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Supply chain practices of dell

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Introduction

I. The Supply Chain Flowchart A Supply Chain flowchart involves the flow of materials, information and finances as they move in a level process from supplier, to manufacturer, to wholesaler, to retailer and finally to the consumer. The SCM flowchart involves coordinating and integrating these flows among all parties involved. Each level of the supply chain is described as a "tier." There can be several tiers beneath the final supplier. Supply chain flowchart can be divided into three main flows: 1. Product flow: The movement of goods from a supplier to a customer as well as customer returns or service needs. 2. Information flow: This involves transmitting orders and updating the status of delivery. 3. Finances flow: It consists of credit terms, payment schedules, and consignment and title ownership arrangements. Three levels of decision making are associated with the SCM flowchart: 1. Strategic: Long-term decisions related to location, production, inventory, and transportation. 2. Tactical: Involves medium term decisions such as weekly demand forecasts, distribution, transportation planning, production planning and material requirements for planning. 3. Operational: These are day-to-day decisions as part of normal managerial duties. Typical purchase procedures: 1. Specifying the amount needed. 2. Determination of the supplier based on pricing comparisons. 3. Negotiating the price as well as payment terms, warranty, and timed cost reductions. Dealing with supplies or commodities depends on their availability, price and quality. 4. Purchase of the supplies. 5. Delivery and inspection of the supplies. Focusing on certain areas within the supply chain flow can reduce costs. There might be times when buying in bulk is cost effective. Manufacturing Resource Planning (MRP) as part of SCM flowchart can help plan and determine the supply needs and timelines for new manufacturing processes in order to predict product delivery schedules, and respond to changes in the market or product. It is software based production planning and inventory control system used to manage manufacturing processes. ...read more.

Middle

Dell took the inventory from SLCs as required usually replenishing its stocks every two hours. It was up to the suppliers to decide on maintaining inventory at SLCs. Most suppliers replenished the stocks at SLCs thrice a week. Dell had a vendor managed inventory arrangement with its suppliers. As per the arrangement, Dell set the target inventory levels-typically 10 days. The vendor had to decide when to order the inventory and the quantity to order to maintain the levels set by Dell. The suppliers also had to decide on sending the components to SLCs so that Dell could take the components as and when required. With some suppliers, who had been with Dell over a long time, Dell agreed to purchase a particular percentage of the components it required. This was to ensure that an adequate supply of products was available even when the demand in the market was higher than the supply. Some of the engineers from the major suppliers worked in tandem with the new product development teams in Dell. This enabled the suppliers to understand Dell's requirements, and in case there was a problem with the components, the engineers from the suppliers were available to rectify it immediately. Due to this close collaboration with suppliers Dell was able to manage with an inventory of just a few hours for some components. Some of the partnerships that Dell entered into with its suppliers enabled it to operate with almost zero inventory levels. A case in point was Sony, which supplied monitors for Dell. These high quality monitors, with very few defects, were not tested by Dell. These monitors were not shipped to Dell's assembly lines but were shipped directly to Dell's customers. Dell shared with its suppliers the data pertaining to sales forecasts once a month. The data was generated by the marketing department of the company and took into account various factors like the demand for new products, and seasonality trends like the demand from the government departments at the end of the year, demand from school children at the start of the academic year etc. ...read more.

Conclusion

In the process, Dell was able to meet the expected price and the vendors also benefitted as they were to sell higher volumes of the components. 7. Brief Summary of the Dell Supply Chain model. Importance of SCM to the PC business of Dell Inc. 1. Material costs account for 74% i.e. 21 billion dollars for Dell. 2. Improving SCM by 0.1% has bigger impact than improving manufacturing process by 10%. 3. Changing technology obsoletes materials value by almost 1% per week. 4. Dell relies on market forecasting to drive production. 5. Constant technological breakthroughs cause very short product life cycles. Dell's Competitive Advantages with its Supply Chain Model 1. Dell boasts of one of the best SCM's in the world. 2. 92% supplies are ordered online using integrated websites of suppliers and Dell. 3. 95% of supplies located very close to assembly plants hence coordination is easier. 4. D ell's factories have only 7 hours worth of inventory for most items whereas if we take industry wise it is around 10 days. 5. 15 suppliers provide almost 85%of all supplies. 6. Dell gets paid by its customers first and then it pays its suppliers. 7. Dell uses the I2 SCM software package which caters to almost 70% of the SCM market. 8. Every 20 seconds the software aggregates orders, analyses material requirements, compares Dell's on hand inventory with its supplier's inventory and then generates a supplier bill of material to meet its order needs. 9. Instead of forecasting the daily supply need, Dell receives the exact material every two hours to fulfill actual consumer orders. Competitors disadvantage Vis a Vis Dell's supply chain model 1. The need to hold inventory at each step. 2. Have to pay suppliers first before getting paid from the customers. 3. Caught with short supplies of hot products leading to lost sales. 4. Stuck up with excess inventories of slow selling products. 5. With about 2000 product transitions a year the ability to reduce product time to the market is critical which only Dell has been able to achieve more effectively than the rest. V. ...read more.

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