Supply Chain-Case Study of Dell

Supply Chain-Case study of Dell
1. Introduction
Dell is one of the worlds largest PC (personal computers) makers and the largest computer distributor
in term of both units sold and gross income (Bygrave & Zacharakis 2010). In term of the product
categories, the company offers majorly laptops, desktops, printers, electronics, software and tablets
and so on to both business users and residential customers. And in term of strategic orientation, it is
believed and perceived by many customers that Dell is competing with quality products with cost
advantage. Below we will analyze the impact of the product life cycle of personal computers on the
strategic fit between implied demand uncertainty and the responsiveness of the supply chain.
2. Analysis
2.1 Product life cycle
Product life cycle refers to the life of the product which is usually made up of four stages:
introduction, growth, maturity and decline (Louis 2002, p.177). According to the product life cycle or
PLC theory, a general product will go through a cycle with different stages from introduction, growth,
maturity to decline with different features in term of industrial profit and overall sale (Havaldar 2006,
p.117).
The personal computer market in the world especially in the developed countries such as the United
States is considered to be in the maturity stage (Argenti 2002, p.66) for the following reasons: firstly,
the maturity of the industry is marked by the appearance of the dominant brands while the small
players are excluded and the market is controlled by several key large players because of the scale of
economies; secondly, personal computer products are basically the same with little differences in
functions; thirdly, though the growth of industrial sale is continued but price is more sensitive than
before and companies tend to use price competitions to obtain further market share which reduces the
profitability.
One thing need to be noticed is that though the PC market seems to be entering into the maturity
stage of the Product Life Cycle, but it is still in the early stage of the maturity as we can see some
significant product modification and change happening in the market such as the appearance of tablets
such as Ipad that is changing the market. And the location of the personal computer products in the
PLC will have implications on the strategic fit which will be discussed below.
2.2 Understanding the customer and supply chain uncertainty
Computers for a long time are considered as innovative products with high demand uncertainty and
low supply uncertainty. On one hand, the development of the personal computer has been very rapid
and constantly changing for the past three decades since the personal computer was first released into
the market hence the PC products are still considered as highly innovative products;
On the other hand, in term of supply uncertainty, because PCs are classified as fast clock-speed
products which request high flexibility in supply chain based on a high demand uncertainty. And as
proposed by David Simchi-Levi (2010, p.164), that a higher demand uncertainty tends to result in a
preference
for
companies
to
manage
the
supply
chain
adopting
pull
strategy.
But the location of the PCs in the product life cycle which is in the maturity stage has two major
implications to the demand uncertainty and the supply uncertainty. On one hand, with the maturity of
the PCs, innovation and modification could become less which results in decreased demand
uncertainty; on the other hand, with less fluctuations in the demand said, the supply uncertainties will
also be reduced to a more stable status. But it is still far away for the PCs to become functional
products based on the current market conditions which are still changing rapidly.
2.3 Understanding the supply chain capabilities
Responsiveness of a supply chain could be referred as the ability of the supply chain to get adapted to
the changes in demand in the dimensions of both volume and the mix of products (Christopher 2000).
The supply chain of Dell is marked as targeting at achieving high flexibility and responsiveness. As
claimed by Thomas F. Wallace and Robert A. Stahl (2003, p.24), Dell has created an admirable
success but keeping quite low stocks, enough of customer lead time and high flexibility and
responsiveness. Below we will check some marketing mix of the Dell PCs to find the supportive
evident to the high supply chain responsiveness.
2.3.1 Product strategy assemble to order approach & back-end intranet
Dells assemble to order approach in its production process is well known to the world. When an
order is made on line or through the call center, within several days the ordered computers will be
assembled according to the order using the parts and the parts will be replenished based on a forecast
basis (Bidgoli 2004, p.556). The advantage of this production mode is that much few stocks will be
kept and waiting to be ordered, and this helps reduce the cost of keeping stocks and contributes to the
responsiveness of the supply chain.
Besides Dell also turns to the instant information sharing to shorten the assembling time, the company
has used a so call back-end intranet to established connections between the material planners
straightly to the supplier inventories to share with them the immediate information about the
customers order and demand (Waters 2010, p.152). This way of information sharing also helps reduce
the cost of keeping the unnecessary stocks and contributes to the responsiveness of the supply chain.
2.3.2 Place strategy
In term of the place strategy, the efficiency of the transportation of goods is vital to the efficiency of
any supply chain and also to Dell which relies heavily on the delivery system of provide convenient
services and goods to the customers. According to Ehap H. Sabri and Salim N. Shaikh (2010, p.211)
Dell has its own transportation management systems which contributes to the reduction of logistics
cost and time consumption in reality.
2.3.3 Pricing and promotion strategy
And in the pricing and promotion strategy, the company has been targeting at providing low price PCs
to the customers with rebates if they purchase on line. This low price strategy is also reflecting the
necessarily of keeping a low cost and efficient supply chain.
2.4 Achieving strategic fit
Based on the above analysis, we can see that now Dell has adopted a strategic fit of High implied
demand uncertainty and Responsive supply chain to manage its supply chain. And according to the
above model, the choice is strategic fid is reasonable, but will with the identification of the location of
PC products in the PLC, there will be some implications to the strategic fit which will be stated in the
conclusions.
3. Conclusions
Firstly, with the product entering into the maturity stage, we have witnessed a change in which PC
products become less innovative, the implied demand uncertainty will be gradually reduced; and in
term of the responsiveness of the supply chain, with the foreseeable maturity of the PC products, Dell
should one hand keep the high responsiveness and on the other hand increase the cost effectiveness of
the supply chain to keep the strategic fit along the shadow field.

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