Dell Case Study

About Dell
Dell Computer Corporation was founded in 1984 and has achieved record sales and profit growth in the past 22 years of operation. The secret to Dell’s success is their direct model which has focus on low cost, direct customer relationship, and virtual integration. This gives them competitive advantage in modern world business. Dell’s focus is direct sales to consumers and companies over the phone and through Internet sales. Dell does all its business via online. Although, recently it has partner up with few large retailer to sale some of its standard products.

1.) What is customer value?
Customer value is perhaps most important for any organization. In past, customer service was viewed as “satisfaction”. In modern world that view has been extended to “value”. In other word, the role of customer service has been evolved from satisfaction to value.
“Customer value is the measure of company’s contribution to its customer, based on the entire range of products, services, and intangibles that constitute the company’s offerings.” (Simchi, Levi, and Kamisky, 2003) Further more, customer value is the way customer perceives the entire company’s product, service, and intangibles. This perception can be broken down in to following dimension of customer values:
-Conformance to requirements
-Product selection
-Price and brand
-Value-added services
-Relationships and experiences
2.) How is customer value measured?
There are several methods of measuring customer value. They are Service Level, Customer Satisfaction, and Supply Chain Performance.
-Service Level is ability to satisfy customer. This can be requirement, delivery date, product, or service. Most organizations have On-Time delivery metric. It is measurement of delivery of orders.
-Customer Satisfaction is business term that measure how product and service provided by company meets customer’s expectation. Some time this is hart to measure. However, customer satisfaction survey can be used to measure customer satisfaction.
-Supply chain performance measures. Since supply chain impacts customer value, the supply chain performance metric serve as important role. There many metric such as Order fulfillment, lead time, cash-to-cash, and supply chain response time can be sure to monitor business.

3.) How is information technology used to enhance customer value in the supply chain?
Information technology can help organization in many ways. It can reduce cost, it can reduce lead time, it can create efficiency, it can increase quality of work, it can be used to collaborate in real-time. This benefit that Information technology provides adds values to customer. For example, Dell offers its customer web access, know as Dell Premier. This tool allows customer to configure and order there desktop or server with ease. In addition, the information is also in real-time, giving both customer and supplier the ability manage its inventories, orders and forecast with efficiency. This cuts down on inventory and lead time for both Dell and supplier.

4.) How does supply chain management contribute to customer value?
Supply Chain Management contributes a lot to customer values since the supply chain get involve from the beginning to end. Supply chain performance affects the ability to provide customer value. For example, customer relies on supply chain availability of product, customer rely on timely response, they rely on supply chain’s service, they rely on information that supply chain provides, and they rely on saving that supply chain can offers. For all these reason and possibly more, supply chain management contribute greatly to customer value.

5.) How does strategic pricing affect customer value?
The strategic pricing can have a big impact on organization and how customers perceive as value. The organization must select appropriate pricing model. For example, in Dell case study, Dell has learned that it can charge different prices for same product to customer depending on whether purchase is made by consumers, small business, medium business, large business, health care, education institute or government. The pricing model is very sophisticated. Its main goal is to increase profitability where ensuring satisfied customer.
One of the systems that help increase profitability is Revenue Management. It is a method of integrating pricing with inventory and demand. This ensures that the company is selling the right inventory to right customer at right time and place.
Smart Pricing is of strategy used by Dell. It has two approaches. They are customized pricing and dynamic pricing. Customized Pricing is distinguishing different types of customer and its prices according to its sensitivity. For example, Dell is very efficient at customizing customer’s computers and/ or laptops. Dell also offers many other products such as printers, personal computers, laptops, software and many other extra supplies. All these products are built to order, giving customer full opportunity to customize before placing order. Another approach is Dynamic Pricing. It is a change in prices over time without distinguishing different types of customers.