Consciously developing a competitive advantage is necessary to maintaining a business in a competitive environment. In the case of DELL, logistics was key to achieving this advantage and defeating rivals such as IBM and Hewlett-Packard.
Unlike its competitors, DELL has a business model that can be identified as “direct model”, in which DELL sells its PC´s directly to customers without using a retail channel.
Therefore it creates a direct relationship with each individual customer which they have segmented into groups to make it easier to approach (large organizations, small and medium businesses, and personal consumers).
The other aspect that makes DELLs supply chain unique is the Build-to-order strategy.
The success of his model is based on three pillars:
The first, maybe the most important, is to keep inventories at zero. The second is to produce nothing that doesn´t already have a buyer. And the third is to maintain a constant and detailed measurement of their performance.
The Role of Supply Chain in Maximizing Profit in DELL
The heart of Dell’s success is its integrated supply chain, which has enabled rapid product design, fabrication, and assembly, as well as direct shipment to customers. Inventories have been dramatically reduced through extensive sharing of information, a prudent choice given the risk of technological obsolescence and reductions in the cost of materials.
Even with reduced inventories, Dell’s strategic use of information has made possible a dramatic reduction in the elapsed time from order to delivery, giving DELL a significant competitive advantage.
Some of the vertical integration strategies that DELL uses are the following:
- Fast communication system
- Clear definition of what DELL does best
- Selection of partners who are the best in their respective fields
- Minimum number of suppliers
- Internet as a strategy to promote effective integration
- More emphasis on using assets rapidly than guarding intellectual assets