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Dissertation Samples

Subject: Research Methods

Topic: An examination of the logistics employed by dell computers plc.


The 21 st century global economy is growing at a very fast pace and companies are facing ever increasing competition. Senior executives are constantly reviewing their corporate strategies to match with the environment in which their businesses are operating. The deregulation of the markets in most development countries has resulted in a number of new players challenging the more established companies for a share of the market. These companies are offering similar products at competitive prices and there is now a greater need to employ strategic nuances and other techniques to maintain a competitive advantage. Dell Computers is one of the major players in the computer manufacturing industry. It has created a good global brand and reputation for itself and has captured quite a large share of the market. The company utilises advanced logistics in their daily operations. The logistics employed by Dell have played a pivotal role in its rapid growth and will continue to do so in years to come. However, in order to keep up with rapid growth and technological innovation in the computer industry, Dell Computers will have to continually review and update their logistics in order to remain ahead of their rivals.

Key Words: Logistics, competitive advantage, strategic nuances


In a world recovering from corporate scandals, fraudulent financial reporting and economic decline, the investment community has now heightened its focus on corporate governance, integrity and accountability. Companies that have sound corporate governance structures and quality financial reporting usually enhance their status in the marketplace. Dell Computers, like all the other players in the industry is always looking at opportunities in the market place. Recent events global events have highlighted the critical role sound corporate strategies. The effectiveness of company wide logistics now plays a crucial in defining a company's position in the marketplace. Sound logistics play a key role in assisting the company deliver their core products. Dell Computers has a unique way of doing business. The company prides itself in delivering customised products at competitive prices direct to the consumer. The company's customer service department plays a major role as it is the first point of contact.


2:1 The Computer Manufacturing Industry

The computer and electronic product manufacturing industry produces computers, computer peripherals including printers, communications equipment, home electronic equipment and a wide array of commercial and military goods. This industry relies more on technological innovation rather than the workforce. This is why major players in this industry invest millions of dollars into their research and development divisions. Their recruitment strategies focus on the recruitment and retention of engineers and technicians who are usually closely involved in research projects. Marketing and sales departments also play a major role in promoting the manufactured products.

Electronic products contain many intermediate components that are purchased from other manufacturers. Companies producing intermediate components and finished goods regularly choose to locate near each other, because doing so allows companies to receive new products more quickly and lower their inventory costs. It also facilitates joint research and development projects which benefit both companies. As a result of having the skilled workforce that fosters product improvement, several regions in the United States of America have become centers of the electronics industry. The most prominent of these centers is the Silicon Valley, a concentration of integrated circuit, software, and computer firms in California 's Santa Clara Valley , near San Jose . However, there are several other centers of the industry throughout continental United States .

Globalisation has become a major factor in the electronics manufacturing industry, often making it difficult to distinguish between American and foreign companies. Many American companies are opening plants and development centers overseas and overseas companies are doing the same in the United States . Many products are being

designed in one country, manufactured in another, and assembled in a third. The American electronics industry tends to be focused on high-end products, such as computers and microchips. Even so, many components of final products manufactured in the U.S. are produced elsewhere and shipped to an American plant for final assembly.

Although some of the companies in this industry are very large, most are relatively small. The history of innovation in the industry explains the startup of many small firms. Some companies are involved in design or research and development (R&D), whereas others may simply manufacture components, such as computer chips, under contract for others. Often, an engineer or a physicist will have an innovative idea and set up a new company to develop the associated product. Once developed, the company licenses a production company to produce the product, which is then sold by the original company. Although electronic products can be quite sophisticated, production methods are generally similar, making it possible to manufacture many electronic products or components with a relatively small investment. Furthermore, investors often are willing to put their money behind new companies in this industry because of the history of large paybacks from some successful companies.

Products manufactured in this industry include computers and computer storage devices, such as DVD drives, and computer peripheral equipment, such as printers and scanners; communications equipment—wireless telephones and telephone switching equipment; consumer electronics, such as televisions and audio equipment; and military electronics—for example, radar, communications equipment, guidance for “smart” bombs, and electronic navigation equipment. The industry also includes

the manufacture of semiconductor products—better known as computer chips, or integrated circuits—which are key components of computers and many other electronic products. Two of the most significant types of computer chips are microprocessors, which are the central processing units of computers, and memory chips, which store information.

2.2 Industry Organisation

The computer and electronic product manufacturing industry has many segments. Companies in the industry are generally classified by what they sell.

Computer and peripheral manufacturing is made up of a wide variety of companies that make computers and computer-related products. A relatively large number of companies build computers for home or business use. Most computers are built by a small number of well-known brands, but there are also many small companies that sell their products locally or on the Internet. Because computers are very complex products, they are made up of a wide range of components, such as motherboards, central processing units, graphics cards, hard disk drives, and power supplies. Although some computer manufacturers build some of these products themselves, many of these products are purchased from other companies and assembled as part of the computer. As a result, many finished computers are simply the combination of a number of other products.

Other firms in this industry segment produce computer-related products, known as peripheral equipment. These products include keyboards, mice, printers and scanners. Other peripherals are physically installed in the computer's case, and are generally

known as internal peripherals. These include hard disk drives, networking cards, modems, sound cards, and disk drives. Many internal peripherals are prepackaged as part of a computer, although almost all of them can be installed by a technician or experienced computer owner.

The c ommunications equipment manufacturing segment of the industry produces a number of devices that simplify communication between individuals or groups. It includes telephones and cellular telephones, as well as equipment used by television and radio stations to transmit information. It should be noted that this does not include computer-related peripherals—such as networking cards or modems—which allow computers to connect to other computers.

Audio and video equipment manufacturing is a relatively small industry in the United States and includes companies who produce consumer electronics. These include televisions, stereo receivers, compact disc and DVD players, and other such devices. While these devices are widespread in the United States , most of them are produced overseas, making employment in this industry relatively small.

Semiconductor and other electronic component manufacturers produce a wide variety of integrated circuits, or computer microchips, which power a wide range of electronic products. They also produce a number of other electronic components, such as resistors and capacitors, as well as printed circuit boards. Unlike most of the companies in this industry, these manufacturers start from basic materials such as silicon and copper and produce intermediate products that are only rarely sold directly to consumers. The exceptions to this rule include companies which produce central processing units and memory chips, although even these products are more likely to be pre-installed in a new computer.

