Demand chain management Essay

1.Introduction affair of this assignment is to analyse the case study of the dingle Inc, relating to the seven questions asked on the case study. Objective of the case study analysis is to get a deeper understanding of the Global outturn, outsourcing and logistics. 2.Compevery overview dingle is a ball-shaped breeding engine room beau monde that cancelleders its clients a broad range of solutions and services delivered orderly by dingle and through other distribution channels. Their counsellinged is to provide technology solutions that ar to a greater extent efficient, more accessible, and easier to manage. dell Inc. is a attribute confederacy that conducts its vocation worldwide through its subsidiaries. Their global corpo regularise headquarters is locate in Round Rock, Texas. In bounds of the PC manufacturing commercialise, dell is at number 3 position (Behind HP & Lenovo) with annual revenue of USD 62,071 Million. They make a net profit of USD 3,492 Million fo r the year 2012, which would translate to a net profit margin of 5.6%.dell focuses on 4 principal(prenominal) market target segments.SegmentRevenue percentageLarge Enterprises30%Public 27% low & medium business 24%Consumers 19%Table 2.1 dingle Incs marketing segmentsThe output portfolio of dingle consists of selling Servers, Networking, Storage, Out man-made laked services, Project Management, Support & deployment services, Infrastructure, Cloud, protective cover services, Applications, Business Process services, Client devices notebooks, workstations, tablets, smartph whizzs, and desktop PCs For the purpose of the case study, the focus will be on the products & distribution of personal computers.3.Case study questions3.1.1.What argon the returns to DELL of having manufacturing sites turn up where they argon? A company once distinguishable to place their takes overseas, must make a decision to whether to centralize their fruit or to de-centralize it over different countr ies. A company will advert at 3 areas in qualification this decision. Country agentive roleso semipoliticalo frugalaloCulturaloFactor CostsoLocation Externalities apt labour technologyoTrade barriersoTransport belloFDI rules & regulationsoExpected exchange rate stability expert factorsoFixed constituteoMinimum Efficient ScaleoFlexible manufacturing/Mass customizationProduct FactorsoValue-to-Weight RatiooServes ecumenic needs(Hill, 2011) dingle Inc which strike a product with lower fixed appeal of manufacturing, lower minimum efficient scale and with low requirement for green goddess customization or flexible manufacturing will opt in for decentralization. as well considering the product factors, Dell has a product which has a lower Value-to-weight ratio and a product which needs to be customized to each market, which indicates the requirement for the De-centralized strategy. Decentralize/ boil d receive decision will be influenced by the companys own objectives. Dell spe cify their objectives as Generating live efficiencies,Delivering products fleet,Better serving their customers urinate a world-class proviso kitchen stove.(Annual Report, 2012) In order tocater to these objectives and agree product factors and technology factors, Dellhas interpreted the decision to De-centralize. Once the decision to modify has been taken, they will go ahead with selecting the countries where they will try to exploit the field factors listed above to their avail. Current locations where Dell has their production facilities are as follows Austin, TexasPenang, MalaysiaXiamen, mainland mainland ChinaHortolndia, BrazilChennai, IndiaLodz, Poland.Advantages exploited from each of these locations can be listed as to a lower place 3.1.1.1.Market Access Generating represent efficiencies, Delivering products faster, Dell main objective is to deliver products faster while generating bell efficiencies. The growth countries and regions that they k instanter highlig hted are BRIC countries (Brazil, Russia, India, and China). The strategy they have used is to keep best possible market access these strategical regions. Analysing the location they have selected following payoffs can be seen. Texas is central to either of the U.SMalaysia is central to the huge Asia-Pacific region.Lodz Poland close to the big markets of the UK, Ger many an(prenominal), and France. Brazil, India and China plants are peg down up to reach the respective markets quickly3.1.1.2.Labor be and qualityChina is a low cost manufacturing locationTexas is cheaper than Silicon ValleyMalaysia is cheaper than capital of SingaporeThe quality of get the picture is high in each of these locations as well. as well having well-educated workers, engineers and technicians, each location has little or no labor union activity. They have besides ignored industry clusters such as Sao Paulo (Brazil) and Shenzhen (China) to ensure that labour markets are not tight and expensive.3.1.1.3. Transportation and telecommunications infrastructure The Texas locations, for instance, are in close proximity to major high guidances and to a major federal Express distribution center. Telecommunications bandwidth, cost, and quality are also factors, especially for shriek centers and data centers.3.1.1.4. judicature