New generation technology concepts and applications

New Generation Technology

CRM at Dell:

Driving Greater Accuracy of Build-to-Order

Selling Strategies with Better Customer Relationships

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Dell Inc. is today a $61B manufacturer of PCs, servers, laptops and tablet PCs, in addition to servers and network storage systems. The company operates in over 50 countries and has distributed its sales forces across the government, enterprise, small & medium business, and state and local government markets. Dell has succeeded in growing profitably and consistently across the last decade due to their highly efficient and unique supply chain that fuels their build-to-order production system and selling strategies globally (Gunasekaran, Ngai, 2009). Dell also has successfully been able to create highly collaborative workflows throughout its supply chains and have successfully transformed knowledge into a competitive advantage (Bilek, 2010). With each new product introduction, Dell adds in additional suppliers, and needs to have an even greater level of accuracy on forecasts from their customers. Dell has such a rapidly growing customer base that they need to be able to capture the highest value accounts, from individuals to corporations, and make the most of these relationships with customers with could be among the most profitable the company has (Sprangel, Stavros, Cole, 2011). Dell is well organized at the supply chain and value chain levels, yet however is continually seeing their rapid growth of customers causing confusion in new product development, forecasting, planning and executing services, and also migrating customers from one product generation to the next. The intent of these recommendations is to better align customer data with the build-to-order supply chain, production and forecasting processes that are at the center of the company's unique competitive advantage.

Executive Summary

Dell Inc. has been able to successfully integrate its supply chain systems and processes with the core unique value proposition of the company, which is its unique build-to-order production system. Dell has also successfully applied their build-to-order production processes to a wide variety of systems and products, often with the result being significant revenue and profit gains (Bilek, 2010). The one aspect of Dell's operations that continue to elude their ability to effectively execute is how to capture customer data for those customers who rely on their build-to-order production capabilities the most. At present, the Dell Inc. systems do not differentiate which customers are the most loyal to build-to-order systems vs. off-the-shelf products. Having this insight would save thousands of hours a year in selling strategy development and would also streamline the supply chain performance of the company overall.

Definition and History of Technology

Definition

The innovations within the Dell value chain have led to customers anywhere in the world being able to order a laptop, PC or server system within 72 hours configured to their specific requirements (Bilek, 2010). Dell was the originator of the complex manufacturing processes of build-to-order, configure-to-order and engineer-to-order and has also continually added to the base of knowledge as it relates to system and process integration for customized complex systems (Gunasekaran, Ngai, 2009). Taken together, all of these factors have led to Dell being able to define best practices in supply chain management (SCM) and the new product development and introduction (NPDI) process where the company can launch a new system within 16 weeks of the initial product specification being written (Gunasekaran, Ngai, 2009). Dell continues to work with suppliers and takes a very analytics-driven, engineering-centric approach to product development, which has given the company a major speed advantage relative to its competitors globally. The Dell culture is one that thrives on analytics and is driven more by costs and a focus on expediting new product development than any other factor (Gunasekaran, Ngai, 2009). This emphasis on new product development must pervade the company as they compete in markets where the lifecycles can average less than a year in many cases.

The performance of the Dell supply chain and its build-to-order production systems is well defined and works in a synchronized series of strategies for every new product introduction planned (Kapuscinski, Zhang, Carbonneau, Moore, Reeves, 2004). The metrics of how efficient the company is at new product introductions that is considered one of the most profitable processes the company has today, as it generates on average 60% or more of their applications (Kapuscinski, Zhang, Carbonneau, Moore, Reeves, 2004). A large percentage of this revenue is derived through sales on the company's internal e-commerce system that are specifically designed to support state & local government selling, in addition to their largest customers also having access to ordering through secured portals where orders of customized PCs, laptops and systems can be ordered. These internal portals are called Dell Premier Pages and there are approximately 700 of them globally for many of the world's largest corporations, federal, state and local governments (Kapuscinski, Zhang, Carbonneau, Moore, Reeves, 2004). These Premier Pages are not connected to any of the CRM systems and also do not connect with the Master Data Management (MDM) systems either. They are also not connected with the build-to-order quoting and ordering history, two vital areas of the build-to-order systems that could provide useful information into how better to plan the next generation of systems across all product categories. There is significant potential for gaining insights into customer requirements by customized systems by integrating these systems together and defining a CRM system that takes into account quoting and product configuration data (Ling-yee, 2011).

History

The Dell business model is predicated on the use of a centralized Enterprise Resource Planning (ERP) system that acts as the catalyst for the supply chain management (SCM), logistics, Electronic Data Interface (EDI) and integration to the many other it systems that production relies on. Figure 1, Overview of the Dell ERP System Platform, shows how the systems were initially organized. Note that there is only support for CRM in the context of Dell Premier Pages and e-commerce.

