Dells Value Chain

Kelompok II Muhamad Syafei Febi Adnesia Angraini Ivo Oskiano Sinukaban Priyo Tri Nugroho P056121793.12EK P056121773.12EK P056121783.12EK P056121823.12EK

TOPICS
Background and Overview Business Strategy Internet and E-commerce Future Strategy for Growth

Topics
Background and Overview
Business Strategy

Internet and E-commerce

Future Strategy for Growth

Background and Overview

Founded by Michael Dell 1984 Youngest CEO in the World Included in Forbes 500 list 1992 Forbes 2010 Rank 38, Revenue $53 Biliion, Profit $1,4 Billion Number one PC seller in US 1999 ( No. 2 in the world) Adopted Internet selling model 1996 Inventory turnover 60 times a year Competitors Compaq, IBM, HP

Dell Facts
Customer Base (Revenues) ~80% Corporate & Institutional Revenue by Product
Desktops = 51% Enterprise = 21% Notebooks = 28%

~20% Consumer

Revenue by Region

Global Manufacturing

Austin, Texas, USA Nashville, Tennessee, USA Eldorado do Sul, Brazil

70% Americas

19% EMEA

11% APAC

Limerick, Ireland
Penang, Malaysia Xiamen, China
Dell Inc. - 2003

~41,800 employees worldwide Revenue $38.4B (last 4 qtrs.)

Background and Overview

Dells Product portfolio
PowerConnect Switches

PowerVault & Dell|EMC Storage

PowerEdge Servers
Software & Peripherals

Precision Workstations Latitude Notebooks

OptiPlex Desktops

Topics
Background and Overview Business Strategy Internet and E-commerce Future Strategy for Growth

Business Strategy Direct sales Build to order

No build up of expensive inventory Build exactly the computer that its customers want. Minimize the need for forecasting New product can be introduced without waiting for old inventory clearance Customers can choose what components they want for their computer, Dell then assemble the order and ships it. This strategy improves customer satisfaction and reduces costs and risks to the company.

Dells Direct Model = Perpetual Success

Industry's most efficient procurement, manufacturing and distribution process

Pass cost savings on to customer

Competitive Pricing

Efficient Model with Lowest Cost Structure

Help Drive Supplier Business Drives Market Share

Competitive pricing ignites demand

Lower cost drives Increased demand

Dell Inc. - 2003

Business Strategy Direct Customer Relationship

Detailed customer data(Name/Equipment/ duration of relationship) Information can be used for add-on Product and services Replacement and product upgrade Customer calls Dell PC Outsourcer Full life cycle management

Dells Direct Model

Direct relationship, most efficient path Low cost and best value Built to order Customized systems Superior, tailored service and support Highest quality and most relevant technology

Benefits of direct sales method

Direct sales in conjunction with build-to-order is a powerful model for both Dell and its customers. Customers get what they want, rather than be forced to choose among a fixed set of options. Dell wins because by developing and building only those systems that customers want, Dell eliminates the excess cost of buying too many components, having high storage and inventory costs, and having to sell the surplus at a loss. Dell can use savings in other areas such as web site improvement, marketing and distribution.

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Business Strategy Dell E-Commerce Company

First web site 1994 ahead of competitors selling online (dell.com) No channel conflict reseller/ distributors Build to order Opportunity to customer to configure products online Internet to coordinate entire value network Suppliers/ Logistics Providers/ Distributors of third party products, SI, Service providers Tight information linkage between Dell and its customers

Competitors Disadvantages vis--vis Dell

Need to hold inventory at each step in value chain . Have to pay suppliers first before getting paid from customers . Stuck with excess inventories of slow selling products .

Dells Competitive Advantages

Dell is having one of the best SCM in the world.
90% supplies ordered online using integrated websites of supplier and Dell (B2B). 95% of suppliers situated very close to assembly plant hence coordination is easier.. 15 suppliers provide almost 85% of all supplies. Dell gets paid by customers and then pays to its suppliers.

