S. r.

luthra institute of management

PRODUCTION AND OPERATION MANAGEMENT

Assignment

Topic: - analyze different aspects of Production and

Operations Management IN DELL COMPANY.

Submitted to: - DR. Ranjan Sabhaya

Submitted by:-

name ENROLLMENT NO.

Dhaval Solanki 207500592019

Nidhi Lad 207500592059

Yash Modi 207500592003

Abdulqadir Ujjainwala 207500592007

Sneha Mavani 207500592023

Signature:
 Analyse different aspects of Production and Operations Management in DELL company

DELL COMPANY

INTRODUCTION
Dell is an American multinational computer technology company that develops, sells,
repairs, and supports computers and related products and services, and is owned by its
parent company of Dell Technologies. Founded in 1984 by Michael Dell, the company is
one of the largest technology corporations in the world, employing more than 165,000
people in the U.S. and around the world.
Dell sells personal computers (PCs), servers, data storage devices, network
switches, software, computer peripherals, HDTVs, cameras, printers, and electronics built
by other manufacturers. The company is well known for its innovations in supply chain
management and electronic commerce, particularly its direct-sales model and its "build-
to-order" or "configure to order" approach to manufacturing-delivering individual PCs
configured to customer specifications. Dell was a pure hardware vendor for much of its
existence, but with the acquisition in 2009 of Perot Systems, Dell entered the market for
IT services. The company has since made additional acquisitions in storage and
networking systems, with the aim of expanding their portfolio from offering computers
only to delivering complete solutions for enterprise customers.
Dell was listed at number 51 in the Fortune 500 list, until 2014. It’s rank is 34th on the
Fortune 500 currently. It is the world's 3rd largest personal computer vendor by unit
sales as of January 2021, following Lenovo and HP Inc. Dell is the largest shipper of PC
monitors worldwide. Dell is the sixth-largest company in Texas by total revenue,
according to Fortune magazine. It is the second-largest non-oil company in Texas
(behind AT&T) and the largest company in the Greater Austin area. After going private in
2013, the newly confidential nature of its financial information prevents the company
from being ranked by Fortune. It was a publicly traded company (Nasdaq: DELL), as well
as a component of the NASDAQ-100 and S&P 500, until it was taken private in a leveraged
buyout which closed on October 30, 2013.
In 2015, Dell acquired the enterprise technology firm EMC Corporation; following the
completion of the purchase, Dell and EMC became divisions of Dell Technologies. Dell
EMC as a part of Dell Technologies focus on data storage, information security,
virtualization, analytics, cloud computing and other related products and services.

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Headquarters in Round Rock, Texas

Formerly PC's Limited (1984-1987)

Type Subsidiary

Industry Computer hardware

Computer software

Founded February 1,1984; 37 years ago

Founder Michael Dell

Headquarters Round Rock, Texas, U.S.

Area served Worldwide

Key people Michael Dell

(Chairman & CEO)

Products Personal computers

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Servers

Peripherals

Smartphones

Televisions

Revenue US$94 billion (FY 2021)

Number of employees 165,000 (Early 2020)

Parent Dell Technologies

Website www.dell.com

NATURE OF PRODUCTION/OPERATION (ABOUT PRODUCTS)

Operation management is a branch which provides the knowledge of managing the

processes within the company to serve better to the customer and deliver satisfactory
goods and services. Operation management enables the company to transform its
resources into goods and services therefore significant in every industry vertical.
Operation management has prime importance for computer industry as it has given the
new rise to the world. The computer industry is the most competitive industries in the
world which has benefited by the explosion of home consumers. Dell Inc is one of the
most profitable and competitive companies in the computer and laptop manufacturing.
In context of Dell Inc, the report discusses the operation strategy of the firm in terms of
competitiveness and sustainability. Based on the analysis, the recommendation has been
made to the company with justification for the changes required in the operation strategy
of Dell Inc to ensure increased competitiveness and long-term sustainability of the
company.

ABOUT DELL INC.

The company was started in 1984 by the vision of Michael Dell with the simple business
concept to manufacture computers for taking ordering the selling the computers directly
to the consumers. At the initial stage of the growth the company has faced numerous
challenges to maintain the capabilities which were distinctive in nature. The company has
set a history of gaining double digit sales. Dell has used objective analysis for ascertaining
the competitiveness in terms of strength, weaknesses, threats and opportunity. The

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vision of the company is to closely work with the development partners to deliver 100%
of the perceived value to the customers in application environment. The mission of the
company is to become a successful computer seller across the world by delivering the
best of customer experience in the market place and serve them at best possible manner.
By doing so, the company will meet its customer expectations for high quality service,
leading edge technology, competitive pricing, and individual as well as company
compatibility along with the financial stability. There are the nine components in the
mission statement of the company including markets, products/services, technology,
growth, profitability and concern for survival. The prime concern for the company to
satisfy the customer needs in best possible manner and second is to be the most valuable
and profitable company.

Operation Strategy of Dell:

Dell inc. has combined its business mission, core competencies and environmental
scanning for the purpose of developing the highly successful strategic business unit. The
company mission as stated earlier is to become a successful computer seller across the
world by delivering the best of customer experience in the market place and serve them
at best possible manner. With its mission statement the company has met customer
expectation in terms of high quality, competitive pricing, accountability, leading edge
technology, superior corporate citizenship and financial stability. All of these components
are focused towards serving the customer and this is achieved by Dell through
competitive operational strategy (Ahlstrom and Westbrook, 2009). With the operation
strategy of the company enable it’s to maintain the competitive position in the market
place. Apart from this the company has developed its growth through best in class service
and support, flexible customization and competitive pricing. The company has developed
in-house capability to reduce the cost. Dell sells computers directly to the customers
without any intermediary. However the other players in the market sell computers using
retailers and distributors such as IBM and Compaq. Using the intermediary such as
distributor and retailer leads to high cost of inventory and slow response to the customer
needs. The idea of the founder Michael Dell’ idea was to sell the computers directly to the
customer by knowing exactly what a customer want from the vendor within a short span
of time. The company has defined its core competencies through latest technology
offerings and flexible manufacturing (Gagnon, 2006). By putting together these
competencies, a competitive business strategy has been developed by the company to
deliver customized computer solution to the customer with in the two days at
competitive prices. The business strategy of the company enabled it to take advantage of
such opportunities which were uncovered by other business players such as business
segment need identification, computer customization, and high reach to the customer and
after sales support. This strategy was successfully implemented through optimal
operation strategy by arranging all the resources in way that it should support the
business strategy of the company. The operation strategy of Dell includes:

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PC value chain by competitors (e.g. IBM, HP and Compaq)

PC value chain by Dell

Manufacture of PC’s Component By Suppliers

Assembly of PC by PC Makers (to fill order from Suppliers and keep distribution Channel
stock)

Manufacture of PC’s Component By Suppliers Purchase By PC Users Service and support

activities Provided to PC Users by reseller (or some PC Makers- IBM to PC users)

Sales and Marketing Activities of Reseller to self Inventories of PC’s on hand Service and
support activities Provided to PC Users eithers by PC Makers (via Telephone, fax, Email)
etc. purchased by PC users

Customized Assembly of PC’s By PC Makers as orders from PC Buyers come in (Source:

Gordon, 2003)

Manufacturing/developing the computers/PCs/laptops, servers and work stations to

order as none was produced for inventory. The customers can therefore order the servers
and workstations depending on their application needs

Dell does not have the in-house stock of finished goods and investor which benefited it to
have no inventory cost (Porter, 2006).

Unlike other competitors, Dell does not have traditional supply chain in which the goods
are delivered through resellers, distributors and retailers. It removes the intermediary
cost such as distributor’s margin and retailer’s margin. Also it moved out the
intermediaries’ personal benefit where they push the new models/stock in market after
finishing the previous inventory (Kendall, 2007)

Dell has its own assembly plant in each continent such as USA, Europe and Asia pacific to
deliver the PCs on time (Kendall, 2007)

Dell is partnered with the supplier as the company has a belief that partnering with the
reputable suppliers of PC parts and components in spite of backward integration and
component manufacturing by its own. By doing this the company has gained several
advantages including the name brand components which enhances the quality and
performance of the Dell’s computer, value based components procurement to supply
across the world markets, using suppliers engineers for assisting Dell’s team in product
design and long term relationship with suppliers enable the company to ensure Just in
time delivery of the components to Dells assembly unit (Porter, 2006).

