E-Procurement And E-Logistics
In this paper, we analyze the e-procurement and e-logistics of the Dell Inc. Company. This will include a brief overview of the company, an exploration of its Customer Relationship Management, the Supply Chain management and an analysis of the various softwares used by Dell Inc in promoting its relationship marketing.
Today, many people have discovered the significance of E-commerce. E-commerce, also known as electronic commerce refers to business transactions and communication via computers especially over the internet and networks (Botha, Bothma and Geldenhuys, 2008: p.23). This involves buying and selling of services and goods, and transfer of funds among other commercial communications through the internet, mainly through the World-Wide Web (Botha, Bothma and Geldenhuys, 2008: p.23). E-commerce takes place in different situations such as between businesses and customers (B2C), between one business/company and another (B2B), and between customer and customer (C2C).
It is mainly divided into two main parts, which are e-procurement and e-logistics. E-procurement is defined as an electronic method of conducting business transactions while e-logistics refers to the transfer of goods sold over the internet to customers (Botha, Bothma and Geldenhuys, 2008: p.24). A well implemented e-procurement system is highly effective in connecting businesses and other business processes with suppliers while running all interactions between them.
According to Botha, Bothma and Geldenhuys (2008: p.23), the development and advancement of technology, many businesses now sell their products through computer technology, which is a brilliant way of making companies reduce overhead costs and reach a wide customer base. Thus, e-procurement benefits not only the business owners, but also customers since they can shop without leaving their homes. Also, customers can easily find the lowest price of products when buying their goods via the internet. In this paper, we analyze the e-procurement and e-logistics of the Dell Inc. Company.
Dell Inc. is a computer company that was established by Michael S. Dell, in 1984 (Krauss 2003: p.7). It offers a wide range of technology product categories (Krauss (2003: p.8). These products range from personal computers to services such as storage solutions. Also, it gives a variety of services, which range from business services and configurable information technology including product-related support services, consulting and applications and infrastructure technology (Krauss, 2003: p.8).
As stated by Levy (1999: p.20), Dell Inc. operates in four global business segments, which include public, Large Enterprise, Consumer, and small and Medium Business. The company designs its own products, manufactures and markets them, sells, as well as supports a range of products and services, which can be modified to individual requirements of customers (Perret and Jaffeux, 2007: p.4). Dell Inc. is considered among the companies that are most profitable. The company offers the most innovative customer service, as well as product custom configuration in the world (Perret and Jaffeux, 2007: p.5). For this reason, the company is faced with the challenge of satisfying the customers’ needs while maintaining a stable relationship with them.
E-PROCUREMENT AT DELL
Dell Inc. is widely known for selling its computers and others services through the internet to other business (B2B) and to individual customers (B2C) (Perret and Jaffeux, 2007: p.5). B2B refers to business transactions between one company and another such as business customers, suppliers and distributors. The B2C refers to business transactions between a company and consumers. At the beginning of the 1990’s, Dell Inc. attempted to distribute wares by retailing. However, the management found out later that this method was unprofitable for business (Gattorna, 2003: p.51). Hence, Dell Inc. decided to key on boosting its customer support and services by allowing customers to make orders directly (Gattorna, 2003: p.52). This was considered a unique strategy for Dell customization.
Recently, Dell Inc. improved its sourcing and buying processes by implementing a leading e-procurement solution known as Ariba Buyer (Krauss, 2003: p.8). In order to ease the business processes between Dell Inc. and its supplier companies, Ariba Buyer which is an e-procurement solution is used. It is quite useful in automating and streamlining sourcing. (Li, 2007: p.20). In earlier years, making purchase orders at Dell was a highly laborious process since company workers filled out forms for each purchase process every time they ordered an item, which included collecting about ten approval signatures (Li, 2007: p.21).
The buyers were then expected to re-enter the data into two different systems that included a home-grown Access database and the legacy purchasing system. This paper-based process was challenging for Dell to track its purchases by commodity, as well as analyze its purchasing patterns in terms of where, how much and from whom the supplies were bought, hence the change in its procurement process. Thus, Dell Inc. implemented an e-procurement solution known as Ariba Buyer.
E-procurement enabled Dell to streamline its supplying base. This helped in the elimination of maverick spending, as well as standardization of the ordering processes for its suppliers. (Krauss, 2003: p.8). This was followed, by Dell’s move, to assess 3 e-procurement systems depending on five criteria. These criteria included a user-friendly boundary, cost-effectiveness, and integration with existing back-end system (Krauss, 2003: p.8). Others included e-commerce links to most of Dell’s supplying companies, and compatibility with the current IT policy of Dell servers (Li, 2007: p.20).