Fabrication plants that build semiconductor products, known as “fabs”, are fitted with dust-free zones called “clean rooms”. Microchip circuitry is so small and complex that it can be ruined by microscopic particles floating in the air, so semiconductor products must be built by computer-controlled machines in an environment with very little human intervention. Most production workers in this industry segment are actually more involved in evaluating manufacturing methods and testing completed chips. Semiconductor manufacturers also spend an inordinate amount of money on research and development—more than most companies in the entire computer and electronic product manufacturing industry.

The navigational, measuring, electro medical, and control instruments manufacturing segment is a diverse group of companies that produce products mainly for industrial, military and health care use. It also includes some consumer products, such as global positioning system (GPS) devices, as well as clocks and watches. This segment is one of the largest in the industry, mainly because the Federal Government puts so much money into defense and health care.

Many of the companies in this segment work as government contractors, producing equipment for military purposes. In some cases, this technology has been adapted for consumer use. For example, GPS technology was originally designed for use by the U.S. Navy, but has been developed into a navigation system that individuals can use in their cars. There is also a growing health care component of this industry segment. Extensive government funding for research in medical technology has led to a number of important innovations that are being used worldwide in medical care.

Manufacturing and reproducing magnetic and optical media is another segment of this industry. Firms in this segment produce blank compact discs, DVDs, and audio

and video tape. They produce some of this blank media for sale to consumers, but most of it they use to duplicate on a mass scale audio recordings, videos and movies, software, and other media for distribution to consumers and business users. Establishments in this segment are generally either subsidiaries of companies that create the software, movies, or recordings or are independent firms licensed by such companies as distributors.

The rapid pace of innovation in electronics technology makes for a constant demand for newer and faster products and applications. This demand puts a greater emphasis on R&D than is typical in most manufacturing operations. Being the first firm to market a new or better product can mean success for both the product and the firm. Even for many relatively commonplace items, R&D continues to result in better, cheaper products with more desirable features. For example, a company that develops a new kind of computer chip to be used in many brands of computers can earn millions of dollars in sales until a competitor is able to improve on that design. Many employees, therefore, are research scientists, engineers, and technicians whose job it is to continually develop and improve products.

The product design process includes not only the initial design, but also development work, which ensures that the product functions properly and can be manufactured as inexpensively as possible. When a product is manufactured, the components are assembled, usually by soldering them to a printed circuit board by means of automated equipment. Hand assembly of small parts requires both good eyesight and coordination, but because of the cost and precision involved, assembly and packaging are becoming highly automated.

2.3 Dell's Background

Dell is one of the largest successful computer manufacturing companies in the world with annual revenues running into billions of dollars. The company has a global presence in the Americas , Asia Pacific, Europe, Middle East and Africa . Dell employs more than 50,000 people around the world. It has a unique business model which involves the design, development, manufacturing, and marketing, selling and supporting a wide range of computer products which are customized to the buyer's requirements. Dell is headquartered in Round Rock, Texas . Dell does not deal with retailers and middlemen as it sells direct to customers. The company is now a market leader in the computer manufacturing industry and will need to do more in order to maintain a competitive advantage.

Dell Computers was right on the edge of declaring bankruptcy in 1985, until they developed Demand Management, a new kind of marketing strategy, which totally reversed the direction of the company. The whole idea in a nutshell was “sell what you have” instead of “sell what you plan”. Previously, supply on hand was matched to incoming demand. That is, new parts were ordered to fulfil the ordered units, regardless of what was already in inventory. Dell had been keeping extremely large inventories in order to build custom machines on demand. Predicting demand two months ahead in order to have the right parts on hand was a ticklish business. Wrong guesses were extremely costly. Reverse the pattern, and find a way to get people to buy systems using what is in stock, and you make more money. So Dell decided to change its marketing and applied price cuts and incentive plans to get encourage people to buy what was in stock. This eliminated the need for keeping large inventories

The story of how Dell did this is the basis for its current logistics patterns and is echoes throughout the industry of supply chain management in different ways at other large multinational global companies. The idea was to introduce more flexibility into the system, so Dell based its choice of about 100 suppliers upon quality, service and flexibility, rather than on price, and worked out deals with those suppliers that met their quality standards consistently. This allowed Dell to adjust quickly to changing market demands, and the higher quality resulted in fewer returns. Dell directly influenced the market, instead of being influenced by it.

Dell's strategy had been built upon direct marketing from the start, and to this day, you can only buy directly from the company. Dell customers want the latest and are early adopters of technology. By cultivating regular feedback from customers, Dell was able to adjust and the product life cycle was trimmed to nine months. Dell used incentives and pricing strategies to minimize the drop in sales between different models of its products.

Dell's whole strategy became a combination of building products to order, manipulating the market to sell what could be made with current inventory and buying components in line with demand. Dell executives moved their forecasting efforts to high end products with a longer shelf life, closing the gap. They reached a 70% accuracy rate by using constant customer feedback. The resulting drop in inventory improved the company's profitability. Dell won corporate business with its reputation for delivering quality products on time. The company took advantage of each drop in component prices as they had not paid the higher price to keep inventories. The resulting float created by selling via credit card and paying its suppliers on a schedule was another profitable advantage. From an on line interview with Dell's senior manager of Internet marketing, Deborah de Freitas said., “Dell repeatedly re-evaluates its online ad strategy, because 'what works one day might not work three weeks from now” ( Dell's Business Strategies Part 2, 2007) This daring change in strategy has allowed Dell to capture a large share of the North American market. Flexibility has been the key component to the turnaround.

2.4 Financial Highlights

Growth Rates


1 Year

3 Years

5 Years

Sales %








Dividend %




Revenue [in Millions of Dollars ]





































Source: Reuters Stocks

The company's revenues continue to grow year on year and are predicted to grow even further by 13 percent in 2008. In its preliminary financial results for the third quarter of 2007 the company reported total revenues of $14.4 billion and an operating income of $824 million. It is important to note that the company is under investigation by the Securities and Exchange Commission for financial and accounting reporting matters.

