Dell Inc

By-

BySurbhi Swarnim Swati Group 8 Vivek Surbhi

Gr 8

Swarnim Swati Vivek

Explain the direct model of Dell Inc. What was the problem the company was facing in mid-2005?

Direct Model of Dell

Starts and Ends with the customer Order online/phone (Customize his configuration) Dell manufactures & ships directly to customers Eliminating the retailers from the Sales Channel Selling Directly to the Customers Customized Products at Lower than average market price 3 major manufacturing units in US

Gr 8

Problem in mid-2005
Dell and its contract manufacturers (CMs) have had to adapt an increasing % of L5 manufacturing: 1. Empty chassis are shipped by ocean (L5) to Dell US & Europe first. Motherboards are then air-freighted to Dell US & Europe. 2. Dell incurs motherboard expedite/air-freight cost and 3rd-party integration cost. 3. CMs incur cost for idle labor dedicated for MB-chassis integration.

Gr 8

What is the importance of contract manufacturers in the PC supply chain? Importance of CM

Helps take advantage of Labor Cost Differences Capacity
OEM cnt make the item or easily acquire this capability and must seek a supplier

Manufacturing competitiveness
The supplier has a low cost, faster availability and so forth.

Technology
The supplier version of the item is better

Gr 8

Compare and contrast the role of contract manufacturers in the supply chain of Dell vis--vis other American PC makers.

In Other American PC makers

Had become FABLESS
Most CMs do everything from Manufacturing to shipping fully assembled pdts on behalf of OEMs

DELL
CM is in ASIA Ships half-assembled pdts to US Factory at US performs further fulfillments Ships it to customers directly
Gr 8 5

Why does L5 incur higher manufacturing and logistics costs than L6?
L6 Integrated offshore & outside a Dell facility L5 Integrated inside a Dell facility Chassis shipped on water

Integrated motherboard-inside chassis shipped on water

Motherboards shipped by air Increased motherboard airfreighting costs 3rd-party integration cost in US Separate logistical costs for chassis and motherboards

Labor savings MB air-freighting costs are eliminated Reduced motherboard packaging costs

Gr 8

What are some of the costs that are incurred in L5 but not in L6? Are there any costs that apply to only L6 but not L5?

Cost incurred in L5
Motherboard packaging cost Motherboard air freight/expedite cost Chassis and motherboard US transportation cost Local/regional integration cost Motherboard rework cost at DELL

Cost incurred in L6
China assemblers cost (Foxconn performing L6)
Gr 8 7

Explain the root causes of increasing L5 manufacturing.

Dells inability to provide motherboards in a timely fashion to CMs Chipset Supplier decommit or supply issues
Creates a disruption in the desktop PC supply chain Accounted for more than 60% of L5 manufacturing

Quality/engineering issues
Leads to dysfunctional or problematic motherboards Create additional demand for motherboards

Dell forecast accuracy

Due to faulty forecast, Dell needs to source its extra chipsets or risk not meeting the customer demand Long Lead Time in chipset makes things difficult for the supplier

New Pdt Introduction

Actual demand for new PC pdt is volatile, so need to air frieght extra Gr 8 motherboards
8

Which of the six proposed manufacturing solutions should Dell implement, based on the survey result? Why? What are the pros and cons of this recommendation?

Option 3A: Integration at SLC/Hub Advantages

Less Complex for Worldwide Procurement Supplier quality engineering management is reduced

Disadvantages
Most Complex for Cost Accounting Extra Production control & Inventory control headcounts are required.
Gr 8 9

How easily sustainable is your recommendation for the previous question if the chipset supply shortage further deteriorates?

Gr 8

10

How good is the methodology employed by the BPI team to determine the optimal manufacturing option for Dell? Are there more effective approaches? Methodology of BPI team was GOOD Process smoothness & sustainability Cost per box Pdt Quality Capital Investment Material Handling Logistics Some other effective approaches can be
Push & Pull strategy Geographical Location of suppliers

Gr 8

11

How can Dell effectively address the root causes contributing to the increase of L5 manufacturing?
By providing motherboards in a timely fashion to CMs Ensuring that Chipset supplier dnt decommit or have other supply issues Have Multiple Suppliers Have some safety stock Reduce Quality/engineering issues TQM Benchmark Standard Operating procedures

Forecast Accurately to avoid demand fluctuations

Plan demand in a better way for New Product introduction
Gr 8 12

Thank You

Gr 8

13