Supply Chain Management – The Dell Company

Michael Dell didn't take long after returning as chief executive of his namesake company to locate the source of the firm's recent financial and operational problems: its supply chains (Hoffman, 2007, p58). Before I look more into this I am going to discuss the concept of Supply Chain Management.

Supply chain management (SCM) is a ‘total systems approach to managing the flow of information, materials and services from raw material suppliers to the end customer (Jacobs et al, 2009, p17). Each product or service will have its own SC (Greasley, 2009, p391). There are three main objectives to SCM, these are; focus on satisfying end customers, formulation and implementation of strategies based on capturing and retaining customer business and managing the SC effectively and efficiently (Johnston et al,1997, p211). The relationship between a firm, a supplier and a customer is known as a supply network. These relationships are shown in the diagram below (Greasly, 2009, p392), this diagram demonstrates the structure of a supply chain. 

Supply chains are highly complex and span many different organisations (Gattorna, 2009, p271). All supply chains are different; as a result organisations need to define the supply chain practices that best support their business strategy (Gattorna, 2009, p273). Therefore the supply chain design is crucial in order to optimise performance. Greasley states that one of the most important design features of a supply chain is the cooperation of organisations with each other, in order to provide customer satisfaction (Greasly, 2009, p394).

This is, according to Michael Dell, where his company went wrong. Dells share price has declined from more than $40 two years ago to less than $25 today on missed financial targets and market share losses to Hewlett-Packard and other competitors. The company has also seen its reputation for customer service tarnished (Hoffman, 2007, p58), all because of the lack of a high-quality supply chain. Dell highlighted some of the things he was going to change in order to get his company back no track;

‘As we continue to grow worldwide, it is important that we increase our ability, via the Direct Model, to manufacture close to our customer and fully integrate our supply chain into one global organization.’ Dell said. ‘This will allow us to drive for even greater excellence in quality, cycle time and delivered cost. We will innovate and adapt our supply-chain model to help drive differentiated product design, manufacturing and distribution models’ (Hoffman, 2007, p58).

After these innovations to the supply chain had taken place it was later said by Jacobs et al, that the Dell supply chain is ‘unique and interesting’ (Jacobs et al, 2009, p361). They also state that through the likes of innovative product design and assembly systems, internet order taking processes and co operation from their suppliers their supply chain has become extremely efficient (Jacobs et al, 2009, p361), therefore proving that a high-quality supply chain may be key to a company’s success.   

References

Greasley, A. (2009). Operations Management. Second Edition. Sussex: John Wiley and Sons Ltd.

Hoffman, W. (2007). Dell Targets Supply Chain. Gulf Shipper. Vol. 18, issue 10, p58.

Jacobs. Chase. Aquilano. (2009). Operations and Supply Management. Twelfth Edition. London: McGraw Hill.

Johnston, R. Chambers, S. Harland, C. Harrison, A. Slack, N.  (1997). Cases in Operations Management. Second Edition. UK: Pitman Publishing.