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Just in time approach yield the major cost advantage to the company to shorten the time
it takes to produce new generation computer models and launch them into the market
place. Also the new advancements can be brought in the so fast in the computer parts and
components including disk drivers, modems and microprocessors so that the inventory
become obsolete for a month and sometime quicker. In case the company builds the
inventory, it will lead to delay to develop new generation computers so quickly. Also
recently the component cost has fallen down by 50% which may lead to high cost of in
case the company keeps the stock of components (Kendall, 2007).

Direct selling approach enable the company to have firsthand experience regarding
customer wants and needs and getting immediate feedback related to design & any other
technical problem (Porter, 2006)

Dell has deployed virtual integration and information sharing system with both the
suppliers and customers who enables to blur the traditional boundaries in supplier-
manufacturer-customer supply chain. The company has provided its customer with
internal technical support tool which enable the customers to resolve the issues
themselves (Kendall, 2007).

The demand forecasting in Dell is excellent. As the company directly deal with large
corporate customer and general consumers. The pulse of demand therefore lies on the
fingers of the company. It provides the strong capability of forecasting the demand
(Porter, 2006).

The research and development activities in the company is efficient as more than 1,600
engineers work on product development by taking the feedback from the customers. The
research and development activity also works on controlling the quality and streamlining
the assembly process to gain the long term sustainability (Kendall, 2007).

TYPES OF PROCESS USED IN PRODUCTION

The purpose of this paper is to analyze Dell, Inc. process strategy and distribution
strategy. There are four basic process strategies: process focus, repetitive focus, product
focus and mass customization (Daft & Lane, 2009). Dell, Inc. uses a mass customization
process strategy, since it performs high-volume and high-variety sales, offers large
quantity of products. Dell’s strategy is based on build-on-order principle, when PC
components are manufactures, and the device (PC, laptop, netbook, etc.) is then
assembled on order of the customer. There is a variety of assembly types, which also falls
into the scope of mass customization strategy. Also, Dell’s equipment and production
lines are flexible, and are customized to match the buyers’ needs.
In addition to high customization, Dell, Inc. also focuses on direct distribution channels:
one of Dell’s main keys to success is the quick delivery time and inventory optimization.
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In fact, it was stated that Dell “uses information instead of inventory” (McIvor, 2010).
Currently, Dell also forms strategic partnerships with major retailers; however, it makes
agreements and limitations on price variation in order for these partnerships not to hard
direct distribution and e-commerce. Dell also manages to integrate online sales into its
distribution strategy.
Headquarters of Dell, Inc. is situated in Round Rock, in Texas, USA. Dell has separate
distribution centers in many countries, and its suppliers are also located worldwide. Dell
uses logistics outsourcing in order to reduce delivery time and optimize distribution
(Inkpen & Ramaswany, 2006). Thus, in general, the location of the main distribution
center is not so important since the whole company is effectively managed, and
distribution lines are optimized in every country. However, Dell is one of leading PC
manufacturers within US, and US segment comprises the largest part of Dell revenues.
Thus, the location of Dell headquarters in USA is quite successful from this point of view.
In future, it is likely that the integration of the whole company will become even more
tight, and the location of the major distribution center will have even less impact on the
company than it has now.

DETAILING OF TYPES OF PROCESS USED WITH ADVANTAGES AND

DISADVANTAGES OF IT

There are four basic process strategies:

1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization

1. Process focus:

Process Focused Strategy- A production facility organized around processes to facilitate

low-volume high-variety productions.

All operations are grouped according to the type of process. In a factory these process
might be departments devoted to welding, grinding and painting. In an office the process
might be account payable, sales and payroll. Such facilities are process focused in terms
of equipment, layout and supervision. They provide a high degree of product flexibility as
product moves between processes. Each process is designed to provide a high variety of
activities and handle frequent changes. Consequently they are also called intermittent
process.

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The system is also called ‘job shop´ as the product moves from one department to another
in small batches that are determine by the customer’s order.

It is usually used to produce small quantity of different items on general purpose

machineries

 Pros & Cons

 Advantages:

 Greater product flexibility

 Use more general purpose equipment
 Suitable for customization

 Disadvantages:

 More highly trained personnel

 More difficult production planning & control (including inventory, machine and
personnel scheduling, maintenance, quality control…)
 Low equipment utilization (25% to 45%)
 Requires more time if the system operates on one or more processes at a time
 High Variable costs

o What are Process strategy main Characteristics?

 Facilities are organized around specific activities or processes

 General purpose equipment and skilled personnel
 High degree of product flexibility
 Typically high costs and low equipment utilization
 Product flows may vary considerably making planning and scheduling a challenge

 Advantages and Disadvantages of Process Layout:

Process or Functional Layout: Process layout means the arrangement of similar machines
in a group in one department according to the functions they perform in the plant. Thus,
welding equipment may be placed in a separate welding department for the benefit of all
lines of department. All lathe machines may similarly be placed at one place in the lathe
department.

This type of layout is generally adopted for job order production under which different
varieties of goods are produced in comparatively smaller quantities at irregular intervals.
It is just the opposite of the line layout and its advantages are the drawbacks of the line
layout and vise versa.

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 Advantages of Process Layout:

The chief advantages of the process or functional layout may be stated briefly as follows

(i) Flexibility. It is more flexible as changes in operations and their order can usually be
made without upsetting the existing layout.

(ii) Scope of expansion. Under such layout, the capacities of the different lines can be
easily expanded.

(iii) Full utilization of equipment. The functional layout of machines leads to better
utilization of the equipment. The investment in equipment would thus be comparatively
lower.

(iv) Better utilization of workers. The special abilities of the workers and supervisors can
be utilized better if the machines ate arranged according to their functions.

(v) Adaptability in case of breakdowns. Unlike the line layout, a breakdown of a machine
does not disrupt the whole work.

 Disadvantages of Process Layout:

The thief drawbacks may likewise be summed up as follows:

(i) Difficulty in the use of machines. The mechanical devices for material handling, cannot
be conveniently employed.

(ii) Dis-economy of floor space. This type of layout requires more floor space than the
product layout.

(iii) Wasteful hauling of materials. The materials have to be carried forward and
backward quite frequently. This means both delay and waste.

(iv) Difficulty of production control. Production control is difficult to enforce under such
layout and is both costly and complex.

(v) Accumulation of work in progress. The work in progress or the stocks of semi-finished
products may accumulate.

(vi) Longer period of manufacture. The manufacturing operations take a longer period
than under the product layout.

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(vii) Uneconomical inspection. Inspection under this layout is more frequent and costilier
because work has to be checked after each operation.

2. Repetitive focus:

Repetitive focus; falls between the product and process focus. The repetitive process is a
product-oriented production process that uses modules. Modules are parts or
components of a product previously manufactured or prepared, often in a continuous
process. Fast-food firms are an example of repetitive process using modules. Product
focus, are high volume, low variety processes; also called continuous processes.

REPETITIVE STRATEGY Repetitive focus is essentially a customary assemblage line that

utilizes modules that are organized earlier than production set in motion.

 Facilities often organized as assembly lines

 Parts and assemblies made previously
 Combined for many output options
 Less flexibility than process-focused
 More efficient Repetitive focus

Repetitive Focus Raw materials and module inputs Modules combined for many
output options Few modules Automobile Assembly Line

o What are the main characteristics of Repetitive Focus?

 Facilities often organized as assembly lines

 Characterized by modules with parts and assemblies made previously
 Modules may be combined for many output options
 Less flexibility than process-focused facilities but more efficient

3. Product focus:

Product-focus is an approach to business that defines strategy, operations and

metrics in terms of products. This is associated with manufacturing and firms that
continually improve products to stay relevant in an industry.

 Benefit of product focus:

Accuracy, precision, clarity

Putting a product strategy into place empowers your team with a clear grasp of:

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 What the product is

 Who it’s aimed at
 Which pain points it addresses
 When and where the USP is communicated
 Why it’s right for your business

Everyone involved in the product’s conception, development, sales, and marketing will
benefit from a well-designed product strategy. Focusing on the points listed above keeps
your business focused on the key reasons why the product has to exist in the current
marketplace and why buyers will want to pay for it.

