Present Situation of Chinese Supply Chain Management

CHAPTER 1

INTRODUCTION

The dissertation research is dedicated to the exploration of the Dell (China) Company Limited supply chain management. First of all, it is important to rely to the background of the company - it is the Chinese leader in the manufacturing of the computer systems. The company has been established in 1998 and its head office is located in Xiamen. Also, there are representatives in Shanghai and Dalian.

The investigation of the supply chain management would be carried out in the light of the following issues: internal supply chain, suppliers’ relations and customers’ relationships. The core purpose of the dissertation research is outlining the key advantages of the effective supply chain management for the enterprises, located in China and for Dell Inc. in particular.

The concept of the supply chain management would be discussed in order to evaluate the role of its effective organization, development and practical implementation and as a result, the competitive advantage of the company in the form of the value-added practice for Dell would be discussed.

The dissertation research is based on the principles of the effectiveness of new information and communication technology rationality and the effectiveness of their practical implementation. The additional attention in the research would be paid to the fact that the innovative technologies should be introduced into the activity of the companies, which are directly interrelated with the high technologies and technological innovations- as the core competitive advantage in the particular industry (Saunders 2003, p.346).

Stanford-Smith and Kidd (2000, p. 399) prove that new age of informational technologies implies the constantly changing business environment in the area of computer technologies and that is why winning the competition in this case is the key objective even while comparing with all other factors of running business. That, in turn, means that all the participants of the market should develop their business strategies, which would guarantee the durable competitive advantage of their products (Rudd, 2005, p.256).

That is why the core aim of the dissertation research is identifying the extent of contribution of the supply chain management and the customers’ relationship management, in particular, to the competitive advantage of Dell Inc. and to the reaching of the leading positions at the current market of computer technologies. The evaluation of this role would be carried out on the base of determining and evaluation of the company’s competitive edge.

While taking into account the fact that the supply chain management (SCM) is  very important factor for the e-business, it is important to pay additional attention to the fact that it may be applied as the main tool for the large market share securing. That is why the company, which operates in the area of e-business, should be focused on its specific niche and on procurement, distribution and delivery strategies, in particular, and also it should pay additional attention to the differentiation and cost leadership.

It is obvious that the activity of each company is based on the supply chain management and its success depends on the way how this supply chain contributes to the quality of the product or service and on the way how the management of the company makes sense of the process. While taking into account the Dell Inc., it is possible to say that this company has reached its priority at the market because of effective costing and delivery planning and the customers’ care relationship (Phillip 2000.p.242).

It is important to make emphasis that the main competitor of Dell Inc.- Hewlett Packard (HP) in the timeframe 2006-2007 has occupied bigger share of market due to the fact that it has become the top manufacturer and distributor of the PC in the whole world. In 2008, the situation has changed radically due to the fact that the model of direct selling, which has been the pioneering, has not met all the requirements of the competitive market anymore and the model, developed by Dell has become more effective. It has provided Dell with  possibility of effective managing the supply chain and the drawbacks, which have been inherent to the HP model of direct sales having led to the lessening of the competitive advantage of the company.

Such factors and limitations of the model as low level of customers’ care and service and the lack of new and innovative products, which have been evaluated by Govindarajan and Gupta (2001), have been applied as the core directions for development of the new unique model for the Dell Inc. This model has assisted in reaching the following advantages: developing the interrelations between the suppliers and customers through the integration process in the convenient and efficient process of purchasing and improving the quality of delivering process and its speed, in particular (Willcocks 2000, p.314)

CHAPTER 2

LITERATURE REVIEW

 In order to carry out the dissertation research, the literature covering the area of researched objectives has been investigated. According to opinion of William Hoover (2001), reaching of the leading positions by Dell Inc. in China has been done with  help of its value-adding activities. As an example, author has considered the efficiency of build-to-order product configuration, which should be added to the currently existing marketing challenges of the company. This approach may be supported by the fact that the customers’ preferences are constantly changing and also by the fact that the new form of the purchasing patterns occurs. As a positive outcome of such approach it is possible to consider the value-adding activities, which increase the volumes of sales and reduce the manufacturing costs and as a result, reduce the prices of the products (Lucas 2002, p. 89).