SWOT ANALYSIS:- B TO B
STRENGTHS Customization Price Customer Focused Technical Knowledge Market Diversification Strong Brand/Positioning Media Savvy Direct Marketing Model Technology Market Inventory OPPORTUNITIES Server Market International strategy Additional markets Product extensions Strategic partnerships

Competition

across markets Commodity pricing (shrinking margins) Complexity of Mgmt. Growth exceeding productivity

WEAKNESSES

THREATS

Dells Competitive Advantages

The Dell Value Chain

Close relations with Customers & Suppliers Elimination of bull Whip Effect & Early to Market Collection of Payments and Negative Working Capital Assemble / made to Order & Faster Inventory turnover Reduced Cost => Competitive Pricing Solid Information management & internal aligment

Weeknest point of Dell value chain

The complicated of integrated resources Low internet penetration in emerging country High shipment cost (JIT) Need to accurate information

Topics
Background and Overview Business Strategy Internet and E-commerce

Future Strategy for Growth

LEVERAGING E-COMMERCE
Direct Business Model Internet Orders Phone Calls Mass catalog mailings Value Proposition Easy Ordering process Customization & Flexibility Easy access after sales support

Embracing the Internet

In its Supply Chain: Partners access to Order information Close co-ordination between IT and Dell Online High Supply Chain Visibility allows Partners to plan based upon demand Customer: Improved Customer Reach Online Ordering & Self Service Tools Paper-less transactions IT Management Tool E.g B2B premier pages

Dell IT and Ecommerce Applications

Logistics Company EDI EDI Dell EDI extranet Internet EDI
Third Party HW and SW suppliers

CMs/OEMs

System integrators

Components Supplier

Extranet
I2 msgs

I2 Intranets DOMs DPS Glovia Tech Docs

Finance Procurement MIS Helpdesk E-Com

EDI

EDI

Repair and Support Services

Distributors

Dells Value Web Model

Topics
Background and Overview Business Strategy Organization of Business Activities Internet and E-commerce Future Strategy for Growth

 The Three Golden Dell Rules

Disdain inventory

Always listen to Customers

Never Sell Indirect

Direct Model
Suppliers Customers

Continuity of Supply E-business

Collaboration Technology Leaders Low-cost Manufacturers

Best Customer Experience Low Cost Efficiency &

Highest Quality

Product Quality Price for

Performance

Partnering/Virtual
Integration

Customization Reliability, Service

and Support Latest Technology

The Power of Virtual Integration

Technology Services
EMC
Customer
SOLUTION
BLUECURRENT

Software E-Business

Dell acts as the single point of accountability while focusing on

our core competency custom-configured computing solutions. Seamless integration with best-in-class partners leverages their core competencies for the benefit of Dells customers.

Inventory Management Experience

100 90

Days Sales Inventory

80 70 60 50 40 30 20
15

10
5

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Dell Inc. - 2003

Q103

Velocity = Direct Demand Feedback

push Buy-to-Plan pull Build-to-Order Customers
Material requested to build customer orders

Suppliers

SLC

Dell Manufacturing
All material is tied to a customer order nothing is built without an order.

1) 2) 3) 4)

Dell facilities act as Manufacturing Centers, not Warehouses only inventory needed for next 2 hours of orders is on site Provides direct signal of Dell customer demand for suppliers Dells performance to customer orders is directly linked to our suppliers level of support Absolute synchronization between manufacturing and sales keeps the process balanced.

Dell Inc. - 2003

1. "PunchOut" - authenticated access to the customer's catalog at Dell from the customer's Internet browser to facilitate shopping 2. Order Requisition - shopping cart data pulled back into the customer's ERP system and workflow processing 3. Electronic Purchase Order - sent back to Dell for automated order processing 4. PO Acknowledgement - response returned to customer

DELLS Supply Chain

SUPPLIERS REVOLVERS

Customer places an Order

(By phone or through the Internet on www.dell.com)

Dell processes the order

through

2-3 days

Sends the order to assembly plant

(any one in Austin, or any other)

Plants build, test & package the product

(about eight hours)

Configuration evaluations
(checking the feasibility of a specific technical configuration)

Financial evaluation
(credit checking)

Dell typically ship all orders

(no later than five days after receipt)

CUSTOMERS

General rule for production is first in, first out

Lean Inventory Model

3 days of inventory - Inventory turns of 122 per year Suppliers Revolvers (SLCs) Dell Factory Delivery

Local Suppliers

Customer
Supplier Owned Dell Owned
www.a2zmba.com

RFID applications

Future Strategy for Growth

Increased Usege of E-Commerce in developing Countries Education Session to Institutional/ corporate Customers Schemes/ Discounts on onlines booking Value added services Usage of Business Analytics Study the nature of purchase from Existing database Design the value offerings based on spending pattern

Future Strategy for Growth..(contd)

Better Usage of Knowledge Sharing tools Sharing of the best practices and Support Solutions Driving Innovation for offering to new market Partner network for Geographical Expansion Better delivery and distribution in new markets Onsite Support Region specific Customizations Opening of stores for touch and feel experience Presence of local sales, cutomer service and support teams

Summary of MIS and its Effect in Dell