Dell Inc.: Improving the Flexibility of the Desktop PC Case Study Gary Lyle
Integrated Supply Chain Applications ISCOM/476
April 7, 2014
Dell Inc.: Improving the Flexibility of the Desktop PC Case Study Dell Inc., is a successful personal computer (PC) manufacturer with a unique business model that sells direct from the manufacturer to the customer. The business model starts with a customer order, and ends with a delivery directly to the customer - no distribution centers or retailers. This business model keeps costs low in shipping and inventory, but can see increased manufacturing costs because of the supply chain requirements involved in the custom fabrication of individualized orders. The case study begins with the investigation of the increased manufacturing costs that reached an alarming level in 2005. Case Study Question Responses
The case study questions involve process analysis, decision-making, supply chain optimization, and root cause analysis. Because Dell Inc., assembled a group of appointed experts with a division director leading the business process improvement, the data required to answer the questions is readily available in easy to use figures, tables, and charts. The increased manufacturing costs relate directly to the supply chain, and solutions to the supply chain and manufacturing problems for the company will result from the task team analysis. Examining the effects of the recommended changes resulting from the root cause analysis on the supply chain also provide valuable insights that may be applied to nearly any manufacturing process. Manufacturing Costs Identification
Why does L5 incur higher manufacturing and logistics costs than L6? Identify costs incurred by L5 and not by L6. Identify any costs incurred to only L6 and not L5. Manufacturing a consumer ready PC from an L5 configuration versus an L6 configuration requires the extra steps of installing the motherboard, and often the power supply. This increase costs because of the additional assembly costs, and supply chain issues related to the additional components. These supply chain issues include the quality of components, forecast inaccuracies, the volatile demand of new product introductions, and the largest issue of suppliers not meeting delivery obligations. The steps involved in elevating an L5 assembly to an L6 incur the additional costs of all of these potential supply chain issues, and the costs of the additional components and assembly. The L5 costs are relatively stable because without the motherboard installed in the chassis, the chassis is in a state that could satisfy a wide variety of customer orders. Because of the associated costs of installing a customer-specified motherboard into a mature L5 chassis, the transition to an L6 chassis may spike manufacturing costs. Manufacturing Solutions
Which of the six proposed manufacturing solutions should Dell implement based on survey results (Fig. 6-1)? Why? What are the pros and cons of this recommendation? Based upon the cost per box information and the survey results, option 3A –integration at supplier logistics center using Dell factory associates appears to be the best solution. The reasons behind this decision come from the information that option 3A has the lowest complexity score from the experts within the company, capital expenditure is low, cost per box is below the average of the options, and there is no impact to the current process. The pros of this option are that a minor change in the supply chain should provide a ready to customize chassis without significant cost per box increases. The cons are a minor capital expenditure, and hiring personnel to build the new chassis at the supplier logistics center. Chipset Supply Shortage
What would you do if the chipset supply shortage further deteriorated? The supply of chipsets is critical to competing a product, and the shortages account for more than 60% of the supply chain problems...
References: Simchi-Levi, D., Kaminski, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: Concepts, strategies, and case studies (3rd ed.). Boston, MA: McGraw-Hill/Irwin.
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