Discuss about the Dell CTO Supply Chain Strategy.
Apart from the configure-to-order supply chain model, Dell uses a continuous-optimization framework to ensure that its supply chain potential is fully enabled. However, the framework is based on four operational steps. In the olden days, Dell was the poster child for the efficiency of the supply chain through the use of its “direct model.” With time, the model was changed to make-to-stock after which the ultimate model became “make-to-order”. Such a transition was vital because Dell was able to minimize its cycle times to unthinkable levels within the high-tech industry. Through the use of such models, the company was able to carry inventory in a few days instead of several weeks like other PC producing companies (Bala, 2017). As a result, other companies that were quick to notice Dell’s success shifted their supply chains to that of Dell. However, such companies failed to realize that such best practices in chain supply are not stone-etched and that such innovative spirit needed to be used several times to ensure that a company stays relevant to its ever-changing customer demands. Therefore, most of such companies dropped the use of the direct model. Regarding Dell, the same model worked appropriately when the company needed a larger more mature base of customers. However, since time and technology has changed the emerging markets require new business dynamics and innovation to meet the need of customers. Such explains why Dell focuses on shifting innovation within its supply chain from time to time. It is the performance of the supply chain that is the competitive differentiator in the current market (Barbu, 2011, pg. 107).
The supply chain and logistics of Dell alone cost about $2 billion every year. The same serves about 13 million customers. With the idea of expanding its global reach, the company intends to enable its potential through its continuous-optimization framework. The steps, as mentioned before, include:
The structure that is deployed is also used to identify the potential of the full logistics network within every market (OpenInnovation, 2003, pg. 2). The work of the supply chain team is to look into the current costs within areas that are relevant to the company. Such areas include country, region, service level, product, lanes, and transportation mode. Cost drivers are then identified on the basis of actual shipments. With all that information, Dell can evaluate its full potential cost (associated with being in the new market) and future opportunities. The main reason behind its success on the same is because as a company, it focuses on competing by focusing on its supply chain strengths alongside areas that it operates differently to other companies (Ke and Wei, 2006, pg. 11).
The supply chain of any given company needs to ensure that it offers solutions tailored to meet specific customer needs. There is no such supply chain as one-size-fits-all; meaning that so are the software and hardware solutions (Institute, 2017). Due to such issues, Dell recognized that with the advent of configure-to-order model, it stands a chance of helping clients minimize costs of inventory as well as reduce delivery time in the market. In the same lane, there are a number of services associated with the CTO model for the purpose of creating the optimal solution for Dell. The aspects of a solution that is customized include:
Some of the associated benefits of CTO model are:
ket via a repetitive service solution provided to the customers. Therefore, the customers have a greater order visibility (Barbu, 2011, pg. 107).
Dell has a supply chain management system for the purpose of handling vital business functions. Such functions are, however, associated with supporting manufacturing operations including computer delivery and inventory management. However, before putting into operation, such a system must be designed in a way that it ensures cost-effective scalability and reliability. If any sort of failure occurs, millions of dollars per minute factory downtime is experienced. As Dell grew in size and might, its servers that lacked the capacity to handle larger operations were replaced with servers that were larger and more powerful (Institute, 2017). The updated servers were redundant and thus updating them didn’t require the shutdown of the entire system. Since the performance of PowerEdge servers has increased associated models are cost-effective and highly scalable. The implemented servers are made operational in almost every location in the world. In every location, they use similar processes to determine issues regarding backup, disaster recovery, and monitoring of every operation of Dell (Open Innovation, 2003). However, such advantages are as a result of the fact that the IT section of the company uses models that are readily supported and cost-effective. In relation to the company’s supply chain, Dell handles huge amounts of transactions as well as pieces of information. Such operations also include numerous key components that are vital in ensuring that such operations run smoothly (Barbu, 2011, pg. 107). The key components are:
Management of Configuration
The components that are used to manage configurations are more than one million in number. However, they are spread to over 200 families of products as well as over 2.5 million bills of materials (BOMs) every year. The component listing for BOMs is created for the purpose of building subassemblies or assemblies for parts produced by Dell.
Procurement
The component associated with procurement manages close to 2 million purchase order in a given year from close to 10,000 suppliers globally. In order to ensure that the processes of procurement are streamlined, an automated application is used by the company for the purpose of vendor communication and workflow approvals. Such also ensure that services like defective part replacement are enabled.
Cost
This component operates smoothly while in batch mode. It is used to calculate the total costs for BOMs. The batch processes run weekly, monthly, or quarterly with every job aggregating material costs.
Inventory
This component is used to manage an average of about 5 million inventory movements in a single day. Such processes are managed from stock rooms to floors in every Dell site. Other functions include the management of about 3 million messages that are transmitted from one system to another as well as analysis, reporting, and factory scheduling (Billtrust, 2017).
Payable Accounts
This component is charged with handling close to 15,000 items every day. Such operations include but not restricted to handling invoices and receipts as well as payments to Dell suppliers. The information regarding vendors includes location, ID number, contact information, and negotiated terms.