3: Dell Customer Service Department

Since Dell deals directly with customers, the company's customer service department plays a very important role in ensuring that customers' needs are met and complaints resolved quickly. Dell has established personal relationships with corporate and institutional customers. Internet and telephone purchases have also become very popular with Dell's customers. Internet sales alone currently run into millions of dollars. Using the latest technology, Dell customer service is at the forefront of maintaining a competitive advantage over the company's rivals. To maintain this competitive advantage in the long run requires a robust corporate strategy which will enable the department to respond to the ever changing economic environment.

3:1 Environmental scan and economic analysis

Environmental scanning is the process of identifying and evaluating external drivers of change affecting a business entity at macro and micro level. It is important to distinguish between the two forms of environmental scanning. According to Nellis and Parker, macro environmental analysis is concerned with identifying external trends relating to political, economic, social and technological developments that are likely to impact on the firm. On the other hand, micro environmental analysis is concerned with the firm's positioning within its own industry and Porter's five forces is the best management tool to deal with this evaluation.

3.1.1. Analysis of forces and trends

Michael Porter's five forces model as shown below is the best management tool available to analyze the forces and trends affecting Dell customer service department.

Today's consumers are becoming more sophisticated and demanding. They possess a lot of power when it comes to choosing products and what price to pay for it. The award winning Dell customer service department has been providing a good service before and after sales over the years. The department continues to offer powerful machines to consumers at very competitive prices. This explains why they control a large share of the market. Over the years, the company has utilized the knowledge it gained from customers to improve its service. However, this seems to be changing as

more and more customers continue to complain of poor service. The complains range from being sold faulty products, refusing to honour manufacturers warranty, selling defective modems and failing to deliver on time. A lot of these complaints have been lodged with consumer watchdogs and are in the public domain. This is testimony to how powerful consumers in the 21 st century have become. The company is losing a small percentage of the market as a result of the poor service. However, it is important to note that the Dell customer service unit is a large business unit employing thousands of people, and it can be difficult to manage all these employees. Consumers will continue bargaining for good prices and services and it's equally important for Dell to continuously upgrade staff skills through training and using the latest technology. In 2006, the company invested $150 million to improve customer experience.

The computer manufacturing industry is now flooded with a lot of copy cat companies offering substitute products at even cheaper prices. Consumers are increasingly turning to the internet to look for substitute products. However, the threat of new entrants and substitute products is negligible for Dell since the company has built a good reputation and has a good brand which it must jealously protect.

Dell uses Intel chips for its computers. Consumers are aware of this fact. Intel and Dell cannot be separated. This gives Intel the leverage to set whatever prices they want. Dell is in a very weak position when it comes to bargaining with its major supplier. The company cannot switch from Intel to another supplier easily. Doing so would result in loss of business as customers would take their money elsewhere.

Rivalry among computer manufacturing companies is moderate. Dell's competitors include NCR and Hewlett Packard. The company occupies a comfortable sport amongst computer hardware companies in terms of sales.

Computer hardware companies in the United States







Market Cap


International Business Machines Corp.






Hewlett-Packard Co.






Dell Inc.






Cisco Systems, Inc.






Xerox Corp.






Sun Microsystems Inc.






Seagate Technology






Apple Inc.






NCR Corp.






EMC Corporation






Most of the above companies have a recognized brand and command a certain degree of customer loyalty. Dell's business model is completely different from most of the above companies and this gives it a competitive advantage. The company's utilizes product differentiation, which is made possible by constant innovation and aggressive marketing. There is strong evidence of price competition and Dell continues to offer competitive prices to consumers.

3.1.2. Macroeconomic forecast

Macroeconomic indicators that are likely to affect Dell customer service department in the future include interest rates and market forces. Economic growth means more people will be able to purchase Dell's computers and massive unemployment and inflation impacts negatively on the company. Dell operates in many different countries across the globe. The economies of most of these countries are ever changing. Currency fluctuations will continue to affect Dell in the future. Dell

outsourcers its technical support and there is evidence that this is not cost effective. Many customers are disgruntled with this process and the company is losing customers. Dell customer service department is spread across the globe. The company has outsourced some of its call centres to India to save money. Customers don't like talking to people in far away countries who are in most cases unable to fully understand the customer's needs. This practice has also led to thousands of Americans losing their jobs. Dell customer service department argues that outsourcing gives them leverage in case of natural disasters or other major unforeseen disruptions. Wages paid to remote location employees are very low and this has a significant impact on reducing costs and increasing profitability. Analysts predict a ten percent growth rate in the computer industry for the next five years. This issue must be fully incorporated into Dells future strategic planning.

3.1.3 Non economic factors

Non economic factors that could potentially affect Dell can be best evaluated using a PEST analysis. Political factors affecting Dell's operations include government regulations and political instability. A number of countries including the European Union have in place laws that restrict the operations of foreign companies. This is meant to protect the local industry. Dell has to comply with these laws and regulations. Dell can enter some of these markets by forming alliances and partnerships with local companies.

Social development in the countries in which Dell operates has a direct impact on the volume of sales the company generates. Computer sales are high in countries where the level of education is high and demand is lower in countries with less educated

citizens. With the threat of global warming, there is a lot of concern on environmental issues. Dell has to come up with a strategy on reducing environmental damage.

3.2 Dell's Competitive Analysis

Dell's has a low cost policy which allows it to charge very competitive prices and simultaneously sustain profitability. The company's cost structure is among the lowest in the industry and this enables the company to achieve its objectives. Dell's prices are the lowest on the market and this has allowed the company to be a leading seller of computer hardware for many years. The company sells PCs for price ranging from $290 upwards. Other players in the industry cannot afford to match these prices as they have a different business model and cost structures. However, the company is now moving away from this pricing structure due to fierce competition from other companies. Companies like Gateway are now offering quality products at very competitive prices. Consumers now want computers that can do what they want and Dell has to change the way it does business.

In July 2006 Dell announced plans to simplify their pricing structure and reduce the amount of mail in rebates for their corporate and individual consumers. Promotions on most of their product lines are gradually being reduced by at least 80%. This rethinking came as a result of a slump in Dell's shares amid fierce competition from companies like Hewlett-Packard. Rivals in the computer industry are now more aggressive in capturing the untapped market enjoyed by Dell for so many years. Analysts are also beginning to question the company's future growth prospects.

