As one of the largest and most sought after technology companies in the world, Dell stands as a multinational corporation, employing over 90,000 people all over the world. It produces, sells and services computers. Over the years, it has gained immense popularity for its mass customization and cost reduction processes. It is also known for its commitment to innovation and creative energy as well as its contributions to supply chain management and digital commerce.
Its vision is to provide technology to guide people to fulfil their dreams and their destiny and to empower them to break through different barriers to achieve their goals. Through its dynamic leadership it has delivered value to customers over the past 26 years and has created for itself a huge fan following and a large customer base. Established in 1984 by Michael Dell, at Austin, Dell started out as ‘PCs Unlimited’. Dell was of the view that if companied started selling personal computers to their customers, they could better comprehend and fulfil customer needs and demands.
Michael Dell dropped out of school to pursue this dream and eventually developed a Pc called Turbo PC. This was the first step which finally leads to expansion of the business globally and to the scope that can be seen today. The name Dell was adopted in 1988 and it started selling computers over the internet in 2002. From here started a journey which further developed into selling TVs, digital players and even printers online. And now Dell is one of the leaders in the computer industry, its focus is primarily on computers, notebooks, laptops and different accessories of computers.
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Dell is one of the few companies which follow up computer sales with complete customer care and after sales service. It undertakes its complete responsibility and understands that this does not end once its computers leave the factory- in fact they go much beyond that. “Dell develops, manufactures, advertise, sells its services, supports and facilitates its clients and designs a range of computer systems and services that are customized to individual customer requirements” (“Business Summary,” 2009).
Customers can buy any Dell product that includes Dell PCs, laptops, printers, scanners, servers and software directly from the Dell Web site. They have introduced this new facility now that you can even speak with their sales representative on the telephone, and take his assistance in getting you buy your new machine. Dells customer base is huge and diversified: it includes various healthcare, corporate, informal businesses, education entities, even U. S government agencies are considered to be one of their clientele (Johnson, 2008).
Dell is primarily a computer assembling and hardware manufacturer and of course the distributor. Dell is one of U. S largest corporation; it is also amongst the worlds largest computer distributor firm according to the gross income and maximum number of units sold. Dell had a golden period from 1999 to 2006, maintaining its supremacy in the computer world, when it produced and delivered the highest number of complete computer systems worldwide as compared to any other PC manufacturing organization.
However, due to poor customer support its reputation took a nose dive and people started to shift to other brands like Hewlett Packard and IBM, hence Dell’s market share started to decrease and in last quarter of 2006 HP finally knocked down Dell by selling the maximum number of computers. Dell is now focusing to integrate with Linux so that it could improve its image, while working on the idea of making its PCs and Laptops compatible with Linux operating system, it is also focusing on using less expensive AMD processors which will obviously reduce the cost of the machine.
And last but not the least the best thing they are doing is focusing on the non traditional methods of marketing and communication with the customers, which is helping them regain their lost position in the market (Johnson, 2008). In 1984, Michael Dell, a university student, founded one of the largest corporations of the world as PC's Limited. The idea was to assemble different parts of the computer and then sell it. He used to sell his assembled computers from his dormitory room. In 1985, he abandoned the university because he wanted to give his entire time to this idea.
It was in 1985 when he was planning to launch his first in-house computer design and within two years time, the company got so successful that it had distribution offices all over the Europe. The name changed to Dell Computer Corporations. With in seven years time, Dell Computers Corporation was listed in the fortune 500 companies which is a dream for every company to be on this list. Dell has been innovative and creative in his distribution and selling techniques by not only using all the available mediums but also experimenting the new ways to market their product too.
They have used the mail order sales, telephone sales, and now they are focusing on the internet sales by coming up with different promotions hence keeping customers wondering all the time which offer to buy and which offer to reject.
In an attempt to improve its global operations, Dell has reorganized its business processes. These changes have been incorporated by the departments at all levels and have resulted in several changes in the organizational hierarchy. Dell seeks to serve its customers all over the world with ‘quicker innovation and better responsiveness’ (Michael Dell).
They aim to change the global structure and divide it into three components: large; small and medium enterprise; and the public area. These are divisions based on different categories of customers. The main idea is to enhance productivity in each of these segments to benefit from core competencies and synergy. Based on arrangement, every segment plays an essential role in understanding and adapting to customer needs, for monitoring changes in the environment and responding rapidly to these changes. Each segment is also accountable for its operations which results in better efficiency and improved service.
According to Michael Dell the restructuring has helped Dell achieve competitive advantage, broadening the product line, efficiency in the supply chain and has made Dell accessible to a greater number of people all over the world. Dell has now become a truly global company whose businesses are now internationally organized. This has given Dell the advantage of understanding exactly the needs and requirements of customers in one part of the world and resolving their issues on the spot through solutions specifically tailored to their needs.
