Competitive Advantage at Dell What

Competitive Advantage at Dell

What are the advantages to Dell of having manufacturing sites located where they are? And (2) what are the potential disadvantages?

Dell's global manufacturing strategy that includes having manufacturing locations in the United States, specifically in the states of Maryland and Texas. In addition Dell has manufacturing locations in Brazil, China and Malaysia as well. Each of the se manufacturing locations provides a unique competitive advantage to Dell in their core business of producing personal computers, laptops, and servers. The first and greatest advantage is the proximity each of these manufacturing locations are to their larger bases of customers. The U.S. market, which continues to be a dominant source of Dell revenue, has two manufacturing centers so that customer orders will be able to be fulfilled quickly. In addition, Dell relies on these two manufacturing centers, as they do with all manufacturing locations, for minimizing the supply chain costs and time constraints involved in inventory management of critical components. The proximity of manufacturing locations in the U.S. To customers on the one hand and to suppliers on the other makes it possible for Dell to synchronize their supply chain with the demands of customers, thereby reducing inventory carrying costs and realizing cost savings as a result. Manufacturing locations in Brazil, China and Malaysia all also fulfill strategic roles of being supply chain hubs for Dell, close to many of their suppliers. Over half of the 200 suppliers that Dell relies on for production of their personal computers, laptops and servers are offshore from the U.S., making the development of manufacturing centers in Brazil, China, and Malaysia critical.

The two locations in China and Malaysia are particularly strategic to Dell in that over 50% of its suppliers are from this region of the world. The company-wide strategy of seeking to synchronize its supply chain with customer demand to attain higher levels of inventory control and attain globally the production of customized computer systems, laptops, and servers at the efficiency levels necessary to be profitable makes global manufacturing centers critical. China and Malaysia, apart from the cost savings due to lower labor costs there, in conjunction with the ability to learn about the customer needs in these regions of the world also underscore the advantages of having production centers located in these regions. Dell continues to focus on global expansion of all of its product lines, and having production centers in these Asian countries also helps the company learn what unmet needs both consumer and business personal computer customers have. Production centers then fulfill multiple strategic goals of being supply chain coordination points or hubs, customer listening locations to understand how to better serve local markets with customized products, and also alleviate inventory carrying costs while striving to deliver systems specifically configured to customers' needs within three days or less.

The disadvantages of Dell having their production centers located in diverse locations globally is that knowledge transfer between locations is made more difficult by both distance and varying cultures in each nation. In addition, the economies of scale possible having production located in one physical location are obviously not possible, nor is the ability to synchronize all company demand with just one contact point for each of their suppliers. Diverse production center locations require an inordinately complex supplier relationship management system to make sure the minimum amount of components and subassemblies are in each location at precisely the right time to support production requirements. An additional disadvantage that Dell faces with multiple geographic locations for production is the routing of orders taken over the Internet for their products. The Internet is responsible for 85% of all orders placed with Dell globally, and the routing and fulfillment of these orders by geographic location requires an extensive level of order management and production level synchronization. The Internet-based tools that Dell relies on including guided selling, their online catalog and the well-known product configurator all must be directly linked, in real-time, to their manufacturing and enterprise resource planning systems. Orders must then be sent to each manufacturing center based on the location of the customer who ordered them. This is a very complex process both from a fulfillment as well as an internal systems standpoint inside Dell. Compounding the routing of orders is the need to have visibility into the suppliers'; inventories and for suppliers to have visibility into Dell's demand levels. Another disadvantage of having a geographically distributed series of manufacturing centers is that quality management and quality control practices may not be as rigorously enforced in one location vs. another, leading to variations in product quality across each center in many comparable organizations. In addition to all these potential disadvantages are the many challenges of dealing with multiple currencies and reporting them through financial statements reported in U.S. dollars. Currency fluctuations caused by multiple international locations can potentially be very costly as well, especially as the U.S. dollar is losing value relative to other currencies as well.