3.3 Dell's supply chain management system

This shift in business model entailed a whole new method of supply chain management, in essence, making the suppliers and the shippers partners in a new paradigm. As a result of the cooperation Dell was able to broker among its suppliers, Dell had an unprecedented cycle of growth and then moved in a totally new direction. Dell suppliers made less money on each component, but the massive sales made the smaller profit per unit into a much larger overall total. Dell began by assembling and selling the designs of other companies. However, Dell was able to induce its staff to develop new skills to fit the changing needs. Marketing managers and buyers learned to predict short term needs up to ninety days and marketing personnel developed a whole new system or marketing, including a dynamic web strategy which matches inventory to buyers, and also harvests customer feedback in real time.

Dell marketing professionals created an e-commerce model and new stakeholders were developed. These were ISP and marketing affiliates with links all over the web. Web marketing entails lower cost, higher response and dynamic feedback which delivers information on trends immediately as people shop. Dell uses partners or affiliates and pays only for the actual traffic to market its products on a pay per click-through basis. Advertising links are moved from low performing sites to higher performing sites on a moment's notice. This new stakeholder group: the affiliates, works hard to optimize the traffic to Dell's links to increase their own profit. These forms of advertising are a huge stretch from the old pay in advance of sales methods. The cost for advertising has been greatly decreased as Dell has made real stakeholders out of its advertising affiliates.

While the turnaround for Dell has involved many different aspects, none is more important than the sweeping changes the company made in supply chain management. None of the rest of the strategy would work with the old methods. It is this that we wish to examine closely to see how it was changed and what effects each aspect of those changes has had on the company.

Dell's own dynamic website includes a tremendous amount of information and self help for customers, and even offers driver downloads and updates. Dell has cultivated a committed staff which developed their skills to suit the company's needs, and they have made a highly attractive and functional website. Hyperlinks take customers to more information and, more often than not, to a purchase link quite quickly. Dell has streamlined customer support; extending the same software that its' customer support staff uses to the website where customers can access it themselves. This is almost a direct connection between the customer and the supply chain. As orders are completed and payment is made, the parts required are deducted from current inventory and any new parts are added to the day's orders immediately. The supplier has real time access to the needs of the retailer, and can ready the shipment accordingly.

Dell moved into doing extensive R&D itself and has created its own branded products preloaded with branded software. A new product area includes custom servers made in Dell's three assembly factories using manufacturing teams, called "cells", to individually custom build each new server to customer specifications. Dell's supply chain is totally automated, and the parts used are added to the real time orders as they are used. Dell staff even loads custom software packages according to the customer's needs before shipment. This allows the server to be shipped to a final destination withsoftware loaded and preconfigured to MIS department specifications. Dell calls this its “DELL Plus Service.” This is a large part of Dell's new business and is totally dependent upon a flexible supply chain. The last major change Dell made was to partner with major outlets to sell its products at their direct prices, thus giving their customers the choice of on line purchase or purchasing in a local retail outlet. Dell did this without opening one single retail outlet.

3.3.1 Dell's current situation

Dell's current mission is “to be the best computer company in the world at delivering the best customer experience in markets we serve” This mission statement shows Dell's strategy and goals to meet customer demands and expectations. Dell is able to achieve these objectives through its strong cash position. The company's accounts receivable are very minimal because customers have to pay first before a computer is made for them. Dell continues to be a stronger company than the rest of its rivals. The company keeps very little inventory due to its direct sales model.

The computer manufacturing industry continues to grow at a fast pace and it faces a lot of challenges in the future. The United States of America is by far the largest market for this industry. Most companies in this industry have their corporate headquarters in the States. There are millions of computer users in America compared to other parts of the world. In recent years, the industry has been plagued by poor financial results resulting in huge job losses. The market for computer hardware has also been shrinking resulting in less demand for computer products. There a number of current opportunities and issues that the industry should incorporate into their strategic plans.

The market for computers in the USA and most developed countries is now saturated. There is a large untapped market for computers in less developed countries in sub-Saharan Africa, Latin America and some Asian countries. Computer manufacturing must seriously consider coming up with innovative products for this market at affordable prices.

As the technology industry evolves more funds should be channelled towards research and development. There are plenty of opportunities for developing even better products at competitive prices in various regions of the world. There are opportunities for collaborations in research and development and this would significantly lower research and development costs and increase shareholder value. Opportunities for mergers and acquisitions must be fully utilized. If the players in this industry are to survive in the future, forming alliances will bring together a pool of important resources.

Relocating most of their operations to countries like India that pay lower wages but have a pool of highly skilled workers is an opportunity that should be explored by these companies. A lot of them have already done that but more needs to be done.

3.3.2 Strengths and weaknesses

Dell's strengths lie in its direct sales model of business. Its strong cash position allows the company to continuously provide innovative and quality products. The world class customer service and a wide range of products is a plus for the company. The company has a global brand which is easily recognizable and is experiencing very fast growth. The company has managed to reduce costs over the years due to its policy of not building up inventory. Dell has a long term relationship with large multinationals and government departments.

Dell's weaknesses include highly depending on Intel and others for components. The customer service is now getting poor and steps have to be taken to restore consumer confidence. The bargaining power of buyers needs to be curtailed.

3.3.3 Strategic long term objectives

Michael Porter advises of two major competitive strategies namely, low cost leadership and differentiation. In the long run, Dell must continue to pursue a low cost strategy and occupy the number one sport in being the cost leader in the industry. The company must also use differentiation strategy in order to be unique in this industry.

Dell must embark on a massive marketing campaign and reposition the company on the global stage. They should explore untapped market opportunities while simultaneously protecting their existing market.

The customer service department of Dell needs a complete revamp. Employees must take ownership of the job they do and always remember that the customer is king. Too many customer complaints are tarnishing the prestigious Dell brand. If outsourcing is causing some of these problems, then the company needs to redefine some of their strategic objectives. The company should improve its customer relationship management system.

Dell has been under a lot of pressure in 2006 and so far the 2007 financial results are looking better than the previous year. Dell has to re-evaluate its business model in order to remain competitive. The company needs to introduce an indirect sales model as the current one cannot sustain them into the future.

Dell must try to explore new areas of business such as software engineering rather than relying on external suppliers. There is large pool of skilled workers in the Asian subcontinent who can be employed to do this at very low wages.

