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Keywords: Inventory management, Supply Chain management, competitive advantage. Purpose: This research examines the effects and significance of inventory management on the supply chain and how it helps in the organisational success. Background: This research seeks to concentrate on the effects of inventory management on the supply chain management of one of the top personal computer manufacturers in the world, Dell computers. Supply chain management is a major issue in many industries as firms realize the importance of creating an integrated relationship with their suppliers and customers. The competitiveness of international companies is highly dependent on their ability to deliver products quickly and timely all over the world. This paper analyses various issues important to inventory and supply chain management and provides broader awareness of supply chain principles and concepts. Four research objectives are served to help the research. These objectives were to analyse the impact of inventory management on the supply chain management and the competitive advantage they are having with supply chain and inventory management. The research also analysed the various processes associated with the supply chain of Dell computers and then recommendations for improvement. Also in doing so it is intended that the lessons learned from the studies presented will be summarized and placed into the perspective of future research that can be considered as necessary. Methodology: This research adopted an exploratory, qualitative approach because of the nature of the research itself and the researcher‟s interest towards business and management research. Different sources like previous case studies, individual experiences, observations, interview etc were used in this research. An inductive approach was employed in this research that included a case study approach that included data collection with the help of semi structured interviews with the managers, observations, online resources, books, and journal articles. Findings: From the findings it was clearly revealed that there is a possibility of continuous improvement opportunity which would result in a sustainable competitive advantage for the organisation. This research helps both academics and managers to gain a better understanding of the complexity of supply chain and inventory management.
LIST OF FIGURES
Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 3.1 Direct and Extended Supply Chain Dell‟s Direct Distribution Channel Dell‟s Supply Chain Just-In-Time Models Research Process Diagram
Table of contents
Title Page no 1 Abstract......................................................................................................................
Acknowledgements...................................................................................................... 2 List of Figures............................................................................................................. Chapter 1: Introduction 1.1 Background ......................................................................................... 3 7
1.2 Research Aims........................................................................................................ 9 1.3 Research Objectives .............................................................................................. 9 1.4 Scope of The Research........................................................................................... 9 1.5 Company Profile....................................................................................................... 9 1.6 Dissertation Layout................................................................................................ 10
1.7 Chapter Summary................................................................................................... 11 Chapter 2: Literature Review ................................................................................. 2.1 Introduction.......................................................................................................... 2.2 Supply Chain Management (SCM)...................................................................... 2.2.1 Importance of SCM 12 12 12
.............................................................................. 14 15
2.3 Inventory Management...... ..................................................................................
2.3.1 Effects of Inventory Management on Supply Chain................................. 17 2.3.2 Effectiveness of Inventory Management Processes in Manufacturing Industries.............. ................................................................19 2.4 Competitive Advantage ................ ..................................................................... 20 21 22 23 23 24 25
2.4.1 Supply Chain as a Competitive Advantage............................................. 2.4.2 Inventory Management as a Competitive Advantage............................. 2.5 Dell‟s Supply Chain and Inventory Management................. ................................ 2.5.1 Direct Sales Model................................................................................... 2.5.2 Build To Order.......................................................................................... 2.5.3 Supply Chain and Inventory Management Processes.............................
2.5.4 Just In Time Model........................................................................................27 2.5.5 Effects of Inventory Management on Dell‟s Supply Chain.............................28 2.6 Competitive Advantage Of Dell.................................................................................29 3
2.7 Conclusion......................................................................................................... Chapter 3: Research Methodology 3.1 Introduction
..................................................................... 31 31
3.2 Research Objectives ........................................................................................... 32 3.3 Research Philosophy ..................................................................................... 33 34 35 36 36 37 37 38 38 39 39
3.4 Qualitative and Quantitative method .................................................................. 3.5 Research Approach ........................................................................................ .................................................................................
3.6 Data Collection Methods
3.6.1 Primary and Secondary Data..................................................................... 126.96.36.199 Quantitative Methods for Data Collection........................................ 188.8.131.52 Qualitative Methods for Data Collection............................................. 3.7 Data Analysing Methods ................................................................................. 3.8 Sampling Techniques.... .................................................................................. 3.9 Research Limitations .....................................................................................
3.10 Validity & Reliability.........................................................................................
3.10 Ethical Issues..................................................................................................... 39 Chapter Summary ........................................................................................ 40
Chapter 4: Data Presentation and Analysis............................................................ 41 4.1 Introduction ..................................................................................................... ................................................................................... 41 41
4.2 Data Collection Design
4.2.1 Semi-Structured Interview............................................................................... 42 184.108.40.206 Interview Question Design..................................................................... 43 4.3 Qualitative Data Analysing Techniques.............................................................. 4.4 Interpretation of Semi-Structured Interview....................................................... 4.5 Conclusion......................................................................................................... Chapter 5: Results and Discussion ...................................................................... 5.1 Introduction ....................................................................................................... ................................................................................. 43 45 51 52 52 52
5.2 Findings and Discussions
5.2.1 Maintaining Low Inventory............................................................................. 52 5.2.2 Impact of Inventory Management on Dell‟s Success................................... 53
5.3.3 Competitive Advantage using Inventory and Supply Chain Management...... 53 4
5.3.4 Effectiveness of Various processes.................................................................. 54 5.5 Conclusion ............................................................................................. ................................................................ 55 56
6. Conclusion and Recommendations 6.1 Conclusion
........................................................................................................ 56 .............................................................................................. 57
6.3 Future Research..................................................................................................... 58 References ............................................................................................................... 59
Appendix 1 Questionnaire.......................................................................................... 64 Appendix 2 Personal development Plan................................................................... 66 Appendix 3 Project Proposal....................................................................................... 67
CHAPTER 1 INTRODUCTION
The main purpose behind this research was to explore the effects of inventory management on the supply chain management which serves as a tool for Dell computers in giving them a competitive advantage in the current situation. This chapter contains the background of the issue addressed in this research, fenced by the research purpose and its significance. The qualitative research was conducted and it revealed various facts that would help in the betterment of the organization and can be a reference for the management. The research begins with the objective to find out the scope for the study and at the end, it details the findings and recommendations for the future. This section gives the reader an idea on the details of the chapters included. 1.1 BACKGROUND The concept of supply chain management was introduced in the 1980s. According to Das (2006), supply chain management is understood to be a set of practices for managing and coordinating the transformational activities from raw material suppliers to ultimate customers and can be considered as a long term oriented, inter-firm arrangement or alliance, involving intermediate or hybrid cooperative relationships. Precisely, supply chain management is related with the