 It brings expertise into the products or services: To create the best possible
products or services for a targeted demographic, there must be an underlying
expertise present within the company. Product knowledge is an asset that cannot
be ignored. That is because natural expertise creates a barrier to entry within the
market to competitors. With a focus strategy, a company establishes itself as the
best, and most people prefer to work with the best when they have a need that
must be met.
 It is a chance to provide a higher quality product: For many consumers, there is a
desire to have the best possible product available when having their needs met.
Many will pay more when there is confidence in the ability of a niche product to
meet their needs. It is considered more of an investment than a purchase. When a
business chooses to embrace a focus strategy as part of their marketing push, it
creates an opportunity to provide higher quality levels without worrying about a
reduction in consumer interest.

o Product-Focused Strategy:
 Facilities are organized to produce a small number of products
 High volume, low variety products
 Other names
 Continuous process manufacturing
 Line flow production
 Continuous production

Product-Focused Strategy

 Pros & Cons

 Advantages:

 Lower variable cost per unit

 Use more specialized equipment’s
 Easier production planning and control

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 Higher equipment utilization (70% to 90%)

 Disadvantages:
 Lower product flexibility
 High shut-down cost
 Usually higher capital investment

o What are Product Focus main characteristics?

 Facilities are organized by product

 High volume but low variety of products
 Long, continuous production runs enable efficient processes
 Typically high fixed cost but low variable cost
 Generally less skilled labor

4. Mass customization:

Mass customization can be defined as the ability of a company to deliver

modified goods and products to fulfil the needs of individual customers. The customized
products are provided at the same price as of the number of mass production products.

Customers are provided with basic product and a range of features that they can add or
subtract to get a unique product.

The rapid, low-cost production of goods and service to satisfy increasingly unique
customer desires

Combines the flexibility of a process focus with the efficiency of a product focus

o What is mass customization?

Mass customization is a concept where customers are provided unique custom-made

products at the mass production prices. This concept of branding is becoming quite
popular with the companies these days, and more and more companies are adopting this
business concept to boost their sales.

The concept of mass customization is becoming popular among people because of their
desire to have unique things. For example, people want to have a wallet with their name
carved on it.

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The concept of mass customization first introduced in the market under the names of
“made-to-order” or “built-to-order.” According to this mass customization, products were
designed for the customers only after they have placed an order.

The products designed under “made to order” or “built to order” were little expensive
than the products made through mass production.

But the concept of “Mass customization” was introduced so that customers can design
products in their style. They can choose from the range of feature provided by the seller
and can have a unique product designed as per their taste.

One thing that makes mass customization different from made to order and built to order
concept is that the price of products made through mass customization is similar to or
near to the price of products made through mass production.

The concept of mass production is not only used by the large organization, but
small entrepreneurs widely use it. Entrepreneurs use a remarkable amount of creativity
to design mass customization products.

To do this, they pay more attention to their design phase and produce products to satisfy
the unique needs of their customers.

Moreover, mass customization brings more business to the entrepreneurs as every

customer wants to be treated as special, and companies learn about the choices of their
customers.

They use this information about their customers to enhance their business ideas and
produce products which will help them to serve their customers in the right manner.

There are different types of mass customization that companies can opt to enhance their
business. One popular type of mass customization is adaptive customization. In adaptive
customization, the basic product is produced through mass production, and customized
features are added once the order is placed.

There are fewer chances of loss in mass customization as the customer pays before they
can ask for the customization to be made. There are many other types of mass
customization other than adaptive customization. Let us learn about them one by one.

o Types of Mass customization

1. Collaborative Customization:
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This type of mass customization business idea is a little expensive for the customers.
It is for those customers who want to create highly customized products. The meaning
of collaborative customization is to create a customized product with the
collaboration of clients.

In this method, customizers talk with the client to understand their needs and then
use the information obtained from the client to create a product that they desired.

This type of mass customization is suitable for clients who are confused with the
range of options and who don’t exactly know how they want their product.

The customizers help them by narrowing down their options and create a unique
product for which fulfill their requirements. This type of mass customization is
preferred by people who ant highly customized products and don’t have a budget
limit.

2. Adaptive Customization:

In adaptive customization, products are not built from scratch as per the guidelines
provided by the customers. But the basic product is prepared through mass
production, and customers are given choice of a variety of features that they can add
to the basic product make it unique.

This type of mass customization easy to make the part of the existing business style.
Only small changes are required to be made in the production process to provide
customized services to customers.

As the base product is made through mass production, the cost of a customized
product is not high, and people of all class can afford it. For example, an online
company The messy corners sell wallet, purse, travel bags, passport cover, etc.

They mass-produced these products in different color and design and provided a
range of options for tags, title, name, etc. to be carved on the products to make it
customized.

Customers can select the product that they want to buy and select the customized
from the drop-down menu provided on the website to select different features that
they want to be carved on the product at a small additional price.

Adaptive customization is best to fit the mass customization business idea for online
businesses.

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3. Cosmetic Customization:

Cosmetic customization is a type of mass customization where standard products are

sold in different ways to a different group of customers. With the increasing demand
of customers for customized products, more and more companies are opting for
cosmetic customization.

Now the companies sell standard products but in different sizes, shapes, containers,
or packaging so that the needs of customers can be fulfilled.

Products produced through cosmetic customization usually carry the name of

customers. For example, a recent trend of cosmetic customization is seen in the
apparel industry, where people spend billions of dollars to buy customized clothing
such as a t-shirt and sweatshirts, etc.

One more example from the apparel industry is the introduction of the plus-sized
clothing line. Earlier apparel companies used to sell clothes of small, medium or large
sizes but nowadays, companies are selling clothes of various plus sizes and even get
customized ready clothes as per the unique requirements of the customers.

Even the impact of cosmetic customization is also seen in the retail industry. Retailers
are opting the cosmetic customization method to provide customized product to their
clients.

For example, a baker not only sells cakes made through standard design and
ingredients but have started selling cakes made as per the unique theme told by the
client and they also use different ingredients to prepare customized cakes for
customers with different health conditions.

4. Transparent Customization:

The transparent customization is a quite new and unique type of mass customization.
In transparent customization, companies customized ready products for customers
by constantly analyzing their behavior.

This method of mass customization is not very popular among the companies as it
requires a lot of additional work and efforts to learn about the customers’ buying
behavior and their needs and choices.

However, if implemented properly, this method can be a successful strategy to gain

the loyalty of customers and boost sales incredibly by putting a few extra efforts.

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o Strategies to successfully implement mass customization

Mass customization is need of the hour as more and more customers want customized
products. However, including mass customization in business is not easy as there are
various factors involved with it.

Companies sell mass-produced products as they are cheap to produce, and also it is
easy for labor to produce identical products.

When every product is unique, then the method of creating it will also vary, which will
increase the production cost whose impact will reflect on the price of the products.
Therefore, it is important to plan carefully before introducing mass customization
concept to justify the increased price in your business.

In this section, you will learn about the different mass customization strategies that
you can include in your business.

1. Differentiate:

Nowadays, more and more companies are getting into the mass customization
business, and they provide customized products to their customers. First of all,
producing a unique and different product for each customer is difficult and requires
a lot of creativity and hard work.

With all this, you also have to handle the increasing competition in the field and
provide such a variety of options that gives you an edge over your competitive
companies. For example, if you want a mass-customized business in clothing industry
then rather than just making custom-designed clothes attach a theme to it.

You can collaborate with a movie star or famous youtube to use his name and quotes
to sell customized clothes.

2. Sell products at a standard price:

Now, this is the most difficult aspect of setting up a successful mass customization
business. Mass production was introduced to lower the cost of production and as a
result of the cost of mass-produced products also decreased.

But in the new era, people don’t want to be part of the crowd, and they want to look
unique and want to be treated special. But how to do this with mass customization.

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This can be done by lowering inventory, increasing cash flow, enhancing customer
satisfaction level, and establishing a quick response system. In addition to this, the
cost can be lowered by outsourcing the production to suppliers.

3. Cut the intermediators between the company and its customers:

In regular business, there are at least 3-4 intermediates between the selling company
and its customers. Customers don’t get a chance to interact with the company, but
they interact with the retailers only.

