Marketing Audit Approach

Supply Chain - Dell Computers

Introduction

Brisk innovation and globalization have produced great opportunities and alternatives in the marketplace for consumers and business organizations alike. Competitive demands have led to sourcing and manufacturing on a global scale, resulting in a significant rise in product offerings. As businesses grow more multifaceted, so as their supply chains. This paper will attempt to describe Dell's supply chain as one of the most successful and leading supply chain in the personal computer industry, including its processes and material flow. Comparison and contrast with its competitors, recommendations for process improvement and its ethical considerations will be discussed.

Existing Supply Chain Process

Dells' business concept based on direct-sales and build- to-order has achieved superior performance in the PC industry in terms of inventory turnover, reduced overhead, cash conversion and return on investment. Building PC to order means that Dell must have parts and components on hand to build a wide array of possible configurations with little advance notice. In order to fill orders quickly, Dell must have an excellent manufacturing and logistics capabilities supported by information systems that enable it to substitute information for inventory.

Order-taking

The supply chain process begins when orders come in, mostly from internet/intranet (90%) using the built-to-order model. Integrated with direct to consumer, the system allows consumers to decide what features are needed for their computers before product manufacturing is completed. Dell offer standard models configured by the customers themselves as they generate the orders. It is called built-to-order as opposed to built- to-stock that requires inventory. Built-to-order significantly lowers financing costs and increases customer satisfaction for Dell's chosen market segment. Dell records an order, clears credit (as they take no chances) and confirms it, and factory starts to build the product.

Component Delivery from Suppliers

Business units receive the orders "downloaded every 15 minutes into a Material Requirements Planning (MRP) system" (Davies, 2005, p.34). MRP is a factory planner that takes an inventory snapshot and generates material request to their suppliers/ logistics centre or "revolvers", short for revolving inventory. The information from customer orders reschedules the factories, every factory, every two hours. Dell's suppliers respond to this within two hours according to their service level agreement. Dell owns the materials as soon as it leaves the supplier docks, but in many cases the dock is right next door to Dell's facilities and has been able to eliminate incoming receipt activity. If a part from a supplier is not validated, or there is an issue with it, Dell won't let it in into the factory and will tell the customer that the product will not be available.

Kitting and Tagging

The parts equivalent to four hour work are delivered to the assembly site and prepared in the kitting area. In this process, unique service tags with barcodes representing a customer are generated and attach for each product to be built. Dell creates the number at the beginning of the process. The serialization system that provides absolute traceability of the entire product is the beginning of their quality process. Tag numbers can be tracked both in the factory and externally. If customers inquire about their orders, Dell can give them information about the product, or if it's possible to increase the storage capacity. The tag helps in terms of fraud, are used to address customer complaints, warranty and after sales support.

Assembly

The factory has several and separate assembly lines for desktop PCs and for notebooks, and a server line. However, all the lines can be interchanged according to demand. The kitted parts move to build area through conveyor lines, where they are differentiated between standard models and customized orders. The customized orders proceed to custom factory line for unusual configuration. Dell assembles the system and does a quick test, to make sure the order is correct early on. This aims to verify the product rather than validate it. The test takes five to six minutes then the unit goes back on the conveyor belt with a seal. A single worker has full responsibility of quality, so it is possible to trace a product back to the one person on a shift. After this, Dell breaks the seal on the unit, loads the software and makes sure the applications run correctly. This takes four hours for a desktop. Technicians roam the area to find fails as soon as possible, and find out the reason. If one unit fails it could hold up as much as 50 units behind it.

Boxing

Labels of authenticity are added, naming the companies such as Microsoft and Intel. The unit gets a general clean, goes in a box, and barcode label is put on the box. In this process a flat box, which employees call "pizza box" (Davies, 2005, p.35) containing the mouse, keyboards and documentation (supplied by a subcontractor) are added into the box with the system. The supplier has to have the pizza box in the assembly area within two and half hours, and it puts the same barcodes that Dell uses on each box. The barcodes on the shipping box, pizza box and system box are scanned to check that all three of them match, and then boxing and addressing happens automatically. A sorting system reads the barcodes and determines which chute the boxes should go down, depending on the initial destination- the distribution hub.

Transfer to distribution hub and final delivery to customers

Dell has strategic logistics hubs in every operational region. In Europe, it has four hubs: Limerick, Coventry in the UK, Copenhagen in Denmark and Tilbury in Holland (Davies, 2005). In US, it has Austin and Round Rock in Texas, Nashville, Tennessee, Winston-Salem, North Carolina and Ohio. It loads the trucks and ships them to these hubs. Depending on the region, Dells' average fulfillment promise is five to seven days.

Material Flow

Factory Material flow

Dell factories have no warehouse. Once an order is generated from the MRP system, the suppliers/logistics centre starts the material flow as shown on Figure 1(Kapuscinski, et.al.,