management of everything right from materials to information across the whole chain from suppliers to producers, distributors, retailers and even customers. It is quite complex for companies to make an optimum plan for the entire chain because every company performs all the activities including purchasing, production and even marketing independently. Any action taken in any one of the chain can have an impact on the entire chain. Researches on supply chain management always focused on three issues. It includes the behaviour of flow of information along the supply chain and another one is inventory management which considers supply chain as a multi-inventory system. Another issue is the planning and operations management. This research is based on the second issue named inventory
management. Inventory can be anything from raw materials, cash, or finished goods. Effective and efficient inventory management helps in optimizing the supply chain, taking out the cash flow and minimise inventory shortage possibility due to orders
that comes variably. Moreover it is of great significance in optimizing inventory management so that the organisational goals are achieved. To prop up company‟s strategic plans and to explain about the market place, inventory management is designed. The fluctuations in the market demand, opportunities due to global marketing, and advanced manufacturing technology prompts firms to change their approach in inventory Management and the associated processes for inventory control. The key purposes of Inventory Management system is to provide information in order to manage the flow of materials efficiently, effective and brilliant use of human resources as well as equipments, coordinate internal activities and to have regular communication with customers. It does not make decisions or manage operations; rather it informs managers to act timely and accurately (Indian Institute of Materials Management, 2011) . This research is based on a case study on Dell, an American multinational information technology corporation based in Texas, US. Dell develops, sells and supports computers and related products and services (Dell, 2011). Michael Dell founded the organisation in 1984 and is now one of the largest technological corporations in the world. The main products of Dell are desktop computers, notebook computers, network servers, workstations, and storage products. Michael Dell‟s strategy of avoiding the retailers and selling computer systems directly to customers, eliminated delays and avoided the need and cost of a supply chain stage. Dell realized that keeping their products in warehouses will result in loses because their computer products depreciate in time. So to eliminate this issue, they developed a supply chain strategy that intends to achieve zero inventories. The inventory management of Dell plays a major role in their supply chain (Dell, 2011). The superior financial performance of Dell is attributed to its successful direct sales model. The computer industry has grown to a great extend for the past decade. Therefore, the firms are in competition with each other (Surbakti, 2011). A supply link packed with yesterday‟s technology and their percent value per week is nearly worthless. Dell takes up few inventories, in connection with its direct sales. The firm itself focuses on speeding the components and products through its supply
chain. Dell has no need to sell the old products in discount, as they have none. Another notable point of Dell is that it delivers products faster than its competitors do. 1.2 RESEARCH AIMS:-The main aim of this research is to explore the effects of inventory management on the supply chain through the case study of Dell. This research includes the study of inventory management process and supply chain of Dell and to provide possible recommendations for its improvement. In order to accomplish this aim, some important objectives are also formulated. 1.3 RESEARCH OBJECTIVES 1. To analyse the impact of inventory management on the supply chain management. 2. To find out the way firms use supply chain management to gain competitive advantage and increase business success. 3. To evaluate the effectiveness of the various processes associated with inventory and supply chain management in Dell. 4. To recommend the possible ways to reduce the inventories and hence improve the supply chain management of Dell. 1.4 SCOPE OF THE RESEARCH The scope of inventory management concerns the fine lines between carrying inventory costs, managing assets, forecasting the inventories, inventory price forecasting. These requirements are to be balanced to meet optimum inventory levels which are a smooth process as the business requires change and react to the fluctuating environment. A study on the effects of inventory management on the supply chain of Dell can help them to achieve procurement goal quickly and reduce the inventories and there by improve the whole supply chain process. 1.5 COMPANY PROFILE Dell, founded by Michael Dell in 1984 has emerged as one of the top personal computer producers and among the most successful organizations in the world. Right from its initial stages, Dell has adopted „Direct sales‟ model. Initially computers were sold over the phone and they were manufactured according to customer‟s
configurations. After using the retail channel from 1990 to 1994, Dell returned to its direct sales model started to grow rapidly. Michael Dell‟s effective and efficient strategic ways have played a crucial role in Dell‟s success story. The key factor of his successful business model of the company is its supply chain and inventory management. The main elements of Dell‟s business model are its direct sales model and the build-to-order strategy. The computer industry had an overwhelming growth in the past decade and most of the organisations that belong to this industry face challenges while Dell has been enjoying the taste of success. 1.6 DISSERTATION LAYOUT The research written in the report format is grouped according to the subject matter for proper information flow so that the reader can understand easily. Abstract: This gives the reader a brief idea of the research issue and the areas which are focused. A chapter wise introduction of the research is given here. Chapter 1: Introduction The reader gets a kind of idea about the aims, objectives, importance of such investigations, and background of research through the introduction. Chapter 2: Literature Review The introduction chapter is followed by literature review and it contains the empirical studies done by experts and the theories that are relevant to the literature. By analysing the associated literature that is relevant to the research, this chapter gives a rigid foundation for the research. Chapter 3: Research Methodology After literature review is the research methodology that contains the methodology selected for the research and the justifications for choosing them. The research objectives are reviewed initially and then the justifications for the used research techniques are done. Reasons for choosing research technique, research philosophy and the type of research approach, data collection methods and data analysing are also done.
Chapter 4: Data Analysis and Presentation This chapter begins with a description of the data collection process and then an analysis and discussion. The data analysis technique used and its strength and drawbacks were also discussed. Strong justifications for why other methods were not employed were also given. A detailed analysis of theme of the objectives was conducted using the thematic analysis method was also done in this chapter. Chapter 5: Findings and Discussion In this chapter, the relevant literature is compared with the findings of the research and a discussion is done. The credibility of findings is also done in this chapter. Conclusion and Recommendation The findings of the research were summarized in this chapter in the conclusion part that were refreshed in reader‟s minds. The readers were then taken to the recommendations section where the researcher gives recommendations for the company to eliminate the gap that researcher found in the data analysis. 1.7 CHAPTER SUMMARY So to summarize, this chapter dealt with the subject introduction, a profile of the organisation under study and also the rationale and significance of the research subject. This is the main part of the dissertation and since it defines the aims and objectives and conveys the overall purpose for selecting the research issue, the approach, methods and for whom this research will be beneficial.
CHAPTER 2 LITERATURE REVIEW
Key words: - Supply chain management, Inventory management, and competitive advantage. 2.1 INTRODUCTION In this chapter, the literature related to the research issue and the research objectives was discussed that can help the readers in their further reading. The definitions and theories needed for the research was discussed initially and the same is structured into theories related to supply chain management, inventory management and competitive advantage. Since this research is about the effects of inventory management on supply chain, the theories that are related to the supply chain management, and inventory management need to be studied. Since the research investigates whether inventory management serves as a competitive advantage for the organisation when the same has been employed as the major tool, the theories related with competitive advantage also need to be detailed. Moreover this chapter had also tried to include counter arguments about inventory management. Based on the various literatures relevant for the research topic, the research objectives used in this chapter are critically analysed by comparing with the associated literature. The broad approach to supply chain management and inventory management can lead to a more enriched and encouraging debate. Simultaneously, this can also lead to an isolated literature with theories that can overlap and difficulty in generating consistent findings and results. 2.2 SUPPLY CHAIN MANAGEMENT (SCM) According to Leong et al (2008), a supply chain consists of all the parties that are involved in fulfilling a customer request. In other words, a supply chain includes all the organisations that collaborate for producing and delivering a finished product to the final customer, even the customer himself. Supply chain varies depending upon the size, complexity of the association between the members and how the physical presence is distributed (Ross, 2004). The below figure shows two types of supply chains. The first one is direct where the supply chain includes just one supplier and a customer of the organisation. Another one is extended that
includes a supplier, supplier‟s supplier and the customers. The supply chains are dynamic and involves information flow, transfer of funds or products through different stages as shown in the below figure. So supply chains are dynamic and include the flow of information, funds and products between various stages as shown in the figure.
