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Dell’s supply chain has transformed significantly since the company pioneered its direct-to-customer model for PCs in the 1990s. Dell’s customer-centricity and lean approach to the supply chain have enabled Dell to remain competitive despite the rise of tech giants such as Apple.
Direct (B2C) Sales
Dell’s direct sales strategy has not only helped the tech company bypass retailers and increase profits on units sold; it has also helped Dell gain excellent visibility into what its customers want. This model has led to the compilation of mountains of valuable data on consumer behavior and preferences, allowing Dell to continuously improve product and delivery options to keep up with ever-changing trends.
Leveraging this data gives Dell an advantage when it comes to demand forecasting and planning. This data is passed onto suppliers to ensure demand is met.
Customization to Segmented Strategy
If you ordered a Dell PC 15 to 20 years ago, you may remember going through a customization process when placing your order, essentially designing a machine and choosing features such as ports, a CD-ROM drive, and so on. Customers would receive a computer that met their specifications and get exactly what they needed without paying for features they had no use for. For Dell, customization enabled better monitoring of the quality of components and kept on-hand inventory low, reducing potential waste and overflow.
However, in 2010, changes in the market meant customization was no longer the most advantageous strategy. The company switched to a segmented approach where they offered customers the following choices when purchasing a PC:
- Configurable: for customers with unique needs.
- Preconfigured: for customers who opt to have Dell adjust products based on specifications provided.
- Ready-to-ship: for customers who want their order fast.
This approach enabled Dell to continue providing customers with a choice of options while simplifying its processes to drive efficiency. The company’s supply chain has been re-modeled to enable delivery of these three options.
Inventory Management Goals
Dell relies on a speedy manufacturing process to keep up with orders, enabling it to hold inventory for no longer than six days and cutting down on warehousing costs.
Strong Supplier Relationships
Dell has prioritized the building of strong supplier relationships to carry out its low inventory strategy and continue to meet consumer demand. Suppliers including Samsung, Motorola, and Sony typically maintain manufacturing facilities near Dell facilities to cut down on transport time and costs.
Communication is key. Dell uses a platform known as Value Chain to share inventory data with suppliers to help them plan accordingly, in a process known as vendor-managed inventory strategy (VMI).
Dell’s ethical and sustainability standards apply to the company itself and its suppliers. Dell co-founded the Responsible Business Alliance (RBA), a coalition that aims to build a more sustainable and ethical global electronics supply chain.
What’s Next for Dell?
Transparency Goals
Dell nominated 2020 as the year it would achieve 100% transparency in key areas regarding their environmental and social impact, and we can expect to see the next phase announced soon. The company measures its progress in achieving transparency through standardized global reporting practices and requires its suppliers to undertake similar reporting.
Reshoring?
The 2020 Covid-19 Pandemic has led to massive disruptions in supply chains, with companies relying on Chinese manufacturers impacted more than others. As China is a tech manufacturing hub, companies like Dell are being forced to assess the level of risk in their supply chains and find ways to minimize disruption. This may lead to a wave of reshoring or nearshoring of suppliers for tech companies like Dell.
Portfolio Development
Dell has recently expanded its offering to include end-to-end IT solutions with its Power-branded portfolio. The increased need for tech solutions brought on by world-wide lockdowns to contain the pandemic has given Dell the platform it needed to get their new solutions off and running, creating a foothold in the market that the company intends to use to step into a powerhouse end-to-end IT provider role. Power product lines include storage, servers, networking, and data protection.
Image Credit: jjpwiki / Wikimedia Commons
