Dell Inventory Management Inventory Management:

Dell

Inventory Management

Inventory management: Dell Computer

Dell Computer is notable for its unique, lean, inventory management system. This is true of the company as a whole, and also of smaller, retail Dell outlet and supply stores. Dell's principle is simple and widely acknowledged: technology, particularly in today fad-obsessed era, has a very short shelf life. How many cell phones have you cycled through, compared with your parents' use of land lines? Computers are nearly as disposable as phones -- some estimate that a new system is justified in as short a period of time as two years. This means that speed is the friend of technological retailers, while depreciation is the enemy. As Dell's CEO once said: "The longer you keep it the faster it deteriorates -- you can literally see the stuff rot" on the shelves (Atkinson, 2005, Dell).

It has been estimated that computers lose one percent of their value per week which is why Dell aims to keep its computers on its shelves for no longer than a week (Atkinson, 2005, Dell). Furthermore, "anytime inventory is held, there are holding costs. Holding costs are simply the costs that are incurred just by holding onto inventory" and these cost estimates do not even factor in the financial drain of depreciation, and the costs of devoting shelf space to old merchandise which should hold new merchandise that is more desirable to consumers (Atkinson, 2005, a simplified). A store filled with old merchandise rarely has what a customer wants, and also creates a bad impression for the likely target audience of a more youthful consumer -- no one wants to buy a piece of technology from a story with suspiciously dusty shelves. Hence, Dell's low-inventory business model.

The traditional arguments in favor of holding higher amounts of inventory are that inventory enables a store to satisfy a customer's demand immediately, and if a customer cannot get what he or she desires, the customer will go elsewhere. However, while this may be true in the case of, for example, canned goods, Dell's belief is that in the case of a major purchase, such as a computer, people are willing to wait for a lower-cost item built to custom specifications. The downside of being a Dell user is the need to buy Dell-specific components, a frequent complaint from unsatisfied Dell users. Dell's method also does incur some expenses for the company that must be counterweighed with low-inventory 'pluses.' For example: a low-inventory method requires careful monitoring of past behavior of consumers during key periods of high use, and this market research and data tracking comes at a price, if it is done in a through and effective manner (Supply meets demand, 2009, Accenture). Also, computing is such a necessity for some users, even waiting one day for the latest technology may be unacceptable. Dell relies upon almost no 'safety stock' and orders directly what is needed. Dell never begins to assemble a computer system until an order is actually placed, and keeps one-tenth the inventories of its competitors. Having well-trained technicians is essential to keep turn-around down to only a few days (Supply meets demand, 2009, Accenture). But this assumes consumers are willing to wait a few days with a non-functioning or nonexistent system.