Dell vs. Walmart the Most

Dell vs. Walmart

The most important cause of the General Motors inventory problem comes from the company's inability to adequately manage the relationship between supply and demand. At this point, despite continuous efforts to reduce supply and production in order to be able to match the constantly decreasing demand, at the end of January 2007, the company still had around 1.1 million units at different GM dealers. This is basically production on stock, which means higher inventory costs.

At this point, the problem is not only the large number of cars on stock at General Motors, but also the fact that 80% of the models on stock in 2006 were 2007 models, which should have had the largest demand from all the portfolio of General Motors products.

The inventory problem at General Motors is in fact part of a larger operational spiral that the company has entered and, at this point, does not seem able to solve. The inventory problem could be easily fixed by simply cutting down production by shutting down a significant number of U.S. production plants. This was tried during 2005 and 2006, among these being the large production plant in Lansing, Michigan, as well as production plants in Detroit.

However, shutting down production for a period of time (say 1 month) is not achievable, because of several different reasons. First of all, it would affect the company's cash positions, because this would virtually mean shutting down all your operations for a period of time. Second of all, it would also bring about issues related to the numerous employees GM has and what to do with them over the period of time the factories are closed.

Inventory techniques, such as Dell's just-in-time inventory methodology, are not fully applicable at General Motors. One of the reasons for this is the difference in industry and the particularities that the car producing industry has. Indeed, demand management and the "sell what you have" approach is functional for computers, which have a short production time, incomparable to the time necessary for buying car. If this was applied at GM, it is likely that demand will further drop, with the company unable to honor orders for long periods of time.

Wal-Mart is a similar situation. Running out of a certain item on the shelves is less likely to cause a sudden demand in the Wal-Mart customers. However, a long waiting period for a car will certainly play worse on GM's company image.