Supply Chain Excellence

© Dell Inc. - 2003

 Dell’s Product
Portfolio

PowerVault
&
PowerConnect Switches Dell|EMC
Storage
PowerEdge
Servers

Software &
Peripherals Precision
Workstations

Latitude
OptiPlex Notebooks
Desktops

© Dell Inc. - 2003 2 Supply Chain Management

 Dell Facts

Customer Base (Revenues) Revenue by Product

• Desktops = 51%
~80% • Enterprise = 21%
Corporate & • Notebooks = 28%
Institutional ~20%
Consumer Revenue by Region

Global Manufacturing
 Austin, Texas, USA 19%
70% EMEA 11%
 Nashville, Tennessee, USA
Americas APAC
 Eldorado do Sul, Brazil
 Limerick, Ireland
 Penang, Malaysia
~41,800 employees worldwide
 Xiamen, China
Revenue $38.4B (last 4 qtrs.)

© Dell Inc. - 2003 3 Supply Chain Management

 Direct Model

Suppliers Customers

• Continuity of Supply • Best Customer Experience • Product Quality

• E-business • Low Cost Efficiency & • Price for
Collaboration Highest Quality Performance
• Technology Leaders • Partnering/Virtual • Customization
• Low-cost Integration • Reliability, Service
Manufacturers and Support
• Latest Technology
© Dell Inc. - 2003 4 Supply Chain Management
 The Power of Virtual Integration

Technology Services
EMC² BLUECURRENT

Customer
SOLUTION

Software E-Business

• Dell acts as the single point of accountability while focusing on

our core competency – custom-configured computing solutions.
• Seamless integration with best-in-class partners leverages their
core competencies for the benefit of Dell’s customers.
© Dell Inc. - 2003 5 Supply Chain Management
 Inventory Management Experience

100

90

80
Days Sales Inventory

70

60

50

40

30

20
15 X
10
5
0

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Q103

© Dell Inc. - 2003 6 Supply Chain Management

 Procurement Responsibilities….

Quality

Cost Delivery
Worldwide Procurement Regional Materials

Shared responsibility

Separating contracting from commerce

© Dell Inc. - 2003 7 Supply Chain Management
 Continuity of Supply

Intense Focus through:

• Separate internal organizations
• Supported by unique processes and systems
• Looking at a different parts of the inbound supply chain
• Dealing with different people at the supplier
n
egy in
g tio
r at an
n
ecu
St Pl Ex

Time Horizon: Beyond lead-time 3 days to order lead-time 0 to 3 days

Org (people): Worldwide Procurement (6X) Regional Materials (4X) Factory (X)
Supplier Interface: Executive Operations SLC

Low inventory does not equal Supply Issues

But it does equal operational efficiencies…

© Dell Inc. - 2003 8 Supply Chain Management

 Quickly Make Product after Sale = Cost Advantage

Mfr Buys
Components
Mfr Assembles
Product Distributor Gets
Cost of Components

Cost to Product from

Competitors Mfr
VAR Gets
Product from
Distributor Customer Places
Mfr Inventory Order

Dell Procures
Components,
Channel Assembles, &
Inventory Ships
Dell Cost

8 Weeks 6 Weeks 4 Weeks 3 Weeks Today

Ago Ago Ago Ago
Time
Consistent
Customer Immediate Response Lowest
Supply
Benefits Globally
to Customer Needs Cost Consistently

© Dell Inc. - 2003 9 Supply Chain Management

 Velocity = Direct Demand Feedback

“push” “pull”
Buy-to-Plan Build-to-Order

Material requested to build customer orders

Customers
Suppliers

Dell
SLC
Manufacturing

All material is tied to a customer order –

nothing is built without an order.

1) Dell facilities act as Manufacturing Centers, not Warehouses – only inventory needed for next 2 hours of orders is on site
2) Provides direct signal of Dell customer demand for suppliers
3) Dell’s performance to customer orders is directly linked to our suppliers’ level of support
4) Absolute synchronization between manufacturing and sales keeps the process balanced.

© Dell Inc. - 2003 10 Supply Chain Management

 Quarterly Business Review (QBR)

Cost Technology/
Leadership Time To Volume
 Senior leadership  Performance to Targets  Product Leadership
involvement  Structural Cost Analysis  Roadmap Alignment
 Advantaged Pricing  Joint Qualification
 Data driven discussion/  Internet Negotiation

 RTS Predictability
decisions Quality
 Warranty Cost
 Identify actions/  VLRR, 90-day FIR
commitments  Process Capability
 Mutual agreement of  5 Sigma Continuity
Service of Supply
future performance
targets  Corrective Action  Supply Chain Optimization
 Global Support  Capacity/Capability
 Measure and reward  Failure Analysis  Globalization
performance  Quality Metrics  Flexibility

© Dell Inc. - 2003 11 Supply Chain Management

 Continuous Improvement

Business Process Improvement

• Initial Six Sigma efforts started in 1994.
• Formal “belting” process in manufacturing - 1998.
• Company-wide program started in 2000.
• Master Black Belt focused on supplier BPI beginning 2001.
• Foundation for Dell’s Winning Culture Initiative.
1. Define
• Over $1B saved during life of program … What’s the problem?
Who can fix it?
What’s the process?

6. Report 2. Measure
Tell others. BPI Can I explain a problem
with data?
Certification Levels
• Yellow Belt 5. Control Model 3. Analyze
Did we improve?
• Green Belt Did we save money? What’s the real problem?
• Black Belt
• Master Black Belt 4. Improve
Let’s improve
the process!

© Dell Inc. - 2003 12 Supply Chain Management

 Low Cost Leader
Dell consistently provides superior value

Operating Expense Over Time (% sales)

28%

26%
Dell’s low operational costs mean
lower prices for customers: 24%

• State-of-the-art supply chain 22%

management 20%
• Efficient technologies: 18%
• Dell.com
• Support.dell.com 16%
• Globally available Premier Pages
14%

12%

10%

8%
Q1 CY02 Q2 CY 02 Q3 CY 02 Q4 CY 02

© Dell Inc. - 2003 13 Supply Chain Management

 Dell’s Direct Model = Perpetual Success

Industry's most
efficient
Efficient procurement,
Pass cost savings Model with Lowest
on to customer Cost Structure manufacturing
and distribution
process
Competitive
Pricing

Help
Drive
Supplier
Business

Drives Lower cost drives

Competitive pricing Market Share Increased demand
ignites demand

© Dell Inc. - 2003 14 Supply Chain Management

 Dell’s Strategies for Success

• Organize around Customers – “Be Direct”

• Manage Business Fundamentals – cash\expenses
• Stick to Core Competencies – leverage partners
• Focus on Velocity – compress time
• Continuous Improvement – cultural mandate
• Simplify Complexity – “Easy as Dell”
• Critical Ingredients = People and Processes

Structural advantages – part of Dell’s DNA …

© Dell Inc. - 2003 15 Supply Chain Management

 SCM@Dell - Velocity Matters!

Thanks!

© Dell Inc. - 2003 16 Supply Chain Management