The next feature, which adds Dell the competitive advantage at the market of computer technologies is the direct selling, which, in turn, implies the following issues: carrying out the sales through the catalogues  not requiring to obstruct in-store inventories and to create the separate bond between the product selection and inventory.

Additional option, provided by Dell to the customers is the possibility of online PC retailing - choosing the product through the “configuration” software and providing the clients with the online technical support in the case if the consultation is needed.

According to the findings of Philip and Thomas (2000) the elaborate and sophisticated decision-support software has been developed by Dell, and that, in turn, has provided the company with the possibility of troubleshooting the problems by own technical staff and  implementation of  new decisions into the supply chain of the company.

Kraemer and Dedrick (2002) consider that the Company has become the global phenomena after entering the electronic industry in mid-1990s, and that issue, in turn, has provided Dell with the possibility of taking an advantage in serving the clients in the competitive industry. Authors have considered that “market potential is the driving force behind Dell’s general location decisions, while costs and capabilities are the driving forces behind the specific location of Dell’s activities”(Dedrick 2005, p.125). That, in its turn, means that Dell has developed the receptive business model and the possibility of serving the markets with its effective cost structuring and production capabilities having been successfully implemented into the practice

According to the opinion of Frederick Betz (2001), there are three strategic possibilities of development of the information strategy for such companies as Dell. They imply the following issues: using of the innovative electronic means in order to reach the highest effects; information capability upgrading and improving the system of information flow and integrating it with the challenges of business. While taking into account Dell, in particular, the main focus of the company is direct selling to large companies and also collaboration with the outsourcing PC assembly, for these purposes the just-in-time manufacturing principle being applied. In addition, the adaptation of the Internet as the major business channel, allowed Dell to improve its model of direct sales.

Kraemer and Dedrick (2001) consider the Information Technology (IT), virtual corporation and electronic commerce as the main tools for the superior supply chain management. The next success factor of Dell is the assembling the computers from the standard components and parts and such approach is not widely applied in the case of focusing on the customer relationship. The new complex of the web relationship, which has been developed by Dell as a prompt respond to the demands of the consumers’ database market has been one more successful innovation of Dell.

That is why it is possible to make the conclusion that Dell’s strategy is the integration of the three technical aspects, which have been developed by Kraemer and Dedrick. The main details of these strategies are the following: developed infrastructure of Dell Inc., online sales and free online support of the clients.

While taking into account the fact that initially online sales have been implemented into the practice in the US and after that, in China and worldwide, the company has faced with such several problems as inappropriate use of credit cards, problem with delivery and delays in delivery and also some the strict regulations of direct sales in some countries. At the same time, the positive factor for Dell Inc. in China is that the online selling strategies are supported by the well-developed infrastructure of Dell in the country and also by the various options of online support. The core success factor of practical implementation of online sales strategy by Dell Inc. in China was the globalised approach towards online trade, which has been incorporated with the local customs of online trade and with the basic trends of trade in China.

The main emphasis has been made by Kraemer and Dedrick (2001) on successful integration of suppliers’ partnerships with mass customization and focusing on the needs and demands of customers. In other words, such integration may be considered as just-in-time and coordinating IT. As an example, authors consider the virtual cooperation between the traditional business boundaries, including the following participants: manufacturer, suppliers, partners on service and support, and finally, the end users of the Dell Inc. production and services.

In addition, the World Wide Web has been used by Dell as an effective tool of internal processes improvement. For example, it has been applied for the ordering, delivery and support processes assessment and for the customers’ care and support programs. The main idea, which has motivated the senior management of Dell Inc. for the implementation of the means of Internet, was the idea of the information diffusion and the advantages of the simplified process of information exchange among different departments of the Company and in addition - staying in touch with the suppliers and clients.

As a particular example, authors consider sharing the information with the clients via the implemented system of logs in the web site interfaces. Such innovation allowed the Dell Inc. to determine the purchasing behavior of the customers, the patterns of the current demand and the level of the customers’ satisfaction. While applying the tool of direct contacting with the customers, top management Dell has got the opportunity of getting the information about the way that their clients purchase the computers and to make the forecasts for the further demand trends and to develop or to improve their production, while taking into account the information, obtained in the process of direct contacting.

