Examining Quality Control and Operation Management in Dell

Examining whole step Control and Operation Management in dingle dingle is angiotensin converting enzyme of the most successful and profitable computer corporations in history. It has been known for its innovative node help and convergence custom configuration. As it continues to grow, it is confront with the challenge of how to maintain its node births and pedigree charge, while continuing to stir the prays and requirements of its clients. This paper volition examine how dell implements enterprise-wide computing softw atomic number 18, which profiles and targets its customers, as well as streamlines the flow of its crossroads through verboten the supply chain. dells collaboration with other computer softw are organization companies has allowed it to give bearing a elapseer in customer relationship watchfulness (CRM) and supply-chain worry (SCM). These initiatives have resulted in net revenues of amid $30 and $60 million over the last five years.Supply Chain Ma nagement is becoming much and more important for the success of to eld wrinkle world. dell has realized this trend from its very first step and has become unrivalled of the most successful PC companies in the world by putting emphasis on its supply chain, concentrating on its its work-to-order and direct gross sales strategies.Dell is still figting with quality control management problem. . The quality problem relates to low and high end servers, laptops, and desktop models. The regular check up by alliance manoeuvre a high change magnitude in the number of machines that need to be serviced by Dell in the field soon after the delivery, and in like manner machines returned to Dell for electric switch/repair.IntroductionDell Inc. is a multinational t from each oneing engine room corporation that develops, sells and supports computers and related products and services. The headquarters of dell are in Round Rock, Texas, United States.Dell has employed more than 90,500 hoi p olloi all over the world according to the survey in the current yearupdate.Dell grew during the 1980s and 1990s and became the largest seller of PCs scarce this was not for a broad date. At the end of 2009, it held the first bit in computer sales, the company sold personal computers, servers, data storage devices, network switches, software, and computer peripherals. Dell in like manner sells HDTVs, cameras, printers, MP3 players and other electronics built by other manufacturers. As of April 2010, Dell topped in computer sales leaving behind HP and Acer.In 2006, chance magazine ranked Dell as the 25th-largest company in the Fortune 500 list, 8th on its annual Top 20 list of the most-admired companies in the United States.In 2007, Dell ranked 34th durinf first few calendar months an during last quarter it was ranked 8th on the equivalent lists for the year. In 2006 one of the top magazines identified Dell as one of 38 high-performance companies in the SP 500 that had consisten tly come forward-performed the market over the previous 15 years.On January 31, 2007, Kevin B. Rollins, CEO of the company since 2004, resigned as both CEO and as a director, and Michael Dell resumed his former role as CEO. Investors and galore(postnominal) shareholders said that rollins due to unworthy performance of the company resigned his job. The company announced fourth time in same year that the company was fail to reach what the analyst estimated and the results were not upto the mark.In February 2007, Dell became the subject of formal investigations by the U.S. SEC and the U.S. Attorney for the Southern District of New York. The company has not formally filed financial reports for either the thirdly or fourth fiscal quarter of 2006, and several class-action lawsuits arrised based on at that place recent performance report. Dell Inc due to lack of financial manifestation was in a bragging(a) side but would normally subject the company to de-listing from the nasdaq and luckily exchange gave a waiver to dell to exchange was do on normal basis and rate.On March 1, 2007, micklefall kept the company showing a quarterly report of gross sales of $14.4 billion, down 5% year-over-year, and net income of $687 million,down 33%.NASDAQ extended the companys deadline for filing financial statements to May 4.The computer industry includes computer software, computer hardware, as well as the product of computer components, assembly, logistics distribution, sales, marketing, and the provision of information technology services. Dell is in the business of manufacturing computers and servers. Its competitors are Hewlett Packard/Compaq, IBM, Apple, and Gateway(depending upon the country competitors may vary eg-gateway is not officialy available in india)The raw(a) trend in the computer industry is to become a virtual corporation and Dell is leading the way. According to Dedrick and Kraemer (2006), Dell is aiming to combine the damage advantages of crosswise specialization with close coordination of vertical integration. In the early 1990s, Dell shifted to parvenu strategies and tried to distribute its products through retail outlets, later realizing how unprofitable this approach was. It unconquerable to focus on improving customer service and support by allowing customers to place and custom configure orders straight. This resulted in a unique strategy-customization. Nearly one out of five standards-based computer system of ruless sold in the world today is a Dell.Dell has one simple concept to sell computer systems directly to customers. Dells customers are global wide and range from individuals, small businesses, large businesses, and institutional organizations, such(prenominal)(prenominal) as schools and hospitals. The mission statement for Dell is to be the most successful computer company in the world at delivering the best customer experience (htttpwww.dell.com). Since Dell is a global wide company, its direct approach is applicable across product lines, regions and customer segments (http//www.dell.com).Michael Dell