Student number: 331446wb Name: Wybren Bosma. This is my original work and not a copy of someone elses work.

1a) In L5 versus L6 manufacturing additional costs are incurred due to motherboard airfreighting and 3rd-party integration (3PI) costs, these are classified as main costs. Motherboard airfreighting costs are incurred, as motherboards are not available in time to be assembled with the chassis in China and thus have to be airfreighted to the US in order to catch up. 3PI costs are incurred as the assembly of the chassis and motherboard is outsourced to a 3rd party at a labor rate exceeding the Chinese. Non-main costs include motherboard-packaging costs, inventory-holding costs, and transportation costs from and to the 3PI. 1b) The only additional cost to L6 manufacturing is the Chinese labor cost of assembling the motherboard into the chassis. 1c) L5 manufacturing offers an advantage over L6 manufacturing in Dells supply chain as it becomes more flexible. Since the motherboard and the chassis travel as two separate components the chipsets do not have to be delivered to the motherboards assembly factory before the chassis is shipped to the US. Rather, Dell can determine the timing and volume of the motherboard production at a later stage as airfreight takes 1 week and chassis shipment takes 5 weeks. In essence L5 allows for more just-in-time production of motherboards and chipsets. L5 also brings an advantage to the chipset suppliers as they can reduce inventory costs with a just-in-time policy. A disadvantage of L5 manufacturing on the supply chain is that it is more complex to manage. Once the motherboard and chassis are both in the US, Dell has to coordinate the delivery of the components to the 3PIs and forecast the capacity they should have available to support Dells demand. Moreover, extra quality checks have to be conducted, as the 3PIs generally deliver lower-quality products, as they are not required to perform integration unit testing. 1d) L5 manufacturing can be justified when a product is in its initial stage of its product lifecycle i.e. new product introduction. Since demand can be extremely volatile during this stage the increased flexibility of L5 manufacturing is defendable in order to reduce the time to market. 2a) I recommend Dell to further investigate option 2 and option 3A as these options have the lowest complexity score or the lowest cost per box. If I were to pick an order I would first investigate option 2 to see whether it is practically possible to achieve the low costs. If this is not the case option 3A is the next best score in terms of costs and has the lowest complexity score (option 5 is even more complex than option 2 so not worth investigating.) 2b) In case the chipset supply would further deteriorate option 5 would be the most sustainable. In the current strategy Dell solely relies on the manufacturing capacity and chip supply from China. In the event of further deterioration Dell option 5 yields Dell a more stable manufacturing capacity and chip supply, as it is able to source its chips from multiple suppliers. 3) I feel that the methodology employed by the BPI team does not yield a solution that

solves the problem of irregular supply. Moreover, there are some limitations to method itself when it comes to solving the optimal manufacturing solution. First, all department scores received an equal weight in the scoring model whereas a weighted scoring model might have been more appropriate to reflect the relative importance of various departments. Second, the scores of complexity are highly subjective to the interpretation of the content expert within a department. This is the case, as a score of six allocated by one department might not reflect the same degree of complexity as a six given by another department. Third, this approach is subjective in its choices as it is limited to the options selected by the BPI team. This leaves the departments without an option to give their own input. Last, this survey did not yield one ultimate strategy. Approaches that better discriminate among the alternatives might have been more suitable here. A more effective approach would include the formation of crossfunctional teams from department throughout the supply chain that focuses on the optimal solution. This is more effective as the department will now understand the consequences of their plans in other departments. 4) Dells relationship with its supplier can be characterized as one of single sourcing, which means that Dell receives all its chipsets from one supplier. I think it is most likely that such a relationship is quite intense in order to keep it manageable and sustainable. This relationship is successful for Dell for three reasons. First, a close relationship nurtures integration of the supply chains. This leads to timely arrival and accurate scheduling possibly generating lower inventory costs. Second, one supplier generally gives the most reliable quality, possibly at a lower costs due to scale discounts. Third, close supplier/customer interaction allows for quick design, development and manufacturing of new product innovations. On the downside this relationship is extremely risky in the event that the supplier suddenly cannot deliver anymore. This would be detrimental to Dells entire supply chain as it basically puts a halt to its entire process. Moreover, Dell has low leverage in negotiations and switching costs tend to be high. 5a) Dells supply chain strategy can be characterized as a push-pull strategy. This strategy combines elements of both a push and pull strategy where the initial stages are operated in a push based manner, while the remaining stages employ a pull-based strategy. In Dells case the push part consists of component inventory used in the final products based on aggregate forecasts. The pull stage consists of final assembly, which is based on specific customer requests. 5b) The advantage of a push-pull strategy stems from the fact that aggregate demand forecasts are more accurate, uncertainty in component demand is much smaller than uncertainty in finished goods thus Dell can reduce its safety stock. Benefits to Dell are lower inventory costs and reduces excess components.