Critical Evaluation of DELL
Critical Evaluation of DELL
Table of Contents
1. Executive Summary 3
2. Supply Chain 4
3. Supply Chain Management 5
4. Dell’s Supply Chain 7
5. Critical Evaluation of the Dell Global Supply Chain 9
6. Conclusion 15
7. References 16
1. Executive Summary
In today’s world of increased trend towards globalization and customer-
orientation, the businesses are operating in a highly competitive
environment to improve on their core competency and focus on the
customers globally. For the purpose of any business to be successful, there
is a strong need to build up strong supply chains and lower the supply
chain management costs to increase effectiveness and efficiency in the
business processes.
Whenever we talk about a strong supply chain, the name of the PC Giant
“Dell” comes to our mind. Dell has, over the period of time; build a very
strong and efficient supply chain management system by improving on it
continuously. Although Dell has a well-managed supply chain, but when
we talk about so much of the positive aspects of the system, it does not
definitely means that the negatives don’t exist. Thus, the supply chain
system of Dell does possess shortfalls and improvement areas do exist.
This paper serves the purpose of critically evaluating the Dell Supply Chain
and envisaging not only the efficiency of the system but its inefficiencies
as well. The paper firstly describes what a supply chain is. The next
section presents what is actually supply chain management. Dell’s Supply
Chain is discussed next following the critical success factors adopted by
the Dell Supply Chain Management. Then a major section of the paper
presents a critical evaluation of the Dell Supply Chain. And then the
conclusions are finally presented.
2. Supply Chain
The key to successful supply chains are the customers because the basic
intention of the supply chains is to fulfill the customers’ requirements
(Chopra and Meindl, 2004). Every party involved in the supply chain works
to fulfill the customers’ demands because when the customers are
satisfied and are getting what they actually want, they are willing to pay
even high prices for the products and making profits is what every
company lives for.
Supply chain also has a great impact on the cost that the organizations
incur and the savings that it makes. Enhancements in supply chains are
not just beneficial for the baseline operations but they are also important
for the top line operations because an efficient supply chain can increase
the competitive advantage of the organizations over the others (David A.
Taylor, n.d.).
For the purpose of delivering the customers what they want directly, in a
cost-effective manner and also in a lesser amount of time, Dell is highly
dependent on the continuity of supply and its suppliers for the purpose of
bringing in the inventory at the right time and within the given amount of
time (Fred Andrews, 2000). Thus, the demand of the customers has to be
monitored accurately and should be communicated properly to the
suppliers so that the required amount of inventory can be brought in (Fred
Andrews, 2000).
Dell keeps inventory for just 5 days having a yearly 76 inventory turns
which is a major reason of its efficient supply chain. Dell has a number of
suppliers of it near its factories only so that the timely supplies can be
received as Dell gives its suppliers a very less amount of time to bring in
the inventory (Alan Johnson, 2006).
Serialization
Most businesses that manufacture products put a serial number on the
products at the end of the processes but in the Supply Chain of Dell, it
assigns the serial number in the beginning and through the serial number
it tracks the serialized parts in machine from the beginning to the end of
the manufacturing process (Alan Johnson, 2006).
In this way Dell traces every part from the beginning till the end and
enhances the quality of the supply chain processes by providing the
customer exactly what he wants through the tracking of the parts from
the suppliers to the customers (Alan Johnson, 2006).
“Will Dell be able to mange without warehouses filled with the required
inventory?”
The entire industry was of the opinion that Dell would be left over with
nothing to sell in some days and will not be able to meet the customers’
demands and will result in loosing the market share from the industry. But
Dell proved itself as an emerging and efficient manager of the supply
chains and through a prime focus on direct delivery and continuous
supply, it was able to become an example for the entire global industry.
But what if some natural catastrophe occurs? Will Dell be able to manage
its so well-known ‘Just-in-time Inventory method’? Will it be able to then
run successfully its ‘direct model approach’ then? Thus, the drawback of
such an approach that Dell follows is that it then has to respond most
quickly to such hazards than any other business and any kind of any delay
is even not accepted by the industry in which Dell operates. Dell therefore
need to plan in advance, else its success is critical. Dell is thus surviving
at the edge of success and failure.
