Dell Supply Chain Management

Research way out appointee 12 November 2010 ID come G00208603 Case Study for affix cooking stove Leaders dells Transformative Journey through issue Chain air di deal Matthew Davis Faced with ever-changing guest involve, intersection pointion commoditization, unique global readments and raw(a), low- represent competitors, dingle embarked on a tierce-year tour to segment its leave orbit response capabilities. The confederacy physical bodyed its tack images based on a mix of cost optimization, pitching speed and overlap choices that clients value, slice aligning intern altogethery crosswise all told functions to execute against this vision.Key Findings dingles marketplace and employment strategies swapd, requiring the company to move from a single hand over chain to a client segmentation bring chain approach. A integrate, cross-functional business dodging with collaborative, decision-making playes across gross sales, selling, product trope, financ e and impart chain is essential for segmentation. Segmentation is modifyd by a cost-to-serve (CTS) methodological compend to dynamically allocate costs to business decisions, highlight net lucrativeness and crusade the reform actions for from each one interpret chain.Supply chain segmentation is a multiyear journey enabled by the development and alignment of memorial tabletal skills to the destinys of the journeys unalike phases. Recommendations Start with segmentation of your companys customers and leaves to understand the different contract rhythms and cycles. Focus on decreasing the time required to sense or shape changes to end-customer prerequisite. Begin the design of your sum up chain portfolio by insulate and quantifying costs of an end-to-end yield chain that optimizes for usable efficiency.Repeat this analysis for show chains that require different supply chain responses (for example, elation rather than efficiency). Use a clear set of goals to align cross-functional inflection and incentives to your portfolio in order to rag the right business decisions for each supply chain. 2010 Gartner, Inc. and/or its affiliates. each(prenominal) rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication whitethorn non be reproduced or distrisolelyed in any form with let on Gartners anterior written permission. The information contained in this publication has been obtained from sources believed to be reliable.Gartner disclaims all warranties as to the accuracy, accomplishness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartners research organization and should non be construed as statements of fact. The opinions expressed herein atomic number 18 subject to change without nonice. Although Gartner research may include a discussion of related jural issues, Gartner doe s not bequeath legal advice or services and its research should not be construed or utilize as such.Gartner is a public company, and its shareholders may include firms and cash in hand that have financial interests in entities covered in Gartner research. Gartners Board of Directors may include senior managers of these firms or funds. Gartner research is produced singly by its research organization without input or work from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, appear Guiding Principles on Independence and Objectivity on its website, http//www. gartner. om/technology/ closely/ombudsman/omb_guide2. jsp Refine and govern your supply chain portfolio continually by establishing crossfunctional reappraisal processes between sales, selling, product design, finance and supply chain. Publication Date 12 November 2010/ID turn G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. rasca l 2 of 11 WHAT YOU subscribe to TO KNOW Dell revolutionized supply chain attention with its direct model, configure-to-order (CTO) manufacturing, just-in-time stocktaking model and impressive cash-to-cash conversion cycle.The company has been a staple in the top five of the AMR Supply Chain Top 25 all(prenominal) year since it started in 2004. But demand for commoditized products, changes in customer channel preferences, emerging market growth, component cost declines, a more undefendable supply base and globalization have challenged the singular supply chain. In this case study, Gartner examines Dells period of transformative change as it segmented customer requirements to make believe a portfolio of supply chain capabilities that provided ternary offerings focused on cost efficiency, speed to customers, choice of features and personalization and/or services.We follow the journey from the perspective of aboriginal leaders within Dells supply chain transformation Annette Cl ayton, VP of global operations and supply chain Jennifer Loveland, disruptive strategy senior manager Perry Noakes, theater director of global business excellence and tend and Bruce Raven, global supply chain optimization senior manager. CASE STUDY Introduction Dell responded to changes in the market by determining how different segments of customers derive value from its products and services. The companys analytics showed customer demand had become quite complex.The B2B market demands predictability, speed, customization, services and precision delivery. Consumers wish multiple channel options, the ability to personalize for niche products, low- wrong options and devices that deliver content. This complexness will only increase as content and virtualization begin to drive the market. To address these issues, Dell segmented its supply chain as patch of a multiyear transformation (see insure 1). Publication Date 12 November 2010/ID occur G00208603 2010 Gartner, Inc. and/or i ts Affiliates. All Rights Reserved. Page 3 of 11Figure 1. Dell Supply Chain Evolution Source Dell (November 2010) Historically, Dell was organise by products and/or region. As part of globalization, the company reorient organizations to customer value consistently across regions. In 2008, it began to supplement its partner engagement of suppliers where capability, quality performance and cost had improved. Dell would retain its in-house network where strategical differentiation was valued by customers and provided a competitive advantage. This work was a precursor for and an enabler of supply chain segmentation.In this research, we review the Customer observe Segmented Supply Chain portion of Dells transformation. The Challenge Dell had three main challenges to solve in end-to-end segmentation