For successful mass customization, you are required to eliminate intermediates so

that you can learn about the needs of customers directly from the customers and not
distorted information from intermediates.

In this way, mass customization can be implemented successfully by fulfilling the

exact needs of customer.

o Examples of Mass customization

There are many companies which have opted mass customization to take their
business one step ahead.

Dell computers:

Dell computers company is one of the oldest and popular examples of mass
customization. Dell company started it’s with the concept of mass customization. You can
choose the components that you want to include in your computer and get your computer
assembled as you want.

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 Advantages of Mass Customization

1. Happy and satisfied customers.

2. Enhanced reputation of the company.
3. Increased revenue.
4. Your workforce gets to showcase their creativity.
5. Lower inventory and unsold goods.
6. less wastage of raw material
7. Less or zero chances of cancellation.
8. Fast and efficient production process.
9. Get to know your customer better.

 Disadvantages of Mass Customization

1. Tiring process of figuring out what customer wants.

2. The constant process of thinking about creative and innovative ideas to
please customers.
3. Keeping and maintaining stock of the variety of material.
4. Tiring process of convincing customers for the higher price charged.
5. Difficult to get the estimate for product demand.
6. Need for highly flexible production technology and machinery.
7. Expenses of maintaining direct customer relationship.

o What are mass customization main characteristics?

 Mass customization is characterised by high variety and low volume.

 It requires process type plant layout; requiring skilled operators and highly
competent and skilled supervisors.
 It requires:
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1. Computer based information systems.
2. Flexi-manufacturing systems.
3. Instant communication media like—e-mail, fax, etc..

 Dell: Competitive Advantage

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Dell Computer is a leader in the e-commerce computer hardware market. It is an

established brand that leads personal computer manufacturers both in U.S. sales and
overall online sales. Its trademark method of selling products to customers, corporate
and individual consumers, originates from the Dell Direct model, a Web-enabled
infrastructure that allows customers to customize their PCs and order other products
they need or desire. This virtual integration structure eliminates the need to manufacture
everything, and instead uses the power of the Internet to share and exchange information
with suppliers and vendors to build a truly superior supply chain that keeps inventory
turnover low and costs to a minimum (Harrington, 2002). The primary method Dell uses
in order to achieve and sustain their competitive advantage is a unique, direct to
customer business model (Dell, 2007). The model is known as Dell Direct, referring to the
relationship between the company and its customers as being “direct.” This model helps
Dell focus on price for customization, service and support, performance, latest technology
and superior shareholder value. Additionally, Dell is able to distinguish itself from its
competitors with its customized on- demand manufacturing. Through customisation of
the products manufactured by dell, the company has the ability to offer more value for
the money of its customers due to the removal of the intermediaries in the manufacturing,
procurement and distribution processes of Dell.

Dell’s primary resources include the most advanced technology, which allows the
company to successfully move along their superior supply chain and achieve the value
they strive for. Dell’s value chain allows Dell and its suppliers to exchange information
and interact with each other. The Internet, Dell’s important IT factor in its success, results
in lower costs to customers than other retailers, the customers tell Dell exactly what they
want and Dell creates products for the consumer without experiencing wasteful
resources in production (Breen, 2004).

Overall, it is evident that Dell’s competitive advantage lies in its Direct model success.
Through Dell’s IT performance, which combines its resources, its relationship with
suppliers and its consumer communication capabilities, Dell has attained a big advantage
over its competitors.

 Analysis of Dell’s Competitive Advantage:

Dell carries the tag of being, one of the best computer systems company in the world. Dell
is able to sustain a competitive advantage over competitors in the computer industry
because of an extremely efficient supply chain/distribution system. Dell is able to achieve
superior profits in the industry because they are a knowledgeable user of information,
communication, e-commerce, e-business, internet, and web technologies.

Dell implements a Just-In-Time inventory system which operates on only 6 days of

inventory. Dell is able to achieve greater profit margins and increased profits because of
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their inventory system. Inventory and labor are the highest liabilities of a firm. Operating
only with 6 days of inventory, allows Dell to reduce its expenses on hiring people to track
and maintain inventory, warehousing, and holding on to obsolete technology. This allows
Dell to free up cash flow to invest in other value adding activities.

The direct Model strategy compels the company to use a JIT inventory system, as the
customers are only allowed to order directly from Dell. Dell uses their website
www.Dell.com to take customer’s orders. The organization focuses on direct sales, cutting
out other distribution channels entirely. This allows for a deeper relationship with the
customers whereby Dell can offer their customer’s better service, savings, convenience,
and efficiency.

Dell’s use of the internet has revolutionized the company. Dells extremely consumer
friendly website offers the customers to place their orders with ease. The separate
“Premier Pages” on Dells website designed for Dell’s large accounts like corporation,
educational institutions and Government, delivers easy navigation, dynamic price
upgrades and wide range of available options. Customer relationship management
software keeps close tabs on the types of computers that customers are buying.

Not only does Dell use the internet to make the customer ordering process easier. They
also use the internet to build better relationships with their suppliers. In order for Dell to
work off of 6 days of inventory, their suppliers have to be very involved in the company
to make sure superior service is met. The use of art production planning programs assist
in predicting the quantities of components needed to build the computers. The forecast
is passed to the supplier, who respond with cost estimates and plan their production as a
result.

Dell’s e-commerce is a huge part of their competitive advantage. Their e-commerce

internet infrastructure is so advanced and knowledgeable that by using it to determine
trends and demands of their products, they have gained superiority over their
competitors.

Dell has set up strategic alliances with other companies to have their products sold on
Dell’s direct selling distribution channel. Back in 2000, Palm, Inc. made an agreement with
Dell to offer an expanded line of handheld Palm products and accessories. This agreement
allowed Dell to drive momentum for the Palm operating system market (Dell: 2000, April
17). Along with Palm, Xerox also partnered with Dell to take advantage of Dell’s e-
commerce. Advantages to Xerox were increased profits by offering the printers with the
Dell computers. Advantages to Dell include selling high quality printers along with their
computers, but more importantly, it allowed Dell to be involved in the customer buying
process for printers. Being involved in the decision making process is the key to Dell’s
success because they see directly what the customers want and determine their
production schedule from that information (Dell: 2000, May 22).

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Dell achieves its competitive advantage over other firms in the industry by having
superior supply chain management. Dell utilizes technology to interpret information. By
being involved in the customer buying process they are able to determine their
customers’ needs. This allows Dell to streamline production and have close relationships
with their suppliers which results in getting timely deliveries in order to mass customize
customer’s computers.

 Analysis of Dell’s Business Model:

The four markets within an industry are defined as Business to Business, Business to
Consumer, Consumer to Business, and Consumer to Consumer. Dell focuses on Business
to Business and Business to Consumer commerce to satisfy their business and individual
customers. Dell differentiates between classes of customers because the needs of their
business customers, who buy large quantities of computers, are different than the
individuals who want to configure a single unit. “Dell’s business model is no secret, of
course, and it’s been emulated with considerably less success by many of its competitors
(Henricks, 2003).”

Dell’s initial success was due to its early implementation of the internet as the means of
sales and marketing. “Dell’s direct-to-the-customer strategy presents a highly attractive
cost advantage that’s tough to ignore. Their direct interaction with their customers
continues to be “a key driver in sales for the quarter (2000).” Dell’s early work with using
the internet helped them get a jump on their competition while their competition was
finding it difficult to conduct successful Business to Business operations online since
“exchanges are still in their infancy and many haven’t even gone live yet. Matching
customer ease of ordering and direct interaction through the internet proved successful
because Dell believes that it is the customer that drives the business model.

Dell recognized the challenges in dealing with the customers and fragmented them into
two distinctive groups with different needs, dealing with the business customers (like
corporations) and dealing with individual customers. Dell has done a remarkable job
managing these two different types of consumers thus far. In the last couple of years, Dell
decided to split their operations into two different websites with separate B2B sites. With
separate sites, Dell planned to “simplify the Internet procurement process for businesses
and institutions of all sizes, generating savings that can range to millions of dollars
annually for large customers (1999).” However, this idea failed, and “Dell had to shut
down its B2B site, four months after it launched. Dell said “the site failed to attract more
than three suppliers”.