For this purpose, Dell was the first one to introduce the customer assistance on their website in the computer industry and later on everybody else just followed it up. It helped Dell in two ways; firstly they it was able to find out there customers needs and requirements, secondly they were able to get a chance to interact with heir customer hence trying to solve their queries in as little time as possible so that their customer could have felt some importance and in he end making them loyal to Dell.
These operations have achieved success due to Dell’s relentless commitment to serving its customers and meeting their demands for greater creativity and innovation. They have also answered the call for standardized products which are available all over the world. This commitment has resulted in increasing brand loyalty all over the world making Dell one of the most liked companies in the world. Also Dell is a company which keeps innovating and coming up with new features and improvements in the designs and giving its customers’ some variation to choose from hence keeping the customers loyal to the brand.
Due to its streamlined supply chain and distribution networks, Dell now stands third in terms of computer shipments falling behind Acer and HP. In the manufacturing sector, Dell has established processes which enable them produce the product close to the customer and streamline all the processes on a global basis. The ‘Direct Model’ has increased the availability of Dell products as well as Dell customer service. There has also been an overall improvement in product quality, and has enabled the implementation of six sigma processes which will be discussed in greater detail later.
Greater innovation and adaptability to the constantly shifting global environment has further increased Dell’s ability to cater to the international market through improved distribution networks and enhanced supply chain management. Dells strategy with online sales and some distribution network in different countries has been paying dividends for the company so far. It plans to increase its distribution network in some other countries by either franchising or licensing, because in this way they will get access to some other un tapped markets and then later on Dell could set up its on distribution house if required.
Dell has built nine plants for manufacturing in five countries across the globe and is looking to expand its operations to India, Brazil and Poland. This is a smart move to meet the growing demands of customers in these new markets. Establishing manufacturing plants there will allow Dell to gain the first mover advantage as well as to tap the potential these markets offer. Through the expertise of its senior management, Dell seeks to create a culture of constant development and growth and a commitment to innovation and productive efficiency.
It has recently hired Mr Cannon to lead the new global operations which will integrate the processes of supply, manufacturing and procurement. He has vast experience in the manufacturing and technology arena and has remained CEO and Director of Solectron Corporation and Maxtor Corporation. He has also worked at the Boeing Company. He is a qualified engineer from Michigan State University and is part of the boards of Adobe, Seagate and the Silicon Valley Leadership Group (Dell, Fredmen, 2008).
Dell constantly undertakes various initiatives to enhance its operations worldwide, improve productive efficiency and to minimise costs. Among other countries, Dell has begun an operation in Lebanon where it looks after the refurbishment and sale of returned personal and notebook computers, processing units and storage units. Nowadays the concept of refurbished computers is very much in the debate. Customers now prefer to get refurbished or used PCs or laptops because hey are less expensive as compared to the new ones. So Dell has to focus on the used and returned PCs and Laptops.
Its distribution networks is spread all over the world
- Americas: Hortolandia, Brazil; Miami, Fla. (Alienware); Reno, Nev.; Winston-Salem, N. C.; Nashville; and Austin, Texas.
- Europe, the Middle East and Africa: Limerick and Athlone (Alienware), Ireland; and Lodz, Poland.
- Asia-Pacific: Xiamen, China; Penang, Malaysia; and Chennai, India (Dell. com)
It seeks to expand operations to Poland in order to better serve customers in the Middle East, Europe and Africa. This will enable it to further enhance its efficiency and reduce costs.
This step will get Dell access to the European market at much lesser cost, which means Dell could reduce its prices and take some advantage of it and generate great amount of volumes in the European market and give its competitors a good fight (Ross, Holland, 2010).
In any manufacturing concern, the inventory costs form a major part of the costs of an organization. Having excessive inventory can lead to a severe burden on the organization’s cost structure while having shortages which cannot be quickly replenished can lead the organization into serious trouble.
Inventory is the major concern of any business, it is very important for the business to manage the inventory effectively. In the Computer Manufacturing industry, managing inventory could be one of the core competencies, and it could well prove t be the critical success factor for the organization (Lawrence, 2008). Just In Time (JIT) or lean manufacturing processes have now been implemented by many organizations all over the world. These allow them to achieve greater competitiveness and strategic advantage in a culture of continuous innovation, improvement and cost cuts.
JIT or lean manufacturing enables organizations to minimize their inventories by making the supplies available in the exact amounts and at the exact time at which they’re needed. This process eliminates the costs of holding large amounts of inventory, cuts down considerably on wastage and leads to enhanced productive efficiency. Cash flows are also improved as less money goes into buying and stocking inventory. Also, costs based on warehousing, storage, handling, record keeping and insurance are greatly reduced.