started Dell in 1984, he had limited cash and bribed most of the supplies needed to build his first computers after the sales were made. Well-established computer manufacturers like IBM had a lock on the computer market, where customers preferred to purchase products from retail outlets. This new idea of building-to-order and ordering over the phone was a major risk. The first obstacle was to create a need on part of the customer to desire the purchase of a customized computer. The second hurdle was having customers refer a toll free number to order the product. Dell had to find a way to overcome these obstacles and then provide a service that would build a reputation for superior business to consumer efficiency.OPERATION MANAGEMENTEvery business is managed through three major run lows finance, marketing, andoperations management. Operations management (OM) is the business function t hat plans, organizes, coordinates, and controls the resources needed to produce a companys goods and services. Operations management is a management function. It views managing population, equipment, technology, information, and many other resources.The role of operations management is to convert or transform a companys inputs into the undone goods or services. Inputs include human resources (such as workers and managers), facilities and processes (such as buildings and equipment), as well as materials, technology, and information.Proper management of the operations function has led to success for many companies.For example, in 1994 Dell Inc. was a second-tier computer quarterr that managedits operations similar to others in the industry. Then Dell implemented a new business model that completely changed the role of its operations function. Dell developed new and innovative ways of managing the operations function that have become one of the examples in todays world. These change s enabled Dell to provide rapid product delivery of customized products to customers at a lower cost, and thus become an industry leader.With historical victimisation there are different concepts in operation management eg. total quality management supply chain management and inventry control management.Total Quality ManagementAs customers demand never ending higher quality in their products and services, companieshave been forced to focus on improving quality in order to remain in the business. Total quality management (TQM) is a philosophy, promulgated by quality gurus such as W. Edwards Deming, that passionately seeks to improve product quality by removing causes of product defects and making quality that speaks by itself.With TQM everyone in the company is responsible for quality. TQM was practiced by some companies in the 1970s and became a major part of the company in the 1990s. This is an area of operations management that no competitive company has been able to ignore.The i mportance of this movement is demonstrated by the number of companiesjoining the ranks of those achieving ISO 9000 certification. ISO 9000 is a set ofquality standards developed for global manufacturers by the International Organizationfor Standardization (ISO) to control trade into the then-emerging European Economic confederacy (EEC). Today many companies require their suppliers to meet these standards as a condition for obtaining contracts.Supply Chain ManagementSupply chain management (SCM) involves managing the flow of materials and information from suppliers and buyers of raw materials all the way to the terminal customer. The objective is to have everyone in the chain work together to reduce cost and improve quality and service delivery. Supply chain management requires a team approach, with functions such as marketing, purchasing, operations, and engineering all working together. This approach has been shown to resulted in satisfyeing more customers, meaning that everyone in the chain profits. SCM has become possible with the development of information technology (IT) tools that enable joint planning and scheduling. The technologies allow supply chain execution and design collaboration, which enables companies to act better and faster to changing market needs. Numerous companies, including Dell Computer, Wal-Mart, and Baxter Healthcare, have achieved world-class status by effectively managing their supply chains.In details we will talk roughly the strategy and management of dell here.Dell competetive advantagesDells Direct Business ModelCommitment to Open Standards govern Velocity/Build to OrderSupply Chain OptimisationContinuous Process Improvement stock-taking controlThe term inventory means the value or amount of materials or resource on hand. It includes raw material, work-in-process, finished goods stores spares. Inventory Control is the process by which inventory is measured and regulated according to predetermined decisions such as economi c lot size for order or production, safety stock, minimum train, maximum level, order level etc.Traditionally, the focus on inventory management has always been about not running out of finished goods. Manufacturers would always have more and more excessive amounts of raw materials, work in process, and finished goods with regard not for holding be but save for protecting against a stock-out. If demand was higher than expected or a supplier bemused a shipment, inventory would bail the manager out. As long as outbound shipments were agreeable, so were the operations managers. But there was a problem in this policy because holding costs and other practices were difficult to nagae due to low technology and managers ignore these.Holding costs can be defined as the annual costs that are incurred by holding onto inventory.The dollar amount for holding costs typically ranges between 20-40% of annual average inventories. For example, if a sozzled has average inventories of $1000, the firm would have an annual holding cost at least $200. Common factors that attract holding costs include opportunity costs, increase rent required for the space of the inventory, higher premiums to insure the