Inventory Management: Dell Company (Essay Sample)

Inventory Management
Name
Institution
Introduction
Dell Inc. is a computer technology company privately owned and based in Round Rock, Texas, in the United States. This multinational company is engaged in developing, selling, repairing, and supporting computers as well as related services and products (Kapuscinski & Zhang et al., 2004). The firm uses the firm’s surname, Michael Dell, who started it on May 1 1984. It is among the largest technological corporations throughout the world and employs over one hundred and three thousand people worldwide.
Types of Inventories Managed and Essential Characteristics
In 2001, Dell computers achieved the world’s largest personal vendor manufacturer with a market share growing in s struggling industry. Inventory is marked as an asset in the company’s statements although it could prove detrimental if not kept in check. The company had earlier changed its inventory management system to a built-to-order system meant it eliminated the intermediaries and dealt directly with its customers. Customers can order products according to their specifications and still receive add-on products and services. Through media such as the internet, Dell can reach its customers most efficiently. The manufacturer relies on outside suppliers for components it uses in its PCs. Such components include CD-ROM drives, disk drives, add-on cards, semiconductors, keyboards, monitors, speakers, and mice.
Other inventories, the company keeps, include standard and specialized software for its clients. Dell relies on partners such Unisys, IBM, and Wang for services such as installations, system integration, repairs, and consultancy. Because of its built-to-order inventory management system, Dell rarely keeps large amounts inventories of finished products. The manufacturing arm of the company notifies suppliers to supply components when an order is received from a customer. Dell requires all its suppliers to be ready for orders of raw materials at any time. It believes in control of the volumes of inventory to the extent of not storing any raw materials for manufacture. This is a strategy aimed at eliminating the chances of ending up with obsolete stock and making losses in the process. Dell has built an efficient and strong sales channel for its products. It developed a strategy to eliminate intermediate distributors by selling its computers directly to the consumer through the internet and media. This lowers the price of its products and increases the company’s competitive edge.
The elimination of intermediate distributors helped in simplifying the supply chain making it easy to control (Burja & BURJA, 2010). Dell Inc.’s inventory of assemble computers has always been significantly lower than its competitors. Low inventory helps the company to incur low costs of maintenance, as well as lower risks of impairing inventory. The overall effect is a significant contribution to the financial performance of the firm. The company’s effective and smart inventory management strategy keeps it competitive despite the minimal expenditure on research and development as compared to other companies.
Integration of Goods and Services Design Concept
Dell uses the just-in-time (JIT) practice to manufacture products for its customers. The trucks from suppliers carrying vendor parts pull up to the manufacturing plants and unload into bins used to build customer orders directly. The vendor parts do not become Dell’s properties until they are unloaded into the bins. Another strategy the manufacturer deploys in the integration of goods and services concepts is emphasizing on information systems. This allows for quick routing of orders to the next business process to eliminate delays, backlogs, and losses. Through fast movement of inventory in the business process cycle, Dell is able to eliminate unnecessary warehouse costs and obsolete goods. The manufacturer is able to deliver to the customer a desktop computer designed to his or her liking within 3 days of placing an order. Customers can call Dell Company directly and receive a computer on time.
Dell was able to grow into $12 billion Company in just 13 years. Since its establishment, the firm has sought to eliminate distribution channels. The company builds finished goods after receiving customers orders, therefore, eliminating the risks associated with carrying large inventories. The direct business model allowed the company to receive vital customer feedback to optimize on value. The company then integrated this information collected with superior technology to build infrastructure that revolutionized business models in the industry. Dell was able to achieve virtual integration of its various stakeholders such as suppliers, customers, and manufacturing units. Technology enables coordination among company units to achieve efficiency and productivity. Virtual integration offers an advantage over vertical integration because of its flexibility, focus, and specialization.
Role of Inventory in Company’s Performance, Operational Efficiency, and Customer Satisfaction
The built-to-order strategy has improved operational efficiency at Dell Company because of its focus on real demand rather just manufacturing. The build-to-order provides a series of advantage over its competitors. Firstly, low cost of maintaining inventory. The company was able to eliminate unnecessary costs associated with storing inventory before it goes into the manufacturing process. The second advantage was the elimination of dealer costs. The final advantage was use of current technology in its products and systems. The online order status system used by Dell enables clients to trail their orders all through the business process. The configuration of the system to the internet enabled full-blown electronic commerce. Through the online systems, Dell customers have the chance to choose the design they want and the firm only manufacturers what the customers need. Through the inventory systems, factory inventory is at most kept for 3 days, receiving support from suppliers who deliver in small quantities, but more frequently than in the traditional models. Downstream inventory for Dell is zero since products and systems are delivered to customers once they are finished. The result is no one in the stream was remaining with inventory for more than 7 days unlike in the traditional model where the average is 60 days (Wang, 2012).
Inventory management at Dell follows the zero inventory strategy (Kapuscinski & Zhang et al., 2004). Its computer sales follow this system in selling Dell PCs. The unique business model has proven successful for the multinational in the market place. The role of this strategy is to ensure no idle stock lies in inventory and no clearance of inventory for new products. The result is up to date products and services that enhance customer satisfaction. The consumers get the goods straight from manufacture without having to receive old inventory first which undergoes depreciation at a rate of 1% every week it stays in the Dell warehouse. Dell has seen success in developing a suitable system of supply chain management. The zero inventory strategy has increased the corporation’s profit margins by a great deal. The other result of the revolutionary and unique system at Dell is high quality products, which attracts more satisfied customers and giving the company an excellent supply chain management (Wang, 2012).
Four Different Types of Layout in Dell Company
The four layouts found in Dell Company include office layouts, process-oriented layouts, repetitive and product-oriented layout, and warehouse layout. The layout strategies aim at developing cost-effective layout, which conforms to the needs of the firm to achieve competitiveness. Some of the considerations, when choosing a layout are; the utilization of employees, space and equipment, flow of information, materials and people, customer interaction, employee morale and safety, and flexibility. Dell’s layouts are suitable to the firm because they consider the flow of information, space and capacity requirements, cost of moving from one work to another, and environment and aesthetics.
The Dell office layouts positions employees, equipments, and spaces to optimize on flow of information. Warehouse layout, on the other hand, considers the space available and materials that need handling. Dell’s process-oriented layout handles the low-volume, but high-variety production.
Two Metrics to Evaluate Supply Chain Performance
The supply chain metrics that Dell uses are; order and delivery, and service (Lambert & Pohlen, 2001). The fact that Dell Inc. maintains a zero inventory means that the corporation has to track the real-time status of all orders. These should be further categorized based on action taken, which may be ‘shipped’ or ‘on hold’. Dell maintains information about customer orders, needs, and forecasts. Through the information, the manufacturing pl...