Long-term demand sensing to continually refine its portfolio Dells direct model provided extensive customer insights, with over two billion online customer visits per year. But the com pany excessively had to figure out how to predict where the market was headed, define a three-year lookout of customer necessitates and support multiple global customer groups.Supply chain design for a impertinently environment It had to address a changing business strategy, product commoditization and proliferation, emerging markets, global supply networks and multichannel sales and fulfillment. Publication Date 12 November 2010/ID enactment G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 4 of 11 complexity reduction Dell had to carve out an end-to-end, low-cost supply chain focused on efficiency, while maintaining its responsive heritage provided by its CTO capability. This required simplification of product designs, configuration management and planning processes.Approach The transformation moved through vi different phases, resulting in a governance process focused on move improvement and portfolio evolution Identify Customer value Dell used historical customer fellowship from contracts, survey results, business intelligence (BI) data and platform sales to begin its customer-centric view of value. To provide a robust, outsidein perspective, Dell invested in resources to complete detailed configuration profitability analysis, targeted surveys and external marketing insights from multiple industries.Understand Dells Strengths As Mr. Raven stated, We had to figure out what we call for to change and what we needed to retain based on what customers value. We were trying to get word what skills would be virtually important for long-term supply chain excellence. The company identified the following core competencies deep customer relationships, supply chain high spirits and a lean culture that continually improved and automatise processes. Understand the External Environment An external perspective was provided through partnerships with Dr.David Simchi-Levi (then prof of engineering systems at Massachusetts Insti tute of Technology), Dr. John Gattorna (then a tour professor at Cranfield School of Management), cross-industry leaders and various consulting firms. According to Ms. Clayton, The perspective of looking outside in is extremely important. We learn from who we believe is doing things high hat from a variety of industries. Dells competitive analysis focused on price points by configuration, new market entrants, such as tablets and smartphones, emerging market requirements and supply chain services.Chart Clear Course and Benefit With a good understanding of customer requirements and the direction of the market, Dell began to design the new supply chain portfolio. It started by defining the supply chain extremes of agility and efficiency (see Figure 2). Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 5 of 11 Figure 2. Chart a Clear Course Align carrefour Strategy to Customer Values Source Dell and Dr. David S imchi-Levi (November 2010) This basic framework was the first step in creating a range of supply chain capabilities.The key was to define the right number of supply chains to fill the gap between roughly efficient and most agile. Dell went through an extensive exercise to complete this analysis. The company defined 18 potential options, and then simplify to six supply chains. The final result was a portfolio based on a mix of configurations predetermined by Dell and products configurable by customers, paired with need it now, planned and flexible delivery cycle times. Dell also aligned the warranty and services processes to its new portfolio for complete, end-to-end customer solutions. apply the inbuilt Organization Segmentation of Dells supply chain required extensive cross-functional collaborationism IT transformation had to occur in tandem with supply chain transformation, supply chain had to work with finance to enable a CTS methodology and process, and supply chain capabilit y had to be fully integrated with product design throughout the development cycle. Plus, aligning the go-tomarket plans with sales and marketing was essential to unprompted the desired demand patterns. Continue to Govern and Refine PortfolioThe result of Dells customer channel and supply chain segmentation was the creation of an endto-end model in which multiple capabilities can be arranged in unique configurations to gather specific customer requirements (see Figure 3) Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 6 of 11 Figure 3. Engage the correct Organization Transformation Is End to End Source Dell (November 2010) Dell used the voice of the customer value chain to line the range of capabilities it would need in different functions.The different combinations of these capabilities is what creates the unique supply chain offerings. The company created a standard process to introduce new supply chain requirements. It has a dedicated center of excellence (COE) that intakes requirements from sales, marketing and operations, evaluates the customer benefit and business strategy, and then enables the right changes within product development and supply chain design. Critical to this motion is continuous improvement that utilizes lean methodologies to maintain a focus on what the customers value and bears benchmarking to provide an outside-in perspective.Results Dells transformation yielded both financial and qualitative gains Stronger connection to customers In Ms. Claytons words, We knew we had to leverage supplier capability and scale, but still control the things that are most important to the customer. We redeployed our resources focused on controlling imaging, delivery and parts of design. We enable best value solutions giving the customer the exact value they want. Complexity reduction Product options had become too complex. In response, Dell decrease configuration comple xity in line with customer requirements.As Mr. Noakes stated, Product offerings had exceeded customer requirements and were adding unnecessary cost and responsiveness waste in the supply chain. Improved innate collaboration Identifying and managing functional interdependencies have driven collaboration across product design, supply chain, marketing, sales and finance. Dell also simplified interactions by centralizing global operations, while aligning to customer verticals. Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 7 of 11Cost reduction We have realized approximately $1. 5 billion of operational cost reductions between 2008 and 2010. This transformation was a diminutive factor in that reduction, said Ms. Clayton. Key drivers in this improvement were leverage supplier capability and scale, building out new capabilities for the customer, simplified design and reductions in complexity. Improved forecas t accuracy The reduction in complexity and better connection to demand resulted in a three-times increase in forecast accuracy at the product, platform and configuration levels.Critical victory Factors Dell identified four critical success factors Start with customer value Historically, customers were segmented by verticals (e. g. , consumer, corporate, government and small business) as headspring as regions and size. Dell had to look across an aggregated view of these brisk groupings to identify shared values relating to product features and supply chain capabilities. A global view was critical to this process. As Mr. Noakes stated, Our growth markets are not in traditional regions.We need to adjust our model to the new requirements. A unified, end-to-end business strategy The Dell team stated this effort was truly a corporatewide transformation. Key to this was the ability to clearly articulate the need for change, the vision and the role of different organizations. To sup port this communication, several leaders started an internal blog to keep people up to date. Executive sponsorship The segmentation strategy and potential benefits were shared with the entire executive leadership team to drive cross-functional alignment.Vice Chairman Jeff Clarke was the sponsor of the effort throughout design and implementation. Ms. Clayton added, We conduct a weekly, cross-functional executive production governance meeting where we spend two-thirds of our time on the future fourth parts and one-third of our time on how our current quarter plan is being executed. Our planning has become much more unified and strategic. Dedicated COE Dell identified 12 key work streams. to each one has a VP sponsor, with small teams organize and program-managing the change.The company also integrated lean techniques to look across work streams, with four to five value streams to realise the customer needs were being met by the proposed changes. Lessons Learned According to Mr. Noakes, Dells industry-leading supply chain account statement has given us the skills to be agile and flexible. Its this history that provides the framework and skills to reach the next levels of success and supply chain leadership. vanadium lessons are critical for this evolution Implementation of Supply Chain Segmentation Is a JourneyDell recognized that the scope of this change would require a multiyear plan and investment. The company set short-term goals to show adhesive friction against the overall plan. A key component of the strategy was to pilot capabilities manually, while designing the automated, scalable solution in parallel. This allowed quick wins to build pulsation and mitigated risk during the transformation. Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 8 of 11 Different Skills Needed end-to-end the JourneyDell had to adapt the following COE skills Phase 1 vision/design The skills re quired are an outside-in perspective focused on customers, knowledge of market and other industries, end-to-end supply chain design and business acumen. Phase 2 change management The skills required are process design, lean/Six Sigma expertise, data analytics, systems optimization, process automation, program management, organizational influence and communication. Phase 3 orchestrating the ecosystem Phase 3 denotes a continuously evolving organization focused on translating customer eeds to supply chain capabilities by coordinating and influencing internal and external partners. Cross-Functional Participation Very Necessary Communication across organizations can be difficult, so messages must be tailored to each group. As Ms. Loveland stated, The broader the span of communications, the more simplified the message needs to be. For example, Figure 3, which mapped the portfolio, was simplified when shared across functions (see Figure 4). Figure 4. Engage the Entire Organization Targ et Messages by Organization Source Dell (November 2010)To vouch long-term, cross-functional collaboration, Dell integrated supply chain design into existing product design processes and created a phase-gate review process to standardize future changes to the supply chain. Phased releases drive step-function improvements, rather than constant adjustments, said Ms. Clayton. Finally, metrics across all functions were aligned to the goals of the supply chain portfolio. Transparency of Data Essential active visibility to customer requirements, demand, cost, materials, forecasts, product road maps, revenue mix and multiple views to margin are required to drive the right decisions.Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 9 of 11 A Balanced Scorecard With Clear Accountability Required Ms. Clayton said, We are now able to better balance customer metrics with operational metrics. Were aligned to customer value . For example, we can even provide better green solutions for customers by balancing logistics nodes with cycle times to take advantage of low-carbon transportation and encase methodology. The key for Dell is that end-to-end segmentation is an ongoing, evolving journey. Optimization is never done, but rather continuously realigned to changing customer values. RECOMMENDED READING Supply Chain Segmentation on the Increase, With High Tech Leading the Pack Supply Chain Strategy for High-Tech shapers The Handbook for Becoming Demand determined Supply Chain Segmentation Helps Plexus Evolve From Contract Manufacturer to Product Realization Partner Top Supply Chain supply Processes Key Issues for Cross-Industry Supply Chain Leaders, 2010Publication Date 12 November 2010/ID Number G00208603 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 10 of 11 REGIONAL render Corporate Headquarters 56 Top Gallant Road Stamford, CT 06902-7700 U. S. A. +1 203 964 0096 European Head quarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/ peaceful Headquarters Gartner Australasia Pty. Ltd.Level 9, 141 Walker Street North Sydney New southern Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. 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