Dell Computers was founded by Michael Dell in 1983, when he was only twenty one years old, at that time a student at the University of Texas. His approach was to make computers for commercial purposes that could be sold to customers. He also used the strategy of building-to-order, intertwined with his visionary leadership and good management skills, which has since made Dell one of the most successful computer manufacturing companies after IBM (Narayandas 1996). The sales strategy employed by Dell has eliminated all agents and middle persons in the distribution, but sells its machines and equipment directly to customers (Nelson 2000). This has made Dell realize high sales margin, since it offers first touch excellent service to its customers at a lower cost as compared to its competitors. This strategy has also worked to Dell’s advantage by helping it build a wide and loyal customer base all over the world.For easier and faster customer ordering, Dell has developed a very user friendly website that enables customers to order computers and services online. Customers are assured of efficient service delivery that is made possible by the company’s clear supply chain and data integration with the suppliers’ (Nelson 2000). The continuous innovation in technology and the modern approach to manufacturing and assembly of computers makes Dell products preferred owing to the better quality of the company’s products at a lower cost.
Service delivery is a very important aspect in the growth of Dell. Dell deals directly with customers who order services they require, which are then delivered through Dell’s closest manufacturing firm. It is worth noting that Dell is an international company with branches around the world. This makes it easy for the company’s delivery channels to reach its respective customers efficiently and effectively. The clear supply chain and the system integration with all the suppliers who are selected based on four criteria of quality products, cost minimization, efficient delivery of products, and technology advancement, makes collaboration from the head office manageable (Meredith & Shafer 2010). This service design is called the Direct Model because there are no distributors and middlemen between the Dell Company and its costumers (Nelson 2000). This direct business model helps Dell be cost efficient by avoiding capital expenditures and setting up infrastructure for distributions and retail.
Dell also gives its consumers a chance to procure computers and equipment with specific specifications. Therefore, Dell manufactures tailor-made products, built only after receiving orders from its customers (Narayandas 1996). In the process, it has been able to cut unnecessary inventory costs and overheads since it does not require any intermediaries. By use of this method, Dell has been able to supply its customers with the latest available technologies, value-added performance and advanced value at a competitive price (Cachon & Terwiesch 2006). By this strategy, Dell has managed to satisfy its customer’s special needs in a way that no other company had provided.
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Dell also has a very good contingency plan in case of any disaster (McDonnell 2000). This was clearly demonstrated after the attack of the World Trade Centre on September 11, 2001 when the company established a mobile technology park in Washington DC and New York by modifying three hundred and eighteen (318) wheel trucks into factories that operated 24 hours a day, so that it could be able to meet the unforeseen customer demands (McDonnell 2000; Cachon & Terwiesch 2006). This response resulted into Dell selling 24,000 desktop computers and laptops a week after the disaster.
The reliable relationship between Dell’s management and workforce made it possible to transform the devastating moment in the I.T industry to an enormous opportunity for the organization. Dell’s inventory management proved to be stronger, due to the sharing of information and data integration between the head office and suppliers, and has been able to monitor repair cycle including real time and historical vendor performance (Higgins 1999).
Inputs, Processes and Outputs
Dell receives information from customers who come to the company in their tones, subject to analysis, and comes up with the best ways to make the necessary products. This has helped the organization to generate user friendly products that are popular with customers as it addresses its core concerns (Narayandas 1996). This is among the many reasons that have made the company effectively compete with its peers.
The Value Chain
Value chain involves the overall company product flow from suppliers to consumers and involves the art of managing information, in a manner that the end user gets satisfaction as the company maximizes profits (Cachon & Terwiesch 2006). In Dell, this chain is quite unique because it sources parts from suppliers, assemble and sell directly to users. This direct sales model in Dell is driven by orders where the company obtains parts from suppliers to build and supply existing orders, which has helped the organization gain leverage over its peers in the industry (Higgins 1999; McDonnell 2000). Information to customers has been seamless because it comes straight from the manufacturers and this has further helped Dell build its brand and develop intangible capabilities according to the Valuable, Rarity, Imitability and Organization (VIRO) (Kamal 2003) model developed to necessarily keep a strategic competitive advantage.
Industry experts were of the idea that Dell had been losing its market share to competitors, since its competitors were increasing their supply chains in a bid to match Dell’s Direct Model (Meredith & Shafer 2010). Therefore, stakeholders recommended using a mixture of direct model and distributer model to expand the market and having exclusive retail outlets (Narayandas 1996). It was also called to attention that Dell was not focusing adequately on R&D, innovation and customer experience-which consumers had started attaching value to. The lack of concentration on quality and professional customer service had let to customer backlash.
The management instead focused on managing costs instead of focusing on customer satisfaction (Higgins 1999). Lack of new products is also viewed as one of the reasons for Dell’s dismal performance, which made HP Computers overtake Dell to be the best PC manufacturing company. Consumer dissatisfactions led to some referring to Dell as `faceless’ in brand audit. Therefore, Dell needs to seriously improve its image to be able to compete effectively in the IT market.
Operational processes and management is concerned with making products and services for either profit or nonprofit purposes, and is especially concerned with performance improvement, delivery of quality products and efficient deliveries (Meredith & Shafer 2010). Six -Sigma is the 99.997% rate of perfection in managing business and ensuring minimal or no defects in the products produced, such as desktop and laptop computers for Dell (Stephen 2004). Six Sigma methodologies focus on improving customer relation (which Dell does through direct ordering and customization), reducing cycle time as well as reducing the manufacture of defective products (III F W 2003). A company that produces only 3.4% defective products out of a million is considered to be performing at the sigma level. DMAIC is a phase of application of the six sigma methodology that stands for; Define, Measure, Analyze, Improve and Control (Stephen 2004).