Although very efficiently managed, this step requires Dell to speed up its
all supply chain operations. This is again very critical to any business
because once the processes are speeded up, it requires second to second
monitoring in order to get each and every process on the right track and
deliver the customers exactly what they want. Dell thus needs to keep the
customers updated as well in order to have mastery in its operations.
Financial Evaluation
In the supply chain management of Dell, inventory lowering has also
resulted in positive financial impacts. Dell has a practice of receiving
payment first from its customers through their credit cards which they
enter when they make an order, although the suppliers are paid a month
or so after the delivery of the products to the customers. Thus, it takes
the payments from its suppliers first and then pays late after the
receivable of the payments.
This practice of Dell Supply Chains is although very efficient for Dell itself
but not beneficial for the suppliers. Therefore, there is a probability that
the suppliers stop supplying to Dell due to the fact that Dell is making its
suppliers bear the costs of Dell’s operations and processes. This fact is
although positive for Dell but entirely negative for the suppliers with
whom Dell is doing business with.
This need for the suppliers to hold inventory for Dell leads to the fact that
if the suppliers once realize that they can do better by forecasting
demands and keeping inventories to minimal, they will stop supplying to
Dell because every organization seeks for improvements and strive fro
increasing its profits in the long run which is not possible for them with
holding inventories for such long times.
Supplier Relations
The critical evaluation of the Dell’s Supply Chain greatly involves
analyzing the supplier relationships Dell Supply Chain has maintained
throughout its road to success. Although Dell gets its supplies on time
from its suppliers but it is not definite that it keeps getting supplies in
time from the suppliers after the relationships that it has with its
suppliers.
What Dell’s relationships are with its suppliers is based on the fact that
Dell gives no flexibility to its suppliers in order to delay even by a second.
They say that if a particular supplier is unable to supply, they can easily
switch to the other and is least concerned about its supplier’s
performance. They want that their supplier update and enhance
themselves continually in terms of quality, technology and demand.
Accurate supply is critical to Dell Supply Chain but it is not necessary that
the systems do the right thing every time. Dell do faces the problem of
making wrong demand forecasts of it systems and sometimes even the
estimated market share is not accurate and is overestimated and even
sometimes Dell becomes over optimistic about its sales which results in
considerable losses as the increase in the volumes also result in
substantial amount of loss (SCDigest Editorial Staff, 2006).
6. Conclusion
For most of the organizations today, warehouses are a key to secure
business but Dell has replaced the warehouses full of useless inventories
with loads of information to its customers and suppliers. Dell’s Supply
Chain is a dynamic and an efficient one through which it has gained a
competitive advantage in the industry.
Dell has achieved the success through a transformation in its supply chain
including prime focus on quality, customer-satisfaction and velocity of the
supply chains resulting in a cost-reduction for the business. But still Dell
faces great challenges in future relating to its supply chain which still
possesses some inefficiency.
7. References
1. Chopra, Sunil and Meindl, Peter. (2004) Supply Chain Management. 2nd
edition. Upper Saddle River: Pearson Prentice Hall.
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[Accessed 15 September 2007].
3. Alan Johnson. (2006) Dell Upgrades Local Supply Chain. [Internet],
Available from: [Accessed 15 September 2007].
4. David A. Taylor. (n.d.) Supply Chains - A Manager's Guide - Chapter 1.
[Internet], Available from: [Accessed 15 September 2007].
5. Ehsan. (2006) Dell Supply Chain Executive Joins Aankhen Inc. [Internet],
Available from: [Accessed 15 September 2007].
6. Fred Andrews. (2000) Dell, It Turns Out, Has a Better Idea than Ford.
New York Times. The New York Times Company.
7. Dell Computer Corporation. (n.d.) [Internet], Available from: [Accessed
15 September 2007].
8. Dick Hunter. (2005) Tying Supply Chain to Customers. [Internet],
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9. Bill Breen. (2004) Living in Dell Time. Fast Company Magazine, Issue 88,
November 2004, p. 86
10. Karthik Mani. (2005) Musings on Supply Chain Management. [Internet],
Available from: [Accessed 15 September 2007].
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September 2007].
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