Figure 2.1 adopted from from Areti Manataki’s article on ‘Dell’s supply chain strategies. Jespersen et al.(2005) defines supply chain management (SCM) as the integration and management of supply chain organizations and activities through cooperative organizational relationships, effective business processes, and high levels of information sharing to create high performing value systems that provide member organizations a sustainable competitive advantage. The concept of supply chain management was introduced in the early 1980s. The supply chain encompasses all organizations and activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information flows. Materials and information flows both up and down the supply chain. To be precise supply chain management is the “Systematic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole” (Mentzer, 2001). It has also been viewed as an organisational
response by firms to pressures and demand changes in their organisational environment. SCM is also defined as a long term oriented, inter-firm arrangement or alliance, involving intermediate or hybrid cooperative relationships (Grant et al., 2011). Designing and making a supply chain function efficiently and effectively is one of the most crucial concerns for large number of modern firms. For the past few decades, because of the increasing competition and economic pressure, manufacturing firms were forced to innovate and create improved methods to monitor and control every single stage in their supply chain from suppliers to distribution channels. Due to recent fluctuations in the economy, matching supply to demand has become even more challenging. Nowadays, there is a growing need for more robust supply chains that are responsive to the changes in market conditions (Hooper & Newlands, 2009) .. 2.2.1 IMPORTANCE OF SUPPLY CHAIN MANAGEMENT In today‟s business world, supply chain is having its own importance. Organisations started competing through supply chains since the market has become more demanding compared to the past. According to Shah (2009), all the decisions related to logistics are having a greater influence on time and can play a crucial role for a company‟s competitive advantage. The main value chain activities of a firm are inbound and outbound logistics, marketing and sales, service and operations. Successful implementation of these processes in an effective and efficient way can help the firm in gaining competitive advantage. Globalization has made the relationship between suppliers and customers and this has really tightened the supply chains (Gardner, 2004). Companies have gradually realised the requirement for supply chain cooperation and its success. After all, a firm‟s success mainly depends on its own value chain as well as on the on the success of the value system it belongs to. Supply chain management has also become very necessary for manufacturing industries because the products should be delivered at a high quality and at a competitive rate than their competitors. SCM also makes the firms rethink about their whole operation and also in restructuring the processes. By this the firm can concentrate on its core competencies and outsource the processes that don‟t come under the core competencies of the company (Soverign, 2008). A company
can survive by considering the current market. Integration of the processes and other efforts can improve the quality since higher profit margins shall get reflected and creates improved facilities for manufacturing, design of the product and ultimately in better customer service. According to Mathur (2010), it is obvious that an independent firm may not be having the resources needed to match its rivals. But they can tackle and overcome any tough business challenges by getting the input by having arranged upstream and a downstream, and distributing with effective and efficient chain partners by processing it to the downstream. 2.3 INVENTORY MANAGEMENT The word „Inventory‟ refers to those goods which are either manufactured or purchased for resale in the business activities of any merchandising company (Accounting Tutorial, 2011). Shortage in inventory can lead to stock outs, resulting in production stoppage. At the same time a very high inventory can increase the production cost because of the high cost in carrying inventory. Bose (2006) says that inventory optimization should be in such a way that the stocks are neither low nor too high. Any product that can go out of style or become obsolete presents inventory risk. Even a costly item that sells slowly results in additional opportunity costs for whoever holds the inventory (Helfert et al., 2008). Inventory management is a part of supply chain management. Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. Inventory management includes resource optimization required for holding stock and has been one of the main analytical aspects of management. This process restricts the inventory from becoming too high by controlling the transfer in of units thereby saving the operation of the company from falling into jeopardy. By focusing on three main aspects of any inventory, the various tasks of inventory management can be balanced. Time is the first aspect. How long the materials take to be included in the total inventory is to be understood by the supplier to process the order and dispatch the same. Inventory management also demands a thorough understanding of the time it will take for those materials to move out of the inventory. These lead times are important to know how much space
is available when an order is placed and it will keep the production unit run smoother (Barcodes Inc, 2010). For many companies, inventory is an essential resource needed for day-today operations. Assembly and manufacturing companies need raw materials to process and combine with purchased items to assemble into finished goods. Distribution centres and retail stores need products to sell. Companies that are predominantly service operations need an assortment of office and other supplies. All operations need various types of maintenance, repair, and operating supplies. According to Mercado (2008), the pattern, timing and need of demand for end products never coincide with the volume and kind of inventory an organisation has on hand. At the time of very low demand, an organisation may have inventory with it that it never wanted to have. At some times, when the demand is high, firms want to have more inventory with them. This scenario leads to what the researcher call the eternal issues of inventory management that deal with how much inventory should be kept on hand the frequency of reorder. There will not be any need of keeping the inventory if the organisation is aware of the level of demand and order lead time. Level of demand is the volume and the requirement for various products and the order lead time is the interval between placing a replenishment order and the actually received time. The figures on the finished material inventory are to be recorded precisely so that information can be conveyed quickly to all the channels about the status of the order and for the shipment details (Barcodes Inc, 2010). As per Bose (2006), an inventory functions as a bank and decouples successive stages of operation. Materials, manufacturing and marketing
departments are the three operating subsystems. Finance and human resource are the non-operating subsystems. The material subsystem procures the inputs, the manufacturing subsystem covers the inputs into a product and the marketing subsystem sells the product. The other subsystems like finance and human resource serve the needs of three operating subsystems. The inventory management process starts when the production is initiated and the required raw materials, or any parts are ordered from the supplier. A short time interval will be there to insert an inventory management plan after the orders are placed and before the ordered supplies are available. Inventory management helps an organisation in deciding the storage of
supplies. The warehouse space has to be optimized in case of large supplies. (Saxena, 2009). Inventory plays a crucial role in environments where a firm suffers from poor cash flow or doesn‟t have strong control over any kind of information transfer among all departments and all vital suppliers, lead times and quality of materials received. The main need for inventory supply is to maintain independence of operations. Setting up of each new production needs cost and this inventory can help the management in reducing the number of setups. Another significant need for inventory is to allow flexibility in production scheduling. If there is a precise knowledge of demand, it may be possible to develop the product to meet the accurate demand. If the demand is not known, a buffer stock is kept so that variation in demand is balanced. To provide a safeguard for fluctuation in the delivery time of raw materials is another purpose of inventory. Materials can be delayed from the vendor due to variation in shipping time, shortage of material, an unexpected strike or even due to defective materials. 2.3.1 EFFECTS OF INVENTORY MANAGEMENT ON SUPPLY CHAIN The effectiveness of inventory management is directly measurable by how successful a company is in providing high levels of customer service, low inventory investment, maximum throughput and low costs. According to Donovan (2011), certainly, it is an area where management should apply a philosophy of aggressive improvement. Supply chain management may need different actors at all stages of hierarchy in multiple organisations to work jointly to achieve a common objective. Managing coordination among the supply chain partners therefore assumes significant importance. Organisational integration can become a catalyst by facilitating information sharing within and among firms (Jespersen & Larsen, 2005). In many organisations, marketing and sales departments use supply chain management to enhance their relationships with customers and improve the sales. The product designers consider supply chain issues and use it to inculcate their partner‟s vision and ideas into product design. According to Johnson et al.(2003), by collaborating CRM (Customer Relationship Management), pricing and supply chain information,
organisations can develop opportunities for sales that can boost their profits, and optimize resource utilisation. As per Ross (2010), the main objective of supply chain management is to provide information of high quality and relevance that helps the suppliers to provide a smooth flow of materials to customers. However, distortions can occur due to fluctuations in demand and it can down the entire supply chain. These supply chain distortions can lead to “Bullwhip Effect” and can cause inefficiencies, lost profits, poor transportation and poor production schedules. This distorted information flow throughout the supply chain can lead to inefficiencies, excessive inventory investment, poor customer service, lost revenues, misguided capacity plans, ineffective transportation and missed production schedules (Katzorke & Lee, 2010). Companies are continually faced with variability and uncertainty throughout the entire supply chain. Inventories can help business overcome the variability and uncertainty. Inventory is a variable resource providing the buffer to ensure business continue to run smoothly amidst the uncertainty that exists throughout the supply chain. Without inventory, customers would be subjected to poor product availability, long lead times and delays and a reduced choice of product variety. From a company‟s perspective, inventory gives greater flexibility to operate a business efficiently, providing a lever to balance the customer service, cost and operational objectives. Purchasing large quantities of raw materials in bulk may result in a discounted price from suppliers. Running longer production runs may result in reduced production and changeover costs. Holding inventory in warehouses located closer to the customer may reduce delivery lead times and lower transportation costs. However the trade-off for each of these examples is increased inventory and higher inventory holding costs. The key is for businesses to adopt inventory levels and deployment strategies that will optimize both the operational and financial performance of the company (Gattorna, 2003). An organisation can minimise their logistic costs and enhance service levels by restructuring and redesigning their supply chain. But it is not easy to analyze large systems because of the presence of complex logistical issues. Inventory is one of the important sources of revenue for an organization. Moreover, inventory equals profit, so a precise accounting of products in stock and inventory that is to be ordered can have a major financial impact on the business.
