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Gateway: A Direct Sales Manufacturer

Presented By S/Lt Danish Ramzan PN S/Lt Hamza Khan PN

S/Lt faiq Ali Shah PN

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Copyright 2009 Pearson Education, Inc.

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Introduction
Gateway is a manufacturer of PCs that was founded in

1985 Gateway was one of the first PC manufacturers to start selling PCs online company had three plants in the United States, a plant in Ireland, and one in Malaysia. In the late 1990s, Gateway introduced retail stores throughout the United States. By January 2002, 280 retail stores in the United States Does not carry any finished inventory only used for order
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Introduction
Gateway utilizes three main sales channels for the

consumer market: telephone sales, online sales, and company-owned stores. These are referred to as call, click or come in. this strategy and raised the stock price to more than $80 per share in late 1999 By November 2002, Gateway shares had dropped to less than $4m
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Introduction
Gateway was losing a significant amount of money.

Plants in Salt Lake City, Ireland, and Malaysia were closed down. The company was looking to sell its PCs through electronics retailers such as Best Buy and Circuit City.

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Why did Gateway have multiple production facilities in the

US? What advantages or disadvantages does this strategy offer relative to Dell, which has one facility? What factors did Gateway consider when deciding which plants to close? Why does Gateway not carry any finished goods inventory at its retail stores? Should a firm with an investment in retail stores carry any finished goods inventory? Is the Dell model of selling directly without any retail stores always less expensive than a supply chain with retail stores? What are the supply chain implications of Gateways decision to offer fewer configurations?

Why did Gateway have multiple production facilities in the US? What advantages or disadvantages does this strategy offer relative to Dell, which has one facility?
US was main market of gateway No inventory stores direct supply no contract with any

shipping company

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Disadvantages
Operating cost is important consideration
More professionals required cost increases Difficult to manage quality Different polices for employees

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Advantages
Low labor cost
May be un available because of disaster Low price raw material Cheaper logistics Shipping Tax Incentives

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What factors did Gateway consider when deciding which plants to close
The markets which were saturated showing poor results,

specially Malaysia plant were have high loses

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Why did gateway choose not to carry any finished product inventory at its retail stores?
Gateway was really clever in deciding whether to keep

such items in inventory or not. As gateway knew that people dont wait for FMCG product for the alternative but when its about computers, customers could wait. Doing so, they had no inventory on risk.

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Should a firm with an investment in retail stores carry any finished goods inventory
Yes, it can

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Is the Dell model of selling directly without retail stores always less expensive than a supply chain with retail stores?
Yes, the DELL model of selling directly without retail

stores is always less expensive than a supply chain with retail stores because of a number of cost cutting factors which make the product available to consumers at a cheaper cost, few of which are:
Manpower (it is always the largest cost in running a

buisness) Retail outlets (rents, energy, law and order situation) Logistic support ( transport, display items)
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What are the supply chain implications of Gateways decision to offer fewer configurations?
Supply chain is not of the view of fewer configurations, extra ordinary configurations help the product reach masses and grow bigger. Few implications are as follows: Holding a fixed inventory Suppliers inflexibility Ineffective assembly line
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Thank you
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