Dell reinvents supply chain to meet new tech demands

LinkedIn +

More than 200 supply chain leaders took part in the 12th Logistics and Supply Chain Conference in London last month.

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 our 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 diversifying 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 built 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.

Companies attending the event included Aldi UK, Argos, B&Q, British Airways, Collect+, Eddie Stobart, Fortnum & Mason, Homebase, Jungheinrich, Mondelez International, Pets At Home, Sony Computer Entertainment, and Whitbread. It’s no use trying to make one size fit all in supply chain, Sue McGeorge, GB supply chain director at Diageo, told delegates in the opening session of the conference.

Diageo, of course, is responsible for some of the world’s most iconic brands including Guinness, Johnnie Walker, Gordon’s gin, Hennessy cognac, and Blossom Hill wines. To meet the needs of different product groups, the company had developed three different supply chain strategies. For high volume products such as Smirnoff vodka, it had an “Efficient” supply chain geared to producing and distributing large volumes.

For lower volume products, such as luxury brands, there was a “Responsive” supply chain which made use of finishing centres to tailor products to destination markets. The third supply chain was “Agile” – designed for innovative products where demand might be volatile. This approach to different product groups is part of Diageo’s supply chain strategy which also includes changing the organisational structure – going from a global organisation to an organisation where markets take responsibility for their indigenous supply chains.”

She also explained that the group had a strong focus on the core supply chain processes of Plan, Make, Move and Technical. And McGeorge highlighted the importance of innovation in the supply chain – innovation didn’t simply apply to products, but also to supply chain operations. She pointed to the development of Ruut beer which had gone from development to market in eight weeks.

Shop Direct’s director of inbound logistics, Paul Miller, explained why the online retailer was benefitting from its focus on end-to-end and lower tier supply chain visibility. Shop Direct’s brands include Littlewoods, Isme, K & Co and Woolworths. Miller said some 40 per cent of its orders now came via smart phones. He described the process of capturing data from suppliers in the far east, and ensuring the data was accurate so that the merchandising teams knew the exact status of incoming goods. And he highlighted benefits in terms of availability, security and efficiency.

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 out 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 their 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.


Test yourself against the best

It’s time to test yourself against the best supply chains in Europe. The European Supply Chain Excellence Awards 2014 are now open for entries. The Awards are the gold standard of supply chain achievement and winners include some of Europe’s leading companies such as Vodafone, BASF, Danone Baby Nutrition and GlaxoSmithKline. The winners of the 2014 Awards will be announced at a glittering ceremony at the London Hilton on Park Lane on Wednesday 5th November.

The European Supply Chain Excellence Awards are organised by Supply Chain Standard in association with PwC. In 2013, the overall winner was Jaguar Land Rover with Unipart Logistics, which fought off strong competition from Telefónica UK and Argos to take the title. The Individual Contribution award went to Dino Rocos, operations director at John Lewis Partnership, whose bold vision to centralise fulfilment – including the emerging new channels for online shopping – was ahead of its time.

And DHL Supply Chain scooped the 3PL of the year award in recognition of its work with Telefónica UK and Debenhams. There were a record number of entries last year – more than 120 companies took part.

What makes the European Supply Chain Excellence Awards special is the stringent process to analyse supply chain performance. Our judging team is made up of senior industry figures who bring years of experience to bear. Shortlisted companies are asked to make presentations to our judges and face detail questioning from panel members. It’s a uniquely exhaustive process that makes the Awards uniquely worth winning.


Award-winning supply chain strategies

75 million times a week people visit Tesco to do their shopping. Not just in the UK, of course, but all around the world. Tesco now has a presence in 12 markets including 131 stores in China, 446 in Poland, and 191 in Turkey. Managing such a diverse and complex supply chain is no small task and sharing best practice has become a vital issue. Delegates at the Logistics and Supply Chain conference heard how the retail giant has deployed a group of experts, known as the supply chain blueprint team, to improve operational efficiency.

The success of this approach made Tesco a winner in last year’s European Supply Chain Excellence Awards. The judges said: They have a clear vision which they were able to demonstrate was aligned to the corporate strategy. They used benchmarking internally and externally to good effect and were able to show improved KPIs in a global context. At the conference last week, Linda Kemp and Mike Moss, two of the leaders of the supply chain blueprint team, led delegates through a number of case studies.

The team, made up of young enthusiastic supply chain professionals, supports countries with coaching and training, with a focus on improving availability of products for customers, reducing working capital and reducing food waste. The first case study centred on rolling out an automatic supplier ordering system that has been in use in the UK. The first application was in Malaysia and it has now been rolled out in Hungary, the Czech Republic and Poland with more markets to follow. The second case study focused on store ordering – particularly complex as a result of the need for promotion forecasting and event planning.

Creating practical forecast models means collecting years worth of data. And the third case study focused on measuring performance to improve availability, reduce food waste and reduce working capital. Vodafone was another of the six award winners speaking at the conference. With operating companies in 30 countries across five continents, as well as 40 partner networks and 449 million customers, Vodafone wanted a way to leverage economies of scale and scope across multiple operating units by obtaining visibility and control across its distributed trading network.

Principal business process manager Jana Bodenstedt explained how the company worked with E2open to design and build a strategic solution for seamless information sharing, process management, and exception handling. It won the award for Supply Chain Operations. Costa Express won the Technology Award in the European Supply Chain Excellence Awards with a supply chain restructuring project that used focused on the implementation of three major supply chain changes – the new IT system; new logistics provider and new purchasing process in January 2013.

Chris Clowes, supply chain manager, explained how Costa had developed its strategy working with ToolsGroup, and using SO99+. Sales data was collected from each of its 3,000 machines every four minutes to identify trends and forecast future demand. It works out how demand is likely to vary and therefore how much safety stock to hold. SO99+ then creates a schedule for re-supplying stock to each site to maximise availability without overstocking.

GlaxoSmithKline cut lead times in its R&D lab supplies operation and more than doubled OTIF through a series of initiatives – and it went on to win not one, but two European Supply Chain Excellence Awards last year. Trevor Reay, GSK’s procurement director for R&D lab supplies, explained how the company implemented its transformation project to delegates. A total of 18 initiatives have resulted in a major increase in service levels in delivery and quality, cycle time reductions, waste reduction from consolidation and data visibility, and greatly reduced risk (Full story, page 18).

Originally appeared in Logistics Manager 05/2014

Share this story: