DELL

It’s Operation and How It

Makes Work

By: Dian
Inda Sari

2008
COMPANY HISTORY
 1984
At the age of 19 with $ 1,000 in start up capital Micheal Dell founded Dell Computer
with simple vision and business concept – that Personal computer could built to
order and sold directly to customer.
He believed that:
1. Bypassing distributors and retail dealers eliminated the markups of reseller.
2. Building to order greatly reduced the costs and risks associated with
carrying large stock of parts, components and finished goods.
 1985
Dell build and design the first computer system
 1988
Dell had raised $ 30 Million in it’s IPO. At this time his capital is $ 85 Million.
 1998
Dell had a 12% share of PC market in US and became one of market leader in
computer business with Compaq and IBM until now.
Company Tour
 Overview We Make Computing Easy. Like it
should be

 Focus Our Direct Connection

 Leadership Why We’re the Industry Leader –

Our Product & Service

We Know Enterprise Computing

 Result
Firsthand

We’re Close to Customers Around

 Global the World
OPERATIONS AND STRATEGY
-1
 Build-to-Order Manufacturing and
Mass Customization
Dell built its computers, workstations and servers to order, none
were produced for inventory. Dell customers could order
custom built server and workstation based on their needs of
their applications.
This sell-direct strategy meant that Dell had no in-house stock of
finished goods inventories and that unlike competitor using
traditional value of chain model, it didn’t have to wait for
resellers to clear out their own inventories before it could push
new models into market place.
Dell Assembly Plants – Austin - Texas,
Ireland and Penang Malaysia.
OPERATIONS AND STRATEGY
-2
 Traditional PC’s Industry Value Chain (Utilized by Compaq, IBM, HP and Most
Other)
Service and
Assembly of PC by Sales and
Manufactured of support activities
PC Makers (to Marketing
PC’s Component Purchase Provided to PC
Fill order from Activities of
By By Users by reseller
Suppliers and Reseller to self
Suppliers PC Users (or some PC
Keep distribution Inventories of
Makers – IBM to
Channel stock) PC’s on hand
PC users)

 Build-to-Order/Direct Sales Value Chain (Employed by: Dell, Gateway, Micron

Electronics)

Service and
Manufactured of Customized Support activities
PC’s Component Assembly of PC’s Purchase Provided to PC
By By PC Makers as By Users eithers by
Suppliers Orders from PC PC users PC Makers (via
Buyers come in Telephone, fax,
Email) ect.
OPERATIONS AND STRATEGY
- 3
Partnerships with Supplier
Dell believed it made much better sense for Dell Computer to
partner with reputable suppliers of PC parts and components
rather than to integrate backward and get into parts and
component manufacturing on its own.
The advantages:
5. Using name-brand component enhanced the quality and
performance of Dell PC’s.
6. Getting the volume of components it needed the overall
market supply.
7. It feasible to have some of supplier engineers assigned to
Dell product design team and for them to be treated as part
of Dell.
8. Dell’s long-run commitment to its suppliers laid the basis for
just-in-time delivery suppliers product to Dell assembly in
Texas, Ireland, Penang.
OPERATIONS AND STRATEGY
-4
 Committed to Just-in-Time Inventory
Practices

Dell's just-in-time inventory emphasis yielded major cost advantages and

shortened the time it took for Dell to get new generations of its
computer models into the marketplace. New advances were coming so
fast in certain computer parts and components (particularly
microprocessors, disk drives, and modems) that any given item in
inventory was obsolete in a matter of months, sometimes quicker.
Having a couple of months of component inventories meant getting caught
in the transition from one generation of components to the next.
Moreover, there were rapid-fire reductions in the prices of components
—most recently, component prices had been falling as much as 50
percent annually (an average of 1 percent a week).
OPERATIONS AND STRATEGY
-5
 Direct Selling

Selling direct to customers gave Dell firsthand intelligence about customer

preferences and needs, as well as immediate feedback on design
problems and quality glitches.
Management believed Dell's ability to respond quickly gave it a significant
advantage over rivals, particularly over PC makers in Asia, that made
large production runs and sold standardized products through retail
channels. Dell saw its direct sales approach as a totally customer-driven
system that allowed quick transitions to new generations of components
and PC models.
OPERATIONS AND STRATEGY
-6
 Virtual Integration and Information
Sharing
Dell was using technology and information-sharing with both supply partners and customers
to blur the traditional arm's-length boundaries in the supplier- manufacturer-customer
value chain that characterized Dell's earlier business model and other direct-sell
competitors. Michael Dell referred to this feature of Dell's strategy as "virtual
integration."16 On-line communications technology made it easy for Dell to
communicate inventory levels and replenishment needs to vendors daily or even hourly.
A number of Dell's corporate accounts were large enough to justify dedicated on-site teams
of Dell employees. Customers usually welcomed such teams, preferring to focus their
time and energy on the core business rather than being distracted by PC purchasing and
servicing issues.
Dell gave its large customers access to Dell's own on-line internal technical support tools,
allowing them to go to www.dell.com, enter some information about their system, and
gain immediate access to the same database and problem-solving information that Dell's
support personnel used to assist call-in customers. This tool was particularly useful to
the internal help-desk groups at large companies.
OPERATIONS AND STRATEGY
-7
 Demand Forecasting

Management believed that accurate sales forecasts were key to keeping

costs down and minimizing inventories, given the complexity and
diversity of the company's product line. Because Dell worked
diligently to maintain a close relationship with its large corporate and
institutional customers, and because it sold direct to small customers
via telephone and the Internet, it was possible for the company to keep
a finger on the pulse of demand—what was selling and what was not.
Moreover, the company's market segmentation strategy paved the way
for in-depth understanding of its customers' evolving requirements
and expectations. Having credible real-time information about what
customers were actually buying and having first hand knowledge of
large customers' buying intentions gave Dell strong capability to
forecast demand.
OPERATIONS AND STRATEGY
-8
 Research and Development

The company talked to its customers frequently about "relevant technology,"

listening carefully to customers' needs and problems and endeavoring to
identify the most cost-effective solutions.
Dell had about 1,600 engineers working on product development and spent
about $250 million annually to improve users' experience with its products
—including incorporating the latest and best technologies, making its
products easy to use, and devising ways to keep costs down. The
company's R&D unit also studied and implemented ways to control quality
and to streamline the assembly process.
OPERATIONS AND STRATEGY
-9

Listen Solve Impact

7. Listen
We gather requirements directly through tens of thousands of customer interaction daily,
organized events, and customer panels. Partnerships with a wide variety of key industry
software, hardware and component suppliers give us a uniquely broad perspective on the
computing landscape.
9. Solve
Many Innovations begin in-house, led by global team of top engineers, product designers and
technical experts. Others begin as a team effort with Dell’s strategic partners. The mission
is to deliver innovative and cost-effective solutions that meet today’s real live customer
challenges and work seamlessly in existing environments and with other product.
11. Impact
Dell is uniquely positioned to impact industry trends. We maintain strong internal development
capabilities. We partner, rather than compete, with top industry technology suppliers and
original development manufacturers. We steer enabling industry standards and technologies
through industry groups and strategic partners. In this way, Dell Spurs innovation and
delivers value to customers.
Library

 www.dell.com
 www.mhe.com
 Other related sources of Dell Company.
The End

Medan, 17 August 2008