Dell's e-system: Order fullfillment process

Fullfilling orders
In order to support the direct sales model Dell utilizes a build-to-order manufacturing system. Dell's e-commerce system is integral to the manufacturing of computers and provides a mechanism through which orders flow from the customer through internal systems and onward to Dell's suppliers and vendors that provide components or services required to manufacture computers.

Dell organizes it's manufacturing by region, with one or more assembly plants to service each regional market according to Kenneth et al[2]. Kenneth describes this part of Dell's I.T. system thus, "A key to manufacturing is managing inbound logistics with suppliers and contract
manufacturers. To have the parts it needs at the right time to assemble a PC, Dell requires
suppliers to hold inventory in warehouses within a 15-30 minute drive of its plants. Dell then
informs the warehouse when parts must be replenished, and they are trucked to the plant, where they are pulled off of the trucks as needed. When a PC is fully assembled, it is sent to an
outbound logistics hub where it is joined with the monitor and peripherals so that the complete
system arrives at the customer’s site together. All of these logistics are coordinated by Dell
through its internal IT systems and via electronic linkages with suppliers, its own logistics hubs, shipping companies, and distributors who handle third party items."

It is clear that the e-system employed by Dell, for the purpose of facilitating a virtual company is an impressive and complex use of information technology. Within the order fullfillment subsystem, control of ordering and logistics both internally and with suppliers ensures that the company has high levels of control over stock levels, shipping schedules and so on.

How does this benefit Dell's bottom line? By utilizing a direct sales and build-to-order model, Dell does not have to build up a large inventory of components or completed goods, either internally or within retail sales channels. Typically, Dell has an inventory turnover rate of approximately 60 times per year, compared with only 15-20 times a year for a typical indirect computing manufacturer. Kenneth[2] notes that this is key point, computing equipment can lose value significant value whilst waiting to be sold, especially if new product or component models are forthcoming.

References
[1] Kenneth Kraemer and Jason Dedrick, Dell Computer: Using E-commerce to support the virtual company, http://www.crito.uci.edu/git/publications/pdf/dell_ecom_case_6-13-01.pdf