incentivesMajor incentives were offered by Texasfinancial incentives were offered in Brazil by the state government Tax holidays in Malaysia3.1.2.What are the potential disadvantages of the locations? Political turmoilPolitical stability is a requirement for a production location. Countries such as Brazil whitethorn be affected by unstable political situations. If shutdown, a Whole region will be realized Economical InstabilityOperations may be effected from economical stability of its countries, especially European region with the current EURO debt crisis. E.g DELL had to close down it Ireland manufacturing arm in 2011, after laying off 2000 employees. Expiration of Government concessionsOne of the key reasons to locate the production facilities where they are is out-of-pocket to concessions offered by government. Most government concessions will be discontinue after a particular period, after which operations might be unfavourable. (e.g Texas, china, Malaysian operations). In such situation net expenditure may drastically rise, making financially unfeasible. wherefore does Dell purchase most of the components that go into its PC market from single-handed providers as opposed to making more itself (Dell does little more than final assembly of components into PC)?Dell purchases many of their products and all of their components from third party vendors. Main reasons for Dell purchasing them from item-by-item suppliers are1.Reduce the hazard of having whacking inventories, which can become out of date quite an quickly In the IT industry generally modernistic products are introduced to the market very rapidly. Therefore exsising pro ducts can become obsolete quite rapidly, with the ledger opening of sensitive products into the market by competitors.2.Reduce the scrutinize holding cost- Inventory holding cost includes cost such as warehousing and logistic cost, indemnity cost, spoilage and breakage cost etc. However since Dell carries extremely lower level of inventories their history holding cost have been let down back to a grater extent. kettle of fish (95%) of Dells suppliers located at closer to the Dells factory and most of these suppliers have to supply the products to Dell within 90 minutes after placing the order. This has also helped Dell to reduce their inventory to a greater extent and has enable Dell to practice Just In Time (JIT) manufacturing.3.Reduce the cost of co-ordination compared to upright integration As Dell does not have its own factories, they are not incurring any expenditure by agency of institution expenses, administrative expenditure etc, which generally carries relative ly queen-sized amounts. too Dell has been able to reduce the cost of controlling and cost of coordination to a greater extent which otherwise would have to be incurred, if they have been vertically integrated.4.Obtain tractableness in terms of cost, quality, quantity, delivery, capacity, support etc, as they are purchasing items from several(prenominal) different suppliers depending on the requirement and circumstances. Dell openly shares its daily production schedules, gross gross revenue forecasts, and new-model introduction plans with vendors using Electronic Data Interchange (EDI)s. Dells forecast of supply is normally 75% accurate and if in case it is wrong, Demand Shaping is done to overcome the situation.5.Reduce the cost Dell purchases 75% of their purchases from 30 main suppliers (15% of their suppliers), and generally maintains several single-source or limited-source supplier relationships, either because two-fold sources are not readily available or because the rela tionships are advantageous to us due to performance, quality, support, delivery, capacity, price etc.Majority of these suppliers are from Asian countries that have relatively lower labor cost and this has been helped to reduce Dells cost to greater extent. Also due to the large volumes that are purchased, their is high bargaining power over their suppliers which has resulted in Dell obtaining vendor rebates and discounts which to a fault have resulted in Dell step-down the cost to a greater extent.6.Reduce cartridge clip to market compared to competitors Time taken to release a new product to market is a decisive success factor in IT industry. Since Dell is purchasing most of their components independent suppliers, Dell is able to introduce new products to the market as and when new components are introduced by suppliers.As a result of Dells effective supply drawstring management, they dont have any warehouse and also their factories have only 72 hours worth of inventory. Also money conversion cycle (time between an outlay of cash for split and collection of payments) of Dell is negative 36, where as in industry it is 30 days. Also their inventory turnover has remained around 107 times where as in companies such as IBM it is 17.5 times. What are the consequences for Dells cost structure and profitability of replace inventories with information?In year 2004, Dell has been able to achieve the lowest inventory levels in the industry that was only three days of inventory on hand, compared to 30, 45, or even 90 days worth at competitors. This was a critical advantage in the computer inventory, where component