Apart from such transactions that are order-related, the supply chain system runs other batch processes. These processes ensure that data is made aggregate in weekly, monthly, or quarterly basis. The chain management system is supported by the PowerEdge servers. The servers, however, work under the influence of five Web-based applications that are internally developed.
Conclusion
This paper is charged with describing the significance of the CTO model alongside other supply chain issues that Dell face. According to outcomes from other research sources, Dell employs a system of chain supply like any other PC producing company in the world. By simple definition, the CTO model is whereby clients are given millions of configurations (Palmer, 2017). With such configurations, they are able to customize their computers according to what they require. Through the CTO model as well as operating in an approach to direct sales, Dell has built systems ready for order worldwide (Oracle, 2017). However, an approach (that is newer) known as the “build-to-order model” (BTO) has been recommended to be used alongside the CTO model. With the two models, Dell hopes that it will offer a wider spectrum of options for customers to choose products from. In addition, since this model is new and unique, the company stands a chance of being able to estimate the needs of the clients, forecast demand, and provide low-cost products (Oracle, 2017).
Alongside the CTO model, Dell also needs to introduce the ‘Smart Selection’ program. Through this program, the company will initiate the pre-building of configurations of popular PC required by customers and then have them supplied within 24 hours. This model is known as the new “build-to-order model” (BTO) (MAYER, 2017, pg. 2). The same will be used as a complement to the existing CTO model. With the two models, Dell hopes that it will offer a wider spectrum of options for customers to choose products from. Statistics show that the introduction of the BTO model changes the landscape of Dell’s supply chain. Such is because the company will start thinking about increasing the capacity of its warehouse warehouses, unlike the CTO model which only required the company to keep a small inventory space. Contrary to that, Dell is associated with a long history of dealing directly with about 2 billion customers in terms of sales. In this way, the company possesses abundant customer intelligence thus, giving it a competing advantage over rival companies. Such close relationships with customers via sales help the company to meet customer demands as well as maintain low inventory (Billtrust, 2017). Besides, the production of limited configurations helps the company determine the gadgets within every system. As a result, troubleshooting and maintenance of the manufactured equipment are easy. Through the use of CTO and BTO, Dell stands a chance of customizing its operations in more countries. Such will ensure that cost is lowered and revenue was driven. Such reductions in cost are predicted to come from support and supply chain. In addition to the two strategies, the company also intends to develop specific educational models. In line with the same, the company’s Wyse business (the client-cloud computing business) is associated with a growth trajectory with revenues reaching about $ 1 billion. According to the management of Dell, such acts as a real future dollar play in which the company needs to work round the clock to drive its long-term growth (Billtrust, 2017).
Source: ‘Brand positioning in Asia & North America; Journal of Marketing (1999)
However, since Dell intends to incorporate both CTO and BTO models into its supply chain, there is a chance that it will deal with a resultant complex mechanism. Apart from just coming up with a new strategy, the current CTO model provides a platform through which Dell can excel. However, to ensure that the company recoups all its investments (that is made from the use of End User Computing strategy for growth) as well as convert its market losses to profits, every department must show excellence in the generation of revenue and profit margins improvement. For the growth strategy, introducing the two models to work side-by-side would be important. However, it is unsure if the two models are complementary to one other and are able to provide the required economies of scale (Alden, Steenkamp, and Batra, 1999, pg. 75).
References
Alden, D.L., Steenkamp, M. and Batra, R. (1999) ‘Brand positioning through advertising in Asia, North America, and Europe: The role of global consumer culture,’ Journal of Marketing, 63(1), p. 75. doi: 10.2307/1252002.
Bala, R. (2017) Unit Guide. [ONLINE] Unitguides.mq.edu.au. Available at: https://unitguides.mq.edu.au/unit_offerings/72118/unit_guide [Accessed 19 April. 2018].
Barbu, C.M., (2011). Cultural adaptation of products. Management & Marketing, 9(1), pp.105-110.
Billtrust. (2017). What Is Payment Cycle Management? | Billtrust.[ONLINE] Available at: https://www.billtrust.com/payment-cycle-management/ [Accessed 19 April. 2018]
Institute, C. (2017). Enterprise Risk Management (ERM). [ONLINE] Cia-ica.ca. Available at: https://www.cia-ica.ca/about-us/actuaries/what/erm [Accessed 19 April. 2018]
Ke, W., and Wei, K. (2006) Organizational Learning Process. Journal of Global Information Management, 14(1), pp. 1-22.
MAYER, F. (2017) CET-Innovation & Entrepreneurship. Sony falls back, pp. 1-3.
Open Innovation. (2003) Open Innovation :: Open Innovation Community. [ONLINE] Openinnovation.net. Available at: https://openinnovation.net/about-2/open-innovation-definition/ [Accessed 19 April. 2018]
Oracle (2017) Working with the Payroll Cycle. [ONLINE] Docs.oracle.com. Available at: https://docs.oracle.com/cd/E16582_01/doc.91/e15133/wrk_wi_payroll_cycl.htm#EOAPY00190 [Accessed 19 April. 2018]
Palmer, A. (2017) Actuaries Managing Risks. [ONLINE] Available at: https://actuaries.asn.au/microsites/actuaries-managing-risk [Accessed 19 April. 201
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