According to Gattorna (2003: p.50), close to seven months were spent by the personnel that were responsible for implementing Ariba. This time was spent in developing twenty interfaces that would facilitate connection of Ariba buyer with Dell’s legacy systems. They created linkages for Ariba and Dell’s purchase order, catalog data, cost center, accounting code validation, and employee data among other systems (Gattorna, 2003: p.50). This was made to ascertain that all the processed orders had been validated. This resulted in a final product, which facilitates making purchases online. This product is known as Dell Internet Requisition Tool (DIREQT) (Gattorna, 2003: p.51).
Currently, DIREQT has made it easy for Dell employees to complete purchasing orders online by loging into DIREQT Web site, as well as conducting searches for certain products, suppliers or services, which usually give accurate status reports (Levy, 1999: p.23). Immediately, Ariba Buyer forwards the catalog items and requisition straight to the right manager at the cost center who signs the order electronically. The system then automatically creates an approving chain before directing it to an employee network. (Gattorna, 2003: p.51). However, if the product ordered is not present in the catalogue, Ariba Buyer includes a Dell buyer to source the product and hands over the request for last signatures (Perret and Jaffeux, 2007: p.6).
After the requisition has been approved, it is moved to the Ariba Commerce Services Network (ASCN). ASCN is a shared network infrastructure that helps to connect with buyers and marketplaces, on the Ariba Business to Business (B2B). Commerce stand (Perret and Jaffeux, 2007: p.6). Ariba uses ASCN to communicate its orders to suppliers, which includes shipping through e-mail, faxes, Extensive Markup Language (XML) and electronic data interchange (EDI) (Perret and Jaffeux, 2007: p.6). Moreover, Ariba Buyer also accelerates the payment process in Dell Inc.
The receipts that Dell’s central receiving department prepares for wares are brought into the organization and matched automatically with the right invoice. This is then fed into the system by the account payable processors (Bothma and Geldenhuys, 2008: p.25). In addition, the purchasers create receipts of the service given to them, which is also matched in an automatic manner. Therefore, this practice helps to avoid the early routine of service invoices, which is time-consuming, when making purchases for approval.
As stated by Botha, Bothma and Geldenhuys (2008: p.25), with the Ariba Buyer at Dell, the requisition cycle time is likely to be reduced by 62%, and lessen operation costs by 61%. However, Dell Inc. believes that it stands to benefit on a larger scale from the perception into the buying process attained through combining customers’ information. Moreover, through the use of Ariba, Dell is able to gather information necessary to evaluate its supply base and re-evaluate key business to market communications services, office products and consulting, among many more kinds of expenditures (Gattorna, 2003: p.50).
CUSTOMER RELATIONSHIP MANAGEMENT
According to Perret and Jaffeux (2007: p.7), Customer Relationship Management (CRM) is the creation and maintenance of relations with customers. The key aim of Dell is to offer its customers technologically reliable customer service requirements. Perret and Jaffeux (2007: p.7) argue that the software that help in facilitation facilitate Dell’s CRM include marketing automation software, a system that benefits the sales, and custom designed Web pages that contain purchase data.
According to Ross (2010: p.88), today, one fifth of standard-based computers sold in the world is Dell’s product. The key concept of Dell Inc. is to sell computers directly to customers. This will increase their success in the computer business. (Ross, 2010: p.88). Before Dell Inc. invented the made-to-order concept, its customers used to buy its products from electronic shops and retail stores. In this case, customers interacted only with the salesperson of the store and not the manufacturer. Therefore, Dell introduced the concept of interacting directly with the customer via the internet so as to fulfil the demands of its clients and deliver quality services.
E-LOGISTICS AT DELL INC.
For Dell Inc., the E-logistics has entirely changed it way of distributing its products. Traditionally, Dell used to pick up components from the warehouses of suppliers then collect them in its central or regional distribution centres, and finally merge them in stock in order to deliver the final products to customers (Ross, 2010: p.88). Currently, through implementation of e-logistics, Dell Inc. can now pick up components from the ware houses of suppliers and then forward the merging of components made during the transit to the logistic-service providers through USP or Airborne Express (Li, 2007: p.36). This has resulted in less fixed costs spent in warehouse centers and distribution, no product technological obsolescence, and no stock-keeping units (SKU).
SUPPLY CHAIN MANAGEMENT AT DELL INC.