While taking into consideration the information, offered by the National Research Council, the collective performance is taken into account by Dell in the processes of creation, manufacturing and distribution of the production to the end consumer. That is why the general strategy of Dell may be described by the following manner: optimized integration of supply chain for meeting the needs of the customers and suppliers and keeping the quality of the products and relationships with suppliers and customers on the highest level (National Research Council 2000, p.27).

In recent years, the integration of the supply chain has taken its place in order to improve the total performance and to focus and to coordinate the relevant sources. As a result, it is possible to consider the benefits of the company - procedural and functional synergy increasing, prompt reaction on the changes at the market and competitive advantage in the industry (National Research Council 2000, pp.27-33).

There are both core and non-core activities in the Dell Inc. All the activities, mentioned above, belong to the core activities of the company and the non-core may be represented in the following manner: they imply furthering of the financial managerial and informational control over all operations, carried out in the company.

Practical implementation of the IT sourcing in Dell Inc. has started from the business imperative and the top management of the Company has made an emphasis on the capability and cost, while applying the tools of delegation of particular functions - both internal and external in order to assist the value-added outsourcing, multiple suppliers, ‘co-sourcing’, spin-offs, equity holdings etc. (Willcocks et al. 2002, pp. 174-177).

For concluding this section, it is possible to state that imitation of the  Dell existing business model is not an easy task for the competitors due to the fact that its implementation into another company, which operates in the same field, requires specific knowledge of the company’s organizational structure, its strategies, principles of work etc. According to the opinion of Henry Lucas (2002, pp. 105-110), the current business model of Dell is mainly influenced by the Internet and by the strategy of direct ordering. That, in turn, has assisted effective implementation of the above listed directions of innovative development into the practice.    

CHAPTER 3

OBJECTIVES

The core purpose of the dissertation research is the evaluation of the impact of the innovative approach towards the supply chain management development in such computer technology manufacturers as Dell Inc. The additional attention would be paid to the fact how the effective SCM has assisted the company development and reaching the leadership positions at the market of computer technologies, which is changeable and has a high rate of competition.

In the scopes of this dissertation research, the major activities of the Dell Inc. supply chain management would be investigated.  The core aspect of investigation would imply the customers’ relationship management, which is  very urgent topic for the companies, operating in China and Dell Inc., in particular. Even while taking into account the fact that Dell Inc. is the leader in its industry, there is incessant presence of competitors. In addition, the price war taking its place and constant innovations in the computer technology industry may jeopardize the competitive advantage of Dell Inc in China. The main reason for that may be the high competition in the industry of IT. In addition, innovations in the area of high technologies determine the longevity of the products at the particular market and the demand for these products. To my opinion, the core aspect of advantage at the market of IT is the reliable technology. Only in such a case Dell will have the possibility of occupying the leading positions at the market (Kraemer 2001, p. 236).

The current situation in the supply chain management of the Dell Inc. would be investigated in the scopes of this dissertation research. In addition, the background of the company would be considered and the internal problems of the supply chain management would be investigated and evaluated. The main source of information would be the online statistics, official web site of the company and the economical studies, concerning the supply chain management in Dell Inc (China).

Another aspect of research in scopes of this dissertation will cover the problems of relationships with the customers and developing the effective tools for managing these problems. Also, the strategies to be adopted in the company would be developed in the end of the research. The core purpose of the above listed strategies implies getting the competitive advantage and keeping the position of an important participant of the computer industry.

Finally, the research would be dedicated to the analysis of the main factors, which make their impact on the SCM implementation and the customers’ relationship management, in particular, to the daily activity of Dell, while applying the following tools as e-commerce and eventual bench marketing in order to develop the effective guideline for the effective SCM in the industry of computer technologies (Govindarajan 2001, p.358).

Generally, the core purpose of the dissertation research is investigation of the internal processes at Dell in the light of the main components of the supply chain management and the customers’ relationships, in particular.  To my opinion, the importance of the customers’ relationship management role and function identification may be considered as the basics for getting the competitive advantage in the industry of computer technologies in China.

The particular importance of the dissertation research is developing such pattern of the business environment, which may encompass the core functions of the supply chain management. That is why the main aim of the dissertation research is developing the model of the maximally effective supply chain management for the Dell Inc. in order to make the contribution to the competitive advantage of the organization, located in China, while taking into account the current trends of making business in this country. That is why the expected contribution of this research is addressing the main problems, which currently exist in the Dell supply chain and according to these problems, it is to develop the set of strategies for the corporation, which, in turn, would result the process improvements and would assist in maintenance of the highest level of motivation for the personnel, employed in the organization (Hoover 2001, p.15).

