Dell Case

Topics: Supply chain management, Inventory, FIFO and LIFO accounting Pages: 5 (1518 words) Published: April 6, 2011
CIS 8060 Case Brief Grade Assessment

Group Number/Name: The A-team

Student Names: Paul Tran, Sukumar Pant, Vaibhav Choudhary

CriteriaScore and Comments
Identifying Problems & Issues [15 points]
Use of case facts to diagnose core problems and issues
Effectiveness in framing the problem & issues
Analysis of Issues [50 points]
Meaningful criteria identified for the analysis of problems and issues •Effective use of case data
Application of concepts and theories
Insightful & creative analysis of issues

Recommendation [20 points]
Specific course of action
Logically deduced (as opposed to opining)
Style and Presentation [15 points]
Succinctness & definitional clarity
Coherent linkage of thoughts
Mechanics of presentation (syntactical errors, formatting, language precision) Aggregate score: _______________________ [out of 100 points]

Problem Identification
Dell’s direct business model helped to double the stock price in a four-year period as well as helped to reach its then long-term goal of $60Bn in revenue. However, in spite of all the sunshine, Dell was facing the following problems 1) Manufacturing costs in the desktop PC division continued to surge with Level 5 being critical. This was leading to an overall increase in the manufacturing costs & thus negating the benefits of the contract manufacturing arrangement 2) Dell had to increase reliance on 3rd Party integrators (3PIs) resulting in lower quality products in addition to forecasting errors in capacity planning at 3PIs.

Analysis of Issues
The Dell manufacturing model follows a push-pull strategy. Push-pull boundary can be pinpointed between level 6 and level 7 when looking at the 10 levels of desktop PC assembly. Dell utilizes delayed differentiation for the push strategy which is level 1 to level 6. Then customization which is level 7 to level 10 is applied through the pull strategy once the demand is known. This hybrid approach allows Dell to take advantage of the cost minimization early in the manufacturing process typical of push strategy while having the ability to be responsive and flexible late in the manufacturing process typical of pull strategy. At the same time, the hybrid strategy helps reduce the bullwhip effect that results from utilizing a pure push strategy due to dependence on forecasting instead of actual demand. Combine this fact with the fact that Dell sells directly to customer means the bullwhip effect downstream is minimized due to lack of intermediary. Upstream however is where problems are showing up and where L5 manufacturing has been increasing in usage. Core reason that was contributing to the problems faced by Dell is the shortage in motherboard arriving on time for assembly onto to the chassis. Instead of integration occurring say in China, the integration was done in the domestic market in order to make up for lost time. Empty chassis were shipped by ocean to Dell US & Europe first followed by air freighting of motherboards to the same locations. The result was incurring expedited & air freight costs as well as 3rd party integration costs. Additionally, CMs were incurring costs for idle labor that was originally dedicated for motherboard chassis integration. The question to be asked here is why Dell is using L5 manufacturing instead of holding more safety stocks for motherboards. Holding more inventories of motherboards would seem like the easiest fix to eliminating the 3rd party integrator and retaining integration in an offshore location. There are two reasons for this setup. The first reason is the speed that L5 has over L6. Take for example a scenario where the motherboard lead time is 6 weeks. In the L6 scenario, 6 weeks would pass which then moves to China for integration with the chassis and then shipped to the supplier logistic center which takes another 5 weeks. In total, the...
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