News Story on Dell.
Sorry if this has already been posted...
November 02, 1998, Issue: 739
Section: News & Analysis
Dell Links Virtual Supply Chain
David Joachim
Round Rock, Texas - Beneath the rhetoric about direct vs.
indirect sales, Dell Computer's stunning success comes
down to execution. Churn out orders, keep costs low.
Simple.
That laser focus on execution is feeding the next wave in
Dell's electronic-commerce strategy. Already the top
online seller of PCs, Dell is constructing an extranet to
automate interactions with suppliers, service partners and
customers. When completed, Dell will have one of the first
fully Internet-enabled supply chains.
Dell's online success is well documented. It is on pace to
record more than $2.5 billion in Web orders this year, or
15 percent of overall sales. The company's goal is to each
the 50 percent mark by 2001, and CEO Michael Dell
doesn't see a limit to that growth.
"If there is a saturation point out there, it's not obvious to
us," Dell said. "We're thinking the saturation point is 100 percent."
The latest e-commerce initiative is taking place behind the
scenes. Dell's supplier extranet, in limited trials now, will
apply Internet technology to automate the same
build-to-order system that has fueled Dell's
industry-leading growth in sales and profits.
Dell has rolled out custom Web sites to 30 of its largest
suppliers, which include Intel for microprocessors, Seagate
and Quantum for disk drives, and Sony for monitors. The
sites give both Dell and its partners real-time access to
ordering and manufacturing systems, so that replenishment
can be tied more closely to orders. It is a potentially more
efficient system than relying on daily or weekly batch order
transfers, because that process relies on a degree of
guesswork.
"It's kind of a modern version of what the aerospace
industry has been doing, only they've been using paper,"
said analyst Vernon Keenan at Keenan Vision Inc. "This is
another example of how the computer industry is leading
the charge in the use of the Internet to link partners."
Quality assurance also is a consideration. Parts that fail
during production or after the sale are tracked on the
extranet and that data is fed to the parts manufacturer. Dell also will mandate that suppliers measure their
assembly-line reject rates and push that information to the computer manufacturer.
"We want to be more proactive about quality concerns,"
said Lance Van Hooser, director of Internet commerce at
Dell. "It's more effective to get failure information from
their lines" rather than find defects after they appear in
finished products.
Dell also is combining packaged applications from
Microsoft and others with its homegrown software. That
will help Dell integrate its planning and manufacturing
systems with those of suppliers and create a "shared
environment where information flows to our respective
core systems," Van Hooser said. Two unnamed suppliers
already are piloting such systems, he added.
Officials would not disclose a time frame for completion of
the supplier extranet but said the system will be accessible to all of Dell's 1,000 suppliers.
Dell also is Webifying interactions with its service
partners, who are contracted to perform on-site repairs.
One application would use Dell's SMART systems
management software to simultaneously alert internal
systems managers, Dell and its service partners such as
Unisys Corp. or Wang Global when a failure occurs at a
customer site.
This way, data about the problem can automatically be
attached to the customer's record, giving a service rep a
head start when the service call comes in. Or for more
serious glitches, a technician can be dispatched without
waiting for a call from the customer.
"The challenge is to make the problem easier to diagnose
and repair without ever going to the site," said Michael
Lambert, Dell's senior vice president for enterprise
systems. "We want to make the systems smart enough to tell
you what's wrong."
Dell called off a more aggressive tactic that used branded
push channels bundled with each machine to push patches
and driver updates to customers (InternetWeek, Sept. 1,
1997).
"Customers did not like the proactive approach because
they thought it was intrusive," said Robert Langer, director
of Dell Online Americas. "The lesson we learned is that
you don't want to shove things in people's faces."
Bert Dumars, marketing manager for systems management
products at Dell, said customers prefer to be alerted about
software updates via e-mail and manually download them
to internal servers, where they can be tested and deployed
by the IT department.
On the customer end, Dell now has 8,000 business
customers placing orders through specially tailored
Premier Pages. That represents about 65 percent of Dell's
online sales, whereas the majority of sales were to
consumers less than a year ago. Work is under way to
integrate those sites with customers' enterprise resource
planning and procurement applications to automate order
processing.
The supplier, service and customer extranets also could be
used in conjunction with one another. For example, they
could allow Dell, its suppliers and service partners to
pinpoint whether the hardware, operating system or
application is at fault during a failure. Lambert called this a
"virtual support organization." He also noted that 75
percent of support calls today are about software problems.
In addition to the goal of bringing the online business to 50
percent of overall sales by 2000, CEO Dell said he wants
to bring online sales in line with the company's overall
revenue mix of 88 percent from business and 12 percent
from consumers.
Consumers "have the lowest barrier to entry. You just get
out your credit card and go typing away," Dell said. "For a
large company, you have this process of convincing the
customer that there are benefits to electronic ordering over
physical ordering."
If nothing else, Dell's extranet ambitions are a sign that the
bar is rising in the battle to win enterprise customers.
Copyright ® 1998 CMP Media Inc. |