inventoryand cost of absolute goods.Opportunity costs are the highest cost. For example, if a firm has an average inventory level resulting in $100 million worth of goods, the firm effectively has $100 million tied up in inventory. Assuming these funds are not being loaned to the firm (which immediately results in interest expenses), then these are funds that should be used in other investments.Objectives of Inventory ControlTo meet future demand due to variation in forecast figures and actual figures.To cover demand due to seasonal or cyclic variations.To meet the customer requirement timely, effectively, efficiently, smoothly and satisfactorily.To smoothen the production process.To provide help for intermediate several products on the same facility.To gain economy of productio n or purchase in lots.To reduce loss due to changes in prices of inventory items.To meet the time lag for transportation of goods.To meet the technological constraints of production/process.To balance unhomogeneous costs of inventory such as order cost or set up cost and inventory carrying costTo balance the stock out cost/opportunity cost due to loss of sales against the costs of inventory.To minimize losses due damage,robbing etc.To stabilize employment,resources and machine and human efforts.Benefits of Inventory ControlEnsures an adequate supply of materialsMinimizes inventory costsFacilitates purchasing economiesEliminates duplication during orderingBetter utilization of available stocksProvides a check against the loss of materialsFacilitates cost score activitiesEnables management in cost comparisonLocates disposes inactive and expired store itemsBasis for financial statements which is reliable.Inventory control DellUsing todays technology, manufacturers and retailers are achieving inventory turns that are as important as the supply chains that produce them. Take for example Dell. Dell has achieved a system that at multiplication leaves them with average inventories for long enough to last only three days. Instead of incurring holding costs, Dell doesnt order until the demand is in place.The system Dell has achieved is referred to as a Just In Time (JIT) system. JIT is designed to bound inventories as low as possible by producing only what is needed and when it is needed. The technology involved allows customers to place an order on Dells website and receive their computer within days and maximum of 1 month. Dells website is connected to their electronic data interchange (EDI) system which allows suppliers to see what parts Dell requires as soon as the customer orders the computer. The suppliers, who make multiple shipments to Dell daily, supply Dell with the parts they need when, and only when, they require them. Although the software is costly, fo r Dell, and some many other firms, the result is savings that give competitive advantage. However, JIT is an extremely difficult system to set up that requires years of practice and extremely cooperative suppliers to perfect. For many firms, this is not an option. In particular, this system is not designed for products that have a very large backorder cost.Backorder costs are the costs associated with failing to meet demand. Maybe the product is a commodity and the cost is nothing more than lost revenue, but maybe the backorder results in bad word of mouth that drives the cost even higher than the lost revenue. It is important for a firm to determine the approximate costs tied to backorders. When this is achieved, managers can par holding costs to backorders in order to help determine what optimal inventory levels are. Unfortunately, backorder costs and holding costs arent the only variables involved with optimal inventory levels. Other costs such as ordering costs (costs associate d with ordering. Includes paperwork, inventory counts, etc.) , supplier lead times (how long it takes between ordering and receiving materials), and supply lead time and demand variations are also important variables that cant be ignored. All of these variables can make optimal inventory levels very difficult for managers to determine. Today, software business solutions help to both ease the workload and drive down costs (in particular, ordering costs).Dells Inventory perturbation DataYear Inventory Turnover Weeks Inventory1992 4.79 10.8561993 5.16 10.0781994 9.4 5.5321995 9.8 5.3061996 24.2 2.1491997 41.7 1.2471998 52.40 0.9921999 52.40 0.9922000 51.4 1.0122001 63.50 0.819Key point to notice here is that Dell was carrying over 10 weeks worth of inventory in 1993. By 2001, Dell was carrying less than 1 weeks worth of inventory. This essentially means that inventory used to sit around for 11 weeks and now it sits around for less than 1 week.So what does this mean for Dell?computers lose 1 percent of their value per week. This isnt like the canned food industry where managers can let their supplies sit around for months before anyone comes and orders. Computers arent canned goods, and as Kevin Rollins of Dell says-.they are rot,the longer a computer sits around, the less it is worth.Due to depreciation alone, in 1993 Dell was losing roughly 10% per computer because the computers were all active to be sold but there was no order coming. In 2001, Dell was losing less than a percent. Based on holding costs alone, Dell reduced costs by nearly 9%.Since 2001, Dell has continueed to lower inventory. Looking at their latest annual reports, days inventory has dropped by almost a day.Benefits of low inventorySupply chain managementA supply chain consists of all parties involved, directly or indirectly, in suffering a customer request. In other words, a sup ply chain (SC) includes all organizations that collaborate in order to produce and deliver a finished product to the final customer. An example of a simple, direct SC would be the one which contains one supplier, a distributor of the materials, the bakery and a customer.Supply chains can be different in size, how complex the relation is inbetween the members and distribution of physical presence. In the adjacent figure two different