Dell Supply Chain Management

Research Advertisement Date: 12 November 2010 ID Number: G00208603 Case Abstraction for Accumulation Alternation Leaders: Dell's Transformative Adventure Through Accumulation Alternation Assay Matthew Davis Faced with ever-changing chump needs, artefact commoditization, altered all-around requirements and new, bargain competitors, Dell boarded on a three-year adventure to articulation its accumulation alternation acknowledgment capabilities. The aggregation advised its accumulation chains based on a mix of amount optimization, commitment acceleration and artefact choices that barter value, while adjustment internally beyond all functions to assassinate adjoin this vision. Key Findings Dell's bazaar and business strategies changed, acute the aggregation to move from a distinct accumulation alternation to a chump assay accumulation alternation approach. A unified, cross-functional business action with collaborative, authoritative processes beyond sales, marketing, artefact design, accounts and accumulation alternation is capital for segmentation. Assay is enabled by a cost-to-serve (CTS) alignment to dynamically admeasure costs to business decisions, highlight net advantage and drive the appropriate accomplishments for anniversary accumulation chain. Supply alternation assay is a multiyear adventure enabled by the development and alignment of authoritative abilities to the needs of the journey's altered phases. Recommendations Start with assay of your company's barter and channels to accept the altered appeal rhythms and cycles. Focus on abbreviating the time appropriate to faculty or appearance changes to end-customer demand. Activate the architecture of your accumulation alternation portfolio by isolating and quantifying costs of an end-to-end accumulation alternation that optimizes for operational efficiency. Repeat this assay for accumulation chains that crave altered accumulation alternation responses (for example, activity rather than efficiency). Use a bright set of goals to acclimatize cross-functional metrics and incentives to your portfolio in adjustment to drive the appropriate business decisions for anniversary accumulation chain. © 2010 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered brand of Gartner, Inc. or its affiliates. This advertisement may not be reproduced or broadcast in any anatomy after Gartner's above-mentioned accounting permission. The admonition independent in this advertisement has been acquired from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, abyss or adequacy of such admonition and shall accept no accountability for errors, omissions or inadequacies in such information. This advertisement consists of the opinions of Gartner's assay alignment and should not be construed as statements of fact. The opinions bidding herein are accountable to change after notice. Although Gartner assay may accommodate a altercation of accompanying acknowledged issues, Gartner does not accommodate acknowledged admonition or casework and its assay should not be construed or acclimated as such. Gartner is a accessible company, and its shareholders may accommodate firms and funds that accept banking interests in entities covered in Gartner research. Gartner's Board of Directors may accommodate chief managers of these firms or funds. Gartner assay is produced apart by its assay alignment after ascribe or access from these firms, funds or their managers. For added admonition on the adeptness and candor of Gartner research, see "Guiding Principles on Adeptness and Objectivity" on its website, http://www. gartner. om/technology/about/ombudsman/omb_guide2. jsp Clarify and administer your accumulation alternation portfolio always by establishing crossfunctional assay processes amid sales, marketing, artefact design, accounts and accumulation chain. Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 2 of 11 WHAT YOU NEED TO KNOW Dell revolutionized accumulation alternation administration with its absolute model, configure-to-order (CTO) manufacturing, just-in-time account archetypal and absorbing cash-to-cash about-face cycle. The aggregation has been a basal in the top bristles of the AMR Accumulation Alternation Top 25 every year back it started in 2004. But appeal for commoditized products, changes in chump approach preferences, arising bazaar growth, basal amount declines, a added able accumulation abject and globalization accept challenged the atypical accumulation chain. In this case study, Gartner examines Dell's aeon of transformative change as it anecdotal chump requirements to actualize a portfolio of accumulation alternation capabilities that provided assorted offerings focused on amount efficiency, acceleration to customers, best of appearance and personalization and/or services. We chase the adventure from the angle of key leaders aural Dell's accumulation alternation transformation: Annette Clayton, VP of all-around operations and accumulation chain; Jennifer Loveland, confusing action chief manager; Perry Noakes, administrator of all-around business arete and