Dell_Case_Study

Flexibility of the Desktop PC ISCOM 476 April 9, 2012 Professor Gary Kowalkowski Flexibility of the Desktop PC Dell Computer Company founded in 1984 uses the business model of eliminating retailers from the sales channel and selling directly to customers. Dell used this model to deliver customized systems to customers with lower than market average prices. To assist Dell in accomplishing this achievement, Dell used contract manufacturers to build and supply various components of its computer equipment. However, Dell has identified issues arising from its L5 and L6 manufacturing processes regarding motherboard availability and the resulting increased cost of manufacturing and logistics. This paper will review and evaluate the L5 and L6 manufacturing and logistics cost, the manufacturing solution to best minimize the issues, and address the chipset supply concerns In addition, the business process improvement methodology will be reviewed, supply changes recommended, and the application to other industries and work environments. The L5 manufacturing and logistics process includes the assembly of the desktop PC chassis, floppy disc drive, fan, and depending on chassis configuration, the power supply. On the other hand, the L6 process includes all the processes in L5 plus the installation of the motherboard in the chassis. Currently, Dell suffers from the inability to provide contract manufacturers sufficient motherboards in a timely fashion. Several factors contribute to Dell’s inability to provide sufficient motherboards: chipset supplier decommits or supplier issues, quality and engineering issues, Dell forecast accuracy, and new product introduction (NPI). Bakker, Zheng, Knight, and Harland (2008) comment, “When operating in a volatile market ‘agility’ is required and information technology is focused on exchange of demand information, whereas in a stable market ‘lean’ is required, which allows working on forecasts and inventory-focused information exchange” (p. 317, para. 2). As a result of these factors, L5 manufacturing processes incur additional costs of expediting motherboards to meet L6 NPI. In addition, third party integration adds cost to the L5 process. Currently L6 has no additional costs compared to L5. Six manufacturing solutions have been proposed by Dell’s business improvement team. Based on the data obtained from Table 6.1 above, Dell should implement option 3A for several reasons (Simchi-Levi, Kaminsky, & Simchi-Levi, 2008, p. 187). Because Dell suffers from the inability to provide motherboards in a timely fashion because of issues with suppliers, quality and engineering, forecast accuracy, and NPI, these issues must be addressed. Therefore, these issues and the relative ease in which these factors can be modified and changed contribute to the decision to recommend implementing option 3A. Advantages and disadvantages exist for option 3A. Advantages of implementing option 3A include the lowest complexity score from Table 6.1. In addition, capital expenditures will be low. Furthermore, the changes recommended by option 3A will not negatively influence the manufacturing process. On the other hand, several disadvantages exist for the implementation of option 3A. The bottom line cost per box increases from the original $7 per box to $7.54 per box. In addition, compared to the original process, cost accounting and logistics become more difficult. Currently the chipset supply is volatile and unreliable at best. If the chipset supply does not improve or continues to deteriorate several changes must occur to avoid additional delays. Among the processes to improve and implement include the avoidance of single source suppliers. Using more than one source provides Dell the ability to have a backup plan if the primary source develops issues and cannot meet demand. Integrating the supply chain using vendor managed inventory (VMI) capabilities in conjunction with material resource planning (MRP) allows suppliers to view the demands Dell has for various components including chipsets for motherboards. As a result, an even flow of chipsets can be manufactured and shipped economically to meet changes in demand like customer preference changes and NPI. As a result, the integration of the supply chain minimizes the bullwhip effects of too little inventory where it is needed and too much inventory where it is not needed. The use of Dell’s business process improvement model provides a large amount of information. The process identified the issues Dell has with providing chipsets when needed. Upon further review several factors contributed to this delay. Whereupon the causes of the delays occurred various alternatives were presented to improve the contributing factors causing the delays in providing chipsets. The use of a completely numeric table is beneficial because of the ease in which individuals can locate important information like the modified cost per box figure instead of Most of Dell’s root causes in the rise of the L5 manufacturing is the inability to provide the motherboards in a timely fashion to the contract manufacturers (Phoenix, 2008). The L5 manufacturing has a overall higher percentage than the L6. The L5 increased from 4% in March to 27% in June which results and increase by over six times itself within three months. The first thing that Dell needs to do is generate a contract for the contractors to sign so that the supplier has made a commitment to Dell to deliver the chipsets in a timely manner as needed for production. The contract needs to state how many and when the chipsets are needed and it also needs to have a penalty instilled on the supplier if it fails to deliver according to the signed contract. The contract needs to include the following issues as well; Dell needs to hold the supplier accountable for any quality issues that might requiure the motherboard to be rebuilt, the forecasting has to be adjusted regularly, and Dell needs to do better at planning and infroming the supplier of new products it plans on introducing into the market. This case study has taught me that every department needs to function well together like a fine oiled machine. That there needs to be metrics implemented at least monthly to see exactly where the company stands so that the areas that need improvement can be focused on and the issues corrected. Also, that forecasting is vital on a regular basis and when a company decides to implement new product they need to ensure that the suppliers are aware of the new product introduction so the supplier can have backup product for emegency puposes. The most important factors that every company needs is supplier commitments, good quality of product, and accurate forecasting. References University of Phoenix. (2008). Designing and Managing the Supply Chain. Strategies, and Case Studies. Retrieved from University of Phoenix, ISCOM 476 website