 Recommendations to build sustainable competitive advantage in future:

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After analyzing Dell’s IT and their competitive advantage as a result of their advanced and
successful IT, it was challenging to come up with recommendations to help them achieve
more success in an industry that they already prosper in. However, even with Dell’s
current success, we realize that in an ever-changing technology industry, there is always
room for improvement.

1) Dell should consider selectively adding other vendors to its supply chain management
system. Due to the increase in Dell’s global sales, Dell may need to consider to selectively
adding additional suppliers to their supply chain management system. The additional
suppliers should not result in any significant cost to Dell and Dell might be able to
negotiate better component costs from new suppliers. New suppliers would want to
participate in this exchange because they would be seen doing business with a leading
technology company

2) Use “Customer Surveys” to gain market share. Although Dell does well in its markets
overseas, Dell has lost some domestic market share and has more potential overseas. It
is important for Dell to advertise and get their products noticed in international markets.
In order achieve this goal, in-depth customer satisfaction surveys should be used in
markets where they trail their competition. .

3) Invest more in Research and Development. With the growth of quality competition, it
is crucial for Dell to keep its competitive advantage by offering new technology products
and services. Dell should consider expanding into peripheral product markets that would
compliment their computer sales.

4) Dell could offer online data back-up capabilities. Another way to increase revenue is
to offer existing customers (business and individual consumers) back-up capabilities on
Dell’s own servers. This process will have advantages for both consumers and Dell. For
consumers, especially businesses, if something happens to their plants and computer
systems, they can always retrieve their data from Dell who has their information backed
up offsite on their system. By keeping their data saved at another location that is
maintained by Dell, Dell can make money by charging for this additional service. Dell also
has a built-in customer list based on the sales that they make for computer systems.

5) Enhance customer support services. Since successful customer support and

communications are crucial to Dell’s success, it is important that Dell keeps enough well-
trained people on the phones and on the Internet for customer support. Based on the
results of some surveys that say that Dell might be losing customers because of actual or
perceived decrease in support, Dell should do a cost-benefit analysis to determine
whether they should invest in more people who can answer technical questions &
support customers with their problems and needs.

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Plant location analysis of Dell Company

Globally, the company also builds computer systems in Austin, Texas; Nashville, Tenn.;
and Winston-Salem, N.C., in the United States; in Limerick, Ireland; and in Eldorado do
Sul, Brazil.

Dell’s first made in India computer rolled out of the conveyor at its newly established
assembly line at Sriperumbudur, near Chennai.

The first locally manufactured desktop was handed over to Infosys Technologies, one of
Dell’s largest customers in India. The Sriperumbudur facility, in which Dell intends to
invest $30 million over the next five years, now has a single assembly line, with a capacity
to roll out four lakh units per annum on a single shift basis.

Major points related to plant location

 While the company can operate up to three shifts, it also has enough land at its
disposal to set up additional lines to achieve its production ramp up schedule to
roll out 2.5 million units per annum over the next few years. Dell have commenced
production today at this facility.
 Which happens to be the third in entire Asia-Pacific region and Japan.
 The Sriperumbudur facility is also our third plant to go on stream this year, with
two others in Brazil and Poland. This facility is very strategic for our operations in
India and it will help in reducing the lead time for delivery by 40 per cent – 50 per
cent. It will also help in reducing costs and we will pass on the benefits to the
customers, as there will be meaningful reduction in prices.
 Dell have put up the facility in just a short eight months and it is great day for
manufacturing and technology in India. New facility has come up over 1.1 lakh sq.
ft. of built up area. Dell have been allocated 50 acres and we have plenty of space
set up addition assembly lines.
 In addition, 100 acres have been allocated for suppliers and Dell intend to
establish an eco-system comprising many of our 90 vendors present globally.
 While Dell formally selected Chennai, which according to company officials got
the nod due to the presence of a sea port and an international airport.

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Types of Plant layouts in Dell Company:

The first decision is to determine the type of manufacturing operation that

Dell Computers want to accommodate. This depends on product volume and variety. At
one extreme, the factory will produce a wide variety of bespoke products in small

Volumes, each of which is different (this is called a ‘jobbing’ operation). At

the other extreme it will produce a continuous stream of identical products in large
volumes. Between the extremes, the factory might produce various sized batches of a
range of different products.

 BASIC LAYOUT TYPES

Once the type of operation has been selected (jobbing, batch or continuous)
the basic layout type needs to be selected. There are three basic types:

1. Process layout
2. Cell layout
3. Product layout

Jobbing operations (high variety/low volume) tend to adopt a process layout.

Batch operations (medium variety and volume) adopt either a cell or process layout.
Continuous operations (low variety/high volume) adopt a product layout.

1. Process layout

In process layout, similar manufacturing processes (cutting, drilling, wiring,

etc.) are located together to improve utilization. Different products may require different
processes so material flow patterns can be complex. An example is machining parts for
computers and aircraft engines. Some processes (such as heat treatment) need specialist
support (e.g. fume extraction), while other processes (e.g. machining centers) need
technical support from machine setters/operators. So the factory will be arranged with
heat treatment together in one location and machining centers in another. Different
products will follow different routes around the factory.

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2. Cell layout

In cell layout, the materials and information entering the operation are pre-
selected to move to one part of the operation (or cell) in which all the machines to process
these resources are located. After being processed in the cell, the part-finished products
may go on to another cell. In effect the cell layout brings some order to the complexity of
flow that characterizes process layout. An example is specialist computer component
manufacture. The processing and assembly of some types of computer components may
need a dedicated cell for manufacturing parts to the quality requirements of a particular
customer.

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3. Product layout

Product layout involves locating the machines and equipment so that each
product follows a pre-arranged route through a series of processes. The products flow
along a line of processes, which is clear, predictable and relatively easy to control. An
example is computer assembly, where almost all variants of the same model require the
same sequence of processes.

 Factors affecting plant layouts:

1) Policies of management
2) Plant location
3) Nature of the product
4) Volume of production
5) Availability of floor space
6) Repairs and maintenance of equipment and machines.

1. Policies of management :
It is important to keep in mind various managerial policies and plans before
deciding plant layout. Various managerial policies relate to future volume of
production and expansion, size of the plant, integration of production
processes; facilities to employees, sales and marketing policies and purchasing
policies etc. These policies and plans have positive impact in deciding plant
layout.

2. Plant location:
Location of a plant greatly influences the layout of the plant. Topography,
shape, climate conditions, and size of the site selected will influence the

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general arrangement of the layout and the flow of work in and out of the
building.

3. Nature of the product:

Nature of the commodity or article to be produced greatly affects the type of

layout to be adopted. In case of process industries, where the production is
carried in a sequence, product layout is suitable. For example, soap
manufacturing, sugar producing units and breweries apply product type of
layout. On the other hand in case of intermittent or assembly industries,
process type of layout best suited. For example, in case of industries
manufacturing cycles, typewriters, sewing machines and refrigerators etc.,
process layout method is best suited.

Production of heavy and bulky items need different layout as compared to

small and light items. Similarly products with complex and dangerous
operations would require isolation instead of integration of processes.

4. Volume of production :

Plant layout is generally determined by taking into consideration the quantum

of production to be produced. There are three systems of production viz,

(a) Job production:

Under this method peculiar, special or non- standardized products are
produced in accordance with the orders received from the customers. As each
product is non- standardized varying in size and nature, it requires separate
job for production. The machines and equipment’s are adjusted in such a
manner so as to suit the requirements of a particular job.

(b) Mass production:

This method involves a continuous production of standardized

products on large scale. Under this method, production remains continuous in
anticipation of future demand. Standardization is the basis of mass production.
Standardized products are produced under this method by using standardized
materials and equipment. There is a continuous or uninterrupted flow of
production obtained by arranging the machines in a proper sequence of
operations. Product layout is best suited for mass production units.

(c) Batch production:

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It is that form of production where identical products are produced in

batches on the basis of demand of customers or of expected demand for
products. This method is generally similar to job production except the quality
of production. Instead of making one single product as in case of job
production a batch or group of products is produced at one time, It should be
remembered here that one batch of products has no resemblance with the next
batch.

5. Availability of floor space:

Availability of floor space can be other decisive factor in adopting a particular

mode of layout. If there is a scarcity of space, product layout may be
undertaken. On the other hand more space may lead to the adoption of process
layout.

