Dell's Supply Chain Management Practices

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Dell maintained nearly zero inventories for some of its components. With the value of inventory declining rapidly at an average of 0.5% a week, holding a significant amount of inventory did not prove to be an advantage. As Dell did not hold large inventory of finished products, it did not have to sell technologically obsolete products at a discount. Dell was able to bring in new products according to the needs of the customers into the market faster than its competitors. In 2004, the inventory turnover rate in Dell was at 107 times a year, compared to 8.5 times at HP and 17.5 times in IBM. (Refer Table IV for the advantages of Direct Model according to Michael Dell)...

The Problems In the years 2005 and 2006, Dell faced several problems, and lost its coveted position as the largest selling PC manufacturer to HP. HP was able to surge ahead of Dell by procuring components at a cheaper price and improving its supply chain management practices. Dell's problems included growing complexities in its product line and pricing system. At the same time, demand from the corporate buyers, who accounted for a major share of Dell's sales fell. According to a survey by CIO Insight, technology spending among companies with revenues of US$ 500 million decreased by 1.3% in 2006...

Analysts felt that in order to realize higher returns, Dell should concentrate on providing a better customer experience and introducing path breaking products by investing more in R&D. They were of the view that Dell needed to move from a model based on cost control to an innovation-based model, providing personalized solutions to the customers. In early January 2007, Dell announced that it planned to move most of its global supply chain and manufacturing operations to Singapore, which would function as the company's 'shared headquarters.'...

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