3.3.4 Re-evaluating Dell's mission and vision statements

Dell's mission statement is to create loyal customers by providing a superior experience at a great value. Their mission statement is the engine that drives the business. The company is committed to strong and direct business rapport through provision of the most up to date products. According to their website, the company has a strong passion for being a winner through operational excellence, superior customer experience, being a global leader and creating shareholder value.

The customer experience is no longer as satisfactory as it used to be and is being surpassed by that of rival companies. Employees are not as committed as they should be. Some of them lack the necessary skills to execute their jobs to their full potential. The company is losing a share of the market to other companies.

The company's mission statement looks good on paper. However, the contents of the vision and mission statements need to be put into practice. A team of senior executives should be tasked with making sure that all employees are aware of the mission statement. If necessary, they should undergo more training. Outsourcing must be reduced to a minimum and continue to establish the Dell global brand recognition. Dell's mission must include the company awareness and role in environmental issues. This is currently a hot topic globally and any serious minded executives must make sure that their organizations are playing a part in protecting the environment.

3.3.5 Dell's marketing strategy

Dell uses a variety of medium to reach out to the global consumer market. The company advertises in a number of newspapers, televisions, the internet, magazines and catalogs. In order to continually lure consumers, Dell usually has special offers which include lower prices, bonus products and free shipping. However, cutting prices has had a negative on the company's profitability and in order to offset this, Dell has responded by moving some of its call centres to India . Most of the company products are sold over the telephone and through the internet. Dell also has thousands of kiosks in shopping malls across the United States , Canada , Australia , Singapore and Hong Kong . The company also has a large store in Dallas , Texas and all the items in the kiosks and the store are for demonstration only. If customers want to buy something, they have to place orders through agents. Dell has entered into a strategic partnership with Dixon 's Stores Group, a major electronics retailer in the United Kingdom . From January 2008, the company will be selling their products in Curries and PC World stores.

3.4 Corporate social responsibility

3.4.1 Defining Corporate Social Responsibility

Corporate social responsibility is seen as the private sector's way of integrating the economic, social and environmental imperatives of their activities. It also involves creating innovative and proactive solutions to societal and environmental challenges as well as collaborating with both internal and external stakeholders to improve performance. According to the World Business Council for Sustainable Development, “ Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

3.4.2 Dell's corporate social responsibility

Dell is the first company in the information technology industry to establish a product recycling goal.With the completion of its global consumer recycling program in 2006, the company was awarded with ‘Recycling Award' by the National Recycling Coalition for its efforts on reducing environment damage. Dell is an active particpant in programmes that are geared towards reducing carbon emmissions. The company has set goals to reduce carbon intensity by fifteen percent by the year 2012 and its primary suppliers are to report carbon emmissions data during their quarterly business meetings.

3.4.3 Problems encountered by Dell

Like many large conglomerates, Dell has encountered numerous problems during the course of their business operations. In 2005, there were claims that Dell had used unfair practices to obtain huge incentives when it began the construction of a facility in North Carolina and this resulted in a lawsuit which was later dismissed by the law courts. In the same year, the company filed a lawsuit against a French company for engaging in ‘parasitism and unfair competition for using Dell's name on his website.

Two years later, some shareholders filed a lawsuit accusing Dell and Intel of conspiring and accusing senior executives of options backdating and of biased financial reports. In the same year, some disgruntled workers sued Dell for unfair labour practices and the lawsuit later became a class action. Some consumers filed a lawsuit in March 2007 accusing Dell of false and misleading advertising. In November 2006, the Securities and Exchange Commission launched an investigation into fraudulent financial reporting which resulted in the company adjusting its earnings by between fifty and one hundred and fifty million dollars.


3.5.1 Supply chain management

Supply chain management systems are responsible for the oversight of materials, information and finances as they move in a process from supplier to manufacturer, to wholesaler, to retailer and finally to the consumer. This involves coordinating and integrating these and the ultimate goal is the reduction of inventory. It is often difficult to differentiate between procurement, purchasing, outsourcing, sourcing, supply and sustainable supply chain management. (Quayle, 2006 pp.1). According to Dooley (1995), purchasing and supply management has emerged as an important strategic area of management decision making while Porter (1987), sees value chain as fundamental to the performance of an organisation. Deming (1988) looked at the importance of supply chain as it relates to total quality management [TQM]. There is a lot of literature written by management scientists and practitioners on the importance and value of supply chain management. The growing significance of purchasing and supply cannot be overemphasised. (Crosby, 1979; Schonberger, 1986; Womack et al, 1991; Lamming, 1993).

The critical success factors in managing a supply chain management system are strategy and deployment of technology (Gunasekaran and Ngai, 2003), and doing the right thing is equally important (Sloane, 2004). Many organisations are now including supply chain and the supply chain manager as key ingredients in meeting the challenges of turbulent times.

3.5.2 Integrated Logistic Support

According to Quayle (2006 pp.138), integrated logistic support is a structures and coordinated approach to support planning that will produce the most technically efficient and cost effective support solution. The main objectives of an integrated logistic support system are to reduce support costs, ensure support influences design and ensure the timely development and acquisition of resources.

Coordinated logistic support involves combining everyone's efforts into one coordinated and planned structure. Doran, 2001; Sum, Teo & Ng 2001 advise that logistics are key to many companies' success. Logistics are interrelated with other business functions. There is a close relationship between the marketing function and the physical distribution sub function of logistics, and the relationship between the manufacturing function and the physical procurement and materials management sub function of logistics.

3.5.3 Globalisation of the supply chain

Globalization of the supply chain makes its management still more difficult. Due to the effects of economies of scale, it's often efficient for some processes to concentrate in a single country. The division of labour in the supply chain becomes global and complex. After that, the pressure increases to reduce logistics costs. The supply chain must then try to achieve efficient and effective flow and storage of the parts and products from the point of origin to the consumer. (Chan, C.K., 2005 pp. 80).

Multinationals that have developed a global network commonly see the world as a chessboard on which they are conducting a wide-range of campaigns. The chessboard's squares are nation-states, and an enterprise can consider entering any one of them by a number of different means? by trading with dependent firms in the country, by developing alliances with enterprises already operating in the country, or establishing a subsidiary of its own in the country. (Vernon, 1988, pp.22).