That is a bad inventory can have a negative effect on the firm and can affect everything right from the bottom line. Poor Customer Service: - Inefficient inventory control can cause delay in the shipment of products to the customers. It can even result in a scenario where the proper parts needed for a product are unavailable because of the failure in checking inventory. Ultimately this results in customer dissatisfaction and in the overall service to the clients. Loss of Cost Effectiveness: - Poor inventory management can be quite costly to the firm. If there is too much inventory, it has the potential to be destroyed or damaged over time due to reasons beyond control. If there is no system to weed out bad inventory, shrinkage may happen. Poor Planning:-Organisations track inventory to fulfil customer orders every time. But most businesses plan ahead and a start with bad cache of inventory can end up in poor plan. Moreover, an unexpected large order which is great for business can cost the firm money again if the inventory is bad and the orders are not fulfilled (Belcher, 2011). 2.3.2 EFFECTIVENESS OF INVENTORY MANAGEMENT PROCESSES IN MANUFACTURING INDUSTRIES Unlike general warehouse management, inventory management in
manufacturing industries are different because it includes the production of a particular product in a short span of time. The factors involved in most scenarios are same even if there are some changes in deciding how fast manufacturers can process the products through the production chain. According to Jaber(2009, p.61), effective management of the available materials can have a greater impact on the supply chain and thereby in the performance of the organisation. All the needed supplies from the raw materials to factory workers are to be made curtained to finish the production process. When the organisation produces enough materials to meet customer‟s requirements without manufacturing too many of any product, it can be considered as good production inventory management. But having a little extra on hand will be helpful so that production run will run smooth when a large order comes in. One of the important
considerations in production inventory is to calculate enough number of products so that even after the quality check, there will be sufficient stock of the required product. The top production inventory management strategies may not success in the long run when production process cost is given utmost importance. To maintain an efficient cost effective production process is important. So overproducing products that come out of the process is a waste of costs for the organisation. Hence the proper conservation of materials, time and energy derived through manufacturing goods that are unnecessary is crucial in maintaining a cost effective production inventory management strategy (Inventory Management, 2007). The proper approach to inventory control can have a greater impact in customer service with the help of low inventory, however complex the process is. Current inventory management process use efficient and advanced methods to improve customer service while decreasing inventory. These advanced approaches have a greater effect and helps in improving customer service and have great impact on market share. 2.4 COMPETITIVE ADVANTAGE Choudhary et al (2008) defines competitive advantage as superior financial performance on a given market, meaning that organisations that have above normal returns also have competitive advantage. An enterprise has a competitive advantage if it is able to create more economic value than the marginal competitor in its product market. Porter (1985) suggested that activities within the organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage. Competitive advantage is secured when competitors cannot duplicate the organisation‟s special ability at all. But no competitive advantage lasts forever. Overtime rivals use their own unique resources, capabilities and core competencies to form different value creating ability of the firm‟s competitive advantages. In general because competitive advantages are not permanently sustainable, firms must exploit their current advantages while simultaneously using their resources and capabilities to form new advantages that can lead to future competitive success.
2.4.1 SUPPLY CHAIN PROCESS AS A COMPETITIVE ADVANTAGE An organisation‟s supply chain represents a chain of business processes, decisions, commitments to resources, various processes that cannot be
unsurpassed by any organisational dimensions. Core business competencies are integrated with supply chain capabilities and this creates value to the customers and bags profits. Effective supply chain management integrates customer expectations, commercial requirements and the materials and services flow. This creates a lowest cost life cycle relationship with the supply chain. Thus it gives value to the customers. The shareholders are awarded with the enhancement in profits and excellent returns (Integrated Strategies, 2008). Organisations that successfully apply good supply chain practices usually incur low costs than their competitors. If the costs such as logistics cost, order processing, materials acquisition and inventory, supply chain planning, supply chain financing and information management costs are considered, the potential savings from effective supply chain management would be much higher. The opportunities available for competitive advantage through supply chain management may be a fine balance between investment, flexibility, service, integration and strategic risk. One of the fringe benefits of close customer cooperation is a higher degree of customer loyality. By building up long-term, trust based cooperation with one‟s key customers, several things fall into place. For example because of quick and precise delivery, high quality simplified administration and lower quality control costs, the risk become smaller. These can serve as a competitive advantage for the firm. According to (Bensoussan & Fleisher, 2007), effective supply chain management analysis can ultimately lead to a competitive advantage due to decreased costs, increased efficiency, better product availability and increased sales. Many companies are using their supply chains to beat their competitors at cost control which can result in more pricing flexibility at the point where the goods interface with end customers. It can also result in higher profit margins. Effective supply chain management can translate to competitive advantage if the flow of information and products among the supply chain participants are synchronized and all parties‟ interests are constructively aligned. Proper alignment and information sharing between parties leads to a winwin relationship and allow the supply chain related parties to minimise efficiencies. Moreover the companies using their supply chains for advantage may build large
leads in the market place before their competitors realize what actually the source of the advantage is. 2.4.2 INVENTORY MANAGEMENT AS A COMPETITIVE ADVANTAGE . Efficiency in effective inventory management serves as a great competitive edge to the organisation irrespective of the nature of the firm. With effective and proper control over stock, and maintaining accurate and quick fulfilments, customers can be awarded comparative pricing. This will reduce the operating costs and also helps in more future businesses by bringing back the highly satisfied customers (Chay, 2011). The advancement in technologies has helped organisations to use effective inventory management as a means of competitive advantage. Inventory management as a competitive advantage has entirely changed the way firms used to manage inventory. The advancement in technologies has helped organisations to look more into network level inventory management and concentrate on methods and techniques that can control and monitor the role inventory plays in business profitability (Mehta, 2007). The speed of delivery and availability of products are both valued by buyers and are a source of relative competitive advantage for a firm, and then the firm should more on activities, structures or capabilities that allow it to sustain that competitive advantage. This plan might include keeping more inventories in stock, which is costly because of the carrying costs but important for maximising speed and availability. Similarly, it would include investments in technology to process orders more quickly or in a larger network of warehouses close to customers, which would also be consistent with this competitive advantage. Moreover investments in availability and speed beyond a point at which the buyer values them and is willing to pay a premium for them would fail to enhance the competitive advantage and should therefore not be undertaken (Phills, 2005). Customers might want and be willing to pay a premium for two-day delivery but be unwilling to pay enough to cover the cost of overnight delivery. In this case the allocation of resources should be limited to the level that optimizes the competitive advantage, given the cost benefit to trade-offs.
2.5 DELL’S SUPPLY CHAIN AND INVENTORY MANAGEMENT The supply chain and inventory management of Dell has been the most effective and has played the crucial role in their profitability. The core elements of Dell‟s business model are its direct sales model, usually referred as “direct model”, and the build-to-order strategy. 2.5.1 DIRECT SALES MODEL It is a common fact that Dell avoids the use of retail channel instead sells the PCs directly to customers through their website as the figure says. Thus Dell eliminates the steps in the supply chain that are time consuming and the costs are reduced or even eliminated. To be precise with its direct sales model, Dell is linked with its customers directly and it turns out to be a source of competitive advantage for Dell.
Figure 2.2 adopted from Areti Manataki’s article on ‘Dell’s supply chain strategies. Dell categorizes its customer segments: large firms, small and medium industries, and individual consumers. The process of segmentation gets finer for better approach to the customers and this helped in improved demand forecasting. For the large firms, the direct relationship is transformed into the so called virtual integration. With the aid of advanced information technology one to one contact, customers interact with Dell as partners.
