Dell Online (Case Study)

Background (General Facts from Case Study)

Dell is a computer corporation recognized for manufacturing computer systems through parts assemble. In 1983, Michael Dell saw an opportunity in using IBM compatible computers for a new assembly line that can be sold to local businesses. The idea as explained by Michael Dell, in an interview with Joan Magretta[1], is that in the early days of computers’ manufacturing, companies had to be able to produce every part of the system. As the industry matured, companies started to focus on single parts and to become specialized in creating items that can be assembled with other parts to prepare a computer. As a result, Dell understood that to have a competitive edge in the market, they needed to focus on activities that drive sales instead of putting capital in producing items that other manufactures are already creating.

In the 1990’s, the computer market revolved around desktops, notebooks, and network servers. Dell competed with high-end machines from IBM, HP, and Compaq with a product line that provided value-priced systems for consumers and highly reliable networked systems for business. In the late 90’s, around 40% of households owned a pc in the US. On the contrary, from the business side, around 80% of the companies still had old server and desktop machines. Management had to approve purchasing orders, which resulted in only 2.2% of servers’ sale in comparison to the total purchases for desktop PCs in 1996.

In order for Dell to achieve $7.8 billion from sales in the late 90’s, it had to skip over the traditional channels of using retail or value-added resellers (VARs) to sell directly to the consumers . The "direct-model "or as Michael Dell comments on how his new employees call it "The model" is not that all powerful system. It is simply a way for Dell to cut on the standard supply chain cycle and deliver goods directly from the manufacturer to the customer. They created partnerships with several suppliers such as Sony, Intel, and others to deliver goods effectively at the time of the order to Dell’s plant where the assembly took place. The delivery and shipment were outsourced through a dedicated service that also insured delivering the monitors directly from the supplier at the same time. Mr. Dell talks about how suppliers are benefiting from the fact that Dell buys more items from the suppliers keeping no inventory and only requesting faster delivery upon orders.

In 1996, Dell capitalized on the growing number of customers who are using the Internet and launched its online store at dell.com. The online venture then proved to be the most appropriate sales channel that matched the supply chain direct model implemented by Dell.

In its path to compete in the market, Dell had to provide additional services such as DellPlus that enabled Dell to install commercial software packages, DellWare which provided hardware and software from other vendors, and after sales and on-site support services. These actions, as described by Michael Dell, required establishing more partnerships, which Mr. Dell describes as a process of "trial and error". The integration with partners was changing as the technology is evolving and many venders go volatile while others remain sold. Furthermore, looking for an IT company to build the online store brought in very few players, which made Dell accept the overhead of developing the portal in-house.

Enterprise Architecture Issues

  • Supply Chain Management: The purchase and number of transactions that Dell took in required a properly configured and concise business process.
  • In-sourcing: To meet the demand of the market some parts of the process required the services of other companies that can be in partner with Dell.
  • Quality Assurance: The computer industry is a very dynamic one, which makes quality products stand out when faced with technology-oriented consumers.
  • Business Automation: As Dell advanced into online markets, its sales staff feared from losing their jobs in favor of automated sales transactions.
  • Dynamic Industry: The technology industry requires closely monitoring consumers’ trend to maintain a low gap between the point of demand and the point of supply.
  • Analysis

This is one of the best case studies in the IT industry. I believe the level of commitment Dell showed in the model he created is inspiring. On the editorial side, I believe more highlights on the internal infrastructure of Dell’s network would have helped in building an understanding of how the supply chain actually worked. Did they use CRM modules, ERP, SCM, or a combination of all? How did Dell secure its information link with its suppliers, were all of them mature enough when it came to Information systems?

Recommendations

  • Organizations should focus on value adding activities like establishing online portals for their customers.
  • Businesses should conduct frequent surveys to measure the level of service they provide and work on enhancing their products.
  • Organizations should decentralize and enable expansion through global techniques such as out-sourcing and in-sourcing.
  • Building internal enterprise information systems is the most effective methodology for information and knowledge sharing.
  • Establishing multiple touch points with customers, strengthen the relationship and increases satisfaction levels.
  • Meeting global quality standards is the only way to get an advantage in a competitive arena.
  • Internal organization assessment and training is vital to maintain the high spirit of employees and increase their productivity.
  • Management support and funding is a key element in the success of any information system implementation.
  • References

  1. Joan Magretta , "The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell." Harvard Business Review 76, no. 2 (Mar/Apr 1998): 72-84, 13, 2.
  2. Majed Al-Mashari and Mohamed Zairi, "Supply-chain re-engineering using enterprise resource planning (ERP) systems: an analysis of a SAP R/3 implementation case." International Journal of Physical Distribution & Logistics Management 30, no. 3/4 (2000): 296-313
  3. Norman P. Archer, "Supply chains and the enterprise" Journal of Enterprise Information 19, no. 3 (2006): 241-245, 242
  4. Sameer Kumar and Sarah Craig, "Dell, Inc.’s closed loop supply chain for computer assembly plants." Information Knowledge Systems Management 6, no. 3 (2007): 197-214,18.
  5. Marcum, Jennifer. "In-Source or Outsource?" BioProcess International, June 2007
  6. Thomas L. Friedman, The World Is Flat (New York: Farrar, Straus and Giroux, 2006), 168.
  7. Dieter Ernst, "Inter-Organizational Knowledge Outsourcing: What Permits Small Taiwanese Firms to Compete in the Computer Industry?" Asia Pacific Journal of Management (Springer Netherlands) 17, no. 2 (August 2000): 223-255, 248
  8. Friedman, The World is Flat, 516
  9. Ali Khatibi, V.Thyagarajan, and A. Seetharaman, "E-commerce in Malaysia: Perceived Benefits and Barriers." Vikalpa: The Journal for Decision Makers 28, no. 3 (Jul-Sep 2003): 77-82, 6.
  10. Bernadette Casey, "Online Monday blacker than in-store Friday." DSN Retailing Today, December 13, 2004: 13-13,0.
  11. Chor-Beng Anthony Liew, "Strategic integration of knowledge management and customer relationship management." Journal of Knowledge Management 12, no. 4 (2008): 131-146.
  12. Anderson, Joan L., Laura D. Jolly, and Ann E. Fairhurst. "Customer relationship management in retailing: A content analysis of retail trade journals." Journal of Retailing & Consumer Services 14, no. 6 (November 2007): 394-399, 6.
  13. Alorie Gilbert, "Dell Online Marketplace Targets Small Businesses." Electronic Buyers’ News, October 2, 2000: 58, 0.

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