CASE STUDY: DELL INC. 1
Case Study: Dell Inc.: Improving the Flexibility of the Desktop PC Supply Chain
Assignment
Travis D. Peaden
School of Business, Liberty University
April 9, 2023
Author Note
Travis Peaden
I have no known conflict of interest to disclose. By submitting this assignment, I attest this
submission represents my own work, and not that of another student, scholar, or internet source.
Correspondence concerning this article should be addressed to
Email: [email protected]
CASE STUDY: DELL INC. 2
Abstract
Dell Inc is a leading player in the manufacturing and sales of laptop and personal
computers around the world. Upon entering the market with the personal computer comes the
discussion of cost and timeline getting it to market. Dell Inc. came up with the idea of doing
direct supply from their manufacturing facility to the customer. This gave them the opportunity
to cut on the middle man, increased their profits, and decreased the logistical route other
competitors where going. There are many levels of manufacturing regarding personal computers,
ten in all. Level 5 and level six are the topics of this case study to be specific. L5 and L6 have
their similarities but also function differently to cater to customers that need more specific high-
grade components added to their personal computer. This case study is meant to explain to the
reader how there is a plan to implement changes to operations at Dell Inc. There is a set list of
questions the team is considering based off of trend charts and operational data to decide their
next plan of action. The team is focusing on both cost aspect as well as the operational
complexity they function in daily. Using the tables and costing measures the team will be able to
apply solid proof to their issues and address root causes to their issues at hand.
Keywords: Logistics, supply chain, manufacturing, sustainability, lead time.
CASE STUDY: DELL INC. 3
Why does L5 incur higher manufacturing and logistics cost than L6? What are some of the costs
that are incurred in L5 but not in L6? Are there any costs that apply to only L6 but not L5?
L5 incurs a higher manufacturing and logistics cost due the fact they use airfreight to ship
their products rather than using only sea freight. Dramatically declining international shipping
rates and rising domestic delivery rates have made for a logistics rollercoaster (Nagl, 2022). Sea
freight keeps them at a 5-week timeline for their chassis but the 1-week timeline for their mother
boards. Manufacturing in L5 uses a third party to integrate the chassis and mother boards in their
processes where in L6 they are integrated in China at a lower cost per unit. L5 is used for a
“Level 10” to install custom parts in the process that is an added fee on the customer to go along
with added cost on the manufacturing side of the business. Both L5 and L6 have similar shipping
then supplying the Dell manufacturing team from the supplier logistics team. They also have the
same logistics structure when going from Dell manufacturing to logistics that supplies the
customer. L6 cost is only associate with the usage of China to integrate the MB and chassis.
Chinese manufacturing is known for its ability to process quantity but lack the quality aspect of
their operations. They are cost effective in labor but tend to cost on the back in with poor quality.
Which of the six proposed manufacturing solutions should Dell implement, based on the survey
result? Why? What are the pros and cons of this recommendation?
Dell should implement both option 3A and option 4. Having the operation under one roof
will give them the ability to manage the process in close proximity with little to no added cost to
their operational budget. Allocating additional floor space, they have and only buying added
equipment will allow the current employees on the floor the ability to apply lessons learned and
keep things localized to their production processes. Dell overseeing their own 3PL will allow
them to integrate what works for Dell in manufacturing and logistics while ensuring the quality
CASE STUDY: DELL INC. 4
control and timelines are kept in place. The critical factor of quality fallout and logistics bottle
necks are the two issues facing Dell. The time it takes products to reach the manufacturing
process is hurting their ability to keep up with demand. Cons to this is Dell will be limited on
expansion of the one facility growing to fit additional processes. With that comes a higher cost
for employees and expenses for added equipment upkeep and maintenance. The issue with lack
of components being delivered on time hurt profits from lack of potential to fulfill customer
orders (Dow Jones & Company Inc, 2022).
How easily sustainable is your recommendation for the previous question if the chip supply
shortage further deteriorates?
Deterioration of chip supplies will be in better hands with option 4 selected due to the
ability to have a better handle on global procurement. Signing exclusive contracts with
manufactures is the way to curb lack of supply and ensure there is product to be obtained
(Magill, 2023). It being in the middle of the road regarding complexity, it is backed up by 3A
which is based at a level 1. There is an added level of quality control on the processes with both
selections that will prevent lost components due to quality issues. At the end of the deterioration
of chip supplies is only headed off at the pass is they are all made in house from start to finish.
The amount of overhead and working components makes it impossible for any organization from
being a one stop shop for one hundred percent start to finish manufacturing. Global chip
shortages are felt by all due to the lack of variety of manufactures.
How good is the methodology employed by the BPI team to determine the optimal
manufacturing option for Dell? Are their more effective approaches?
Given the time that this case study was conducted they used all available resources to
come up with the best solutions for Dell. They used data pulled from the bottlenecks that they
CASE STUDY: DELL INC. 5
saw and they issue they noticed causing them issues on operational effectivity and cost
associated. In the year 2023 there are many ways to determine the pros and cons of actions to
take to improve business functions across all areas. Cloud based tracking through RFID or real
time logistics shows the user trends of what is being produced and what needs to be in the
pipeline. Artificial intelligence paves the way to remove the human element and ensure accurate
decisions are made for the betterment of the organization. More precise data and trend charts can
be formed live through manufacturing processes to see where the issues will arise before they are
seen by human interaction (Alami & ElMaraghy, 2021).
How can Dell effectively address the root causes contributing to the increase of L5
Manufacturing?
The number one issue in the realm of L5 manufacturing is the inability to get
motherboards in the manufacturing process. The production of motherboards needs to increase
so that there can be more items available for air shipment to the contract manufacture. Customer
demand is the main driver for this line leading Dell Inc to increase the safety stock of
motherboards they are ordering from their supplier. Limiting their suppliers down to one or two
will cut down on projected incoming stock but would allow them to have a tighter hold on their
quality control measures for those products (Niñerola, Hernández‐Lara, & Sánchez‐Rebull,
2021). Gaining the maximum space in air freight will ensure there is optimum products arriving
to the CM.
CASE STUDY: DELL INC. 6
References
Alami, D., & ElMaraghy, W. (2021). A cost benefit analysis for industry 4.0 in a job shop
environment using a mixed integer linear programming model. Journal of Manufacturing
Systems, 81-97.
Dow Jones & Company Inc. (2022). Irobot swings to Q4 loss, says that chip shortage, shipping
delays dent sales. Market Watch.
Magill, K. (2023). GM signs exclusive chip supplier agreement with GlobalFoundries. Supply
Chain Dive.
Nagl, K. (2022). Metro detroit manufacturers ride roller coaster of issues; shipping costs,
logistics issues still a plague. Crains Detroit Business.
Niñerola, A., Hernández‐Lara, A., & Sánchez‐Rebull, M. (2021). Improving healthcare
performance through Activity‐Based costing and Time‐Driven Activity‐Based costing. The
International Journal of Health Planning and Management, 2079-2093.
