Subject: Dell’s Value Chain Case
1. How has Dell used its direct sales and build-to-order model to develop an exceptional supply chain? Dell encourages suppliers to focus on their individual technological capabilities to sustain leadership in their components. Suppliers are also pressed to drive down lead times, lot sizes, and inventories. Dell constructs special Web pages for suppliers to plan based on actual end customer demand. On the distribution side, Dell uses direct sales, primarily via the Internet, to increase revenues by offering a virtually unlimited variety of desktops, notebooks, and enterprise products. Options displayed over the Internet allow Dell to attract customers that value choice. Customers select recommended product configurations or customize them. Dell’s customers place orders at any time of the day from anywhere in the world. Dell has track past purchases and place orders consistent with their purchase history and current needs. Assembly begins immediately after receipt products filling the distribution channels (including shelves at retailers) before a product reaches the customer. Dell introduces a new product to customers over the Internet as soon as the first of that model is ready. In an industry where products have life cycles measured in months, Dell enjoys a huge early-to-market advantage. 2. How has Dell exploited the direct sales model to improve operations performance? Direct sales allow Dell to eliminate distributor and retailer margins and increase its own margin. Dell collects payment in a matter of days after products are sold. But Dell pays its suppliers according to the more traditional billing schedules. 3. What are the main disadvantages of Dell’s direct sales model? It result in higher outbound shipping costs that selling through distributors from its distributors and retailers. Dell sends individual products directly to customers from its factories. But many of these shipments are small (often one or a few...
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