6. Repairs and maintenance of equipment and machines:

The plant layout should be designed in such a manner as to take proper care
with regard to repairs and maintenance of different types of machines and
equipment being used in the industry. The machines should not be installed so
closely that it may create problems of their maintenance and repairs.

 Significance Of Dell company:

The layout of a plant is quite important in view of the above definition but the
importance of a layout may greatly vary from industry to industry.

 There are design changes in the product.

 There is an expansion of the enterprise.

 There is proposed variation in the size of the departments.

 Some new product is to be added to the existing line.

 Some new department is to be added to the enterprise and there is reallocation

of the existing department.

 A new plant is to be set up.

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PRODUCT PORTFOLIO

The corporation markets specific brand names to different market segment.

Its Business/Corporate class represent brands where the company advertising
emphasizes long life-cycles, reliability, and serviceability. Such brands include:

 OptiPlex (office desktop computer systems)

 Dimension (home desktop computer systems)
 Vostro (office/small business desktop and notebook systems)
 n Series (desktop and notebook computers shipped with Linux or Free DOS
installed)
 Latitude (business-focused notebooks)
 Precision (workstation systems and high-performance "Mobile Workstation"
notebooks)
 PowerEdge (business servers)
 Power Vault (direct-attach and network-attached storage)
 Force10 (network switches)
 Power Connect (network switches)
 Dell Compellent (storage area networks)
 EqualLogic (Enterprise class iSCSI SANs)
 Dell EMR (Electronic medical records)

Dell's Home Office/Consumer class emphasizes value, performance, and expandability.

These brands include:

 Inspiron (budget desktop and notebook computers)

 XPS (high-end desktop and notebook computers)
 G Series (high/medium-performance gaming laptops)
 Alienware (high-performance gaming systems)
 Venue (Tablets Android / Windows)

Dell's Peripherals class includes USB key drives, LCD televisions, and printers; Dell's
monitors include LCD TVs, plasma TVs and projectors for HDTV and monitors. Dell
Ultrasharp is further a high-end brand of monitors.

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Dell service and support brands include the Dell Solution Station (extended domestic
support services, previously "Dell on Call"), Dell Support Center (extended support
services abroad), Dell Business Support (a commercial service-contract that provides an
industry-certified technician with a lower call-volume than in normal queues), Dell
Everdream Desktop Management ("Software as a Service" remote-desktop management,
originally a SaaS company founded by Elon Musk's cousin, Lyndon Rive, which Dell
bought in 2007), and Your Tech Team (a support-queue available to home users who
purchased their systems either through Dell's website or through Dell phone-centers).

Discontinued products and brands include Axim (PDA; discontinued April 9, 2007),
Dimension (home and small office desktop computers; discontinued July 2007), Dell
Digital Jukebox (MP3 player; discontinued August 2006), Dell Power App (application-
based servers), and Dell OptiPlex (desktop and tower computers previously supported
to run server and desktop operating systems).

PRODUCT DESIGN ANALYSIS OF ANY 3 PRODUCTS

1. Analysing Product Development within Dell Computers

The Product Development at the Dell Computer Corporation case can be summarized
with just its name, product development. The case focuses on development of Dell’s
personal computers, highlighting the area of the laptops.

The personal computer industry can be dated back to the 1830’s and Charles Babbage
with his invention of the first digital computer. However, with limitations of materials
and marketing his vision mainly stayed on what is called “the drawing board.” It was not
until the time period of World War II when a factory size computer was created by army
engineers, they were named Mark I and Colossus and they were 50 feet in size. Through
the 1960s and the 1970s only the government, mainly for defense, and big business had
the opportunity to use computers. As technology increased and microchips replaced the
wires and transistors, and financial availability became friendlier for consumers the
microcomputer revolution began. In the 1970s and 1980s Apple Computer was a
successful leader in a commercialized interface that was easy to use. Apple set the
technological pace for cramming as much new technology in to their products as possible.
IBM who was always trying to play catch up with Apple kicked off its traditional corporate
based computer line, with strong direct sales and service. Dell also released its own
branded personal computer in 1981. During the 1980s personal computer sales grew
from nothing to $40 billion dollars.

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It was in 1983 when Dell Computer was started by Michael Dell, who at this point in time
was a freshman at the University of Texas. He would upgrade IBM compatible computers
and go door to door selling them. The success was overwhelming for Dell, and he moved
off campus and dropped out of school, with the initial idea of returning back to school if
there was failure with the business. However, with $180,000 in sales during his first
month the idea of going back to school never entered his mind. The next step for Dell was
to buy and assemble his own brand name personal computers and get them directly to
the customers. This is where Dell’s principle to eliminate the middle man began. With this
premise in mind, high growth rates and attractive margins the building of the Dell name
began. Soon, Dell would start a 24-hour complaint hotline and they would offer a supply
of backup replacement equipment. By 1990, Dell computers had a distinctive line of its
own personal computers which won several trade magazines awards for service and
products.

By 1990 microcomputers accounted for 40% of all computers sold. And there was major
competition the brands helping to drive down the costs of manufacturing as well the cost
for the consumers. With the development and success of Dell and their direct-to-
consumer sales as well as their laid-back sales manner, imitators such as Gateway 2000
and CompuAdd began business. While focusing on the competition Dell expanded in to
the retail market attempting to gain more revenue. However, this was unsuccessful since
Dell overshot the target budget of sales, finding them in a cash crunch. It was then decided
on that that needed to do something different. They needed to stand out again.

♦ The Dell Business Model: -

The Dell business model is a simple one. “Eliminate the middle man”. Dell sold its
computers directly to customers with no retailers in the middle. Customers are able to
order a customized computer that fits their needs. Customers like universities, large
corporations, and government agencies all have different needs when it comes to
computers. Dell also kept this strategy with its small customers. People can order a
computer based on battery life, software applications, size, gaming, business orientated,

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and many other customizations. A great advantage with this business model is that Dell
can maintain a low inventory cost which saves the company lots of money.

♦ How it works: -

Dell achieves this business model by having a small lead time from when the computer
order comes in to when it actually gets to the customer. This is very important to Dell’s
success because the negative to directly selling to the customer is that the customer
cannot just walk into a Dell store or retailer and just buy the computer. Dell has a general
lead time of 3-5 days. This is the time is takes to build the computer and ship it. This
doesn’t include the couple of days for the shipping. The lead time can vary depending on
the type of customization. Sometimes it could be longer or shorter based on inventory
and the depth of customization. This is a major advantage for Dell to be able to ship
computer within days. Dell must plan, build, and test vigorously all within the 3-5 days.
This also allows Dell to maintain minimal inventory of hand. Unlike other computer
companies, Dell does not have to have ready-made computers on hand. If Dell experiences
a slow month in sales, then it doesn’t cost them as much as its competitors because Dell
is paying less for inventory overhead. This great success is a product of the new
structured operations that Dell has implemented starting with the product development
process.

Another advantage of Dell’s business model is the 24-hour customer support system that
it offers. Dell offers this option so that customers can call at any time to fix a problem with
one of Dell’s computers. Not only is the feature convenient for the customer, but it is also
very effective. In the Harvard case, it states that the customer support team was able to
solve problems themselves 91% of the time. That is an amazing statistic that reflects
Dell’s training program and due diligence on building and retaining customer
relationships.

♦ Dell Product Development Process: -

Original Product Development Strategy: -

Dell’s original product development process was very informal. The process was very
amateur and lacked structure. First, the process involved self-governed teams that had
no accountability or management. The teams were made up of engineers and developers
that had all the same ideas or similar strategies. Second, risks were not being assessed
properly in these teams. Since the teams all had similar viewpoints, the members were
collectively overlooking risks. The biggest problem with this process was that projects
were being passed onto the next stage of development when it should not have been. This
leads to fail projects which in return cost Dell lots of money and time which could mean

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the difference in such a competitive market. The margin of error for Dell was slim to none
during this time. When Dell had a major project fail which cost it several millions of
dollars, it went to management, engineers, and developers to see what their opinion was
on trying a new process. The management wanted a new process that had more structure.
The engineers and developers wanted to keep the old process mainly because they
thought that structure would stifle their creativity. After a long debate Dell decided to
change its product development process. Dell decided that its old process was similar to
a start-up company’s process and not an experienced company, like itself.

