CASE STUDY: DELL INC. 1
Case Study: Dell Inc.: Improving the Flexibility of the Desktop PC Supply Chain
School of Business,Liberty University
Case Study: Dell Inc.: Improving the Flexibility of the Desktop PC Supply Chain
A case study was performed on Dell Inc. on June 2005 (Simchi-Levi et al., 2021). Dell
has seen 100% or more significant stock growth since 2001 (Simchi-Levi et al., 2021). Despite
CASE STUDY: DELL INC. 2
this growth, Dell faced issues with tightening manufacturing costs and Supply Chain chipset
shortages affecting organizational revenue (Simchi-Levi et al., 2021). Tom Wilson identified that
these increased costs came from the level five manufacturing operations (Simchi-Levi et al.,
2021). Five case study questions will be answered to address the issues identified by Tom
Wilson. These questions will analyze the differences between level five and six manufacturing
costs. The second will determine which of the six proposed manufacturing solutions Dell should
choose. The third will analyze the sustainability possibility given a further chipset shortage. The
fourth will evaluate the effectiveness of the BPI team manufacturing resolutions. The final
question is how Dell can address the root causes behind the L5 manufacturing issues.
Comparison of L5 and L6 Manufacturing for Dell Inc.
Dell has instituted ten levels of PC manufacturing options, with the higher levels fully
integrated and the lower levels simplistic with minimal integration to achieve various
manufacturing objectives (Simchi-Levi et al., 2021). Level five includes the assembly of the PC
chassis, fan, and disk drive with the optional power supply for designated PC cases (Simchi-Levi
et al., 2021). Level six includes the installation of all level five components with the inclusion of
the motherboard installation (Simchi-Levi et al., 2021). The Supply Chain activities for L5 and
L6 vary as they are completed at different manufacturing levels. L5 has to have the motherboard
and the pre-assembled chassis delivered with different transportation methods and lead times to a
third-party integrator who assembles the needed parts to achieve level ten manufacturing
(Simchi-Levi et al., 2021). The motherboard and air freighted with a one-week lead time, and the
chassis is transported via boat carrier with a five-week lead time. The L6 has the advantage of
the chassis and motherboard being installed in the Chinese manufacturing plant and collectively
transported via boat carrier to the third party integrator to complete level 1ten manufacturing
CASE STUDY: DELL INC. 3
(Simchi-Levi et al., 2021). The additional freight step creates higher costs and complexity for the
manufacturing g and supply chain operations for L5. Transportation costs are one of the top
expenses for Supply Chains, with air and ocean freight at the top within this category (Reich et
al., 2020). Including both freight types create waste within L5 manufacturing, which does not
add direct value to the customer and thus reduces Dell's profit margin for L5 (Reich et al., 2020).
L6 creates higher levels of risk as the Chinese integration of the motherboard and chassis could
be completed incorrectly, creating long rework cycles and increased costs for Chinese labor,
freight costs, and third-party integration (Simchi-Levi et al., 2021).
Recommendation for Dell's Manufacturing Solutions Implementation
The cross-functional business process improvement (BPI) team was created to solve the
problem of rising manufacturing costs (Simchi-Levi et al., 2021). Each member was chosen from
Dell's various business operations affected by the global chipset shortage. The BPI creates six
manufacturing options to manage the United States assembly work (Simchi-Levi et al., 2021).
The BPI surveys the various departments impacted at Dell to determine the complexity and cost
analysis of the six options (Simchi-Levi et al., 2021). These options were outlined to give Dell
various choices to measure the level of risk the organization was willing to take to react to the
global chipset shortage (El Baz & Ruel, 2021). Understanding that risk allows Dell to remain
competitive regardless of the situations outside their control with chipsets (El Baz & Ruel, 2021).
Option 3A would be the superior choice, with option four being a close second. Option 3A has
the lowest complexity score of 55 and the third lowest cost of $7.54 (Simchi-Levi et al., 2021).
Option 3A has a balanced complexity score from the twelve Dell operations surveyed, creating a
collective decision for business continuity. Option 3A has the lowest complexity score as this
would only require Dell to install new equipment within the SLC location, which would create
CASE STUDY: DELL INC. 4
minimal capital expenditures while not creating additional complexities to business operations
(Simchi-Levi et al., 2021).
Sustainability Evaluation if the Chipset Supply Shortage Further Deteriorates
Option 3A would still be a superior choice if the chipset shortage continued to deteriorate.
Option 3A had the lowest overall complexity score, with some of the lowest impacted areas
being Global and Regional Procurement, Master Scheduler, operations, engineering, inventory
control, and logistics. These scores highlight that difficulties would increase either way, but the
risk would be mitigated with Option 3A. The further shortage would also allow the BPI team to
utilize the superior option of 3A to create new survey data to identify a superior option to adapt
to the new changes in the business. This new data would become a part of the new data
collection and analysis phase, allowing Dell to deal with the shortage while strengthening the
organization to deal with future Supply Chain crises (Adhi Santharm & Ramanathan, 2022). The
new data would allow for another round of Supply Chain planning to create countermeasures for
Dell (Adhi Santharm & Ramanathan, 2022).
