DRABACKS
On the darker part, Dell company bear a high shipping cost then selling their product to retailers and wholesalers. In this way dell has to bear shipping cost for each product when ordered by customers, whereas other companies bear large shipment via tucks to warehouses and finally then to retailers which is less expensive per unit.
DISCUSSION QUESTIONS
1. How has Dell use its direct sales model and build to order model to improve its supply chain?
Ans: Dell Company's path of action is to enhance technological capabilities to compete and enjoy continuous leadership. Special Web pages are designed to encourage supplier's to meet customer's demand by driving down lead times, lot sizes and inventories. Focussing on their distribution path, Dell offers variety of it's component, virtually through the internet leading to increase in their revenue. Customer's can choice their products based on their value choice. Customers can select products during any time by recommending product configurations or customizing them and also based on their purchase history and current needs.
Direct Sales and build to order model are use by the Dell to build supply chain by synchronizing the process from the starting to it's completion. Dell produce products on the basis of their customer's order and execute accordingly after receiving the payment. No Products are produced prior to customer's order and based on the order procurement starts. So first step of the company si to do research of customer's preference and then based on it, a design is made which is displayed on the web site. Integration of supplier's is done through web page, which displays the orders that are not yet executed, giving supplier's the vital information to structure their plan based on the requirement. These models have been proved exceptionally useful by drastically decreasing the overall process timing to a couple of hours in comparison to months. Increase in cash flow is also witnessed as the payment is received by the company before making the payment to their suppliers.
2. How has Dell exploited the direct sales model to improve operations performance?
Ans: Dell produce products for the customers who have value for choice from different part of the world. Internet played a key role in the success of the direct sales model. The Products with high life cycle in an industry face difficulty to compete with dell, who enjoys advantage of early market. Dell introduces the first model to customers in form of a new product. Supplier's are directly linked to the orders, so that they know the quantity of components to be manufactured and shipped. The compression of supply chain give Dell a competitive advantage. Depreciation and write off of inventories costs are reduced as Turnover rate of inventory is 60 times per year. Negative cash conversion cycle is operated by Dell by using Direct sales model. Money is received by the company in advance to pay to it's supplier's for the components. No stocks are kept and orders are executed based on the customer's choice. Sale Price and orders of the product are received by the company, simultaneously, customer also receives the product accordingly to their preference within a short span of time.
3. What are the main disadvantages of Dell's Direct Sales Model?
Ans: The disadvantage of Dell's Direct Sales Model is the shipping cost and customer support service cost ,which the company has to bear after the sale is done. Dell bears the direct cost of shipping, as it deals directly with the customer and where retailers have no role to play. Other companies produce and send the products in bulk in comparison to Dell, who delivers sm