New Product Development Strategy

The new product development strategy was much more formal. The teams now were
called “core teams” which were made up of a mix of engineers and managers who had
different views and techniques. Dell wanted diversity in its groups to encourage
conversation and debate. Each group was also held responsible for a project from start to
finish and the team was governed by an outside manager. This made the teams
accountable for all their decisions and moves. The new process had six phases in which
each phase would last around 3 months. The total time for a project was approximately
18 months.

 Profile Phase- Teams would write a guide on the new product and its market that
it would be sold in
 Planning Phase- Teams create a detailed business case for the product which must
be viewed by a senior manager before it is passed onto the next phase
 Implementation Phase- Teams must design and test prototypes of the product and
orders must be made to the suppliers
 Qualification Phase- Teams build production prototypes and key customers give
feedback
 Launch Phase- The customer experience is tested, from opening the product to
setting up and using the product. Early adopters have their orders filled
 Acceptance Phase- Teams collect feedback and reports are compared to actual
results.

2. Battery design analysis: -

In 1991, Dell came out with its first line of the portable computer. And in 1992 Dell’s
portable computers accounted for 17% of sales. However, with the backlash of rumors
about unreliable screens, frequent power failures, being slower than most other portable
computers and broken hinges Dell could not compete even with their low prices.

Early 1993 brought about the cancelling of Dell’s new line of laptops. Under the guise that
they were too slow and not ready for sales. After recalling 17,000 notebooks, Mark

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Holliday, the portable division head of Dell, calls a meeting with all of the company
officers and forces a decision for a battery to be made. During this meeting it is decided
that there are three different battery decisions that Dell can go with. At the meeting it was
decided that the battery decision must be made at the end of Phase 1 (the profile phase)
of development and the three different choices are NiHi Nickel Metal Hydride, LiOn
Lithium Ion, and the last choice was to not make a choice really, it was to defer a choice.

The first choice for batteries was the NiHi otherwise known as the Nickel Metal Hydride.
The chart below shows what some of the disadvantages and advantages to the NiHi
battery. Overall, this battery would not have been a great choice for Dell, because it did
not solve the problem of lasting more than 3 hours like the consumers wanted and it
could not recharge to its full potential. The second choice was the LiOn also known as the
Lithium-Ion Battery this is was the battery that Dell ended up choosing and still uses
today. The third and final choice that dell had was to defer the choice of batteries, this
would give Sony time to develop the battery and get a good production line going. This
would also allow for Dell to be prepared for either battery design.

♦ Strategy and Finances: -

One of the major decisions for Dell was to choose the right battery power for its new
Laptop which was targeting the laptop market. A strategy is a set of actions that
coordinate the resources and commitments of a business to boost its performance.
Strategy selections should be guided by the firm’s situation rather than by historical
choices. Choosing a strategy that makes sense for a particular business is a decision which
may lead to superior performance. There are a few choices that steer corporate
strategies. Cost- Based Strategy requires a firm to be the lowest cost producer in the
market. This can be lowest cost labor to efficiency in operations. Spirit airline is an
example of this strategy. They are billed as the “ultra-low-cost carrier”. Spirit operates 28
Airbus planes and serves Eastern and Midwestern cities in the Unites states.

The second type of business strategy is Differentiation-Based. This model emphasizes the
uniqueness of a firm’s product or service. This model places emphasis for the consumer
to be convinced of the uniqueness and value of the product or service, whether real or
perceived. Dell looked to achieve this type of strategy.

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Dell focused on the need to connect with their customer, remove the middleman and
speak directly to their customers. Dell starts their innovation process with asking their
customers, “What would you really want this thing to do? Is there a different way to
accomplish that?” Then they meet with their suppliers and ask, “Can we do this in a
different way?” Then they try to come up with a totally different approach that exceeds
the original objectives.

The focus strategy selection of the battery power would impact the company in hopes of
gaining market share through satisfied customers. Michael Dell and his team needed to
relate to their environment, particularly to the customers and competitors. Choice of
battery technology was of vital importance to Dell. Many factors were evaluated;

1. Competition abounded due to imitation of Dell’s direct model

2. Dell felt a cash crunch due to their rapid expansion
3. Lack of senior management capable of guiding the firm
4. Lack of structure in Dell’s product development process, growing importance of
the portable computer market
5. Lack of senior management capable of guiding the firm toward maturity
6. Lack of structure in Dell’s product development process Growing importance of
portable computer industry
7. High rate of battery life in minds of consumers
8. Limited life of the NiHi battery
9. Uncertainty of the emerging LiOn battery technology

Dell was dependent upon the future success of the new “Laptitude” laptop product to
revive its share in the portable computer market. Dell was hoping to distinguish itself
with the introduction of the fresh LiOn battery technology. Unfortunately, the LiOn
technology was immature and risky but, Dell needed to make a decision of whether to
adopt this technology in the new product line or remain with current technology.
Ultimately, Dell needed a winner and needed to make the critical and right decision to
ensure an emergence back into the already competitive market along with a need for a
significant financial infusion.

Tenacious is a good word to describe Michael Dell and the company he created. And
tenacity and efficiency will be enough to keep Dell in the game. But to rise to the next level
and really boost its growth, it may have to find a little more heart.

Dell’s new product development process was put to the test immediately as the decision
was being made on how to develop a new laptop PC. Market research identified battery
life as the third most important feature to customers when purchasing a laptop. “One way
the company distinguishes itself from other suppliers of perform-alike PCs is by acting
quickly on the masses of data it gathers from customers.” Information is a valuable
competitive weapon,” says Tom Thomas, chief information systems officer.” Our whole
business system is geared to collect it”. Due to a chance meeting between Michael Dell
and Sony executives, Dell had the opportunity to have exclusive access to the new Lithium

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Ion (LiOn) battery technology which greatly extended battery life, and offered superior
overall performance to the standard Nickel Hydride (NiHi) technology. The new
technology would add value to Dell laptops as they sought to recapture market share. The
technology was not fully developed however, and there was a risk that it would not work.
Dell thus faced a critical decision about how to allocate resources for the development of
the laptop. Four options were identified by the product development team:

Option 1- commit to the old technology (NiHi)

Option 2 – commit to the new technology (LiOn)

Option 3a – over-design the computer so that it could accommodate either type of battery,
thus deferring the battery commitment until later

Option 3b – dual design (in parallel) of laptops that would use either NiHi or LiOn
technology

Option 1: Continue with a proven battery technology (NiHi):-

According to estimates made by project manager and product marketer, Henry McCarty,
Dell’s market share will be 2.5% if Dell stays with the status quo battery configuration of
NiHi. This equates to 825,000 units sold over the estimated 3-year product life. Given an
average gross margin per unit over life of product of $600 and expected $10 million
expected cost of development effort, the expected profit margin is $485 million. There is
100% confidence that the NiHi battery product will work.

Option 2: Go with the new battery technology (LiOn):-

The new Development Team, McCarty predicts Dell’s market share to jump to 3.0% or
990,000 units over 3 years, if LiOn technology works. If the LiOn technology fails, Dell’s
market share will fall to about 1.25% or 413,000 units over 3 years. This drop in market
share would be attributed to competitors already having an established product on the
market, while Dell undergoes substantial rework, 70% of original schedule, and 30% of
cost to switch back to NiHi. There is only a 60% confidence that the LiOn battery product
won’t fail. Given an average gross margin per unit over life of product of $600 and
expected $10 million expected cost of development, the expected profit margin is $444
million under option 2.

Option 3a: Dual Development – Defer commitment until qualification phase

review: -

Dual Development option has an estimated $10 million expected cost of development and
an additional fixed cost of $2.5 million because Dell would have to develop two
technologies at the same time. These are the actual project costs incurred which
incorporates the additional designers and engineers, material and tooling costs, etc.

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These costs do not include the product opportunities Dell would forego if they had to pull
people away from other projects. Given the new fixed costs and calculating a weighted
average of expected profit margins based on the success rate of the technology, option 3a
has an estimated profit margin of $542 million, the highest of the three options.