types of channel relations can be seen direct, where the SC consists of one supplier and one customer of an organisation, and extended, where apart from the above, a suppliers supplier, a customers customer, etc. are included. In general, supply chains are dynamic, and involve the flow of information, products and funds between different stages.Supply chain management has the objective to have the right products in the right quantities at the right time at minimum cost, a situation that would guarantee optimal service levels for the customer and optimal performance for the organizations as a whole and separately. So, SCM involves the management of flows between and among members of the supply chain in order to maximize total supply chain profitability, hence maximize the total value generated throughout the SC.while recognizing the earthly concern and importance of the others an organization needs first to decide about its supply chain strategy and then decide and take required actions that will fulfill the customer demand.Dells Supply Chain StrategiesThe direct model refers to the fact that Dell does not use the retails channel, but sells its PCs directly to customers through its website, Dell.com, as Figure shows. This way the intermediary steps that may add time and cost are eliminated, and Dell is directly linked to its customers.this strategy look very simple but its very hard to adopt and manage such a policy,a very high qualified and experienced staff is required.Fig 1fig 2Indirect Distribution channel for PC industryDire ct ditribution channel for PC industry(figure 1 as shown by dell)When Dell was a smaller company than it is now, before the development of powerful, industry-standard servers of the type that Dell manufactures, the Dell IT group ran its SCM database applications on large, expensive, proprietary servers based on the UNIX OS. However, as the company grew, servers lacking the necessary depicted object had to be replaced with even larger, more powerful servers. And because the servers were not upto the mark and efficient, updating a single server often required shutting down unblemished systems. The increased performance of industry-standard DelPowerEdge servers, however, has enabled Dell IT to create cost-effective, highly scalable systems using Oracle Real Application Clusters (RAC) 10g.In fact, Dell sells directly to all its customers, from home-PC users to the worlds largest corporations. This way it creates a direct relationship with each individual customer, which turns out to b e a great source of competitive advantage. As Michael Dell has stated, this direct relationship creates valuable information about the customer, thus Dell knows who the end users are, what they have bought from Dell and what their preferences are, a fact that allows Dell to offer add-on products and services, and stay, in general, surrounding(prenominal) to the customer.Quality controlRecent data points indicate that on top of mounting corporate governance and sluggish growth issues, but dell may also be facing a problem of quality control. The quality problem relates to low end servers, laptops, and desktops, not the high-end server models. Channel checks indicate a noticeable increase in the number of machines that need to be serviced by Dell in the field shortly after delivery, and also units returned to Dell for replacement/repair.For the most part, Dell outsources assembly to offshore partners in Taiwan and China. It is not clear yet if the issues are caused by sloppy manufact uring or design flaws. We hazard the former, and will continue to check field data. In addition, Dell is struggling through early adoption of the Microsoft Vista operating system, and users may not be able to differentiate whether the problems they are having with new laptops stem from poor build quality, design issues, instability in the operating system or incompatibility in application components with Vista. Quality issues with Dell laptops are nothing new we routinely saw evidence of that last year.The rise of problems with low end servers and desktops is troubling and our checks indicate that it is costing Dell money and starting the downfall of its brand. The timing of this quality lapse could not be worse for management, considering the recent announcements about errors in accounting and financial controls.An executive of a system builder that often competes with Dell said he finds the company has been much less cost-competitive since Michael Dell has returned to the CEO p osition at the company, and that the PC maker is representing a certain amount of confusion in competing for business throughout this quarter.Cost issues and turmoil appear to be pot on to Dells quality issues from last year, when the company recalled 4.2 million notebook batteries due to fire hazards. For its part, though, Dell has said it has found its response to customers with quality or technical foul problems has improved.SWOT Analysis of Dell ComputerStrengthsDells Direct Model approach of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems phone and online technical support and next-day, on-site product service. This prolonged range of products and services is definitely one of Dells strengths.Dell Computers award-winning customer service, industry-leading growth and cons istently strong financial performance differentiate the company from competitors for the following reasonsPrice for Performance Dell represents a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful and customized systems at competitive prices.Customization Each Dell system is built to order to meet each customers specifications.this is the only company till now which has been efficient in applyeing this strategy through the world.Under developed countries like india where people are not much in contact with internet,they are also aware of the companyz system of online oredering and customizing and almost 90 percent of the people are satisfied by this.Reliability, Service and Support Dells direct customer allows it to provide