2) What advantages does Dell derive from virtual integration? How important are these advantages in the auto business?
In terms of communication and coordination, vertical integration leads to efficient and effective collaboration between supplier and Dell, and between Dell and customer through the physical proximity, established patterns of communications, and greater willingness to cooperate with other members of the same group. Another rationale for vertical integration is real time responsiveness and inventory management. Dell has real-time updating of order status and is able to check order status regardless of where the order is in the fulfillment process, which provided Dell with differentiating capabilities. Improved inventory velocity facilitates Dell PCs with newly innovated technologies to get to market much sooner than competitors. A major benefit Dell gain from virtual integration is the ability to forecast demand. Dell’s direct relationship with customers is key to forecasting.
These advantages are crucial to the success of auto business. …. 3) What challenges does Ford face that are not also faced by Dell? How should Ford deal with these challenges? As the nature of auto industry, Ford had some historical legacies which pose challenges to move to direct business model. First, it is the process complexity – Ford’s supplier network had many more layers and many more companies while Dell had just a handful of suppliers. To worst the matter for Ford, the modernity of technology decreased rapidly in lower supplying tiers, causing problems of exchanging information and connecting to suppliers and other external parties who tend to be less technologically advanced than the Ford. Secondly, Ford has to manage 180 manufacturing facilities which are much larger than only 3 units of Dell. Another roadblock for Ford is the dealer networks with relatively powerful independence, widening the distance between Ford and its customers. While Dell’s 90% of...
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