Dell - Integrating the Internet

Dell Computer Corporation

Integrating the Internet

Dell Computer Corporation has long capitalized by catching products as they move to the commodity phase and then applying their low-cost direct model to provide customers with quality and value in their products and services. The Dell direct model was the key to their success, and because the Dell direct model was continuously being improved upon, it was difficult for competitors to duplicate. The Dell direct model worked to establish direct customer relationships and was about low-cost and virtual integration.

The Dell direct model involved an extremely efficient distribution system which was characterized by customized manufacturing. The build-to-order manufacturing system would take orders by phone or from a Dell inside sales representative who would be working with Dell’s larger accounts. This allowed Dell to achieve higher average revenue per unit, regardless of their industry-low pricing structure. In most cases, Dell was able to complete an order from receipt to shipment within 36 hours, and in some cases in as little as eight hours. Dell’s direct model operated with only six days of inventory by the end of the year 2000, while most of Dell’s competitors were operating with 20 to 70 days of inventory. Dell’s suppliers have been major contributors to their ability to manufacture on a just-in-time basis. The supplier’s warehouses were located within 15 minutes of the Dell factory. Between 1992 and 2000, Dell reduced the number of primary suppliers from about 200 to just 25, a reduction that developed intricate supplier partnerships.

Another element that contributed to the success of Dell Computer Corporation was its phenomenal customer relations. Dell was ranked first in customer relations in 2001 according to the results of a survey of senior officers of Fortune 1000 companies. Dell set the standard for customer service, and in return, enjoyed significant, cost-effective servicing by telephone and eventually via the internet.

Dell’s integration of the internet back in 1995 was a strategic move that highly impacted the success of the company. At that time, Dell began delivering technical support and order status information by way of the internet, and eventually designed an online store in which consumers could purchase Dell products online. Dell programmers converted their build-to-order model to an online environment, which replaced the role traditionally held by a phone sales representative.