Dell's supply chain transformation - John Gattorna

dialogueDell’s supply chain transformationHistorically regarded as one of the great innovators insupply chain management, Dell has undertaken a deeptransformation of its supply chain that includes shifts froma regional to global structure and from the famed direct-onlymodel to multiple channels. Annette Clayton, vice president,global operations and supply chain, talks to TurlochMooney about the new supply chain model that has beenthree years in the makingKey objectives of the new model– Move from a one-size-fits-all model to asegmented supply chain portfolio– Create globally, standard yet flexibleprocesses that leverage partnerships– Align to customer priorities around speed,choice, and cost– Create infrastructure that is responsiveto the changing needs of the businessWould you tell us how long the transformationwill take to implement in full, and how you willmeasure its success?The overall transformation has been a three-plusyear process. We are already seeing the benefits ofthe transformation. The process redesign is aboutcreating a culture and is really never done. Wecontinue to work to create a Lean culture.Ultimately it boils down to delighting customersas shown by the corporate Net Promoter Score.There are a variety of more detailed measuresthat track our ability to predictably deliver globalsupply chain capabilities at targeted total landedcost levelsOverview of changes taking place– Regional Global structure– Direct only Multiple channels– Variabilise cost structure by expandingour partner network and leveragingpartner capability– Global IT infrastructure optimisation– Segmentation of the supply chain– Optimised product and processcomplexity– End-to-end process redesign– Aligned internal cost incentives– Corporate shift to solutions focus30Supply Chain Asia January/February 2011

dialogue• Customers: With specific needs will choose configurableproducts Who want to use Dell as a trusted advisor willtend to choose pre-configured products Who value speed will choose from finishedgoods inventory or planned productionproducts and purchase them either director through the channel• Each supply chain will leverage the same globalpartner network, tools, and general processes.Targets for metrics will be different based onthe objective of the supply chain.What are the key challenges in overhauling yoursupply chain system in this manner and how areyou overcoming these challenges?Key challenges in this transformation includethe cross-functional and cross-organisationalnature of the change and the shift in skill set andculture required. We are tackling these throughstrong executive sponsorship, dedicated changemanagement, and cross-functional coordination toredesign processes end-to-end.How have the changes affected the organisationalstructure of Dell? How are they affecting yoursupply chain partners?As part of this transformation, Dell has transitionedfrom a regional structure to three global customerbusiness units – large enterprise, public, andconsumer/small & medium business. As part ofthe transformation, Dell’s supply chain investedin skill sets and capabilities. We created aroadmapping and phase review process to managechanges to the supply chain. As part of that wecreated a dedicated global supply chain strategyand enablement team. Additionally, we havedramatically changed how we interact with eachbusiness unit through our sales and operationsplanning transformation.Does the new model improve the CSR andsustainability capabilities of Dell? If so, in whatways?Dell is working to make ‘being green’ easy and costeffectivefor our customers. We offer free recyclingof PCs and related accessories to consumersworldwide.We have set goals to make our packagingsmaller and more recyclable. We are alsointroducing more sustainable packaging materialssuch as bamboo. We have reduced the energyconsumption of our desktops and laptops by 25percent since 2008. We source more than 25percent of our global electricity needs from clean,renewable energy.The structures that we put in place to managechange to supply chain capabilities will only helpus continue the focus and speed up responsivenessin this area.Dell is regarded as one of the great innovatorsin supply chain management. Do you think yournew supply chain model continues the traditionof supply chain innovation and if so, why?Absolutely, but in a different way. Dell wasoriginally heralded for creating a simple, powerfullyadvantaged model with just-in-time inventory andfull configurability. Supply chains must supporttheir business strategy. Dell’s business hasdramatically changed in the last decade and willcontinue to do so; our supply chain will follow suitand evolve, too.Dell’s innovations going forward will be in thespeed at which our supply chain can adapt tochanging customer and business priorities.Would you provide some details on the currentstructure and make-up of your supply chainoperations in Asia?Dell’s overall supply chain strategy is global. Aswith most of our industry, much of our $38bnin annual spend ultimately comes from Asia. Wecurrently have (including its ODMs) manufacturinglocations in multiple cities across Asia (Chennai,Penang, Shanghai, Xiamen, South China, Yantai,Taiyuan, and most recently announced Chengdu).We also use 12 distribution sites across the AsiaPacific and Japan region.How do you see this structure changing overthe coming years and what are the key factorsdriving this change?We are pleased with our global structure comingout of this change. The major factors drivingany future changes will be demographic shifts,macroeconomic considerations, and ultimatelywhat provides the best value and capability for ourcustomers.32Supply Chain Asia January/February 2011