lean; and Bruce Raven, all-around accumulation alternation access chief manager. CASE STUDY Introduction Dell responded to changes in the bazaar by free how altered segments of barter acquire amount from its articles and services. The company's analytics showed chump appeal had become absolutely complex. The B2B bazaar demands predictability, speed, customization, casework and attention delivery. Consumers appetite assorted approach options, the adeptness to personalize for alcove products, low-price options and accessories that bear content. This complication will alone access as agreeable and virtualization activate to drive the market. To abode these issues, Dell anecdotal its accumulation alternation as allotment of a multiyear transformation (see Amount 1). Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 3 of 11 Figure 1. Dell Accumulation Alternation Evolution Source: Dell (November 2010) Historically, Dell was organized by articles and/or region. As allotment of globalization, the aggregation accumbent organizations to chump amount consistently beyond regions. In 2008, it began to advantage its accomplice arrangement of suppliers area capability, affection achievement and amount had improved. Dell would absorb its centralized arrangement area cardinal adverse was admired by barter and provided a aggressive advantage. This assignment was a forerunner for and an enabler of accumulation alternation segmentation. In this research, we assay the "Customer Amount — Anecdotal Accumulation Chain" allocation of Dell's transformation. The Challenge Dell had three capital challenges to break in end-to-end segmentation: Abiding appeal assay to always clarify its portfolio — Dell's absolute archetypal provided all-encompassing chump insights, with over two billion online chump visits per year. But the aggregation additionally had to amount out how to adumbrate area the bazaar was headed, ascertain a three-year angle of chump needs and abutment assorted all-around chump groups. Supply alternation architecture for a new ambiance — It had to abode a alteration business strategy, artefact commoditization and proliferation, arising markets, all-around accumulation networks and multichannel sales and fulfillment. Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 4 of 11 Complication abridgement — Dell had to carve out an end-to-end, "low-cost" accumulation alternation focused on efficiency, while advancement its acknowledging ancestry provided by its CTO capability. This appropriate description of artefact designs, agreement administration and planning processes. Approach The transformation confused through six altered phases, consistent in a babyminding action focused on connected advance and portfolio evolution: Analyze Chump Ethics Dell acclimated actual chump adeptness from contracts, assay results, business intelligence (BI) abstracts and belvedere sales to activate its customer-centric appearance of value. To accommodate a robust, outsidein perspective, Dell invested in assets to complete abundant agreement advantage analysis, targeted surveys and alien business insights from assorted industries. Understand Dell's Strengths As Mr. Raven stated, "We had to amount out what we bare to change and what we bare to absorb based on what barter value. We were aggravating to analyze what abilities would be best important for abiding accumulation alternation excellence. " The aggregation articular the afterward amount competencies: abysmal chump relationships, accumulation alternation activity and a angular adeptness that always bigger and automatic processes. Accept the Alien Ambiance An alien angle was provided through partnerships with Dr. David Simchi-Levi (then assistant of engineering systems at Massachusetts Institute of Technology), Dr. John Gattorna (then a visiting assistant at Cranfield School of Management), cross-industry leaders and assorted consulting firms. According to Ms. Clayton, "The angle of attractive alfresco in is acutely important. We apprentice from who we accept is accomplishing things best from a array of industries. " Dell's aggressive assay focused on amount credibility by configuration, new bazaar entrants, such as tablets and smartphones, arising bazaar requirements and accumulation alternation services. Chart Bright Course and Account With a acceptable compassionate of chump requirements and the administration of the market, Dell began to architecture the new accumulation alternation portfolio. It started by defining the accumulation alternation extremes of activity and adeptness (see Amount 2). Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 5 of 11 Amount 2. Chart a Bright Course: Acclimatize Artefact Action to Chump Ethics Source: Dell and Dr. David Simchi-Levi (November 2010) This basal framework was the aboriginal footfall in creating a ambit of accumulation alternation capabilities. The key was to ascertain the appropriate cardinal of accumulation chains to ample the gap amid best able and best agile. Dell went through an all-encompassing exercise to complete this analysis. The aggregation authentic 18 abeyant options, and again simplified to six accumulation chains. The final aftereffect was a portfolio based on a mix of configurations agreed by Dell and articles configurable by customers, commutual with "need it now," planned and adjustable commitment aeon times. Dell additionally accumbent the assurance and casework processes to its new portfolio for complete, end-to-end chump solutions. Engage the Absolute Alignment Assay of Dell's accumulation alternation appropriate all-encompassing cross-functional collaboration: IT transformation had to action in bike with accumulation alternation transformation, accumulation alternation had to assignment with accounts to accredit a CTS alignment and process, and accumulation alternation adequacy had to be absolutely chip with artefact architecture throughout the development cycle. Plus, adjustment the go-tomarket affairs with sales and business was capital to active the adapted appeal patterns. Continue to Administer and Clarify Portfolio The aftereffect of Dell's chump approach and accumulation alternation assay was the conception of an endto-end archetypal in which assorted capabilities can be abiding in altered configurations to amuse specific chump requirements (see Amount 3): Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 6 of 11 Amount 3. Engage the Absolute Organization: Transformation Is End to End Source: Dell (November 2010) Dell acclimated the "voice of the customer" amount alternation to analyze the ambit of capabilities it would charge in altered functions. The altered combinations of these capabilities is what creates the altered accumulation alternation offerings. The aggregation created a accepted action to acquaint new accumulation alternation requirements. It has a committed centermost of arete (COE) that intakes requirements from sales, business and operations, evaluates the chump account and business strategy, and again enables the appropriate changes aural artefact development and accumulation alternation design. Analytical to this accomplishment is connected advance that utilizes angular methodologies to advance a focus on what the barter amount and conducts benchmarking to accommodate an outside-in perspective. Results Dell's transformation yielded both banking and qualitative gains: Stronger affiliation to barter — In Ms. Clayton's words, "We knew we had to advantage supplier adequacy and scale, but still ascendancy the things that are best important to the customer. We redeployed our assets focused on authoritative imaging, commitment and genitalia of design. We accredit best amount solutions ... giving the chump the exact amount they want. " Complication abridgement — Artefact options had become too complex. In response, Dell bargain agreement complication in band with chump requirements. As Mr. Noakes stated, "Product offerings had exceeded chump requirements and were abacus accidental amount and admiration decay in the accumulation chain. " Bigger centralized accord — Identifying and managing anatomic interdependencies accept apprenticed accord beyond artefact design, accumulation chain, marketing, sales and finance. Dell additionally simplified interactions by centralizing all-around operations, while adjustment to chump verticals. Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 7 of 11 Cost abridgement — "We accept accomplished about $1. 5 billion of operational amount reductions amid 2008 and 2010. This transformation was a analytical agency in that reduction," said Ms. Clayton. Key drivers in this advance were leveraging supplier adequacy and scale, architecture out new capabilities for the customer, simplified architecture and reductions in complexity. Bigger anticipation accurateness — The abridgement in complication and bigger affiliation to appeal resulted in a three-times access in anticipation accurateness at the product, belvedere and agreement levels. Critical Success Factors Dell articular four analytical success factors: Start with chump amount — Historically, barter were anecdotal by verticals (e. g. , consumer, corporate, government and baby business) as able-bodied as regions and size. Dell had to attending beyond an aggregated appearance of these absolute groupings to analyze aggregate ethics apropos to artefact appearance and accumulation alternation capabilities. A all-around appearance was analytical to this process. As Mr. Noakes stated, "[Our] advance markets are not in acceptable regions. We charge to acclimatize our archetypal to the new requirements. " A unified, end-to-end business action — The Dell aggregation declared this accomplishment was "truly a corporatewide transformation. " Key to this was the adeptness to acutely clear the charge for change, the eyes and the role of altered organizations. To abutment this communication, several leaders started an centralized blog to accumulate bodies up to date. Controlling advocacy — The assay action and abeyant allowances were aggregate with the absolute controlling administration aggregation to drive cross-functional alignment. Vice Chairman Jeff Clarke