Dhaval & Group

7/27/2019 Dhaval & Group

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Case Study on :-

Managing Operations

A Study On Dells Supply Chain

Management

Submitted to:-

Yashpalsinh Jadeja

Submitted By:- Dhaval Patel Anil Gami Savan Bhatt Vishal Patel

Retail Supply Chain

Management & Warehousing


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Objectives

This Case intends to critically study and analyze theOperations Management activities within the organisation ofDell and how it can optimize the business strategy andprocess of the plants and offices around the globe.

How they are Managing the Distribution & Supply chainsystem.

Strategy for supply chain & Distribution Innovation.

What is the Performance and Improvement Strategy?

How they are developing their Suppliers. To know future strategy of Dell.


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INTRODUCTION TO OPERATIONS

MANAGEMENT

Operations Management (OM) is a chain of activitiesinvolved in the creation of a product or servicesthrough transforming input of raw material to output offinished goods.

OM is about managing people, processes andsystems to deliver a product or service with thecollaboration between departments such as sales &marketing, finance, accounting, human resourcemanagement and production.


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Operations management is an area of managementconcerned with overseeing, designing, and controllingthe process of production and redesigning businessoperationsin the production of goodsor services.

It involves the responsibility of ensuring that businessoperations are efficient in terms of using as fewresources as needed, and effective in terms of meetingcustomer requirements.

It is concerned with managing the process that convertsinputs (in the forms of materials, labor, and energy) intooutputs (in the form of goods and/or services).
http://en.wikipedia.org/wiki/Managementhttp://en.wikipedia.org/wiki/Production_(economics)http://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Efficiencyhttp://en.wikipedia.org/wiki/Effectivehttp://en.wikipedia.org/wiki/Materialshttp://en.wikipedia.org/wiki/Manual_labourhttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Manual_labourhttp://en.wikipedia.org/wiki/Materialshttp://en.wikipedia.org/wiki/Effectivehttp://en.wikipedia.org/wiki/Efficiencyhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Production_(economics)http://en.wikipedia.org/wiki/Management


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Type Private

IndustryManufacturingSoftware developmentIT services

Predecessor(s) Dell Computer Corporation

Founded

Austin, Texas, United States

(May 1, 1984)Founder(s) Michael Dell

Headquarters Round Rock, Texas, United States

Area served Worldwide

Key people Michael Dell, Chairman & CEO
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Types_of_business_entity


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Products

Personal computersServersPeripheralsSmartphonesTelevisions

Services IT services

Revenue US$ 56.94 billion (2013)[3]

Operating income US$ 3.01 billion (2013)[3]

Net income US$ 2.37 billion (2013)[3]

Total assets US$ 47.54 billion (2013)[3]

Total equity US$ 10.68 billion (2013)[3]

Owner(s)Michael DellSilver Lake Partners

Employees 1,08,800 (2013)

Website dell.com
http://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Dellhttp://dell.com/http://dell.com/http://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Dellhttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Dell


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Michael Dell founded PCs Limited in 1984 and later changed itsname to Dell Computers in 1988. Dell was listed as the Worlds500Largest Company by Fortune magazine making Michael Dell theyoungest CEO of a Fortune 500 company.

It has 6 manufacturing plants, business centers and support officesaround the globe. Dell started its operation in Malaysia by Openingits first plant in 1995 and its second global business center based inCyberjaya in 2007.

Dells product offering are desktops, notebook, servers, storages,switches and information technology peripherals. Dell manufacturesits entire product range.

Dell is well known for its build to order module whereby the productis only manufactured upon ordered. Dells direct go to market hasalso proven to be effective as the resellers are eliminated and thesaving is passed on back to the customer.


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PROCESS TECHNOLOGY STRATEGY
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Order Approval And Credit Check

1. Order being received from the sales department.

2. Credit check will be run on the customer. If it is aconsumer end user, then the term shall be prepaid andthe finance department will ensure the correct paymenthas been omitted.

3. The completion of the credit check, the finance creditdepartment will release the order to flow to production.


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Order is pushed to Manufacturing Department

Once the order is pushed to manufacturing, the lineoperator will be fed the custom specification of the modelthrough a unified communication system.


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7 stations in line

1. Besides the line operator that receives the order.2. After other will collect chassis, motherboard, processor, ram,

hard disk and power supply. The last operator will push theassembled machine to Line 2.