2.5.2 BUILD TO ORDER Anderson (2004) defines build-to-order as “a value chain that produces quality products or services depending upon personal or a group of customer requirements at a very competitive rate without any time delay by having an influence on the core competencies of partnering organisations and suppliers including the use of advanced technologies integrating a value chain. So as far as Dell is concerned, they manufactures a product only after customer orders for it and then the just in time and lean manufacturing process occurs. After the order is received, the detailed specifications are sent to the production process and then the manufacturing and assembling process begin. Once the computer is made, the software requested by the customer is loaded into it and then it is dispatched to customer hands. The use of a build-to-order and JIT manufacturing procedure has given many advantages for Dell. Mainly, the inventory levels are reduced which in turn minimised the inventory costs and a quicker response to changes in demand. For example, when a new microprocessor is launched in the market, Dell can start ordering for it from it since they don‟t need to move out any existing stock. Moreover customer payment is done before suppliers are paid for the components and this allows Dell to function on a negative cash conversion cycle. Thus Dell knows exactly what the customers want even before the manufacturing and customized products are offered to them. Dell‟s relationship with its suppliers supports its build to order model. Dell considers suppliers as an integral part in their business and the main factor in their organisational success. The main advantage behind direct sales model and build to order manufacturing is that the costly inventory does not accumulate in the storage and depreciates its value before the same can be sold out and the new products can be launched without clearing the old inventory in stock. The build-to-order process has been in effect for many years now and includes the entire manufacturing cycle and the supply chain. Thus a product of Dell is designed in such a way that human touches are minimised in manufacturing and high quality products are ensured from the suppliers and are integrated into the production physically. The whole customer order fulfilment is managed by combining internal and external information systems. Dell‟s interaction and relation with its suppliers have helped them to function with zero inventories. The suppliers have to maintain the inventory near or in the
plants of Dell so that build to order manufacturing is given a hand. The suppliers can also manufacture anywhere and ship the same to supply hubs (Thinking Made easy, 2010). 2.5.3 SUPPLY CHAIN AND INVENTORY MANAGEMENT PROCESSES As per Schoenfedlt (2008, p.171), holding inventory is a huge liability since the technology changes rapidly. A supply chain packed with the technology in the past is almost worthless. However, Dell carries very little inventory with the help of its direct sales. Entire organisation focuses on speeding components and products through the supply chain. The new products are delivered to the market at a faster rate by Dell than its rivals and do not have to sell old products at a discount rate because it doesn‟t have any. Dell‟s supply chain and inventory management works as follows. When an order is placed by the customer through phone or internet, Dell processes the order through credit checking evaluating the configurations. This takes two or three days and then the order is sent to one of its manufacturing plants in Austin, Texas. These plants are efficient enough to build, test, and package the product in a span of eight hours. It follows a first-in first out formula all the orders are shipped within five days after the receipt. However there are exceptions for this. In scenarios like large number of orders with same level configurations or when the defective units are to be replaced, Dell may manipulate the schedule.
Figure 2.3 adopted from Daniel Gmo’s article on Dell’s supply chain.
Dell doesn‟t have enough time to respond to customers than the time it takes for transportation of the components from suppliers to assembly plants. It takes almost seven to thirty days for transportation since most of its suppliers are located in Southeast Asia. To counterbalance for long lead times and buffer against uncertain demand, Dell needs its suppliers to hold the inventory that are readily available in the Austin revolvers. Revolvers or supplier logistics centres (SLCs) are small warehouses that are positioned within a few miles of Dell‟s assembly plants. For using these supplier logistics centres, the suppliers pay rents and they share the revolvers among them. Dell pay the suppliers for using the revolvers indirectly through component pricing. The cost of holding inventory in the supply chain is, however, included in the final prices of the computers. Therefore, any reduction in inventory, benefits Dell‟s customers directly by reducing product prices. “However the pricing of the final product largely depend on the demand and supply of the product” (Friedman, 2008). Maintaining low inventories also help in keeping up higher product quality, as Dell can in time detect any of the quality problems more quickly than it could, holding high inventories. They wish to lead of their competitors who adopt a direct-sales approach, and it must be able to trim supplier inventory to obtain significant leverage. The cost of the supply chain comprise of all the prise that which is need to start and till the final assembly, Dell specialised majorly on the inventory of Dell specifically. (parts which is designed for the Dell such as the revolvers and assembling plants) The assembly plants have the inventory only for very little hours, so the Dell's major aim is to focuses on the accessible inventory. Dell has a particular vendor-managedinventory (VMI) planning with its supplier: in which the supplier make a decision to how much inventory to enjoin and uncertain time to instruct, while Dell locate aim inventory levels so that they don‟t influence the complete procedure. From the said target they will keep a record on this. Dell heuristically decide an inventory aim of ten days supply, and it utilize a periodical provider scorecard to assess how fine each provider does in continue this aim inventory in the revolver. Dell removes record from the revolvers as and when necessary, on an average, every two hours. In case the product is multi resourced (that is, parts from dissimilar dealer are totally identical), Dell can remove (pull) those mechanism from any division of the dealers. Dell often removes elements from one dealer for a few
days before changing on to another. Dealer chooses and keeps a trace as to when they need to send their commodities to their revolvers. In exercise, most of the dealers make the deliverance to the revolvers three times a week tentatively. Dell shares its forecasts with the suppliers once every month, in turn helping them to make good ordering decisions. These forecasts are generated by Dell‟s line of business (LOB) marketing department (Surbakti, 2011). 2.5.4 JUST IN TIME MODEL ''Just in Time'' was a manufacture model which was found by Toyota Motor Corporation in the 1960s. It highlights the requirement to have just the necessary garnishing, just the necessary quantity and just the necessary time required for manufacture and allotment. In the 1980s, many American enterprises artificial the JIT model, however, with little result. JIT depiction all kinds of difficulty in management while reducing dissimilar kinds of inventory, and it analyzes the causes before tackling the crisis to make developments. And, the dragging manufacture that organizes the manufacture according to customer demand is one of the most successful ways to decrease inventory(Hanlon, 2010). Just-In-Time is a production planning and control philosophy that seeks to eliminate waste. It is desirable to complete a task as close to its due date as possible This certainly means that a company operating following the JIT manufacturing system would purchase only the required quantity materials each day to meet that days needs. Moreover, the company would have no goods still in line at the end of the day, and all goods completed during the day would have been set off for distribution. Although not all companies are not successful with this model, some could reduce their inventories to an extent. Thus warehousing costs and orders has been reduced and the operation has become more efficient. The flow of good is balanced by a pull approach in just in time model. During the final stage of assembling, the preceding work station gets a signal which equals the accurate amount of materials that are required over the next few hours to fulfil the customer orders and the materials and parts needed for that is provided. This same signal is again returned to each and every work stations so that a proper material flow is maintained without inventory build up at any stages. Hence all work stations replies to the pull given by
the last stage in assembly which fulfils the customer orders(Accounting For Management, 2010).
www.accountingformanagement.com Although the main goal of JIT is to reduce inventories, the way it is implemented offers many more benefits (Jozefowska, 2007). Better product quality Shorter delivery times Better flexibility in terms of production and mix volume More efficient utilization of workers capabilities Good relationships with suppliers resulting in increased reliability of supplies.