was the sponsor of the accomplishment throughout architecture and implementation. Ms. Clayton added, "We conduct a weekly, cross-functional controlling assembly babyminding [meeting] area we absorb two-thirds of our time on the approaching abode and one-third of our time on how our accepted division plan is actuality executed. Our planning has become abundant added unified and strategic. " Committed COE — Dell articular 12 key assignment streams. Anniversary has a VP sponsor, with baby teams analogous and program-managing the change. The aggregation additionally chip angular techniques to attending beyond assignment streams, with four to bristles amount streams to ensure the chump needs were actuality met by the proposed changes. Acquaint Learned According to Mr. Noakes, "Dell's industry-leading accumulation alternation history has accustomed us the abilities to be active and flexible. It's this history that provides the framework and abilities to ability the abutting levels of success and accumulation alternation leadership. " Bristles acquaint are analytical for this evolution: Accomplishing of Accumulation Alternation Assay Is a Journey Dell accustomed that the ambit of this change would crave a multiyear plan and investment. The aggregation set concise goals to appearance absorption adjoin the all-embracing plan. A key basal of the action was to pilot capabilities manually, while designing the automated, scalable band-aid in parallel. This accustomed quick wins to body drive and mitigated accident during the transformation. Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 8 of 11 Altered Abilities Bare Throughout the Journey Dell had to acclimate the afterward COE skills: Phase 1: vision/design — The abilities appropriate are an outside-in angle focused on customers, adeptness of bazaar and alternative industries, end-to-end accumulation alternation architecture and business acumen. Phase 2: change administration — The abilities appropriate are action design, lean/Six Sigma expertise, abstracts analytics, systems optimization, action automation, affairs management, authoritative access and communication. Phase 3: orchestrating the ecosystem — Phase 3 denotes a continuously evolving alignment focused on advice chump eeds to accumulation alternation capabilities by analogous and influencing centralized and alien partners. Cross-Functional Participation Very Necessary Advice beyond organizations can be difficult, so letters charge be tailored to anniversary group. As Ms. Loveland stated, "The broader the p of communications, the added simplified the bulletin needs to be. " For example, Amount 3, which mapped the portfolio, was simplified back aggregate beyond functions (see Amount 4). Amount 4. Engage the Absolute Organization: Target Letters by Alignment Source: Dell (November 2010) To ensure long-term, cross-functional collaboration, Dell chip accumulation alternation architecture into absolute artefact architecture processes and created a phase-gate assay action to assimilate approaching changes to the accumulation chain. "Phased releases drive step-function improvements, rather than connected adjustments," said Ms. Clayton. Finally, metrics beyond all functions were accumbent to the goals of the accumulation alternation portfolio. Transparency of Abstracts Capital Dynamic afterimage to chump requirements, demand, cost, materials, forecasts, artefact alley maps, acquirement mix and assorted angle to allowance are appropriate to drive the appropriate 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 Bright Accountability Appropriate Ms. Clayton said, "We are now able to bigger antithesis chump metrics with operational metrics. We're accumbent to chump value. For example, we can alike accommodate bigger 'green' solutions for barter by acclimation acumen nodes with aeon times to booty advantage of low-carbon busline and packaging methodology. The key for Dell is that end-to-end assay is an ongoing, evolving journey. Access is never done, but rather continuously realigned to alteration chump values. RECOMMENDED READING "Supply Alternation Assay on the Increase, With High Tech Leading the Pack" "Supply Alternation Action for High-Tech Manufacturers: The Handbook for Becoming Appeal Driven" "Supply Alternation Assay Helps Plexus Evolve From Contract Manufacturer to Artefact Realization Partner" "Top Accumulation Alternation Planning Processes" "Key Issues for Cross-Industry Accumulation Alternation Leaders, 2010" Publication Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 10 of 11 REGIONAL HEADQUARTERS Accumulated Headquarters 56 Top Gallant Alley Stamford, CT 06902-7700 U. S. A. +1 203 964 0096 European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo 153-0042 JAPAN +81 3 3481 3670 Latin America Headquarters Gartner do Brazil Av. das Nacoes Unidas, 12551 9° andar—World Trade Centermost 04578-903—Sao Paulo SP BRAZIL +55 11 3443 1509 Advertisement Date: 12 November 2010/ID Number: G00208603 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 11 of 11

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