3. Relevant drivers and softwares is loaded to the hardwareand pushed to a burn test.

4. The burn test will take from 4 hours to 48 hours dependingon the configuration of a system.

5. The burn test is a stress test to identify defect on the

hardware.

6. This is a continuous flow of production with no halt untilboxing of a product.

7. It will goes for Shipping.


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CAPACITY MANAGEMENT

Capacity Management is a process used to manageinformation technology (IT). Its primary goal is to ensurethat IT capacity meets current and future businessrequirements in a cost-effective manner.


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Success story of DELL

Dell success is because it built its supply chain managementfrom backwards, from customer to production by prioritizing itscustomers.

Dell has set up a Supply Chain Management Institute in

Xiamen, China to work with Tianjin University and AntaiCollege of Economics to share its expertise and experience.

Dell identifies its resources capacity by assessing it labourhours, the plant runs on a 24 hours shift and takes 25 minuteson average to finish a typical desktop or server.

The assembling machineries work at the paces of theoperator. At its optimum level, the process can be finishedwithin 20 minutes instead of 25. If the is 5 workers at astation, with 8 station and 2 lines, the service output is

measured at 240 units of server per hour.


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Dell measures the capacity of labour needed by previousyearsrecord. In fact many of Dellsdecision is based in pastyear trend analysis.

This also gives Dell a better control of capacity planning and

capacity management. This trend is not only monitor on production basis but also in

sales processes, assuming the factory receives a spike inorder for 500 GB hard disk, the system will trigger the partsplanner who will alert the Sales & Marketing department


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ORGANISATION AND SYSTEM DEVELOPMENT

Being one of the organizations practicing Just In Time (JIT),Dell holds just enough inventories for three to four daycompared to a conventional method of holding a monthsstock.

They key to this success is by continuous monitoring of

demand and supply in real time. Having a couple of months ofcomponent inventories meant getting caught in the transitionfrom one generation of components to the next.

Striving to deliver quality in speed, a senior operator can take

as less as 3 minutes to build a PC. This is possible after a period of monitoring by observation

and improvement, instead of screws and bolts, Dell hasmodified its hardware to clips, which snaps right into places.This does not only saves time but also allows easier means

for customization pre-production and post-sales.


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Dell was using ERP solution from i2 Trade Matrix and Oraclebefore creating its own ERP system. With its in housedevelopers, Software as a Service (SaaS) team and thestrategic partnership with Sales force (Sales force, 2003), Dell

has created its own suite of ERP and Customer RelationshipManagement (CRM) modules.

The legacy system is designed to incorporate the front endand the backend of the operation. The data available is realtime from various departments such as Human Resource,

Finance, Sales & Marketing, Credit and Production enablesdecision making much easier.


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LEAN PRODUCTION

Dellsmodel of production is simple as a pay as you use. Itonly pays for the inventory delivered to the manufacturingplant 30 days post invoicing.

With its implementation of JIT, Dell has saved much cost and

turned them into profit. The economics here is when Dell has 4 days of overall

companywide stock, its competitors carries 80 and when anew technological upgrade is released, Dell will be able tomarket 76 days ahead of it competition.

When a new upgrade is launched the cost of current partdrops tremendously and being vulnerable to product transitionwill lead to inventory of obsolete products (Thompson &Strickland, 2001).


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By producing custom built orders and not for inventory, Delldoes not face the problems of being stuck with oldergeneration technology.

Often when this happens, a manufacturer will need to drop its

price to clear the stock hoping to at least cover its cost. Andby having a built to order module, Dell has the first handmarket intelligence of what a customer wants, what are theirdemands like and the purchasing pattern and trend of themarker instead of relying on its channel partners to feed these

informations.


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PERFORMANCE AND IMPROVEMENT STRATEGY

Certification Dell has qualified are, ISO 9001, ISO 20000,ISO 27001, ISO 14004 and OHSAS 18001 (Dell, 2012c).

Dellscommitment to zero waste

Kaizen approach aims to deliberately constructing anenvironment conducive to having capable and empoweredpeople creating and rapidly implementing idea

The program is conducted in each country with 1 weekclassroom training, 1 week hands on training with 2 months

period of learning and monitoring. The outcome from the program saw a result of 13% to 60%

improvement in production and capacity (Tuite, 2004)


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Warranties cover next business day and on site

Dell even offers a 1 to 1 product exchange

One of Dell success factor is standardization; it

standardizes system and workflow, creating continuity insystem.