Figure 1: Overview of the Dell ERP System Platform

Based on analysis of Source: (Kapuscinski, Zhang, Carbonneau, Moore, Reeves, 2004)

In the past, CRM systems were not a priority in Dell, Inc., which relied on supply chain and production efficiency and only provided configuration data into the online e-commerce systems including product configurators and guided selling systems during the phase of product introductions (Bilek, 2010). Absent is a strategy for ensuring a high level of customer data integration and a focus on how to create a customer-driven system of record (Finnegan, Currie, 2010). As Dell continues to move into entirely new product categories, this lack of a centralized customer system of record begins to slow down the rate and profitability of growth. It is also evident from looking at the approach Dell initially defined its internal systems that even if there was an intention to create long-lasting relationships with customers, it would be very difficult given the system architecture (Sprangel, Stavros, Cole, 2011).

Background of Dell and it Reliance on the Build-to-Order Business Model

At the center of the Dell business model is the build-to-order production process the company has transformed into a sustainable competitive advantage over time. The synchronization of the supply chain, pricing, services, procurement, direct selling, and marketing departments transformed the new product development and launch process into a well-orchestrated series of events the company could complete relatively easy after years of experience (Bilek, 2010). The Dell build-to-order model excelled in the initial stages of its development in managing the assemble-to-order and build-to-order production processes where the products being sold were at most 30% customized for a given customers' needs (Bilek, 2010). With a relative low level of product customization the company felt that there would be little need for getting deep into customer data and using a CRM system to capture needs when their online product configurators were doing that already with a high degree of granularity and focus (Gunasekaran, Ngai, 2009). The culture internally within Dell was so engineering-centric at the time that the focus on pure execution and efficiency overtook the need for customer data, and the belief that pure efficiency would be the best strategy for growth (Bilek, 2010). This is typical of high-growth technology businesses that believe in the power of their product strategies and speed of execution over listening to customers (Ernst, Hoyer, Krafft, Krieger, 2011). Figure 2, Dell Inc., Marketing and Manufacturing Process Integration shows how Dell operated for decades, taking into account Demand Planning, Distribution Requirements Planning on the Marketing side and Manufacturing supporting the core ERP functions of Master Production Scheduling and Procurement Planning. These critical processes were often done in isolation from customers input and insight, which eventually led to Dell becoming so myopic in focus that they lost focus on where customers were going with their needs and requirements. While these systems shown in Figure 2 ran as efficiently as ever, they were slowly becoming irrelevant because they were not anchored in customer needs.

This myopic focus cost the company valuable and profitable customer relationships, which is often the case within companies who allow technology to dominate their focus instead of unmet customer needs and priorities (Ernst, Hoyer, Krafft, Krieger, 2011).

Figure 2:

Dell Inc. Marketing and Manufacturing Process Integration

Based on analysis of Sources: (Kapuscinski, Zhang, Carbonneau, Moore, Reeves, 2004) (Gunasekaran, Ngai, 2009) (Bilek, 2010)

Discussion of Current Business Issues

Today Dell suffers from not having enough insight into the most critical customer relationships necessary to grow its emerging virtualization and Cloud computing businesses, as the company's approach to managing by technology instead of customers created a very myopic mindset. The transition from being purely technology- and product-centric to one that puts customer feedback and their insights into the center of a business model can only be achieved by measuring processes and improving them (Liu, Guo, Lee, 2011). Nowhere is this more evident than in the company's quoting process. Ironically for a company so well-known for its build-to-order process online, tis enterprise-wide quoting systems are seriously broken and often can take weeks to produce a highly specific quote for a series of servers for example (Gunasekaran, Ngai, 2009). The lack of customer insight into why customers are ordering a specific configuration also needs to be assessed. This lack of information has led to incorrect configurations being recommended to long-standing customers and the quoting timeframes drastically increasing from weeks to in some cases months for very complex system and network configurations. The consumer and low-end configurations of systems is very efficient as it has become integrated into the overall supply chain workflows however the higher-end systems lack CRM and process integration.

Proposed Solutions

There are many potential solutions to the lack of customer insight and intelligence as it relates to the quoting process. One of the most expedient is to create a small CRM system based on Salesforce.com, which is delivered entirely over the Web, and integrate the back-end systems to the quoting application, an approach used in other manufacturing companies successfully (Rapp, Trainor, Agnihotri, 2010). This approach would provide easily usable applications and would also be paid for using operating expense (OPEX) funding, an approach Dell relies on as Capital Budgeting (CAPEX) is a lengthy process and heavily reliant on the cost of capital and interest rates. The SaaS-based approach would allow for quickly defining the strategic priority of customers and also give insights into how best to create a more customer-driven enterprise quoting process (Wu, 2010). The downside of this approach however is the lack of security for the data involved and the fact that data capture and analysis is not as well defined within the Dell process workflows as well. As a result of these factors, going to a SaaS-based approach to implementing advanced CRM systems into Dell to further increase their insights into customers is not going to be effective, however it will have a rapid turn-around time to be completed.