costs account for 75 percent of revenues and typically fall by 1 percent per week due to rapid obsolescence.Replacing inventory with information has contributed greatly to Dells business model it is the cornerstone of their cost structure. Reducing inventory also reduces the need for working capital thereof replacing inventory with information boosts profitability. Another aspect of dells customer focus was build to order philosophy. Every dell pc has been built this way un analogous many other companies who build for sales forecasts. To offer build to order system, companies must have cell manufacturing squad of workers who build each PC from extend to finish rather than a typical assembly line production. Cell manufacturing in which one company of people is responsible for building a pc.Among other things cell manufacturing allows you to build to order in an efficient way. Dells original inspiration was to go direct but that only got it off the ground. Dell has make crucial innovations in its business model as it has grown these successive innovations have made it prosper not its adherence to a single rigid imagination standards based technology as a point of market entry is one of those crucial points. Then dell began to implement a new model. Its operations had always featured a build to order work out with direct sal es to customers but dell took a series of slick steps to eliminate its inventories.Three golden rules of dell are trade inventory, listen to the customer, never sell indirect. Note that disdaining inventory was number one. Because of computers and the way they handle information zero or near zero inventory control is going to be a major business factor in the coming years and dell lead the way. Inventory is a drag on any business and particularly pure lucre based businesses need no inventory on hand. Inventory actor capital investments and that investment is a formidable challenge to any start up. progress holding considerable amount of inventory in a business increase the overall debt position of unanimouss and force them to incur extensive amount of interest cost.The strategy to disparage inventory is the only way to maintain start up cost and interest cost at an acceptable level. In the short run it will permit more start-ups because smart companies with tiny inventories come online with minimal capital investment and Dells strategy of direct sale through online was a smashing example for the above. Dell actually funds its operations in large part by maintaining zero inventory.It bills customers immediately but pays suppliers 36 to 45 days later. So it can flat an enormous amount of cash on which it earns a significant amount of additional interest. Besides cut and reversing capital investment, zero inventory means that stock depreciation and obsolete a central concern in high tech is or so on problem. Maintaining zero inventory naturally keeps a company more agile. In fact true zero inventory keeps a company on the knifes edge of responsiveness which is where dell similars to be. Dells model demand comes first supply second.Cost building1.Inventory acquisition and holding cost2.Interest cost3.Re-work cost4.Obsolete inventory written offProfitability1.Gross profit and net profit margin2.Higher move over on investment3.Interest cover4.Higher E BIT marginQuestion 6What is the source of Dells competitive advantage?A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and services that justifies higher(prenominal) prices. Michael Porter suggests that accompany can adopt one of the three strategies Differentiation, cost leadership, or focus in finding its competitive edge. Dell mass produce its components to keep the cost minimum, while postponing the assembly of the computers till the customer final orders are received. The model enabled Dell to gain competitive advantage ahead of competition with Low cost structure and customer have a go at it. Dells global business model which is look up to by world-over has positions its production plants close their key markets in order to reduce transfer and transport costs and access to labour markets on low advantage and with high productivity.The JIT inventory enabled D ell to reduce heavy investments on large inventories and warehousing. Short channel length and optimized supply cooking stove process reduces cost of doing business further internet sales which generates major revenue inflow is an low cost sales channel helped Dell immensely in gaining cost leadership in the industry. Dell offer customers unique pass with its responsiveness through assembled-to-order, speed and accessible purchasing cycle online. How pimp is this advantage ?Dells practical and economical model combining mass production and customization is a key strength which is well penalize by effective integration of business plans aligned with supply chain resources. Evolvement of lean supply chain can give Dell with its driving force for innovation to capitalize heavily and come up with better business model enhancing value proposition to the customer. Similarly fast-paced technological developments too will be opportunities for Dell to enhance their competitive advan tage. Internet sales channel can further expanded with Brazil and China