Option 3b: Over-design – Defer commitment until qualification phase review: -

Similarly with the dual development we need to calculate the cost of the over-design
strategy. The expected cost will be $10 million for development and additional variable
cost of 0.5% of revenue (2.0% of margin) since Dell would have to develop two
technologies in the same time. Due to the LiOn battery’s different dimensions and
properties, Dell would have to over-design the computer case, charging circuitry, and
battery management software to accommodate either battery technology. Given the new
variable costs and calculating a weighted average of expected profit margins based on the
success rate of the technology, option 3b has an estimated profit margin of $533 million.
This is the second highest of all options.

3. How Dell designs its master class laptops: -

Dell has showed off its tarnished reputation for faulty PCs and its cheesy "Dude, you're
getting a Dell" ads from the '90s to become a true juggernaut in the computing world. In
its XPS profile alone, Dell produces some of the industry's best designed laptops.

As we've previously seen, the Round Rock, Texas firm takes a great deal of time and care
into designing the impressive Dell XPS 13. But what exactly is the process of taking a
device from concept to prototyping to a final product?

"We do an incredible amount of research," Frank Azor, Dell GM of XPS and Alienware,
answers with a grin. We are sitting in the very board room where the company spent two
long years deliberating over its latest iteration, the magnificent Dell XPS 15.

Azor continues to explain that the XPS team looks at everything from market data,
customer research, customer reviews, new trends in the industry as well as media outlets'
reactions.

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♦ Better by every measure: -

These guiding principles help Dell carry a device from the hypothesis stage to working
concepts. All too often the final product will look nothing like the original idea.

Case and point, Azor explains this as he picks up the Dell XPS 15 and says, "the hypothesis
notebook had thin border bezels on it, but it was maybe a different color, different
dimensions, didn't taper off like this in terms of its industrial design [or] this carbon fiber
weave might have been darker or lighter."

Motioning to the rest of Dell's Parmer campus in Texas, Azor says this is where it goes
through all those iterations of the XPS 15. It all starts with deciding on the internal
components and creating industrial design models.

♦ Going with your gut: -

While Dell's product design is largely driven by research and consumer feedback, Dell
also employs its own 32 years of experience in building PCs.

"Most of the team has been doing this for a very long time," Azor points out. "Donnie
Oliphant runs the team with Steve Macon, and they've been doing this for now, like, over
20 years, and they are very well grounded in the where the market trends are."

"We do and incredible amount of research, and sometimes we listen to it," he admits. "But
honestly, sometimes we get in a room and argue the hell out of it, and we decide we're
not going to listen to the research."

Azor explains that the interesting thing about research is that it involves only feedback
given in the here and now. Meanwhile, the company is making decisions for products that
won't come out until 18 months later, when the world will be a very different place.

♦ Striking the perfect balance: -

According to Azor, the biggest hurdle that the XPS team faces is striking the perfect
balance with their devices. The XPS 15 and the XPS 13 were both not designed to be the
thinnest or lightest laptop in their respective classes. Instead, the XPS team wanted the
best balance between performance, form factor, screen quality and battery life.

"You look a product like this, and it's a nice 15-inch notebook, but there are so many
conversations that go into every aspect of the product," he says, holding the device up
again. This means that everything – from the components and screen resolution to the
color of the body and the tint of the black carbon fiber – is discussed in depth.

"Every fraction of a millimeter is argued, it's modeled, we create a bunch of samples and
we go make a decision on that," Azor expounded. "Every single factor is a huge deal, and

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it can sometimes be frustrating and painful, but it leads you to making ultimately
excellent products.

Other Relevant Information Related To Dell

Security:-

1. Self-signed root certificate:-

In November 2015 it emerged that several Dell computers had shipped with an identical
pre-installed root certificate known as "eDellRoot". This raised such security risks as
attackers impersonating HTTPS-protected websites such as Google and Bank of America
and malware being signed with the certificate to bypass Microsoft software filtering. Dell
apologized and offered a removal tool.

2. Dell Foundation Services:-

Also in November 2015, a researcher discovered that customers with diagnostic program
Dell Foundation Services could be digitally tracked using the unique service tag number
assigned to them by the program. This was possible even if a customer enabled private
browsing and deleted their browser cookies. Ars Technica recommended that Dell
customers uninstall the program until the issue was addressed.

Environmental record:-

Dell committed to reducing greenhouse gas emissions from its global activities by 40% by 2015,
with the 2008 fiscal year as the baseline year. It is listed in Green peace's Guide to Greener
Electronics that scores leading electronics manufacturers according to their policies on
sustainability, climate and energy and how green their products are. In November 2011, Dell
ranked 2nd out of 15 listed electronics makers (increasing its score to 5.1 from 4.9, which it
gained in the previous ranking from October 2010).

Dell was the first company to publicly state a timeline for the elimination of toxic polyvinyl
chloride (PVC) and brominated flame retardants (BFRs), which it planned to phase out by the end
of 2009. It revised this commitment and now aims to remove toxics by the end of 2011 but only
in its computing products. In March 2010, Greenpeace activists protested at Dell offices in

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Bangalore, Amsterdam and Copenhagen calling for Dell's founder and CEO Michael Dell to "drop
the toxics" and claiming that Dell's aspiration to be 'the greenest technology company on the
planet' was "hypocritical". Dell has launched its first products completely free of PVC and BFRs
with the G-Series monitors (G2210 and G2410) in 2009.

Green initiatives:-

Dell became the first company in the information technology industry to establish a
product-recycling goal (in 2004) and completed the implementation of its global
consumer recycling-program in 2006. On February 6, 2007, the National Recycling
Coalition awarded Dell its "Recycling Works" award for efforts to promote producer
responsibility. On July 19, 2007, Dell announced that it had exceeded targets in working
to achieve a multi-year goal of recovering 275 million pounds of computer equipment by
2009. The company reported the recovery of 78 million pounds (nearly 40,000 tons) of
IT equipment from customers in 2006, a 93-percent increase over 2005; and 12.4% of
the equipment Dell sold seven years earlier.

On June 5, 2007, Dell set a goal of becoming the greenest technology company on Earth
for the long term. The company launched a zero-carbon initiative that includes:

 reducing Dell's carbon intensity by 15 percent by 2012

 requiring primary suppliers to report carbon emissions data during quarterly
business reviews
 partnering with customers to build the "greenest PC on the planet"
 expanding the company's carbon-offsetting program, "Plant a Tree for Me"

Dell reports its environmental performance in an annual Corporate Social Responsibility

(CSR) Report that follows the Global Reporting Initiative (GRI) protocol. Dell's 2008 CSR
report ranked as "Application Level B" as "checked by GRI".

The company aims to reduce its external environmental impact through an energy-
efficient evolution of products, and also reduce its direct operational impact through
energy-efficiency programs.

Dell 2.0:-

Dell announced a change campaign called "Dell 2.0," reducing the number of employees
and diversifying the company's products. While chairman of the board after relinquishing

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his CEO position, Michael Dell still had significant input in the company during Rollins'
years as CEO. With the return of Michael Dell as CEO, the company saw immediate
changes in operations, the exodus of many senior vice-presidents and new personnel
brought in from outside the company. Michael Dell announced a number of initiatives and
plans (part of the "Dell 2.0" initiative) to improve the company's financial performance.
These include elimination of 2006 bonuses for employees with some discretionary
awards, reduction in the number of managers reporting directly to Michael Dell from 20
to 12, and reduction of "bureaucracy". Jim Schneider retired as CFO and was replaced by
Donald Carty, as the company came under an SEC probe for its accounting practices.

On April 23, 2008, Dell announced the closure of one of its biggest Canadian call-centers
in Kanata, Ontario, terminating approximately 1100 employees, with 500 of those
redundancies effective on the spot, and with the official closure of the center scheduled
for the summer. The call-center had opened in 2006 after the city of Ottawa won a bid to
host it. Less than a year later, Dell planned to double its workforce to nearly 3,000
workers add a new building. These plans were reversed, due to a high Canadian dollar
that made the Ottawa staff relatively expensive, and also as part of Dell's turnaround,
which involved moving these call-center jobs offshore to cut costs. The company had also
announced the shutdown of its Edmonton, Alberta office, losing 900 jobs. In total, Dell
announced the ending of about 8,800 jobs in 2007–2008 — 10% of its workforce.

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