Analysis of the BPI Teams Methodology Employment
The methodology employed by the BPI team was partially effective. The correct
decisions were made to create a cross-functional team of areas affected by the global chipset
shortage. Creating and utilizing a survey is an effective tool to reach a larger audience. No
references were made to how additional data or brainstorming options were completed to analyze
these problems. Implementation of any of the six options would incur a level of risk, as shown
by the previous question about how the option would work if the chipset shortage further
deteriorated. Additional models and data analysis would allow Dell to create these options while
including contributing analysis to create a more effective manufacturing option for present and
CASE STUDY: DELL INC. 5
future success. The push-pull strategy is another option Fowler et al. state is a "hybrid of "push"
and "pull" supply chains where semi-finished products are produced by forecasts and "pushed" to
a stock point, then are "pulled" by actual customer orders and go through remaining processes to
be delivered" (2019, p. 1). The push-pull strategy identifies continuous improvement strategies
that can be implemented to create organization-wide changes to empower the various business
units and create a culture of continuous improvement.
Dell's Root Cause Action Plan for L5 manufacturing
Rising manufacturing costs have led to an increase in L5 manufacturing, which has higher
manufacturing and logistics costs versus L6 (Simchi-Levi et al., 2021). Dell has determined four
potential root causes relating to the inability to provide motherboards efficiently to the CMs
(Simchi-Levi et al., 2021). The push-pull strategy would be able to address the root cause of
chipset supplier de-commit or supply issues and new product introduction issues (Simchi-Levi et
al., 2021). This is because the push-pull supply chain makes decisions based on long-term
forecasts, reducing the time Dell would require to react to changing marketplace for L5 and L6
production (Simchi-Levi et al., 2021). The push-pull system also combats the bullwhip effect of
heightened variability from retail orders versus customer demand (Simchi-Levi et al., 2021). The
push-pull systems are demand-driven to coordinate with actual calculated demand levels,
reducing variability and the possibility for the bullwhip effect to occur (Simchi-Levi et al.,
2021). The advantage of demand-driven can be paired with a pull systems utilization of just-in-
time operations to reduce freight and inventory costs between the various pieces of Dell's Supply
Chain (Sinaga & Wangsaputra, 2018). The benefits created from the push-pull system improve
organizational efficiency, which increases company competitiveness, thus creating or
maintaining Dell's competitive advantage in the market (Sinaga & Wangsaputra, 2018).
CASE STUDY: DELL INC. 6
Conclusion
Dell was and will continue to be a successful Global Technological organization because
of ever-evolving business practices and effective continuous improvement strategies. L5
manufacturing has higher costs due to increased air freight charges, while L6 has higher
manufacturing risks. The most effective manufacturing solution for Dell would be 3A due to the
lower complexity scores for business implementation and continuity. Further shortages of Supply
Chain chipsets showcased the advantages of the 3A manufacturing option. 3A would increase the
least amount of manufacturing complexity, allowing the needed time to re-analyze business
operations to adjust to the changing Supply Chain dynamic. The BPI team is an effective cross-
functional team that would benefit from utilizing the push-pull strategy to improve business
operations. The short and long-term advantages of the push-pull system will create the needed
competitive advantage for Dell to increase double-digit stock growth year to create sustainable
long-term success.
CASE STUDY: DELL INC. 7
References
Adhi Santharm, B., & Ramanathan, U. (2022). Supply Chain Transparency for sustainability –
an intervention-based research approach. International Journal of Operations &
Production Management, 42(7), 995–1021. https://doi.org/10.1108/ijopm-11-2021-0684
El Baz, J., & Ruel, S. (2021). Can supply chain risk management practices mitigate the
disruption impacts on supply chains' resilience and robustness? Evidence from an
empirical survey in a COVID-19 outbreak era. International Journal of Production
Economics, 233, 107972. https://doi.org/10.1016/j.ijpe.2020.107972
Fowler, J. W., Kim, S.-H., & Shunk, D. L. (2019). Design for customer responsiveness: A
decision support system for push-pull supply chains with multiple demand fulfillment
points. Decision Support Systems, 123, 113071. https://doi.org/10.1016/j.dss.2019.113071
Reich, J., Kinra, A., Kotzab, H., & Brusset, X. (2020). Strategic global supply chain network
design – how decision analysis combining MILP and AHP on a Pareto front can improve
decision-making. International Journal of Production Research, 59(5), 1557–1572.
https://doi.org/10.1080/00207543.2020.1847341
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021). Designing and Managing the Supply
Chain: Concepts, Strategies and Case Studies (4th ed.). New York, NY: Richard D.
Irwin, Inc.
Sinaga, A. T., & Wangsaputra, R. (2018). The determination of production and distribution
policy in push-pull production chain with supply hub as the Junction Point. IOP
Conference Series: Materials Science and Engineering, 319, 012058.
https://doi.org/10.1088/1757-899x/319/1/012058
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