Dell Online (Case Study)

Background (General Facts from Case Study)that, it continues to find means to increase the
Dell is a computer corporation recognized forefficiency of its products. Michael Dell suggested that
manufacturing computer systems through partsreducing the human interaction with hard drives during
assemble. In 1983, Michael Dell saw an opportunity inassembly would decrease its failure rate. As a result,
using IBM compatible computers for a new assemblythe reduction of the number of "touches" dropped
line that can be sold to local businesses. The idea asthe failure rate to 20%.
explained by Michael Dell, in an interview with JoanBusiness Automation
Magretta[1], is that in the early days of computers'The general attitude from individuals and employees
manufacturing, companies had to be able to producewithin organizations is that automation through
every part of the system. As the industry matured,information systems complicate their internal
companies started to focus on single parts and toprocesses, and might result in cutting down the
become specialized in creating items that can benumber of staff (Khatibi, V.Thyagarajan and
assembled with other parts to prepare a computer.Seetharaman 2003)[9]. There are several
As a result, Dell understood that to have apsychological and behavioral problems associated with
competitive edge in the market, they needed toreluctance to change, which appear to impede the
focus on activities that drive sales instead of puttinggrowth of E-commerce. On the other hand, retailers
capital in producing items that other manufacturesno longer think their web sites are simply an added
are already creating.benefit for their customers since the ROI (Return on
In the 1990's, the computer market revolved aroundInvestment) percentages from online websites have
desktops, notebooks, and network servers. Dellfar outweighed their bricks-and-mortar counterparts
competed with high-end machines from IBM, HP, and(Casey 2004)[10]. For that reason, the staff involved
Compaq with a product line that providedin the traditional sales process requires training to
value-priced systems for consumers and highly reliableembrace new technologies and to learn how they
networked systems for business. In the late 90's,can benefit from it.
around 40% of households owned a pc in the US. OnFor Dell online store the response from the
the contrary, from the business side, around 80% ofconsumers was huge, however, at first the sales
the companies still had old server and desktoprepresentatives feared that the online website would
machines. Management had to approve purchasingreduce the number of sale deals they closed. To
orders, which resulted in only 2.2% of servers' sale inovercome this, Dell introduced the cost saving model
comparison to the total purchases for desktop PCs inshowing how the online store would support sales
1996.representative close more deals and at the same
In order for Dell to achieve $7.8 billion from sales intime would produce cost effective results that would
the late 90's, it had to skip over the traditionalhave a positive ROI on the business.
channels of using retail or value-added resellersDynamic Industry
(VARs) to sell directly to the consumers . TheCustomer relations management (CRM) is a very vital
"direct-model "or as Michael Dell comments on howcompetency that was born from the amount of
his new employees call it "The model" is not that alltransactional sales deals through call centers. The
powerful system. It is simply a way for Dell to cut onprocess of understanding customers goes through
the standard supply chain cycle and deliver goodsthe initial phase of collecting data then analyzing
directly from the manufacturer to the customer.trends and eventually building a knowledge base that
They created partnerships with several suppliers suchwill drive the profitable relationship (Liew 2008)[11].
as Sony, Intel, and others to deliver goodsOrganizations' use of CRM models is an attempt to
effectively at the time of the order to Dell's plantget firsthand knowledge that would improve
where the assembly took place. The delivery andmarketing effectiveness, bring more personalization,
shipment were outsourced through a dedicatedand build brands among other objectives based on
service that also insured delivering the monitorsthe nature of the business (Anderson, Jolly and
directly from the supplier at the same time. Mr. DellFairhurst 2007)[12].
talks about how suppliers are benefiting from theMichael Dell model is based on keeping no inventory,
fact that Dell buys more items from the suppliersin order for Dell to maintain that they focused on
keeping no inventory and only requesting fastersegmenting their customers into scalable businesses
delivery upon orders.that can be analyzed for their level of demand. Sales
In 1996, Dell capitalized on the growing number ofexecutives at Dell used communication skills to elicit
customers who are using the Internet and launchedinformation from customers that would further
its online store at The online venture then proved tosupport the demand forecast initiatives at the
be the most appropriate sales channel that matchedcompany. In addition, Dell sent surveys to customers
the supply chain direct model implemented by Dell.to further understand the satisfaction level with the
In its path to compete in the market, Dell had toservices provided by Dell and modify its product line
provide additional services such as DellPlus thatand services accordingly. Furthermore, Michael Dell
enabled Dell to install commercial software packages,discussed how regional meetings in various countries
DellWare which provided hardware and softwareinvited potential customers to further enrich the
from other vendors, and after sales and on-siterelationship and give room for comments and
support services. These actions, as described byfeedback about Dell's services. On top of all that, Dell
Michael Dell, required establishing more partnerships,strived to provide information for its customers to
which Mr. Dell describes as a process of "trial andhelp them make proper choices for their IT
error". The integration with partners was changing asrequirements and gain privileged information about
the technology is evolving and many venders gonew and upcoming technologies. Dell invested in
volatile while others remain sold. Furthermore, lookingdeveloping a web portal in the form of "Premier
for an IT company to build the online store broughtPages" for high-end customers and another for small
in very few players, which made Dell accept theto medium businesses at Dellmarketplace.com[13].
