Business Strategy

Topics: Variable cost, Costs, Supply and demand Pages: 65 (4552 words) Published: October 15, 2014
Supply Chain Management
Chapter 5
Network Design in the Supply


A strategic framework for facility location
Multi-echelon networks
Gravity methods for location
Plant location models


1. Network Design Decisions
 Facility role: What role should each facility play? What processes should be performed at each facility?
 Facility location: Where should facilities be located?

 Capacity allocation: How much capacity should be allocated to each facility?
 Market and supply allocation: What markets should each facility serve? Which supply sources should feed each facility?
 (How many plants, DC’s, retail stores, etc. to build?)


Dell, Inc.
 Designs, develops, manufactures, markets, services and supports a range of computer systems, including

enterprise systems (servers, storage and networking products and workstations), notebook computer systems,
desktop computer
systems software and peripherals.

 Services that help maximize information technology (IT), rapidly deploy systems and educate IT professionals and consumers.
 Financing alternatives, asset management services and other customer financial services for its business and consumer customers in the United States through Dell Financial Services L.P., a joint venture between Dell and CIT Group, Inc.

 The Company is generally managed on a geographic basis: the Americas, Europe and Asia Pacific-Japan.

Vital Statistics
Founded in 1984
Employs 83,000 people worldwide
Revenue: 60.70 B
Enterprise Value: 19.2 B
Profit Margin: 3.36%


Founded by Michael Dell
Assemble & market own PCs
Sell through retail outlets
Withdrawn from retail
PC outsourcer
back to retail channel

Focus on delivering the best possible customer
experience by directly selling computing products
and services online

Business Model
Direct sales
– Direct customer relationship
– Products and services targeted at distinct customer segments

– Lean manufacturing
– Just-in-time production
– Close relationship with suppliers

PC Distribution

PC Maker



PC Maker

6% cost advantage
Detailed customer knowledge




Limited customer reach
Need for strong brand

Go to retail channel in 2007
Market share decreases
– PC shipment unit share : HP 19.1%, 3.9% over Dell.
– 1st quarter, 2007, HP: 28.2% market growth, Dell: -6.9%

Dell’s former CEO Kevin Rollins resigned, Michael
Dell back
– "The direct model was a revolution. It's not a religion,"

A lot of customers still want to see and touch before
putting down their hard earned money

PC Market Shares in 2013 (US)

PC Market Shares in 2013

Customer Segmentation
– Companies buying at least $1M annually (Fortune 1000)
– 60-70% of total sales
– Devoted sales representatives

– Small & medium enterprises
– Individual customers (home & office)

Public & international customers

Order -> configuration
Kitting: chassis + spec sheet
– Cables, connectors, motherboard, memory from inventory
– Other required modules (HD, CD-ROM, DVD, etc.)

Software download
Power & test

Business Process Improvement
Product redesign
– Various models share components

Suppliers redux

15 key suppliers (85% of materials)
World class quality
Warehouses 15 mins away from Dell factories
2 hours of inventory

Process improvement
– 2hrs for assembly

Virtual integration

Generic Business Strategies
Cost leadership: focus on gaining advantages by reducing its economic costs below the costs of its competitors

Size difference
Economies of scale
- volume of production
- specialized machines
- cost of plant & equipment
- employee specialization
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