Dell Computers and Intel Corporation illustrate how purchasing organizations manage both local and global procurement strategies. Dell has manufacturing facilities in the United States, Brazil, Ireland, Poland, China, Malaysia, and India. The company purchases vast quantities of Intel microprocessors for its various computer product lines (laptops, desktops, and servers). In turn, Intel maintains a dedicated sales force at Dell’s headquarters to negotiate purchasing contracts and manage the relationship. Dell has a central purchasing organization that consolidates procurement requirements globally and negotiates pricing centrally with Intel. However, the actual purchase orders are created at the local Dell manufacturing facilities in each region. In other words, Dell US purchases chips from Intel US, Dell China purchases chips from Intel China, and so on. All purchases are based on the global contract and pricing terms negotiated between Dell and Intel headquarters, but they are executed locally by the purchasing groups for the various plants. This arrangement ensures that Dell receives the best pricing and terms due to the aggregate demand and strategic oversight of the centralized purchasing organization. At the same time, however, the local manufacturing facilities maintain control over the tactical purchasing activities because the purchasing organization is located on the same premises. Intel also benefits from this arrangement by gaining global visibility into Dell’s purchasing so that the company can better adjust their manufacturing capacity to provide the right amount of chips to Dell when and where they are needed.
Q2. Analyze the procurement process that should be used in Dell Computers to procure microprocessors from Intel US. Support your answer with detailed diagram.
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