Finally, I would like to pay additional attention to the fact that the main direction of the dissertation research paper would be dedicated to the customers’ relationship management, as one of the three major activities of the supply chain management.

 
CHAPTER 4

METHODOLOGY

The methodology of the dissertation research would be considered in the light of five following aspects: research perspective, research perspective, research design, data collection, and also scope and limitations

4.1 Research Perspective

Saunders et al. (2003) define three components of the research perspectives, i.e. the positivist perspectives, the interpretivist ones and the realistic approach. This dissertation research would be developed in accordance with the basic rules of the interpretivist approach, which implies in the continuum investigation of the research questions. Such a choice may be supported by the fact that the nature of the question is the descriptive and that is why the fundamentals of the Dell Inc., supply chain management would be described. The main emphasis of the research would be made in distinguishing the contribution of the existing SCM to gain the competitive advantage. The additional attention in the process of research would be paid to the pros and cons of the existing in Dell model of direct sales and the critical evaluation of the e-business effectiveness for the Dell would be carried out.

4.2 Research Perspective

While taking into account the fact that the dissertation research has got the descriptive nature, its core aim is representing the facts about the current situation in the supply chain management in Dell Inc. China. In addition, the conditions, systems, and events, based on the opinions of the respondents would be also investigated in the process of the research (Creswell 1994, p.58).

Finally, the current trends in the relationships with the customers in China, i.e. the process of interrelation, the impacts of effective interrelation for the company and the beliefs of the clients would be taken into account in the process of developing the suggestions for the current situation in the Dell supply chain management improvement (Danhof 1969, p.14).  

4.3 Research Design

The multi-method approach would be applied in the dissertation research for the pertinent data collection. It is possible to consider two advantages of such approach: first of all, according to As Saunders et al. (2003), different methods may be applied for meeting several goals and from the other hand, the possibility for triangulation occurs. Cross sectional approach would be applied for the research due to the fact that the data would be collected for analysis of a particular case- the Dell Inc. China supply chain management analysis.  The -structured interviews, questionnaires, analysis of the documentation and the structured observation would be carried out for enlarging the scopes of the research and for achieving the highest level of its objectiveness and validity.

For this dissertation research, the survey strategy has been chosen due to the fact that it enables gathering the large amount of data from population (Saunders et al. 2003, p.569).

 The questionnaires include two parts. The first part  covers the basic information about the researcher. The second one includes eight categories. The categories are developed in accordance with the foundations of the previously reviewed literature (Betz 2001, p.146).

Another method being applied for the research is the case study method, which in turn, implies the “strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence” (Robson 2002, p.159). The practical implementation of the case study would imply the telephone interviews due to its convenience and low costs.

4.4 Data Collection

For the data collection in the dissertation research both qualitative and quantitative approaches would be applied. The qualitative data would be collected from the interviews and questionnaires which would be developed for the operating in supply chain employees of Dell Inc, China. The qualitative data imply the evaluation of the opinions, beliefs and behavior of the personnel even while taking into account the fact that it is not possible to measure the above listed categories numerically (Creswell 1994, p.56).

In the light of the qualitative study both primary and secondary data are analyzed in the process of research. The primary source of information implies the direct interviews and questionnaires. Such data would be applied for developing the detailed definitions of the terms, which are applied in the research.

The secondary sources of information imply the online information, publications in scientific journals and the related studies in management and corporate management, in particular. For this dissertation research using the secondary sources of data is more effective and convenient due to the fact that it is already organized, classified and condensed.

4.5 Scopes and Limitations

The research would be centred on the supply chain of Dell, and its competitive advantage. All the business aspects, which are related to the supply chain management, would be also investigated in the light of the central idea. The incorporation of the aspects, which concern the supply chain management inside Dell and the way of achieving the set objectives of the revitalization plan, would be investigated in the scopes of the dissertation research.

Finally, the impact and the efficiency of the current supply chain management for the relationships with suppliers and customers would be investigated in order to focus the dissertation on customer relationship management.