Mba 550 Benchmarking
Benchmarking synopsis
Concept: Distribution Management Strategy
Dell
Dell has become a $25 billion dollar company in less than 20 years since it was founded. In today`s economy most of the top technological companies are posting losses due to the slowdown in the US economy, Dell has managed to remain profitable. Dell's success is largely due to its famous build-to-order model. Dell needed to revamp the inventory management system because computers depreciate at a high rate and inventory that is just sitting means loss of profits. Dell's CEO, Kevin Rollins said "The longer you keep inventory the faster it deteriorates -- you can literally see the stuff rot,"(Inventory management review 2005) he says. "Because of their short product lifecycles, computer components depreciate anywhere from a half to a full point a week. Cutting inventory is not just a nice thing to do. It's a financial imperative."(Inventory management review 2005) This means that every seven days that one of dell`s computers sits on the shelf the company can expect a 1% loss in value. Dell needed to lower its inventory turn. An inventory turn, is "cost of goods sold from the income statement divided by value of inventory from the balance sheet". Typically, this is turned into a value showing how many days worth of inventory a firm has by dividing inventory turnover by 365."(Inventory management review 2005) The main component of Dells supply chain strategy involves stocking materials close to the manufacturing facilities. The main suppliers have storage facilities located near the manufacturing plants. This supply chain solution helps Dell to communicate with the hubs in real time to deliver the required materials just-in-time. "Dell carries only about 5 days worth of inventory whereas its competitors are laden with 30, 45 and even 90 days of inventory."(The manage mentor 2005) Dell has a significant cost advantage as it operates in a market where material costs...
View Full Essay