Dell reinvents supply chain to meet new tech demands

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Computer giant Dell has been reorganising its global supply chain to meet changing market requirements, Gearoid O’Donoghue,  director in Dell’s global procurement organisation, told delegates at the Logistics & Supply Chain Conference in London.

The company has built a $57 billion business with its innovative configure to order (CTO) strategy for personal computers.

However, O’Donoghue highlighted four key trends in the technology market that were impacting on the company’s strategy: mobility, cloud computing, big  data and security.

“These are causing us to reinvent out supply chain.”

He highlighted some of the issues by pointing to the growth of big data. By 2020, stored data would top 35 zettabytes (a zettabyte is one billion terabytes).  In  2009 the figure was half a zettabyte.

Dell has been responding to these trends by dversifying its product range. It now offers tablet computers.
And it has also become a solutions provider which has had a significant impact on its supply chain.  O’Donoghue pointed to the development of Dell Active Systems where the company is now setting up complex systems on customer premises.

To meet these diverse needs, Dell has developed three fulfilment models.

The first is for catalogue products that are held in stock. It calls these “Smart Selection” products and it aims to ship these on a next day basis.

The second model is also for catalogue products but these are build to order where goods are not held in stock.

The third model is for commercial customers and products that are built to order and will also require additional configuration.

O’Donoghue also explained how Dell was reconfiguring its global movements. He highlighted the use of the deferred air network which allows for consolidation to optimise routeings. Dell is also making increasing use of block trains from China to Europe. These have the advantage of taking 16 days as opposed to 35 or more for ocean while the cost is only marginally higher. And of course it is significantly cheaper than airfreight.
The big problem came in winter as delicate electronics would not stand the extremes of cold that the train experienced and consequently couldn’t use the rail option.

Dell is also looking the use of “warehouses on the water”, he said.

* Speakers in a session on “Predicting the future” highlighted the importance of accurate forecasting, but said companies also needed agility to deal with the unexpected.

David Sheldon, who is responsible for global supply chain development at Nestlé pointed that for any company agility is good thing to have. “If your only strategy is to have a better forecast, then you have got the wrong strategy.”

Calum Lewis, operations director at Lego, agreed, pointing out that companies had to have a supply chain that could deal with the degree of error in there forecasts.

Nevertheless,  it was also important to continue trying to hone down the degree of error in the forecast, he added.

Jonathan Jackman, vice-president EMEA at Logility,  focused on the need for segmentation of the supply chain to cater for needs of different products. It shouldn’t be one size fits all situation, he said.


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