consisting of one of the largest internet populations of the world. Product life cycle of PC market is at maturity stage and global trend is consumers are demanding for more convenient devices. Treats from low cost new entrants and rivalry among competitors make Dell, more reputed and admired organization to stand tall.Pressure from USA on China on exchange rate, China and Brazil growth as a lay income nation can impact the low cost labour and conflict of the product. Lack of culture driving innovation in countries they operate limits options for Dell to move value added services to lost cost labour countries like how HP has moved its design and R/D centre to Singapore. Anti-globalization ideology of China could impact Dells business future. For reputed organization like Dell, Green SC, ethics and CSR will require additional investments will increase their cost structures. In conclusion, we are of the view th at considering above situation, Dells competitive advantage is not secure and could impact their current advantages.07. What are the potential risks associated with Dells global supply chain strategy? How can these risks be mitigated? grant chain risk can be defined as followsUnforeseen events that might interrupt the smooth flow of materials. (Waters, 2008) distant local or company-specific risks, system-wide risks are those which significantly disrupt supply custody across multiple operations and a wide geographic area. systemic risks are created or magnified by the way supply chain systems are configured.So they are not easily resolved by individual acts. In todays globalized and interconnected world, any major disruption from a disease to a fire, has the potential to cascade through supply durance and permeate other systems. According to the research of consulting firm Accenture in 2006, over 50% of executives surveyed felt that the risk of supply chains had increased as a result of their globalization of business operations & also significant supply chain disruptions have been found to cut the share price of impacted companies by 7% on average. Further Accenture research done in 2012 indicates that more than 80% of companies are now concerned about supply chain resilience.The World Economic assembly in 2012 conducted a detailed survey on Supply kitchen range Risk across Europe, North America and Asia via the World Economic fabrications Supply Chain Risk Radar. The aim was to understand how the risk landscape varied across the three regions and compared with the top five global risks from 2011. Survey respondents considered global risks and their potential to cause system-wide disruptions in global supply chains. According to the survey the following top five disruption figures in 2012 were identifiedWhat risks is Dell exposed to through its supply chainGovernment Regulations / Legal decisions Currency / Interest rate volatility Country fiscal Risks Political & Social Disruptions Corporate Governance issues Disruption of key supplier / partner Theft of intellectual property Natural disastersRisk Why Dell is exposedMitigatesGovernment Regulations / Legal decisions50% of the major suppliers are in Asia (Developing countries)Close study on the changes in regulations & the political situation of the countries invested in and limit expansion if the conditions are adverse Currency / Interest rate volatility200 suppliers of which 50% located outside USASupply on determined fixed prices for a specific period of time Forward exchange rate contractsTheft of intellectual property85% of the sales are done through the internetDepend on a resilient core network, appropriate communication tools, and an element of redundancy. 34 This requires IT systems that are scalable, secure and re-routable Natural DisastersMany suppliers & factoriesAdequate insurance protectionsWorld Economic Forum, Building Resilience in Supply Chains January 2012Conclu sionDells effective supply chain management has enabled them to reduce their cost to a greater extent, which has in turn helped them to improve its international competitiveness. Also effective supply chain management has enabled them to increase the value mental institution to the customer by providing a faster and better service to the customer. When find out the production locations, consideration must be given to country factors, technological factors and product factors prior to finalizing the decision.Strategiclocations of Dells production facilities have helped them to minimize cost, improve product quality and enabling better delivery channels. furthermore Dells strategy to purchase components from independent suppliers has facilitates strategic flexibleness and helps the company to avoid the problems and costs associated with vertical integration. However unlike topically operated companies, global operatorslike Dell, has system-wide risks which could significantly disru pt supply chains across multiple operations and a wide geographic area other than the inbuilt company specific risks. In conclusion it is important that global companies like Dell should continue to mitigate these risks and achieving a better supply chain management through close alliances with suppliers and customers in striving for long term business competitiveness.