overhead of developing the portal in-house.Both sites aim at providing information to customers
Enterprise Architecture Issuesand establishing a single point of access for
- Supply Chain Management: The purchase andcustomers' IT service requirements.
number of transactions that Dell took in required aConclusions
properly configured and concise business process.Dell is simply a success story; it shows how one can
- In-sourcing: To meet the demand of the marketgain market advantage by simply understanding what
some parts of the process required the services ofbrings value to customers. No one, even Michael Dell
other companies that can be in partner with Dell.himself when he started, thought that people would
- Quality Assurance: The computer industry is a veryenjoy customizing their PC orders and wait patiently
dynamic one, which makes quality products stand outas the order makes its way back to their homes.
when faced with technology-oriented consumers.Some studies talk about how people challenged the
- Business Automation: As Dell advanced into onlineinitial delivery estimates provided by Dell to see if
markets, its sales staff feared from losing their jobsthey were met.
in favor of automated sales transactions.The level of expansion Dell strived to achieve
- Dynamic Industry: The technology industry requiresbrought in problems as with any growing business.
closely monitoring consumers' trend to maintain a lowHowever, by adapting techniques such as In-sourcing
gap between the point of demand and the point ofand mutual benefit partnerships it reduced its
supply.potential staff from 80,000 to only 15,000. Dell also
Analysiswas aware of factors that would hinder its supply
Supply Chain Managementchain. For example, they maintained a multiple list of
Supply Chain Management (SCM) aims at integratingshippers as not to be affected by unexpected delays
all corporate activities to improve relationships at alland organizational issues. In addition, they understood
levels (internal operations, supplier networks, andthe importance of developing their own enterprise
distribution channel) to meet the competitive edgesystems in-house to control all the variables and
and satisfy the customer (Al-Mashari and Zairimaintain their business processes.
2000)[2]. In order to build an effective and completeThis is one of the best case studies in the IT
business process that supports SCM, informationindustry. I believe the level of commitment Dell
among all business partners need to be shared.showed in the model he created is inspiring. On the
Information sharing through the Internet reduce theeditorial side, I believe more highlights on the internal
gap for business-to-business (B2B) commerce byinfrastructure of Dell's network would have helped in
enabling seamless integration with enterprisebuilding an understanding of how the supply chain
processes among partner corporations (Archeractually worked. Did they use CRM modules, ERP,
2006)[3].SCM, or a combination of all? How did Dell secure its
Dell developed its internal business process byinformation link with its suppliers, were all of them
creating production cells that start assembly at themature enough when it came to Information
point of order. It also established an internalsystems?
information system to make the details of theRecommendations
products under production electronically available to all- Organizations should focus on value adding activities
parties within the chain. To manage the supply oflike establishing online portals for their customers.
computer parts, Dell maintained close relationships- Businesses should conduct frequent surveys to
with their suppliers and logistics providers to makemeasure the level of service they provide and work
their vendors manage the inventory system while Dellon enhancing their products.
focused on product assembly (Kumar and Craig- Organizations should decentralize and enable
2007)[4]. In addition, Dell used enterprise technologyexpansion through global techniques such as
to make their database and methodologies availableout-sourcing and in-sourcing.
to the supplier to understand how Dell works. On the- Building internal enterprise information systems is
consumer side, orders made through the phone orthe most effective methodology for information and
online through produced a tracking code that theknowledge sharing.
consumer can use to track the status of his or her- Establishing multiple touch points with customers,
order at any time through the phone or on Dell'sstrengthen the relationship and increases satisfaction
website.levels.
In sourcing- Meeting global quality standards is the only way to
Organizations worldwide are benefiting from theget an advantage in a competitive arena.
specialized services offered by various companies. In- Internal organization assessment and training is vital
the shipping and transport arena, companies Like UPSto maintain the high spirit of employees and increase
(United Parcel Service) and DHL stand out as masterstheir productivity.
in their industry. UPS and DHL have established- Management support and funding is a key element
offices and transportation vehicles all across thein the success of any information system
world. They provide business services throughimplementation.
in-sourcing which enables them to be part of theReferences
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our hub, then flying it from our hub to your repairre-engineering using enterprise resource planning
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to shipping. In terms of quality of service, Dell hasSmall Businesses." Electronic Buyers' News, October 2,
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