Dell’s Channel Transformation –Leveraging Operations Research to Unleash Potential across the Value Chain
Dell pioneered the direct sales model by offering its customers technology solutions through full-system configurability. High internet penetration and efficient e-commerce ecosystems enabled the success of this model in developed economies. Changing market dynamics, technological advancements and Dell's global expansion required that the company cater to diverse customer needs and purchase behaviors.
Five years ago, Dell launched several strategic initiatives to drive channel transformation by offering fixed configurations through online channels, retailers, distributors and other channel partners. We developed solutions applying Operations Research (OR) and analytics to address key challenges across the value chain and deliver profitable growth in the new channels. These solutions include (i) Configuration Optimizer to reduce product complexity by identifying fixed hardware configurations (FHCs) to build and stock, (ii) Online Conversion Rate Accelerator to refine the online purchase experience leading to higher revenues and satisfaction of FHC customers and (iii) Retail Margin Maximizer to forecast better, mitigate inventory risk and recommend promotions for margin improvement.
Further, we have developed solutions to optimize return-on-investment (ROI) on marketing spend, to reduce warranty part dispatches and to optimize pricing across channels. Analytics has solved complex business problems and facilitated Dell's growth in the FHC business to $15 billion in the last five years. These OR solutions have delivered a margin impact of more than $140 million through reduction in markdown expenditure, improved online conversion rate, increased ocean shipment and enhanced customer satisfaction since 2010. The success of these transformational initiatives has strengthened our confidence in the application of OR to resolve complex business problems. It has helped in inculcating a culture of data-driven decision making in the organization.