Supply Chain Management (SCM) is a system that Dell established to ensure the availability of precise computer components for its customers on demand and location. SCM describes how the company manages how raw materials are transformed into the end products and how products and services get to all its consumers (William, 2003: p.150). This has enabled the company to develop a tight bond with its supplier companies and consumers.
In this regard, Mencarini (2003: p.19) states that Dell Inc. have one of the most effective SCM system in the world, and that it is focusing on creating the best SCM through the i2. This will improve the supply chain process through connecting its suppliers and planners in order to satisfy the requirements, as well as demands of their customers.
SOFTWARE USED BY DELL IN PROMOTING RELATIONSHIP MARKETING
Dell also uses a variety of software to promote relationship marketing such as Hotlink, Premier Pages and an enhanced CRM system, among others (Gattorna, 2003: p.57). Its database software is highly efficient and effective with customer relationship management, which stores tables of data used to check the information of customers and establish promotional campaigns. These databases mainly include the information of customers, their products and interests. According to Gattorna (2003: p.57), customer database helps to increase profits since it contains the information of clients, which determines the efficient and effective ways to target and divide the consumers.
Hotlink is an automation software program, which facilitates tergeting and marketing communication, monitoring of customers and market development (Mencarini, 2003: p.21). This software gives Dell a free opportunity to advertise its products through the word of mouth. Also, it impacts its customer base to ensure that customers receive better services than before. Premier Pages are a transparent online system/software custom designed Web pages, which contain all the purchasing data (Gattorna, 2003: p.57). In addition, the software contains a paperless ordering process, which captures the technology configurations of customers. Mencarini (2003: p.21) argues that Dell created Premier Pages in order to gather less clientele details than they already have and develop a win-win situation that is more realistic. This starts when the clients places their orders for a computer and built later.
Another system that Dell uses is an enhanced CRM system, helped by an information system company called the IS Partners (Moon, 2003: p.45). ProClarity offers a comprehensive analytical ability that highlights negative and positive areas of the business. Moreover, the company breaks down its sales by region where each team enables Dell to measure its own trend and success. ProClarity significantly benefits all the financial sections of the company. It also helps the Dell staff to easily access detailed demographic information about customers. The marketing department is able to follow product sales, customer activity and marketing mixes via this software. The management can follow activities in customer accounts, and act on lapsed quotes.
Additionally, Dell installed the e-commerce software i2 Collaboration Planner, i2 Supply Chain Planner and i2 Factory Planner in order to meet its supply chain needs (Moon, 2003: p.45). This is applicable in the management of build-order procedures that exist between placing orders and customer support. The software enables Dell Inc. to classify customers and target them through their most preferred medium, obtain and analyze results (Moon, 2003: p.45). Moreover, Dell Inc. has signed an agreement with Part-Miner (Gattorna, 2003: p.51). Part-Miner is a vertical portal in electronic components industry, which provides information and helps to meet the demand and supply of the components.
FUTURE PLANS OF DELL INC
In future, Dell plans to update its processes of purchase such as the establishment of online auctions for products and services like printing, shipping, and paper (Li, 2007: p.20). The company also plans to make order status, payment information and receipts easily accessible to suppliers online. In coming years, Dell intends to expand its catalogue base and purchase choices by convincing its main suppliers to use the Ariba Business to Business Commerce Platform (Li, 2007: p.20).
CRM-SCM integration tries to satisfy clients through prompt delivery of products, ensuring its accessibility and maintain the manufacturer’s profits and returns. Thus, there are several lessons that can be drawn from Dell’s application of e-business. This trend can be emulated by other organizations in the industry. This will result in offering of better services to customers. It can be portrayed via the way Dell Inc. uses CRM to its advantage. Customer satisfaction will increase their trust in the organization, improving its reputation. In addition, custom-building a PC desired by the clients has formed a particularly strong relationship between Dell and its customers (Moon, 2003: p.50). In addition to this, implementing technology in a phased fashion has helped Dell to achieve a strong relationship with its clients. Dell set up simulated environments in order to support the i2 system in blotches without affecting the live form. Dell ensured that all stages of the completed process allowed future growth of the company before developing the whole system. Hence, this reduced risk and increasing efficiency.
Another significant lesson from Dell would be to extend the link from the customer to the supplier, while maximizing its operation efficiency as well as customer satisfaction (Ross,2010: p.92). As a result, customers were able to spend less money on purchasing customized machines. This is because Dell approved the savings that resulted from managing its inventories efficiently. The company was, therefore, able to share information with suppliers about customer requirements and buying patterns in real-time.
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