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SUPPLIER DEVELOPMENT STRATEGY

Using the performance report, Dell awards the percentage ofparts to be supplied by each supplier. With 30 suppliersproviding 75% of the inventory, the suppliers make it astandard practice to hold 8 to 10 days supply of the inventory

in SLC. Dell practices supplier tiering from Tier 1 to Tier 3 based on

criticality to business,

Dell also hired a third party agency, CSR to conductassessment of the suppliers SER and recommendsimprovements.

Diversity is a key aspect of Dells business model. Dellwelcomes supplier from businesses that are owned byindividuals of diverse backgrounds.


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Dell promotes entrepreneurship and gives every one equalopportunity without neglecting individuals with special needveterans and minorities.

With the help of Ariba Buyers e-procurement solution, Dell

has managed to achieve 61% reduction in requisition cycleand alleviate operational cost by 62% (Dell, 2001).


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DELLS DISTRIBUTION AND SUPPLY CHAIN

INNOVATION

In 1985, Dell changed his strategy to begin offering built-to-

order computers

The meteoric rise of Dell Computers was largely due toinnovations in supply chain and manufacturing, but also due to

the implementation of a novel distribution strategy. By carefullyanalyzing and making strategic changes in the personalcomputer value chain, and by seizing on emerging market

trends, Dell Inc. grew to dominate the PC market in less time

than it takes many companies to launch their first product.

No more middleman: Dell started out as a direct seller, first using a mail-order system,

and then taking advantage of the internet to develop an onlinesalesplatform

By 1997, Dells internet sales had reached an average of $4

millionper day.
http://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-101-The-role-of-selling-in-a-start-uphttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-101-The-role-of-selling-in-a-start-up


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This move away from the traditional distribution model for PC salesplayed a large role in Dellsformidable early growth. Additionally, animportant side-benefit of the internet-based direct sales model wasthat it generated a wealth of market data the company used toefficiently forecast demand trends and carry out effective

segmentationstrategies.

Virtual integration

The company sought to develop long-term relationships with select,name-brand PC component manufacturers. Dell also required itskey suppliers to establish inventory hubs near its own assemblyplants.

This just-in-time,low-inventory strategy reduced the time it took forDell to bring new PC models to market and resulted in significantcost advantages over the traditional stored-inventory method.
http://www.marsdd.com/entrepreneurs-toolkit/articles/Market-Researchhttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Segmentationhttp://www.marsdd.com/entrepreneurs-toolkit/articles/Segmentationhttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Sales-forecasting-for-start-upshttp://www.marsdd.com/entrepreneurs-toolkit/articles/Market-Researchhttp://www.marsdd.com/entrepreneurs-toolkit/articles/Market-Researchhttp://www.marsdd.com/entrepreneurs-toolkit/articles/Market-Research


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Innovation on the assembly floor:

In 1997, Dell reorganized its assembly processes

Dell instituted manufacturing cells. These cells grouped

workers together around a workstation where they assembled

entire PCs according to customer specifications. Reduced assembly times by 75%.

The following are some key lessons from the story of

Dells incredible rise:1. Disintermediation (cutting out the middleman):

2. Enhancing customer value

3. Process and operations innovation

4. Let data do the driving


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FUTURE STRATEGY

Inventory management with an SLC model can beimproved further with the adaptation of Vendor ManagedInventory (VMI). This model will operate exactly how aJIT organization operates but with a real time visibility of

the inventory of the client. The future of lean operation is outsourcing. This is

because professional graduates in countries like India,Philippines and China are willing to work for one fifth of

the current wages.


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Outsourcing saves cost and improves the quality of productas the product or service is built or rendered by a specialist. Italso saves times to focus on core business and planning andswitched fixed to variable cost by easing the need of huge

upfront capital (Reilly & Tamkin, 1997). By choosing to strike a balance between and cost reduction,

an organisation adopts to a more sophisticated butdemanding approach to outsourcing.

Instead of having a bigger pool of people, organisation will

choose to maintain a few managers to manage contractors toensure brand and quality is up to expectation and theintellectual property is being protected.


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