2.5.5 EFFECTS OF INVENTORY MANAGEMENT ON DELL’S SUPPLY CHAIN Dell‟s effective and efficient inventory management has a greater impact on its supply chain. Dell have revolutionized the sales of computers using direct sales model that takes orders from the customers directly and thereby minimises inventory. The zero inventory strategy by Dell generates customer values (Giunipero et al., 2009, p.347). This value is function of the whole value chain integration. This includes innovation, development, plan, production, logistics and transportation, service, delivery and marketing. Thus the value chain integration generated visibility
and developed a strong and bonded relationship among Dell and their suppliers and customers. The zero inventory held by Dell helps them in gaining an economic advantage, because the value of components and manufacturing materials declines about one per cent per week. The five day inventory also minimizes a customer's ability to change their wants before they receive their computer. Dell's use of just in time results in cost savings, superior customer satisfaction, limited waste, and the ability to provide their suppliers with more information. In the end these benefits all result in a cost savings for Dell and higher revenue. Since Dell holds minimal inventory, they do not have to fund raw materials, work in process or finished goods inventory. Dell has been able to achieve increased customer satisfaction, minimise the stock out, efficient production plan, improved logistics, comparative pricing and by optimizing inventory management (Beims et al., 2005). 2.6 COMPETITIVE ADVANTAGE OF DELL According to Hitt et al. (2009, p.85), the effective inventory management process in Dell has been serving as one of the main competitive advantages in their whole supply chain and thus behind Dell‟s success. Their direct sales model and JIT have played a pivotal role in Dell‟s business success. Dell‟s business structure of “virtual integration” allowed it to surpass in an improbable competitive industry. It's competitiveness resulted from a highly efficient business model followed, that sought out every opportunity to work more productively without compromising on the quality of their product. Efficiency in production lowered the cost which in turn provided Dell with huge profit margins. As Porters Five Forces exhibits that when the bargaining power of buyers is high, the potential for price battle increases. Dell combated failing into the trap of a price battle by making a PC that was a better product than the competitors, yet near their competitor‟s price. Their costs could stay competitive while delivering an exceptional product because their business kept internal costs low, thus posing the effectiveness of “virtual integration. Dell was able to create this lasting profitability with three essential ingredients virtual Integration, real value customer service features and tailoring manufacturing to customer needs. From the above discussions, it is clear that the „assemble-to-order‟ manufacturing process allows Dell to reduce its inventory requirements while
maintaining a large range of configurable end products built to the customer‟s specification (Gattorna, 2003). 2.7 CONCLUSION In this chapter the researcher reviewed the literature in alignment with the research objectives. The literature reviewed here was able to show off some of the major theories, modes, techniques and approaches associated with inventory management and supply chain to an extent. Literature included the impact of inventory management on the supply chain. Inventory management is having a greater impact on the supply chain in achieving business success and ensures the business to run smoothly. It also helps in reducing the inventory costs and thereby improves the service levels. The negative effects include poor customer service, loss of cost effectiveness, and poor planning. The researcher has also researched on the positive and negative effects of inventory management and the inventory management process in Dell. Moreover there were not enough authentic researches that came across as counter to the fact that inventory management plays a vital role in supply chain and it serves as a competitive advantage to the firm. Relevant literature regarding competitive advantage and how supply chain and inventory management serves as a competitive advantage for organisations had been discussed in the literature review. All the activities should be running at an optimum level to gain competitive advantage as per the theory. Efficiency in supply chain and inventory management is a great competitive edge and organisations have been following this. The use of advanced technologies in their supply chain and inventories helps organisations like Dell in having a competitive edge over their competitors. The researcher had also reviewed that direct sales and just in time model of Dell has been serving as their competitive advantage. The literature says that an organisation gains competitive advantage when it creates more economic value. The literature review also included the effectiveness of various inventory and supply chain processes. The organisation‟s various processes have a greater effect on product pricing and reducing inventory costs. The researcher was able to include all the relevant literatures in alignment with the research objectives and reviewed them effectively.
3.1 Introduction This chapter consists of the research philosophy, research approach and research strategy & design. The explanations for choosing a particular approach, method or philosophy and reasons for rejection of the remaining were done. Different methods employed for primary data collection and data analysing methods were also explained. The justifications for selection of each strategy and approach were being done by the researcher. The chapter starts with a detailed explanation of the research aims and objectives so that the readers can easily understand the reasons for the selection of the approaches. According to Kothari (2008), research refers to the search for knowledge and is similar to science investigation. Research contains defining and redefining issues or problems thereby generate hypothesis or the resolutions, collecting, modifying, rearranging and analysing the data, making required alterations and rectification and concluding to find if they are according to the hypothesis that was generated. Thus to be more precise, research is thus a true contribution to the knowledge that is in use to make it more advanced. Ethridge (2004) defines methodology as the process in which processes or functions are implemented. Research methodology executes the principles for arranging, planning, modifying, designing and doing research.
RESEARCH PROCESS DIAGRAM
Research Philosophy (Interpretivism)
Methods of data Collection (Semi-structured Interview)
Finding and Recommendation
3.2 RESEARCH OBJECTIVES The research aims and objectives are directly linked with the methodology and techniques chosen for the research. The main aim of this research is to explore
the effects of inventory management on supply chain management and how inventory management is used as a tool for attaining competitive advantage through a case study on Dell. This research is on the inventory management process in Dell, the review and opinions of managers regarding the current processes and to give recommendations that are possible to enhance the inventory management processes of Dell in alignment with their corporate strategies. The main objectives are to analyse the impact of inventory management on supply chain, to find out the way firms use supply chain management to gain competitive advantage and increase business success. The other major objectives include the evaluation of effectiveness of various process associated with the inventory management of Dell and to recommend possible ways to reduce the inventories and hence improve the supply chain management of Dell. The researcher was able to accomplish the research aims by these research objectives. 3.3 RESEARCH PHILOSOPHY Research philosophy can be defined as the development of the research background, research knowledge and its nature (Lewis et al., 2009). Research philosophy is also defined with the help of research paradigm. A research paradigm is a perspective about research held by a community of researchers that is based on a set of shared assumptions, concepts, values and practices. More simply, it is an approach to thinking about and doing research (Christensen & Johnson, 2010). Paradigms also typically include specific methodological strategies linked to these assumptions and identify particular studies that are seen as exemplifying these assumptions and methods. At the most abstract and general level, examples of such paradigms are philosophical positions such as positivism, constructivism, realism and pragmatism, each embodying very different ideas about reality and how we can gain knowledge of it (Maxwell, 2005). According to Saunders et al.(2009), there are two research philosophies given to the researcher. They are positivism and interpretivism. Both these philosophies had their own advantages and disadvantages with respect to the research subject. Positivism attempts to view the world objectively in order to manipulate it. Positivists attempt to “understand a set of affairs scientifically only to the extent that we have knowledge of what to do in order to control it, and it is thus that the ability to control
phenomena provides the framework in terms of which scientific explanation proceeds” (Field et al., 2007). Positivism is a term with many uses in social science and philosophy. It embraces any approach which applies scientific method to human affairs conceived as belonging to natural order open to objective enquiry. Interpretive paradigm is associated with unstructured qualitative methods, including participant observation studies and in-depth interviews. The interpretivists differ with positivists on assumptions about the nature of reality, what counts as knowledge and its resources and the values they hold and their role in the research process (Chilisia, 2011). Interpretive approaches rely heavily on naturalistic methods like interviewing and observation and analysis of existing texts. These methods ensure an adequate dialogue between the researchers and those with whom they interact in order to collaboratively construct a meaningful reality (Robert Wood Johnson Foundation, 2008). These definitions reveal the fact that some researches involve the investigation of matters of the topic that needs a clear understanding of the views, ideas and also the interpretations of people and not the objects. So in this research on the effects of inventory management on supply chain management need the clear knowledge of the views, ideas and interpretations and actions of individuals included in the research. Other than that, the inventory management process is complex and unique and needs the functioning of set of human and situations that makes an interpretivist approach. Moreover because this research includes an indepth analysis and study of the inventory management practices to investigate if this practices help in gaining competitive advantage by using inventory management as a major tool in supply chain, an interpretivist philosophy better suited here. Another justification for choosing this interpretive philosophy is that this research didn‟t want to make any suggestions for the firm to make rapid changes to their strategies and techniques but trying to realise the effectiveness of various process associated with inventory management in Dell and how they achieve competitive edge over the competitors. 3.4 QUALITATIVE AND QUANTITATIVE METHODS Out of the two methodological approaches, quantitative and qualitative, the researcher has decided to employ the qualitative approach in conducting the research. Quantitative research is defined as “Explaining phenomena by collecting
