Management Control System on Dell Essay
The traditional value chain in the personal computer industry was characterized s “build-to-stock. ” PC manufacturers, such as IBM and HP, designed and built their products with prefigured options based on market forecasts. PC Manufacturers controlled the upstream part of the value chain, giving the downstream part of middlemen. Two trends In the early 1 offs allowed Michael Dell reengineering the PC Industry value chain, first corporate customers were becoming Increasingly sophisticated and therefore did not require intense personal selling by salespeople.
Second the different components of a PC became standard modules, permitting mass customization in PC configuration. Dell Computer’s direct model departed from the industry historical rules on several fronts : The company outsourced all components but performed assembly. It eliminated retailers and shipped directly from its factories to end customers. It took customized orders for hardware and software over the phone or via the Internet. And it designed an integrated supply chain linking Dell’s suppliers very closely to its assembly factories and order-intake system.
Dell also expanding Its market to consumer electronics market. The declining Roth of PC business and convergence of dealt devices acted as catalysts for many computer manufacturers to enter this market. Before getting Into a product
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By about November 2004 about 15% of Dell’s revenues came from the Consumer. In 2005, Dell ranked as America’s most admired company by Fortune because very sixth computer being sold in the world was a Dell Machine. Dell revenue and financial stature growth significantly than its competitor, that’s why Dell was no longer the underdog of the PC Business. Instead of resting its laurels, Dell realized that the PC Business was slowing down and chose to build a diversified IT portfolio.
Dell moved into servers and storage, mobility products, services, software peripherals, and also challenged the dominant player in those markets. Management Systems Turning Michael Dell’s concept into reality meant rallying a large and dynamic organization around a common purpose and measuring its performance by relevant and concrete measurements (or metrics). Michael Dell engaged with Pain & Company, Inc to develop a set of metrics to Judge business unit performance.
Michael Dell insist it was all about assigning responsibility and accountability in the daily decision making to the all line manager. All decision making process must be based on facts and data, that’s the main reason why metric measurement is important. Dell recognized early the need for speed, or velocity, quickening the pace at every tepee of business. The company learned that the more workers handled, or touched, the product along assembly process, the longer the process took and the greater the probability of quality concerns.
Dell began to track and systematically reduce the number of “touches” along the line, driving it to zero. The company took orders from customers and fulfilled them by buying and assembling the needed components. Customer got exactly the configuration they desired and Dell reduced its need for plants, equipment, and R n D. As a result, Dell turned a product business into a arrive industry. The primary financial objective that guided managerial evaluation at Dell was return on invested capital (URIC).
Dell’s scorecard included 10th financial measures (URIC, average slipperier, component purchasing costs, selling and administration costs, and margins) and non financial measures (component inventory, finished goods inventory, accounts receivable days, account payable days, cash conclusively, stocks out, and accuracy of forecast demand). The scorecard was generated on real time basis, and relevant performance measures were broken down y customer segment, product category, and country.
Dell could perhaps match a startup company in its informality and execution speed and energy. Dell used its structure as a competitive advantage and localized decision making. The efficient channels of communication and the accessibility to the management ensured that even Junior employee’s ideas, which could benefit the company, got implemented without dampening effect of bureaucracy. Similarly, the senior management also harvested the speed of the flat structure to quickly roll out strategies and to respond to the competitive markets.