4.1 Current trends in supply chain management systems

Supply chain management is now taking center stage in many public and private companies in throughout the world. This is mainly due to the growing number of companies forming alliances and increased competition and the quest to maintain a competitive advantage. New players are always coming onto the market threatening to overtake existing established businesses. In previous years, supply chain management was being used in a number of companies but was not given the importance that it deserves. However, it is interesting to note that there has been a lot of technological innovations which have resulted in advanced logistics in a number of companies greatly improving output and profitability. Many other smaller companies are in the process of automating their supply chain management systems and the more established organizations are always reviewing their systems with a view to improving them.

4.2 Future of supply chain management systems

Supply chain management systems have and will continue to determine the success of many companies in the future. Companies which make use of advanced technological will remain competitive and far ahead of many other business organizations. However, companies must be wary of the challenges and opportunities for supply management in the years ahead. It is important to keep investing in research and development in order to remain competitive. It is important to get the right goods at the right time and at the right price.

4.3 The Dell supply chain database

The Dell supply chain management (SCM) database systems handle key business functions that support worldwide manufacturing operations, including the efficient Dell inventory management model and fast, direct delivery of computers, accessories, parts, and supplies. These systems must be designed for reliability and cost-effective scalability: a failure can cost thousands of dollars per minute in factory downtime, and the SCM systems must be able to handle increasing workloads as the company grows.

When Dell was a smaller company than it is now, before the development of powerful, industry-standard servers of the type that Dell manufactures, the Dell IT group ran its SCM database applications on large, expensive, proprietary servers based on the UNIX OS. However, as the company grew servers lacking the necessary capacity had to be replaced with even larger, more powerful servers. And because the servers were not redundant, updating a single server often required shutting down entire systems.

The Dell SCM system must handle an enormous number of transactions and pieces of information, and includes multiple core components necessary to keep operations running smoothly: The configuration management component manages over 1 million Dell part numbers per year across approximately 200 product families, and over 2 million bills of materials (BOMs) per year. BOMs listing component part numbers are created for manufacturing facilities to build assemblies and subassemblies

for Dell products. The procurement component manages nearly 8 million purchase order lines per year from more than 5,000 suppliers worldwide. To streamline the procurement process, Dell uses an automated application that includes managed the production database on Oracle Database.


Logistics and supply chain management have been a dominant issue in developed market economies for more than a decade particularly in the USA , Europe Japan and a number of other Asian countries. It took some time for emerging economies to take the concept of supply chain management seriously. However, with globalization and the competition to win investors and a share of the global market a lot of time, effort and money are now being spent on automating supply chain management systems.

In recent years, a lot of research covering the various logistics and supply chain frameworks has been carried out. A lot of business schools particularly in Europe and the USA have taken the lead in these research projects. The Institute of Supply Management has in the past called for research proposals in logistics and supply chain management. There is an abundance of literature on supply chain management particularly in the developed world.

However, it is particularly disturbing to note that very little research on supply chain in Sub-Saharan Africa and other developing countries has been done. Universities and the academia in sub-Saharan Africa have not done a good job of researching on this important subject. This may be attributed to lack of resources and placing less importance on logistics and supply chain management. This explains why most corporations doing business in this subcontinent rely on expertise from the developed countries when trying to improve the smooth running of their businesses. However, with many large companies outsourcing and relocating some of their operations to developing countries where labour costs are lower; this will soon be a thing of the past.

There is an urgent need to continue carrying out research on logistics and logistics and supply chain management. This will benefit industry, stakeholders and the world economy.


6.1 Research background

As mentioned earlier, Dell is one of the largest computer manufacturing companies in the world. The company has a unique business model of selling direct to individual and corporate consumers. Dell has often realized how closely logistics and manufacturing are linked in the era of global supply chains and mass customization.

Dell's manufacturing, logistics and shipping strategies make it possible to customize computers for individual consumers at a low cost and for a low price. Dell plans to keep that competitive advantage by bringing assembly and distribution closer to its customers. With its dominant share of the PC market, its distribution plans also are closely watched by competitors and logistics providers. Dell held 30.4 percent of the U.S. market and 16.8 percent of the worldwide market in the third quarter, and it shipped nearly 7.9 million PCs in the quarter, according to the Gartner Group research and consulting firm.

Dell also has assembly plants in Austin, Texas, and central Tennessee (in addition to distribution centers in Reno, Nev., and one announced last month to be near Cincinnati), and facilities in Brazil, China, Malaysia and Ireland. Dell is the only major PC manufacturer with assembly plants in the United States . Most computer makers buy parts and assemble overseas, then ship finished product to warehouses in the United States . This can lead to not only impracticably long supply chains but also to delivery delays that risk missing sudden changes in demand or obsolescence of evolving products such as personal computers. The company's entire direct-to-consumer business model, not just its logistics approach, gives it cost and price advantages over competitors. Dell gets a two-to-three point cost advantage by delaying assembly until a customer's order is received, King said. This approach scales operations to actual customer demand, which further enhances the effect. Business process improvement initiatives that encourage employees and managers to find more efficient ways of doing things further reduce cost. Can dell's current logistics and supply chain management systems sustain the company into the future?

It is against this background that this paper critically analyses the logistics used by Dell Computer Corporation Inc.

6.2 Research question

The research question for this project is, “How can the logistics used by Dell sustain the future growth of the company and are the current supply chain management systems enough to maintain a competitive advantage?”

6.3 Aims and objectives of the research

The objective of this research is to critically analyze and identify weaknesses in the current logistics and supply management function and how this can be modified to suit with customer demands. The aim is to provide insights and recommendations that will improve and strengthen the effectiveness of Dell's logistics and supply management systems.

6.4 Research methodology

In order top gain a clear picture of the logistics and supply chain management systems, a lot of secondary data was collected, reviewed and analyzed. This was followed by a research questionnaire, which was designed and sent out electronically to different corporations and individuals. This questionnaire instrument consisted of both open and closed questions and also used a checklist response format. Open questions offer the advantage of having respondents offer their own opinions while closed questions are a very convenient way of collecting factual data and usually easy to analyze. (Collins and Hussey, 2003). This questionnaire was targeted at Information Technology departments particularly Information Technology Managers and looked at a number of issues ranging from size of the information technology department, company size, operating systems being used, customer satisfaction and the preferred choice when buying computer hardware.