numerical data that are analysed using mathematically based methods (in particular statistics)” (Muijs, 2011). In order to be able to use mathematically based methods, the data have to be in numerical form. This is not the case with qualitative research. Qualitative data are not necessarily or usually numerical and therefore cannot be analysed by using statistics. Qualitative research involves the studied use and collection of a variety of empirical materials-case study, personal experience, introspective, life story, interview, observational, historical, interactional and visual texts-that describe routine and problematic moments and meanings in individuals‟ lives (Neergaard & Ulhoi, 2007). It consists of a set of interpretive, material practices that make the world visible and includes the study of things in their natural settings, attempting to make sense of or interpret phenomena in terms of the meanings people bring to them (Flick, 2007). This approach is adopted because this research tries to investigate the meanings rather than the measurements. The data collected in qualitative research can be in the structure of words, objects and records, pictures and diagrams. More importantly a social research is different to a scientific research so here the research cannot carry out the research using the similar approach used in a scientific research. Moreover the researcher likes to go beyond mere description at a generalisable level in the empirical investigations. Hence qualitative research has been used. As per view of the research, the subject like effects of inventory management on supply chain management cannot be studied using quantitative method as the research objectives do not concentrate on the financial effects and it only involves the perceptions and views of individuals and their behaviour and how the factors provide advantage for the company. 3.5 RESEARCH APPROACH The research questions throw the need for knowing about the theories and concepts. Thus, a research approach that is depended upon observations, document studies and interviews taken from real world are asked to achieve the research objectives (Divitini, 2010). Various research approaches have to be generated during the process of research. The methodological approach chosen for the research should also have an impact of the choice of the research approach. This research is conducted using the inductive approach. Here the observations are used relevant to the literature review. The main concentration here is to describe the data to generate a model of recommendation or suggestion. It is all about explaining from a specific
case or cases and developing a general rule. These observations are later modified into theories and then for further testing (Buddenbaum & Novak, 2001, p.225). As explained earlier, inductive approach is chosen because initially the researcher was not having an idea regarding the inventory management process of the organisation and its effects on the supply chain and how they are using it as a competitive advantage. More over the researcher was unsure about the advantages through inventory management by firms. These factors strengthened the need for an inductive approach in this research where the data are investigated and analysed to arrive at conclusions. Inductive approach begins with accurate observations and general models and theories. The research builds theories in relation with the analysis and interpretation of the data collected. 3.6 DATA COLLECTION METHODS The researcher required primary data‟s like the opinions and views of the managers regarding the process of inventory management and its impact on the supply chain of Dell. Some information is needed from the side of management regarding the policies, process and practices in the organisation. The researcher employed qualitative approach because of the nature of collected data was qualitative as explained in the earlier part of data collection. The collected data can be from primary or secondary source. 3.6.1 Primary data and Secondary data Primary data collection addresses specific research issues as the researcher controls the search design to fit their needs. Primary data is collected to answer the parts of the research problem that the researcher cannot answer by secondary research (Collins, 2010). The researcher prefers following primary data collection method because it is more for a qualitative method. Primary data are collected through interviews, questionnaire etc. Interviews can be structured, semi-structured and unstructured and the questionnaire can be open ended or closed ended. Secondary data collection involves data collected by someone other than the researcher. The common sources of secondary data are companies report, journals, financial reports etc and are mostly used in quantitative data analysis. This research
employed a few secondary data collection methods for primary data support. Data and information from websites, books, news papers, journal articles etc were used. 220.127.116.11 QUANTITATIVE METHODS FOR DATA COLLECTION Questionnaire: - A questionnaire is a series of questions designed to collect information from the respondents. They are mostly designed for statistical analysis. The main advantage of questionnaire is that large amounts of data can be collected from a large number of people within a short span of time and that too in a cost effective way. Moreover it can be analysed more scientifically and objectively than other forms of research. But it has some disadvantages as well. Questionnaires are argued to be inadequate to understand some forms of information that is changes of emotions, behaviour etc. Moreover the respondent may be forgetful or not thinking within the full context of the situation. But since this is a quantitative approach and because the research is qualitative, it can‟t be employed here. Structured Interviews: - This type of interview includes closed ended questions that have the options „Yes‟ or „No‟. It is then used to justify theory or hypothesis by taking the average. The main advantage of structured interview is that they allow the exploration of specific topics, while allowing people to express their opinions, philosophies and ideologies. But they are time consuming and require designing questions and intensive resources. Moreover it lacks reliability and the researcher will be able to interview only a very few people. 18.104.22.168 QUALITATIVE METHODS FOR DATA COLLECTION Observation: Observation is a strategy in qualitative research that helps researchers to become familiar with an online or conventional setting by systematically and ethically recording what they see and hear in the field (Daymon & Holloway, 2002). To be more precise, the collected information through watching real events or physical characteristics acts more real. Semi-structured Interviews: Semi-structured interview can be defined as “guided conversation in which only the topics are predetermined and new questions or insights arise as a result of the discussion and visualised analyses. It is informal and conversational and is a well defined and systematic activity with a set of clearly
defined goals and guidelines. To be precise it is a qualitative research interview (Guijt et al., 1995). Justification:- The researcher has adopted semi-structured interview method for data collection for the qualitative research because it can help the researcher in getting a proper insight of the issue. Since the questions are open ended, it opens a way for collecting information from different perspectives. This helps the researcher in becoming more flexible and can alter the number of questions depending upon the relation of the interviewee with the issue. 3.7 DATA ANALYZING METHODS Since this research use interview to gather primary data‟s from the associated respondents it is mandatory to apply various techniques for analysing the data that are collected. The qualitative analysing methods are the mostly available method and are used by the researcher here. This method is justified by the fact that this research has chosen qualitative and inductive approach rather than quantitative and deductive. This qualitative method is more practical and close to reality to analyse the information collected for this research because it helps the researcher to reach at the theories and facts about the firm‟s inventory management process and its effect on the supply chain of the company. 3.8 SAMPLING TECHNIQUES In qualitative research, the term sample is taken to mean the specific set of people interviewed or observed for a study. The respondents‟ effectiveness in the research is largely depended on the size of the sample. But that doesn‟t mean that small size samples are ineffective (AQR, 2011). Researcher strongly believed that collecting data from a few individuals having a thorough understanding of the research is far better than gaining data from a large number of less knowledgeable individuals. The time limit in completing the research has also forced the researcher to interview a very few managers. Researcher intends to take up a sample size of 4 managers from the supply chain and inventory management department of Dell. One of the mostly employed sampling techniques in research is convenience sampling. This sampling method tries to attain a sample of convenient factors. The choice of sampling units is based upon the interviewer‟s decision. The justification for
selecting this is because it‟s cost effective and doesn‟t take longer time and due to the accessibility of the sampling units and co-operation. During the initial stages of this research, random sampling was proposed, but due to lack of time and budget, random sampling was dropped. 3.9 RESEARCH LIMITATIONS No work is perfect and will be having so many limitations. The main limitation was to get the appointment of managers of Dell since they are busy with their work schedule. Another limitation is the difficulty in employing a large sample size. The research was conducted within a short span of time and the main culprit was budget because it was quiet difficult to grab data from a larger sample to conduct a qualitative analysis. Since the research was conducted from a supply chain and inventory perspective, the research will be limited to the supply chain upstream. But the researcher could bring an inspiration to other research in a scientific perspective. 3.10 VALIDITY & RELIABILITY The questions regarding the reliability of data are addressed by the researcher, thus facilitating the authentication of data collection. The initial reading and associating it to secondary data gives improved dependability on the research concept. The authenticity of the data will depend upon the data given by the literatures and researcher‟s accurate findings. The precision of the data are tried to be maintained at cent percent and the researcher reached a conclusion which is unanimous so that it can be applied to the supply chain industry. 3.11 ETHICAL ISSUES: When doing the research, the researcher must be considerate of ethical and data protection issues. Ethical guidelines seek to work towards protecting the individuals, communities and environments involved in the studies against any form of harm, manipulation or malpractice (Banyard & Flanagan, 2005). The researcher had to face different ethical issues while doing the research. The researcher assured the respondents that all the data and information they have exchanged will be kept confidentially and will not be disclosed. Because of the ethical issues, the researcher had to cancel collecting data from the head office. The conducted research aims to abide to all the rules and regulations and to codes and norms in alignment with the
issue. It also aims at concealing and safeguarding the organisation‟s privacy. The interviews and data provided will be kept confidential and will not be given to any other social activities. Chapter Summary This chapter included the methodological aspects in connection with the research. This chapter starts with a detailed description of the research aims and objectives that enforce its impact on the research methodologies chosen for the research. In a precise order the major stages like research philosophy, research approach, are discussed including the data collection and analysing methods. The presentation, analysing and discussion of the findings from the semi structured interviews are detailed in the next chapter.
