Dell's Demand Management through forecasting

Solution Preview

Guidance on Demand Management at Dell
Dell Corporation and its business model
Dell Corporation is the third largest PC manufacturer in the world with a market share of 12.7% worldwide and second largest PC manufacturer in United States of America with a 22.6% market share as per Gartner research estimates (Gartner, 2015: Jan. 12). In 1984, Michael Dell started his business called PC Limited and bypassed the middlemen, tapped his savings account for $1,000 an initiated his own PC business (Biography, 2015: n.d.). Therefore, the company adopted a Direct-to-Customer model wherein zero level distribution channel were chosen. A zero level distribution channel means that there is no intermediary between the customer and the company. Michael Dell founded Dell Corporation with a different model rather than using standard personal computer and laptops and selling through resellers. The approach of the company was to design the product to the order of the customer by assessing his/her requirement as the customer has to make some specifications. The challenge which arises as a result of adopting this approach is that the company may face shortages and excess of raw materials. Therefore, the company adopts an approach wherein the personal computers and laptop components are ordered by Dell based on its anticipation or expectation of customer's orders (Chopra & Meindl, 2013). Dell has already achieved excellence in managing the company's supply chain and has been named as supply chain leader by Gartner repeatedly for years (Lewis, 2013: Feb. 15).
Therefore, to understand demand management at Dell Corporation it is essential to analyze its supply chain. The supply chain of Dell involves the suppliers working closely with the factory of Dell who supply the component raw materials which are then assembled at Dell's factory from where the finished product is supplied directly to the end user who ordered the product online.
Therefore, the customer side demand assessment is done through forecasting as follows:
Demand Management through Forecasting
It is evident that Dell uses demand forecasting methods such as Delphi method, expert opinion and sales force opinion method as at its monthly master sales plan and master production plan meetings chaired by Michael Dell, the current quarter plus one forecast / five quarter rolling forecast is being done with all experts who are departmental leaders arrive at the forecast after conducting the assessment of competitive situation and constraints and deciding on the company's internal product strategies (Brynes, 2003: June 2). In Delphi method of demand forecasting an expert panel is given questionnaire who answer and then a summary is provided by the facilitator at the end which is followed by another round of questionnaire provided to the experts and so there can ...