Dell's Supply Chain Management Practices

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Case Details:

Case Code : OPER063
Case Length : 26 Pages
Period : 1991-2007
Organization : Dell Inc.
Pub Date : 2007
Teaching Note :Not Available
Countries : US
Industry : Hardware

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"As we continue to grow worldwide, it is important that we increase our ability, via the direct model, to manufacture close to our customer and fully integrate our supply chain into one global organization. This will allow us to drive for even greater excellence in quality, cycle time and delivered cost. We will innovate and adapt our supply chain model to help drive differentiated product design, manufacturing and distribution models."¹

- Michael Dell, Founder and CEO, Dell Inc., in 2007.

"The direct model is fundamentally sound. Dell still has the most efficient supply and distribution chain."²

- Roger Kay, Endpoint Technology Associates³, in 2006.

Introduction

In February 2007, US based computer hardware manufacturer Dell Inc.⁴ (Dell) announced that Michael Cannon (Cannon) had been brought into the company to assume responsibility as the Head of Global Operations Organization (GOO).

GOO is Dell's center for consolidating its global manufacturing, procurement and supply chain activities. The company aimed to integrate its supply chain and achieve higher efficiency and quality through GOO. Overlapping activities would be eliminated, and new manufacturing and distribution models to focus on the requirements of the customers spread across the world would be introduced as a part of GOO.

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Cannon was made responsible for Dell's existing facilities in five countries and proposed plants in India, Poland, and Brazil.

Earlier, all Dell's factories had been managed regionally, and procurement functioned as a separate division⁵. The changes were made after Michael Dell (Michael) returned as CEO on January 31, 2007⁶. The changes were part of an effort to regain the company's position as the #1 PC manufacturer in the world. Dell had been the top PC manufacturer till the second quarter of 2006. But in the third quarter of 2006, HP overtook Dell (Refer Table I for worldwide PC shipments by major players during 2006). According to Brent Bracelin, Analyst with Pacific Crest Securities, Portland, "This (the introduction of changes) is a first step in perhaps Dell trying to regain the supply chain advantage they had and lost."⁷

Dell's Supply Chain Management Practices - Next Page>>

1] William Hoffman, "Dell's Logistics Restart," Traffic World, February 26, 2007.

2] Grace Wong, "Putting the Fire out at Dell," money.cnn.com, August 30, 2006.

3] Incorporated in Massachusetts, Endpoint Technologies Associates Inc., a market research firm, was founded by Roger L Kay, one of the well known market intelligence analysts.

4] Dell was incorporated as Dell Corporation and the name was changed to Dell Inc. in 2003.

5] Dell's manufacturing, supply chain and procurement activities were functioning separately. Procurement functioned as a standalone unit, the regional business executives were in-charge of manufacturing, and supply chain was a part of the worldwide operations of the company.

6] Kevin Rollins who was the CEO and member of the Board of Directors resigned after Dell lost its lead in the PC market to its competitor HP and Michael Dell replaced him. Analysts pointed out that the investigation by SEC into Dell's accounting irregularities could also be the reason for Rollins' departure.

7] Connie Guglielmo, "Dell Creates Global Operations Group, Hires President," www.bloomberg.com, February 14, 2007.