The questionnaire was followed by 23 semi-structured interviews with executives from various companies. This was meant to provide me with more knowledge on how important computers are in their different organizations and whether Dell is meeting their specifications and delivery turnaround time when they order computer hardware. I also wanted to know the quality of after sales service they receive from Dell. Most of the interviews lasted no more than half an hour.

In addition to the above, I also looked at logistics of other players in the industry. This was meant to give me an insight into their supply chain management systems and the logistics they use. Out of interest, I also reviewed some of Dell's financial statements to give me a fair reflection of what direction the company is currently taking.

6.5 Analysis of the response to online questionnaire

I received a response rate of about seventy five percent to the online questionnaires that I sent out. About thirty percent of the respondents indicated that they have used Dell at one point in the past. Twenty percent were currently using Dell as their preferred supplier of computer hardware. Most companies spend about fifteen percent of their budgets on computer hardware and related service.

There was a mixed reaction to the quality of customer service the customers receive from Dell. Sixty percent of the respondents were happy with the service received from Dell and forty percent complained of poor customer service from Dell call centres. The after sales and repairs services received the lowest ratings. Ten percent of the respondents said they would switch suppliers if they found a better deal elsewhere.

The majority of respondents also indicated that the current logistics needed some improvements.

The major complaint was the shoddy delivery service. Ordered goods are not being delivered on time and customers are lied to when they phone the customer service. There is now very poor communication between consumers and Dell customer service. Some respondents advised that they often connected to people who can't speak English very well and this only causes more anger to customers.

6.6 Analysis of the responses to interviews

Most IT Managers were happy with quality of products they receive from Dell. A few of them complained of delays in receiving their products and sometimes receiving faulty products. Generally, they are happy with the fact that they can order customized items from Dell. The majority of them would continue using Dell in the future; however, they would like to see improvements in the way the company does business.

6.7 Analysis of the financial statements and secondary data

Analysis of the financial statements and secondary data indicated that Dell computer corporation is one of the major players in the industry. It has dominated every market that it has ventured into. Annual revenues run into billions of dollars and the company has a very strong financial base which it uses to finance research and development. The company does not keep any inventory at all thereby reducing costs. Its stock is well sought after by individual and institutional investors. Because of its size, Dell receives attracts a lot of complaints from customers. However, the same complaining customers keep going back to Dell for more products. The company's brand is now recognized globally and it's difficult for other players to overtake them.

6.8 Research findings and conclusions

This research shows that Dell has advanced logistics and a world class supply chain management system which it fully utilizes to its advantage. The logistics used by this conglomerate are among the best in the world and a lot of companies could learn a thing or two from Dell.

Dell has an intricate network of suppliers around the globe which it makes it easier to meet customer demand. The Dell customer service department even though it is at the centre of everything that the company does, is not longer doing a very good job. Customer service has declined over the years. Customers are often lied to and intimidated and are not given any respect at all.

After sales service is getting poorer and delivery turn around times are shoddy. Overall the logistics employed by Dell are generally advanced and even though they constantly need to be reviewed and improved, they will surely catapult the company into even greater success in the next century.


While the research findings indicate that a number of consumers are disgruntled with Dell's products and customer service, this has no significant impact on the company as a whole. The company's sales continue to grow every year. Complaining customers often come back as they now addicted to the Dell brand. The company has just formed a strategic alliance with Curry's and Dixon 's stores in the United Kingdom and sales will grow even higher.

In order to keep up with technological innovations and to retain their market share some reorganization will need to be done.


  1. The Dell Customer Service department needs further training and a complete overhaul. It is wrong to lie to customers.

  2. Quality of products needs to be carefully improved and monitored to avoid selling faulty products.

  3. Customer deliveries must always be done on the stipulated days and times and if there any changes customers must be notified immediately.

  4. Though it is cost effective to relocate their call centres overseas, the company must ensure that staff manning these calls centres abroad are properly trained and can speak in proper English.

  5. After sales service must be greatly improved. The same applies to technical support.

  6. Dell must recapture the large US market and strive to be a leader again in the United States market


The research was conducted over a short period of time and this limited the number of questions I was able to ask hence, the results of this research cannot be extrapolated to the entire company since only a small sample of research interviewees and respondents was used. The face to face interviews were held with only twenty three executives and the interviews lasted no more than thirty minutes. Due to time constraints, the participants were not in a position to disclose their all their thoughts on the subject matter. I was also able to review only a few financial statements and annual reports due to time constraints. It would have been a good idea if I had looked for the opportunity to work in one of Dell's business units while undertaking this research.


More detailed research needs to be done on logistics and supply chain management. A larger sample must be studied and the research period has to be a bit longer. A comparison must be made with the other players in the computer manufacturing industry. Other areas of supply chain management and logistics could also be explored. Universities and research institutes can play a leading role by calling research papers on this topic.


I learnt quite a lot of different things during this research project. I gained more knowledge on company logistics and the importance of supply chain management systems. Research projects are not easy at all. They require a lot of hard work, proper planning and perseverance. This research involved traveling, and this can be really expensive and this required me to budget my finances accordingly. Making appointments for interviews with senior executives can be a daunting task. Sometimes you have to go through a lot of bureaucracy in order to secure an interview, and even after getting an interview it can be cancelled without notice. This taught me to be very patient.

Overall, this was one of the greatest learning experiences of my life and I will utilize this knowledge in future research projects.


TABLE 1: Dell Stock Price History:

TABLE 2: Dell Inc Analyst Ratings:

Analyst Ratings



1 Month Ago

2 Months Ago

3 Months Ago

Strong Buy





Moderate Buy










Moderate Sell





Strong Sell





Mean Rec.





TABLE 3: Dell Inc Financial Highlight


59.61 Bil.


2.99 Bil.

Net Profit Margin


Return on Equity


Debt/Equity Ratio






Book Value/Share


Dividend Rate


Payout Ratio



Revenue - Quarterly Results (in Millions)


FY (01/08)

FY (01/07)

FY (01/06)

1st Qtr




2nd Qtr




3rd Qtr




4th Qtr








Earnings Per Share - Quarterly Results


FY (01/08)

FY (01/07)

FY (01/06)

1st Qtr




2nd Qtr




3rd Qtr




4th Qtr









Qtr. over Qtr. EPS Growth Rate


FY (01/08)

FY (01/07)

FY (01/06)

1st Qtr




2nd Qtr




3rd Qtr




4th Qtr




Yr. over Yr. EPS Growth Rate


FY (01/08)

FY (01/07)

1st Qtr



2nd Qtr



3rd Qtr



4th Qtr



TABLE 4: Dell Inc Key ratios

Growth Rates %



S&P 500

Sales (Qtr vs. year ago qtr)




Net Income (YTD vs. YTD)




Net Income (Qtr vs. year ago qtr)




Sales (5-Year Annual Avg.)




