Saturday, September 14, 2013

Dell Dell Dell...

This is the second time Dell appears in our readings and I start to connect some dots of what we have learned so far when studying the dell model. 

1. Four Major SC drivers
In the first week’s lecture, we talked about four major drivers: Inventory, Facility, Transportation and Information in both areas of effectiveness and responsiveness. Dell model, minimizing Inventory, would normally indicate more risk in availability and thus in responsiveness , especially in the event of disruption.   However, in the reading, Dell survived the 10-day labor lock.  The secret contributing to this “miracle” and the overall success of Dell Model is their great effort and full use of another SCM driver: Information.  As the article puts it “replacing inventory with information”.

a. Dell’s Global Command Centers
Dell has five Command centers which literally spread across the world (U.S. Europe, China, Malaysia, Japan) and they are multifunctional: providing real-time visibility to respond to customer demand change and more importantly, these centers closely track weather changes and are always ready to deal with disruptions (natural disaster and other crisis) These centers guarantee Dell’s real time data on a number of key demand/customers parameters and they are also portrayed in this week’s article that fully cooperative with Dell headquarter to help deal with the crisis.

b. Its sophisticated internal information technology infrastructure (a whole range of Oracle software)    Quotes from the article: Dell keeps a “massive database that tracks the purchasing patterns and budget cycles of its corporate customers”   and “Dell will update its suppliers 3 times a day about the demand”. Dell’s demand prediction accuracy is approximately 75%. Remarkable.

2. BullWhip Effect

Small volatilities in the downstream demand will cause large volatilities in the upstream. The same logic applies to demand forecasting.  A small misforecast  downstream will bring big problems for upstream suppliers. In Dell’s case, luckily dell has pretty impressive forecasting capabilities however, compare the inventory time: Dell 2-3 days while its suppliers, although some of them are specially modeled on build-to-order strategy, hold “from 20 to 80 days” inventory to buffer potential risks and accommodate Dell’s request to be “responsive”.

3. Critical thinking about Dell model. Last week’s reading about Dell’s Faulty computers states that Dell has been plagued by problems of “misleading customers desires, poor customer service and suspect product quality”. These problems are partially stemmed from its business model.  

4. Dell culture. When reading Dell case, I get this strong feeling that Dell is up for perfection and is pretty demanding on both its suppliers and itself. It seems that Dell has very limited tolerance to problems/ misforecasting. This culture will influence employees’ behaviors. Although there is no evidence to it, I think the reason that Dell employees try to conceal the faulty computer problems has something to do with this culture. In this lean manufacturing company which always up for perfection,  it will probably be harder for employees to confront mistakes.

I am pretty concerned about the relationship between Dell and its suppliers. Like Ikea, Dell wants to create intense competition among its suppliers and put tremendous pressure on these suppliers. To some degree, I feel these suppliers are being “exploited” and do not have a choice…
Will this relation ship pose potential threat to the sustainability of Dell model?

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