Define: This is the phase where a problem area is identified, and process area and improvement requirement have their boundaries drawn. Activities undertaken at this phase are: establishing project team, finalizing the characterization of the six sigma team (as identified above in the Dell case), detailing the voice of the customer (such as Dell computers design suggestions), and defining critical to quality parameters and clearly defining process maps.
Measure: At this phase, a comparison between the current performances of the process to the desired performance is made. The activities necessary at this point include putting in place a data collection plan, carrying out a measurement system analysis, base lining data for the current process and putting in place operational definitions. Dell partly uses its website for this purpose.
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Analyze: This is the phase where Dell analyses the root cause as to why the process is performing at current levels is done. The deliverable at this phase is the validation of the root cause for the deviation in the present process. Improve: At this point, Dell finds an alternative process for improving performance and conducts a pilot project. The activities in this phase involve suggesting a solution alongside its cost-benefit analysis, executing the pilot project plan and issuing the improved process to stakeholders.
Control: This is the point where Dell takes measures to uphold the improved performance and the activities of improving process execution together with process control plans. Dell’s successful implementation of Six Sigma Methodology is indicated by the selection of a business main concern for the project, a clear understanding of processes that need to be improved, use of data for illustrations, selection of the appropriate six sigma tool for the right situation, communication of project goals and achievements to the stakeholders and conducting routine fitness checkups on the new improved process to ensure the process is in line with the prescribed guidelines.
Data Collection and Analysis
Data collection is an activity carried out at the Measure Phase. In this phase attention is shifted form whether Dell agrees that issue `A’ is the problem to what phenomena is going on in `A’ that makes it the problem (III, F. W 2003). An example is machine breakdown in the Dell manufacturing set up, where it is crucial to determine how frequent it fails, when it fails and if there are any other items related to the failure. Therefore, it is inherent that Dell collects data to be able to provide answers to all these questions. It should be equally noted that our sixth sense should also be a guide on where to collect the data; Dell’s personnel should be able to reconcile their feelings of where the problem lies with the data collected. The main purpose of data and the measure phases is to identify the problem and problem space that will impact Dell in the biggest way, as well as setting an improvement target. There are several tools (III, F W 2003) used in the actualization of the measure phase and these include:
Run Chart: Also known as line graphs, it displays process performance over time. It shows events on the y-axis against period on the x-axis. On this chart, trends, both upwards and towards are spotted and further investigated. Control Chart: This takes into account inherent variations in a process. There are two types of variations in a process-common cause and special cause. An example of common cause and special cause can be illustrated in carving a sculpture where if someone accidentally bumps into a sculptors hand during the curving process, then the special cause gets expensive on the final product. However, there would be inherent variations even without interference on the sculptor; this is what is called common cause. Prioritization Matrix: This is a fairly simple tool that has a provision for sorting varied set of items in order of significance. It helps in prioritizing complex and unclear issues in order of importance (Stephen 2004). When used, items to be urgently attended to in a list of several possible items is the outcome, it therefore helps stakeholders in speedily agreeing key issues.
Measurement System Analysis: Dell’s assessment is based on the existing measurement systems and on the basis of these systems, bonuses, rewards and recognition are determined (III, F. W 2003). This means that if Dell has unreliable measurement systems, then there is a direct impact on the expected incentives. Therefore, Dell’s systems should be stable, accurate, linear, repeatable and reproducible to be accepted as reliable (Stephen 2004). A stable system generates the same values over time while an accurate one is that which provides users with room to know how close they are to the set targets. A linear system on the other hand, should be one that gives similar results to different users at all times and so is a reproducible system. Spaghetti Diagram: This is a visual tool used to offer clear demonstration of the flow of material, information and finances in a process. It is very easy to understand as it diagrammatically shows point of departure, the existing state of affairs and what improvements are necessary (III F W 2003). The Analyze Phase: This is Dell collects data and utilizes it in helping its team to find and verify the actual root causes of the existing problems. The actual objectives at this phase entail performance of cause and effect analysis on the problem (Stephen 2004). There is a need for Dell to continue performing analysis up to a point where solvable root causes are identified.
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This phase is reached after the actionable root causes have been identified and confirmed (III, F. W 2003). At this point, solution selection matrix is among the tools used in identifying relevant potential methods that can solve the problem that Dell Computers may be facing (Stephen 2004). Dell then puts an action plan in place clearly showing who is responsible for what action cause. Barriers and aid diagrams are then drawn, which usually states the possible challenges in the implementation process (III, F. W 2003). A cost-benefit analysis is a final tool in this phase that lists the finances involved and the possible benefits.
Recommendations & Conclusions
Dell Computers managed to succeed in operation management of the inventory, but needs to improve on the customer experience area, new product development, and improve on the quality of the products released to the customers. The company should also diversify its sales outlets by employing both the Direct Model and the use of retail outlets to be able to increase the sales volumes that directly translate to improved profits (Meredith & Shafer 2010). The company should also fully implement the Six Sigma methodology in its management and operation process to ensure that no defective goods are manufactured and use of the five phases of DMAIC to drive its performance to a satisfactory level, and to remain competitive (Stephen 2004).
Dell Computers should clearly define its problem, compare the current and the desired performance, analyze the root cause of the poor performance, identify the alternative method for correcting the problem and finally make a decision on the implementation of the chosen method to improve and sustain desired performance. With regards to its value chain, there is a need to segment its clients into a set of corporate and individuals. The corporate segment should receive customized solution on storage and server related issues from Dell Computers. The individual market should get low end market-oriented products from Dell. With this segmentation and custom solutions to each set of customers, Dell Computers is surely bound to be the market leader for many years to come.