Net Income (5-Year Annual Avg.)




Dividends (5-Year Annual Avg.)




Financial data in U.S. dollars

TABLE 5: Dell Inc Ownership

Ownership Information

Shares Outstanding

2.24 Bil.

Institutional Ownership (%)


Top 10 Institutions (%)


Mutual Fund Ownership (%)


5%/Insider Ownership (%)


Float (%)



Ownership Activity


# of Holders


Total Positions



New Positions



Sold-out Positions



Net Position Change










Institutional Ownership Mutual Fund Ownership 5% Ownership

Institution Name

Shs Held

Shs Chg




% Port

Rpt Date

State Street Global Advisors (US)








Barclays Global Investors, N.A.








Vanguard Group, Inc.








Fidelity Management & Research








T. Rowe Price Associates, Inc.








Harris Associates L.P.








Brandes Investment Partners, LP








Deutsche Asset Management Americas








Davis Selected Advisers, L.P.








Capital Research & Management Company








AIM Management Group, Inc.








Dodge & Cox








Franklin Mutual Advisers, LLC








Goldman Sachs Asset Management (US)








ClearBridge Advisors









  1. Chan, C.k., (2005). Successful Strategies in Supply Chain Management . Idea Group Publishing, Hershey , PA , USA .
  2. Collins J and Hussey R (2003), Business Research: A practical guide for undergraduate and postgraduate students – Second Edition . Palgrave Macmillan, Hampshire , England .
  3. Crosby, P., (1979), Quality is free , McGraw Hill, London
  4. Deming, W. E. (1988). Quality, productivity and competitive position (MIT study, pp. 2930). Cambridge , MA .
  5. Dooley, K. (1995). Purchasing and supply: An opportunity for OR? OR Insight. 8(3), 21-25.
  6. Gunasekaren, A., & Ngai, E., (2003), Successful management of a small logistics company. International Journal of Physical Distribution & Logistics Management, 33(9), 825842.
  7. http://moneycentral.msn.com/investor/invsub/analyst/recomnd.asp?Symbol=Dell accessed 31/12/200.
  8. http://www.dell.com accessed December 26, 2007 .
  9. http://www.findarticles.com/p/articles/mi_m0EIN/is_2005_Oct_25/ai_n15732802 accessed 01/01/2008 .
  10. http://www.newsobserver.com/104/story/438280.html accessed 01/01/2008
  11. http://www.theregister.co.uk/2005/06/23/dell_nc_suit. accessed 01/01/2008 .
  12. http://www.wikepidia.com accessed 31/12/2007 .
  13. Lamming R., (1993), Beyond partnership, Strategies for innovation and lean supply , Prentice Hall, Hemel Hempstead , England .
  14. Nellis, J and Parker D., (2002), Principles of Business Economics , Financial Times, London , England .
  15. Porter, M., (1980), Competitive Strategy: Techniques for analyzing Industries and Companies, The Free Press, New York .
  16. Porter, M., (1987), From competitive advantage to corporate strategy, Harvard Business review, May/June pp 43-49.
  17. Quayle, M., (2006), Purchasing and Supply Chain Management: Strategies and Realities, Idea Group Publishing, Hershey , USA .
  18. Schonberger, R.J., (1986), World class manufacturing: The lessons of simplicity applied . Free Press, London , England .
  19. Slone, R. E. (2004). ‘ Leading a supply chain turnaround' . Harvard Business Review, 82( 10), 114121
  20. Sum, C., Teo, C., & Ng, K. (2001). Strategic logistics management in Singapore . International Journal of Operations & Production Management, No.21. Vol.9, 12391260.
  21. Vernon , R., (1998), In the hurricane's eye, Harvard University Press, Cambridge , MA .
  22. WBCSD (2000). Corporate Social Responsibility: Making good business sense . World Business Council for Sustainable Development . ISBN 2-94-024007-8 .


•  Online Research questionnaire

This questionnaire is intended to gather information on logistics employed by Dell Computer Corporation. This is a research for an MBA dissertation and the objective of the research is to investigate how the logistics employed by Dell have contributed to its present growth and success. All data collected will be kept in the strictest confidence and shall be solely used for the purpose of this research. No individual or company names will be mentioned in the final report. All participants will receive feedback at the end of the research. Thank you for your time.



Telephone number:

1. What is your highest level of education?

2. Does your company have an Information Technology [IT] Department?

Yes OR No

3. Which operating system do you use?

Windows XP
Windows 2000
Windows 98
Windows 95
Others [Please specify]

4. Which of the following is your preferred supplier of computer equipment?

Hewlett Packard
Other, please specify:

5. How often do you buy computer equipment from Dell?

No of times:

6. Sector?


7. Annual revenue?


8 Number of employees in your organization?


9. Are you satisfied with the customer service you receive from Dell?

Not sure

10. Have you had any major disagreements or problems with Dell?


11. What improvements would you like to see made at Dell?

Customer service
Delivery time
Technical support


Others: Please specify

2. Do you believe in the current Dell business model of selling direct to the consumer?


13 . If not, how would like the products to be sold?

14. What percentage of your annual budget, is spent on computers and peripherals?

15. Please rate the following Dell services on a scale of 1 to 5, 5 being the highest and 1 being the lowest.

Customer service

Manufacturing to customer specifications

After sales service

Technical support

Product quality

16. Are you aware of any quality computer products that are better than Dell's?

17. Would you recommend Dell products to your friends and business associates?

18. In your opinion, should Dell reduce or increase the prices of its products and if so why?

19. Generally, do you think Dell is the best computer company available on the market?

20. Going forward, what do you think Dell should do to improve its customer service, technical support, product quality and image? Are you happy with the logistics employed by Dell Computer Corporation?


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