By using just in time inventory
Process we can ensure that the inventory is utilized properly wherever there is need for it, it is delivered where there is less requirement we do no focus on that area. Through this we can actually provide the right thing at the right time in the right quantity and that is the basic objective of sales and distribution. With JIT inventory system Inventory Turnover is managed effectively (Wisner, Leong, Tan, 2009). Such a system has been implemented by Dell which has enabled it to manage its inventories effectively. It has achieved booming sales through its effective inventory and supply chain management.
Due to JIT, Dell gets all the required items, in the exact quantities needed at the specific time for distribution and manufacturing. It enables improvements at all levels of management as it requires extremely updated and sophisticated processes to keep track of minute-by-minute requirements. At Dell, its direct business model and lean manufacturing system are working hand in hand to improve efficiency. The Direct model uses market forecasts and sales to facilitate production. It allows Dell to create products which are currently in demand and it also allows it to supply these directly to the customer.
This has caused a streamlining of processes starting from initial receipt of orders, to the assembly of the required product and the supply of the product. Orders are directly received at the manufacturing plant and only the required quantity is manufactured and delivered immediately. With this inventory system, the delivery time has reduced tremendously, because now the orders are taken more quickly and there are less layers of people in the middle, hence order gets to the manufacturing plant more quickly and gets delivered more quickly.
The lean manufacturing process has enabled Dell to make extraordinary improvement to its supply chain. Its promise of ‘delivery within 7 days’ is made possible through its well integrated supply chain processes which have gained customer dependence and reliability. It has also got Dell huge amount of customer loyalty too. This process is efficiently put into practice through the smooth flow of information from the customers to the manufacturers to the suppliers and then back to the customers.
The development of a prompt data and information forum for quick data transfers and support is essential to guide a JIT system. Dell has successfully established such an information forum over the years. Dell was the first one to introduce JIT system in the computer manufacturing business and others have just followed it. Now customers just need to go to the Dell’s website and select their PC or laptop or rather they can create their new machine by choosing from different accessories and then submitting the order.
Rest of the job is done by Dell, which makes sure hat the customer gets its desired product within seven working days. That is how simple a new PC or laptop has become to purchase. The new PC or laptop is just delivered to your doorstep which makes convenience is at its best. Overall, the success of the lean manufacturing system at Dell is due to its close co-ordination with all related processes. It also requires proper training of employees to develop basic skills required to function in the JIT arena. This enables them to rise to demanding situations and to anticipate changes.
This represents a cost of implementing JIT which also include accounting costs for developing new systems which can cope with and handle the contemporary processes (Lipton, 2007). This holds immense significance in implementing lean manufacturing processes efficiently. It is through technology that close links are maintained between suppliers and customers, through whom the inventory levels are closely monitored and information regarding these is transmitted constantly. Without effective technology systems, the lean manufacturing process cannot be put into practice (Holweg, 2009).
As regards accounting methods, lean manufacturing has enabled Dell to eliminate various procedures which include the distinctions made in raw material costs, WIP inventory, inventory of completed products, and the COGS. Most costs can be directly and easily assigned and this leads to greater transparency which is essential for the smooth functioning of an organization. This also helps to eliminate fraudulent practices (Lipton, 2007). Even though, JIT leads to many additional costs, it also allows the organization to cut back on much traditional expenditures.
It allows a smaller task force to complete the work in an organization and allows different workers to carry out multiple roles as they can handle the different processes in the organization. Also, the information that is made available is organization wide and can be used effectively in decision making processes. This has also enabled a greater level of delegation in the organization and of a more decentralized structure where decision making is passed down to the lower levels to people who are directly involved with the various processes and have a better understanding of them.
Communication is one of the most important factors in the lean manufacturing process and Dell had sought to optimize this process through smooth communication channels. However, this too represents an added cost. Also, there is a risk involves if there is some sort of blockage of the channels and the company is not able to acquire the correct amount of materials needed and can hence seriously impair the business. A huge reliance on technology has often resulted in setbacks which have resulted in huge losses for the company (Hall, 2010).
Despite the setbacks and costs, Dell is one of the few companies which have effectively utilized lean manufacturing methods to create superior value for its customers. They have done this through careful integration of the entire value chain model and through a much directed strategic focus. This has allowed them to manage their inventories so effectively that they keep only five days of inventory on hand while the industry average is 20-30days (Dedrick; Kraemer, 2007).
For a company with production and services as widespread as that of Dell, quality control and effective process performance are key factors for success and continued growth and improvement. These must be closely monitored in order to stay ahead of the line in the industry and to constantly deliver quality products and services to build and maintain a strong and loyal customer base (Hall, 2010). In order to cope with these needs, Dell has established a unique business model which many companies are trying to develop. Dell is using six sigma principles to achieve improvement at all levels in the business process.
