Case study: Competitive Advantages in Dell Company DELL Computer is well-known for its ability to mass-produce computers that

are customized to a cus-tomers order, a production and operations process known as mass-customization or, in a valuechain context, a build-to-order (BTO) strategy. The ability to build to order depends on how well a company can efficiently meet customer demands at each stage of the value chain. At Dell, this ability depends on computer systems that link customer order information to production, assembly, and delivery operations. At Dell the BTO process begins with receipt of the cus-tomer order from the Internet, fax, or telephone. It takes approximately one day to process the order and for production control to ensure that the necessary parts are in stock. Assembly and shipment takes another day, and delivery to the customers home or office takes a nal 1 to 5 days. The value chain in place at most rm assumes a make-to-forecast strategy . That is, standard products are produced from long-term forecasts of customer demand. Thus the primary activities of the value chain move from inbound logistics to operations to outbound logistics and then mar-keting and sales, all based on projections of what customers will be buying and in what quantities. A make-to-forecast strategy offers efficiencies in production, but if the forecasts are inaccurate, as they frequently are, the results are lost sales (inadequate supply) or heavy discounting to move excess product (oversupply). Then the bottom line is, literally, less prot. Another major disadvantage of the maketo-forecast strategy is the inability of the rms to track ongoing changes in customer demand. Dells value chain moves the marketing and sales activity forward to the front of the value chain. In its build-to-order strategy, Dell assembles the product only after the customer has placed the order, so marketing and sales comes rst. The primary disadvantage of the BTO strategy is system sensitivity to short-term changes in cus-tomer demand. For example, if a particular computer com-ponent suddenly becomes wildly popular or temporarily unavailable, the standard two-week supply in inventory may diminish fast and customer orders will not be com-pleted on

time. A successful build-to-order strategy offers companies like Dell numerous benets in process, product, and volume exibility. For example, customer requirements are linked directly to production. As a result production decisions are based on up-to-the-minute customer demand, not long-range forecasts, which can be wildly inaccurate. This increases managements knowledge about trends in the marketplace and decreases inventory holding costs.BTO also offers partners in Dells value system increased visibility to the demand and ow of goods. As noted in the text, understanding this entire value system can give additional insight and opportunities for competitive advantage. In addition, the support structures for BTO are naturally more exibile, creating a higher sense of responsiveness within the rm and a more exible and agile company. One outcome of such exibility is that adjustable price and sales incentives can be used to manage demand levels, rather than reactively discounting excess stock. Finally, be-cause the customer gets exactly what he or she wants, rst-time customers are likely to become repeat customers and recommend Dell to friends and colleagues. Executing a build-to-order strategy isnt easy, as many companies have found out. Not only must interconnected information systems be built, but BTO frequently requires a change in organizational culture, managerial thinking, and supplier interactions and support. Inevitably the process begins by acquiring a better understanding of customer demand; then improvements in information ow will produce the ability to increase responsiveness in all areas of the value chain. QUESTIONS:1. Analyse value chain model in Dell Company. 2. What is BTO strategy? Explain the different strategies adopted by Dell Company to attract more customers. 3. Understanding this entire value system can give additional insight and opportunities for competitive advantage. Explain.