Magazine Winter 2013

When One Size Does Not Fit All

As a business diversifies, it may need more than one supply chain. Here’s how Dell addressed that challenge.

David Simchi-Levi, Annette Clayton and Bruce Raven Reading Time: 9 min 

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Dell created a new organization to manage the transition to four supply chains, each focused on a different customer segment.

Image courtesy of Dell.

Most operations strategies focus on either efficiency, sometimes referred to as a push strategy, or responsiveness, sometimes called a pull strategy. Either the company seeks operational efficiency and tries to hold down costs across all functional areas, or it focuses on responsiveness and tries to ratchet up speed, order fulfillment and service levels.

Although seasoned operations and supply chain executives understand the difference between efficiency and responsiveness, many are confused about when to apply each strategy. In recent years, more and more companies have been caught in the bind in which Dell Inc. found itself in 2008, when it realized that the highly responsive configure-to-order supply chain that had made its online store the world’s largest channel for personal computers sales no longer fit the needs of some of its fastest-growing businesses: its new physical retail channel, its enterprise sales or even its high-volume consumer products. Facing increased pressure from emerging and revitalized competitors, Dell found that its long-vaunted supply chain was no longer right for all aspects of its business.

In 2008, for example, when Dell entered the retail channel, the company tried to use the same supply chain as its online configure-to-order business. But competition in conventional retail can be more price-sensitive than it is online, and the supply chain Dell designed for online was not optimized for lowest cost. By contrast, what was valued most online — the customer experience associated with the ability to configure the product to exactly what the customer wants — was not needed in the store as most retail orders are large and focused on fewer configurations.

Adding to the challenge, the company faced corporate and public sector clients who were increasingly looking for a complete solution for their IT needs, and in many cases, a solution designed specifically for their organization. This again entails a supply chain strategy quite different from the one employed for online customers.

Clearly, Dell needed to transform its supply chain to serve new customers in new channels with new types of products.

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About the Authors

David Simchi-Levi is a professor of engineering systems at the Massachusetts Institute of Technology. Annette Clayton is a former vice president of global supply chain and operations at Dell Inc., and Bruce Raven is the director of supply chain tools at Dell.

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Comments (6)
Do You Really Need Multiple Distribution Channels?
[…] and in most cases, this is all that is needed. For others, however, it’s a good idea to have two or even three ways of delivering the goods. In some cases, a company’s needs will change over time as it adapts […]
Leanne Huang
Thank you for the interesting article. The distinct analysis on how Dell employed strategies to satisfy various levels of demand uncertainty and customer relationships brought fourth another set of unique insights. Understanding the company's core focuses to optimize the balance between complexity and simplicity, your article clearly detailed how Dell demonstrated synergies between various areas, which I believe is one of the most challenging tasks within supply chain management. Nevertheless, I would also like to learn further about the how the employee training was conducted with its new re-organized supply chains and how the organization of the company was affected throughout the changing processes. 
Again, thank you!
Geetsikha Pathak
Your comment is awaiting moderation.
Thank you for the incredibly thorough analysis on Dell; I knew that Dell had two distinct methods of dealing with demand when it came to online retail versus brick-and-mortar retail.

**I realized the edit for that would be the addition of: I had not known they have such distinct supply chains.**
Geetsikha Pathak
Thank you for the incredibly thorough analysis on Dell; I knew that Dell had two distinct methods of dealing with demand when it came to online retail versus brick-and-mortar retail. 

I'm curious about the authors' takes on emerging e-commerce retail companies, such as ModCloth, who appear to make a lot of their sourcing decisions on direct customer feedback through social media. Lay's did something very similar when they launched their "Do Us A Flavor" campaign, and had their fans and followers on Facebook and other social media outlets to submit, vote on and, in fact, continue to vote on various flavors. 

The founder of ModCloth, Susan Gregg-Koger, makes a constant point to say during interviews that what ModCloth and, as we can ourselves see, other companies are doing is disrupting the traditional top-bottom flow of ideas. There is more and more power going to the customers. 

My question is...do you all feel that this (what ModCloth and others are doing) is a trend that will bleed into other industries, and if so, what would be the implications of such industry transformations for the business analytics field, and to what extent would the field be important?

Warm regards!
Nidal Dwaikat
Very interesting article with a good real-life example that shows how and when to implement different supply chain strategies.  In fact, the case you provided gives me clear and strong understanding of SC strategies. 

Thank you,
Jens Claassen
Interesting article. With customers becoming more educated companies have to evolve their business models. Business stragegy has to look at all value streams including the supply chain.  Business architecture would help to identify the key value propositions and the key enablers and activities. The better understanding should guide the company and define how it makes money in each customer segment.