Introducing Dell Inc.
Dell Inc. is one of the top personal computer manufacturers in the world. Headquartered in beautiful Austin, Texas, Dell is currently the number one supplier of personal computers in the United States and number two in the world. Over the course of the last 25 years, Dell has grown from a small one-man shop operated out of a college dorm room to a multi-national, multi-billion dollar business. The key to Dell’s success has been its direct-to-customer business model (Hicks, 2009). Dell specializes in made-to-order computers, rather than producing generic computers for the mass market. In order to allow customizability at its current production level, Dell has developed key operating tools that set it apart from its competition.
Although customers can place orders over the phone or in retail outlets, the key to Dell’s tremendous growth has been its online ordering system. Dell offers a wide variety of computing options and an even larger array of customizations. Dell has pioneered the effort to move the order process online; giving customers the ability to modify nearly every detail of their computer purchase and watch as the price is updated in real-time. This front-end ordering system is tied into back-end systems that ensure customers are offered discounts that benefit them and Dell. For example, if the back-end systems realize that 40 GB hard drive inventories are running low, the front-end ordering system might discount 60 GB hard drives to encourage customers to upgrade (Collier & Evans, 2008).
Online Ordering Success
Dell’s online ordering system was very nearly an overnight success. After launching the system in 1996, Dell was realizing $1 million per day in sales within seven months (Hicks, 2009). As we will see momentarily, the benefits of online ordering extend beyond the popularity of the system in terms of daily sales. The communication of the online order facility with the rest of the supply chain ensures a smooth flow of real-time data to the systems that handle the ordering of the individual components that make a Dell personal computer.
Dell currently utilizes over 3,500 components from over 250 suppliers. Dell has integrated supplier ordering system directly into the operation of their supply chain. Every two hours, each Dell factory is updated with new order information and supplier delivery schedules are updated to reflect the changing demands (Collier & Evans, 2008). This process ensures that complicated systems with late-arriving parts are not causing easy builds to back up. The complete automation of the supply chain has removed the possibility for human error. Additionally, operations management tools are able to more quickly process the ever changing inventory schedule.
Supplier Integration Success
It is no coincidence that Dell ships more than one computer per second (Hicks, 2009). It is a testimony to their mastery of supplier integration that they can build and ship personal computers so fast. The flexibility provided by their operations management tools has created a process that is nimble enough to allow frequent re-scheduling of factory work flow without actually interrupting that flow at all. Additionally, these updates flow out to the suppliers in the form of purchase order and delivery schedule changes. These updates happen without human intervention and suppliers are able to make deliveries without necessarily knowing the changes have occurred.
Before Dell, the personal computer industry typically relied on Value-Added Resellers (VARs) to customize their stock systems according to end-user specifications. Dell saw that by removing the need for VARs, it could lower the price of end systems, while still supplying end-users with the customizations they desired. Through the development of their online ordering tool, Dell was able to ensure that end-users received the exact system they requested without fear of miscommunication between end-user and reseller. Additionally, their supplier integration tools have paved the way for Dell to ship record numbers of computers, each designed to an individual specification.
Collier, D. A., & Evans, J. R. (2009). OM 2008 edition. Mason, OH: South-Western.
Hicks, B. (2009). Dell company profile. Retrieved May 11, 2009 from Faulkner Information Services.