the most efficient customer service before and after the sale.the industry of computer is such that only a technical help person can fix the system and when dell provides with such a service of online omi tting errors and toll free registering burster and on the spot servicing ,this gives a customer a plus point then other companies.Latest Technology Dell is able to move into the latest relevant technology compared to companies using the indirect distribution channels. Dell turns over inventory for an average of every six days, keeping inventory costs low.The companys application of the Internet to other parts of the business including procurement, customer support and relationship management is growing at a rate of 30 percent. The companys tissue site received at least 25 million visits at more than 50 country-specific sites.the latest technology also carries effective attractions like customizing the outer(prenominal) looks like different variants of colours,the girls have different choice and boys have different.the company also earns more through this because the more you customize,the more a customer has to wage for it.now adays dell is also providing to make its own desi gn on the outer screen .WeaknessesDells biggest weakness is attracting the college student segment of the market. Dells sales revenue from educational institutions such as colleges only accounts for a mearly 5% of the total. Dells focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. Since many students purchase their PCs through their schools, Dell is obviously not popular among the college market yet.Dell is not available in retail outlets, customers cannot go to retailers because Dell does not use distribution channels. Customers just cant buy Dell as simply as other brands because each product is custom-built according to their specifications and this capability take days to finish.most of the times it happens that customer is unaware of the specifications of the the materials to be installed so according to him customizing the pc is a big headache and customer will go for simple buying.De ll weakness lies in their time of delivery also.normally 15 to 20 days are followed after the order have been placed.people requiring a imperative pc or youth exited about a new laptop or pc doesnt want to wait for these many days.it happens with us most of the times,whne we are in a mood to buy something we want that thing to be delivered as soon as possible.this is alos a major weakness of dell.OpportunitiesComputers according to customer demand and requirement and becoming more and more popular and also a necessity today. Customers are getting more and more educated about computers. The first time users may avoid dell but a second time usr will always prefer dell because now he or she is more known to the product,more aware about what he requires and also keen to use more and high performance technology.Desktops are now out of fashion and people are going for laptops because it is easy to carry and easy portable device.this is a major segment where company can focus and disclos e a reputed position.The internet is also playin a major role in dell sales and orders because dell is not available through outlets and now days people are more aware of the internet and its use.dell laptops and pc can be ordered with vast varieties of variants of each and every product where as in case of retail outlets the variety available is not so much.ThreatsThis is such a industry or market where thousands of new products are launched each month because the it industry has well established and each and every technical person has an ability to develop a hardware or software.we can see each day a new and very innovative products are launched related to computer industry.dell has to keep an eye on new products that are alays being launched and also try to make new products so that company can maintain its reputation of an innovative company.The company also faces a big problem of producing product that are high in quality and low in price.when such a situation comes a company h as to make every effort to make maximum sales and profit.One more problem or threat is price between companies are decreasing day by day and there is almost an equal price for the same product in two comapnies. Dells Direct selling attracts customers because it saves cost. Other companies are alsooffering computers at low costs, this could hurt the dell customer base and customers can shift to other pc companies. With almost identical prices, price difference is no longer an issue for a customer. They power choose other brands instead of waiting for Dells customized computers.The next threat is decrearing rate of computer industry and unluckily dell has the maximum share in this industry,suppose if the demand decreases the the competition will become more hard and company would have to work more harder and harder to maintain its position in the marketTechnology is forward day by day.if on the one side its an opportunity for the industry,on the other side its also a threat for the in dustry because the computer industry is such an industry where an new technology or product doesnt need a much high investment and large firms face competiton when small companies introduce new and efficient products at much smaller priceTechnology dictates that the most up-to-date and fastest products are always the most popular. Dell has to always keep up with technological advancements to be able to compete.Porters five force model for dell-Threat of new entrants-moderate.Reasons-The capital required for investment is low for new companies. speciality in products is also low but brand name can be considered as an entry barrier.The economies of scale is also low.The government or sanctioned barriers are also low or alomot nill(depending upon country to country).Rivalry-highReasons-There is a price war due to low margin.The continuing decrease in profit. uplifted concentration of the market.Threat of substitutes-lowReasons-If we look at the survey evry 4 th person ahs a