They have developed a ‘Business Process Improvement’ initiative which includes six sigma approach. This is a tool which provides the skills needed to comprehend, analyze and improve business processes. It seeks to delegate authority to employees and empower them with skills. Information and processes required to enhance the processes of Dell and make them more efficient through efficient cycle times, lower costs and better quality. This process has allowed Dell to reduce defects, improve manufacturing starting from the initial steps to the final stages and develop products of world standards.
Dell is making sure that the principle of Total Quality Management is being followed across the organization across its world over distribution networks (Scheck, 2008). These quality and process control measures have given Dell the advantages of reducing its transactional costs, improving quality and overall streamlining of the business process. It has provided Dell with an opportunity to empower its employees and due to which Dells organizational culture has improved a lot. Dell is actually considered to be one of the most preferred organizations to work in rated by the employees across different countries.
It has resulted in highly trained and professional employees who are empowered to make their own decisions and who deliver increased efficiency as effective members of work teams and groups through increased sharing of ideas, expertise and information. Not only has this enhanced production efficiency, it has also enabled new product development and idea generation. At Dell, employees are given so much authority and independence, that the employees just keep coming up with some out of the box ideas and techniques. This also results in employee’s higher moral and motivation to perform well for the organization (Scheck, 2008).
All of this has ultimately translated into superior products which meet customer demands for product quality and innovation. They also allow them to produce customized products at reduced costs which have made them a leader in the personal computer industry. Now you can create your own machine from your home, you need to follow some steps and with in minutes you can create your own PC or Laptop according to your needs, or you could also get some guidance from there online customer support agents that which machine will sui you or what will be the best machine to get in your budget.
Now Dell is also coming up some financial plans, which means that you can buy a PC or a Laptop on installments or even on a loan too (Koehn, 2009). However, despite all these measures, recent views indicate that at present there are several quality control problems being faced by Dell. These problems are mostly associated with laptops and desktops. There has recently been an increase in the number of new machines being resent for repairs, replacement and servicing. This does not work well statistically for a company like Dell which prides itself on its quality control and high end products (Scheck, 2008).
For most of its products, Dell outsources production of many of its materials in different parts of the world. These issues in quality could be caused either by an inherent fault in the design of the product or due to sloppiness by the workers. Also, there might be issues due to the Windows operating systems being used with different Dell computers (McSpadden, 2008). Such problems are costing Dell substantial amounts of money as well as a loss in credibility and reliability. It has therefore taken several initiatives to overcome these problems and come true in their promises of quality control.
These are methods that have helped them come out of crises by setting up new guidelines and procedures that establish new guidelines and set higher benchmarks for quality approval. What Dell needs to do to help reduce this problem is to try and make even those accessories which it is not manufacturing yet, hence it will make less dependence on the other manufacturing organization and then Dell could be in for the best quality in the computer manufacturing market (Koehn, 2009).
In order to standardize its quality control processes, Dell has implemented ISO 90001:2000 certified quality management systems which emphasizes on catering to customer needs as well as allowing employees to perform their duties well. The Manual establishes the roles and goals of this system and contains a step by step procedure for judgment and approval. Dell believes that success is achieved by doing things right the first time round which is why they have established a systematic way of dealing with all quality control issues.
It also creates a control environment where processes are effectively monitored and engineered, and where the employees’ jobs are facilitated through clear guidelines. At the heart of all these quality control plans lies a framework which enables close understanding of customer wants and needs so that processes can be developed in such a way as to deliver maximum quality and superb functionality. This is the basis on which Dell has differentiated itself in the market.
It has also therefore, been able to maintain adaptability, Sustainable development and effectiveness at the organizational and personal level. Self assessment is considered an important tool for quality control measures and it involves internal and external audit which enable an understanding of the internal and surrounding environment of the company and how various elements in it are functioning.
Immense significance is awarded to customer complaints and suggestions and this feedback goes into establishing a strong network of communications as well as continuous improvement (Koehn, 2009). Process performance and conformity with regulations is monitored closely and it is made the duty of every individual to undertake quality control measures at each step of the production process. This leads to the development of a high quality and superior finished product.
- Koehn, N. F, (2009), Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell. Harvard Business Press. pp. 287 Hall C, (2010), "Cyberstates: Texas second-largest tech employment. "
- Austin Business Journal Lipton, J, (2007), "Dell's Investigation Comes To a Close", Forbes.
- McSpadden W, (2008), “Direct From Dell”, Technology Review, Vol 104 pp 79 – 86.
- Johnson C, (2008), "Just In Time - Industry Trend or Event? " The Industry Standard.
- Wisner, J. , Leong, G. , Tan, K. (2009), "Principles of Supply Chain Management: A Balanced Approach", Cengage South-western; 2 edition
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