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ect data on the time and information actually used in maki 'fichase. The ability to measure the actual investment and how wnglla speCI, 1C pudr-. fi d · · e a users nee swere sahs te IS Important to the fmal step in rnanagmg · the procurementprocess.4. Evaluate ks the effectiveness . of the procurement , process· Th' 1s IS · a contra1 h step t atas ttwo questiOns: (I) Were the users needs satisfied> · and (2) was the mvest- ·mei~ necessary? Remember, the goal is to invest only enough time and information to exactly satisfy the user's needs· If the procurement process wasOn the line How Dell Defines DirectBefore the first E-tai.ler everset up shop, Dell Computer turned the personal computer industl)'on 1ts ear by ptoneenng the tdea of selling custom-built PCs directly to consumers. By developIng and then staying focused on what he termed the direct model, Michael Dell built a $21 billion company that 1s both known for supply chain excellence and widely considered to have thenght bus ~ness model for the Internet age." Michael Dell attributes his company's success to an unrelenting focus on the customer.From t~e st~rt, our ent1re busmess-from design to manufacturing to sales-was orientedaroundhsten1ng to the customer, and delivering what the customer wanted" has allowed Dellto eliminate all aspects of the business process that do not contribute directly tom r _tomer needs. ee mg cusDell's success did not come without some growing pains. In the first few years, Dellb learned · · tough but cructal lessons about the importance of parts 1 ·nventory management andutld~ng to what the customers said they needed. And time and again it learned that continuedsuccess was lightly tethered to maintaining focus on the direct model.. Forming strongalliances with the suppliers who would make the direct model work wasan Important task. First Dell chose to source components from expert outside suppliers ratherthan build them ttself. Dell found that this approach gave it the flexibility to rapidly scale operations as customer needs dtctated and to gain access to the best components in the world.Further,. 11 believed 1n supplter partnerships where goals and strategies are shared freely~adramatic departure from the traditional buy-bid cycle. When this approach to procurementworked so well, Dell was among the first companies to outsource significant portions of its logtsttcs operattons to third-party logiStics providers.To avoid the error, cost, confusion, and complexity that come from managing multiplesuppliers, Dell partnered With only a few key suppliers and then brought the 1· 1to D II' b · b se supp ters c ose. e sown ustness, oth geographically and electronically. Dell required suppliers to sitetheir faCIItttes close to Dell's own manufacturing facilities to allow for belt · ·and se · d t t . er commumcat1on
rvtce an. as er t1me to market~all critical for a company that does not begin building
a computer until it rece1ves an order.
Today, Dell uses the Internet as a key p!rt of its IT strategy: the company is now creating
Web-based links for each of 1ts suppliers to facilitate the rapid exchange of information such
a~ _compone~t qua_llty metncs, cost ~tructures, and current and future demand forecasts. ProViding supplters wtth closer electromc links helps Dell continue to push for· d · 1
vel 't d b tt . Improve mven ory
oct Yan e er quality data and ultimately reduce the total cycle time from when Dell customers place an order to when they receive it.
Source: "How Dell Defines Direct," Channefs5, no. 1 (2000): 7. Reprint d 'th · ·
nels, a UPS Logistics Group publication. e WI permiSSIOn of ChanProcurement and Supply Management
not effective, the cause could be traced to not enough investment, not performing the proper activities, or mistakes made in performing one or more of the
activities. In any case, when the procurement process is not effective, the manager must determine why and take corrective actions to make sure that future
purchases will be effective. If the purchase satisfied the user's needs at the
proper level of investment, the procurement process was effective and can serve
as a reference for future purchases.
Thus, although the procurement process is complex, it can be managed effectively
as long as the manager develops some systematic approach for implementing it. A key
factor in achieving efficiency and effectiveness in this area is the development of
successful supplier (vendor) relationships. In fact, many professional procurement/
materials managers agree that today's global marketplace requires developing strong
supplier relationships in order to create and sustain a competitive advantage. Companies such as NCR and Motorola go so far as to refer to suppliers (vendors) as
partners and/or stakeholders in their company. When vendors are "partners," companies tend to rely more upon them to provide input into product design, engineering assistance, quality control, and so on.
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