Dell plans ‘fundamental change’ in logistics strategy

April 28th, 2010 by Renu Chopra Leave a reply »

Computer firm Dell is planning to revolutionise its supply chain by transferring huge numbers of shipments from air to ocean, according to new reports.

The Journal of Commerce reveals that the firm, which pioneered the build-to-order business model, is planning a “fundamental change” in its logistics strategy which could “set a touchstone for distribution in the technology sector”.

“Dell’s diversification from strictly direct-to-consumer sales to include more retailers has led to increased outsourcing and a recent announcement to begin to move from costly air to slower ocean freight.

If it is successful the practice will likely become more common, as the company strives to compete with rivals such as Hewlett-Packard, which replaced Dell as the world’s No. 1 computer maker and relies heavily on ocean shipping,” the Journal of Commerce stated.

However, the publication went on to caution that shift in Dell’s core supply chain management business model comes with risks – damage, order cancellation, product value decline during shipment – as well as higher inventory carrying costs: “Dell’s inventory turns – a formula dividing the cost of goods sold by its average quarterly inventory – are its shining star and one that stands to fade with a longer supply chain,” it noted.



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