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Inside Dell: The Secrets of Its Supply Chain Success

What does it take for a US$60 billion high tech giant like Dell Inc. to compete in today's margin-hungry PC market? "We are always looking for ways to take out waste, to take out time, and take out costs, and then passing those savings along to our customer," says Dave Schneider, continuous improvement engineering manager for Dell Americas operations.

To meet these goals, Dell relies on a unique supply chain strategy that gathers large volumes of customer information through its direct-sales model and shares it with internal procurement and sales departments, as well as external suppliers.

"These close relationships with customers and suppliers allow us to know what we must be able to supply in real time, and then very quickly and precisely meet that demand while maintaining low inventory," Schneider says. "We are not manufacturing finished goods that we hope people will buy. However, the relationships we have with the majority of our customers enable us to forecast accurately without filling a pipeline of finished goods."

It's All About the Information
To successfully forecast demand, Dell maintains a constant flow of data in two information loops: One between customers and the Dell sales team, and the other among sales, procurement, and suppliers.

Key metrics Dell shares with suppliers include forecasted sales dollars, sales quantities, and parts requirements. In return, it receives data about how well suppliers can support these forecasts.

"We need to understand the supportability of our demand in the short term for every single product that we're going to sell—down to every hard disk, video card, and optical drive," Schneider explains. "What we are really measuring is our suppliers' ability to be flexible and adjust to our changing demands."

The information Dell receives from suppliers tells its sales team what products it can effectively promote. "That really goes to a demand-shaping concept."

Information Evolution
Dell's communication system evolved from the early days of spreadsheets to today's sophisticated online and collaborative tools, which provide a rich mix of current and historical information about supplier performance.

Dell's other key IT infrastructure components include Oracle Database 10g (on which it's standardized) and Oracle E-Business Suite 11i, including Oracle Financials, Oracle Purchasing, Oracle Order Management, Oracle Collaboration Suite, Oracle Field Sales, and Oracle Telesales. Dell also uses the Oracle Customer Data Hub.

"We have certainly moved the needle on the use of technology in this supply chain process," Schneider says.

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