps in the reduction of the bullwhip effect which means the replenishment of orders at different levels without an apparent link to final demand. They do this by constructing web pages for the suppliers that allow them to view orders for the components that they produce and therefore suppliers plan according to consumer demand.

Finally, it helps in the timely collection of payments because the use of the direct sales model allows Dell to collect payments approximately 5 days after product sales. Dell on the other hand continues paying its suppliers according to the schedules of traditional billing. This ensures low levels of inventory and it operates with negative capital hence increasing performance.

The incorporation of such a supply chain in Wal-Mart could have both advantages and disadvantages. The benefits that Wal-Mart can get in terms of revenue opportunities include the attraction of customers who do not want to come to the supermarket to order products online. It also can make it possible for customers who are from out of town to order special items online (Michael, n.d).

As for the cost opportunities, this supply chain can lead to a reduction in facilitation costs because fewer checkout clerks are required. Centralization also leads to inventory savings especially for slow-moving and specialty items.

However, there also are some disadvantages of this supply chain to Wal-Mart. One of these disadvantages is the additional outbound cost of transportation as they have to cover the delivery costs to the customer as they cover the last mile. Finally, there is an additional cost for picking and packing products for the customers. Regardless of these disadvantages though, it is a strategy worth consideration by Wal-Mart.

References

Dell Annual Report (2007). Web.

Michael, G. & Michael, J. (n.d) Supply chain integration through information sharing. Web.

Kapuscinski et al. (2004) Inventory Decisions in Dell’s Supply Chain. Web.