DATA INTERPRETATION & ANALYSIS
4.1 INTRODUCTION The research methodology implemented in doing the primary study was explained in the previous chapter. A very detailed analysis of the primary data is done here and is mainly focused on consideration, evaluation and interpretation of the data/and or results obtained from the primary research. This chapter also includes the various methods employed by the researcher to collect the primary data. Data from experts of the organisation were collected based on the personal and professional contact of the researcher. The researcher used interviewing method to collect primary data. The recorded interview is interpreted in a report format and then analysed for the findings. The analysis has got various stages where the collected data is interpreted and then related to the literature for evaluation. 4.2 DATA COLLECTION DESIGN The researcher has used qualitative data analysis approach in alignment with the research objectives. For the purpose of collecting the data and information from the managers, researcher used semi structured interviews in which the questions were prepared on the basis of open ended questionnaire. The time limit in completing the research and considering the busy work schedule of managers, the researcher was forced to interview a very few managers. Researcher intends to take up a sample size of 4 which is called probability sampling and the respondents are from the middle management. It is also considered as a demographic factor. 4.2.1 SEMI-STRUCTURED INTERVIEW In order to meet the objectives of the research, the researcher interviewed middle level managers of various departments of the organisation. An in depth interview is necessary to get the opinions of the managers in their perspective. The researcher has chosen four interviewees and they are given standard questions
since there are various departments in the supply chain of Dell and each and every manager has certain roles and responsibilities. So, to find out if the strategies are different or not or to find out the similarity they were made to answer the standard questions. All the interviews lasted for three hours where each of them took approximately fourty five minutes. Two of the interviews were noted down and the remaining two interviews were recorded. By collecting and transcribing interview talk, the researcher can produce rich empirical data about the perspectives of individuals. They are structured around a set of themes which serve as a guide to facilitate interview talk (Cousin, 2009). 22.214.171.124INTERVIEW QUESTION DESIGN Semi structured interview is mostly for qualitative research questions and are used to explore and explain themes that have emerged from the use of a questionnaire Lewis et al. (2009, p.236). The order of the question can be modified, added and deleted according to the requirement. Since the interviewees were the middle management from different departments, the researcher cannot ask irrelevant questions. Hence researcher has applied the same technique. The interview questions were based on the main theme of supply chain management, inventory management and competitive advantage. Fourteen questions were asked to the interviewees to cover the relevant information. But the number of question went on changing with plus or minus of one or two question. The summary of brief questions that bagged the required data in alignment with the objectives is attached in Appendix 1. All the data that are collected through the semi structured interview needs to be analysed and evaluated. So an appropriate qualitative technique has to be chosen. 4.3 QUALITATIVE DATA ANALYSING TECHNIQUES Qualitative Data Analysis (QDA) is the range of processes and procedures whereby we move from the qualitative data that have been collected into some form of explanation, understanding or interpretation of the people and situations we are investigating. The idea is to examine the meaningful and symbolic content of qualitative data (Ezzy, 2002). There are various qualitative data analysing techniques available. Some of them are
Content Analysis:- According to Stevens (2007), it is the preferred method for analyzing semi-structured interviews and cognitive testing interviews. Content analysis is mostly self-taught and the progresses are analysed in a short span of time. The disadvantages are the analyses can be poor and the results can be unsatisfactory. Grounded Theory:- This is one of the standard techniques for data analysis. It includes a systematic hierarchical set of steps to develop theory that are derived with inductive approach. Grounded theorists collect data to develop theoretical analyses from the beginning of the research. By adopting grounded theory methods, the researcher cam direct, manage and streamline the data collection and moreover construct an original analysis of data (Charmaz, 2006). Triangulation:- This method is used in qualitative research and it involves using multiple research techniques and multiple sources of data in order to explore the issues from all feasible perspectives. Triangulation can be used not only as an approach but also as an effective validation and verification strategy to strengthen data analysis. The information is supported by statistical or numerical data (Gass & Mackey, 2009). Thematic Analysis:- This is one of the most commonly used qualitative data analysis methods and the researcher has employed the same in his research. Thematic analysis is about trying to identify meaningful categories or themes in a body of data. By looking at the text, the researcher asks whether a number of recurring themes can be abstracted about what is being said. Then, in the results section of the report, the themes abstracted are collated and reported on. A summary of the findings can be offered but also a critique of the author's own interpretations – this refers to the concept of 'reflexivity', that the researcher‟s is only one interpretation of the text (Gass & Mackey, 2009). Justification:- The researcher has followed thematic technique as it is most suitable for the semi-structured interview analyses as explained in the previous section. This technique gets insight of the issue and gets the knowledge of the reasons for the issue occurrence and compares to find the gap. For better findings, individual theme analysis is done in alignment with the objectives. The themes are grouped into categories based upon the questions and the analysis is done at one time and this
saves time for the researcher. Since this research is mainly based on the occurrence of phenomena within the firm and it has no statistical and numerical figures to reflect on the data proof which is required in triangulation method, thematic technique is most suitable approach and hence the same has been used. 4.4 INTERPRETATION OF SEMI STRUCTURED INTERVIEW Themes Respondent Views Interpretation Evaluation Low Inventory Maintaining low inventory According to the responses is one of the toughest from the respondents, the challenges for any researcher has interpreted maintaining low &
organisation. Respondent that
A said that companies like inventory has been serving Dell always use very little as one of the key factors inventory as possible. behind Dell‟s business
According to him, when a success. firm relocates its inventory Theory:to another The general location theory on „low inventory‟ in literature on review is
because of poor space the
utilization or handle the based inventory multiple times; it between
results in very high labour supply and moreover the costs. Efficient inventory expenses management of in carrying
Dell inventory and the possible
avoids these issues and lead outs due to shortage minimises the labour cost in inventory (Bose, 2006). related with the inventory. Even a costly item that Respondent B and C add sells greater effect on Dell‟s for slowly results in
that low inventory has a additional opportunity costs whoever holds et the al.
overall performance. Both inventory respondents agree that its (2008). because
computers GAP:- There is a GAP here
depreciate at a very high according rate and a ton sitting in researcher.
inventory, loses a
computer inventories could point to a of value. scarcity a of materials. little can extra in
Respondent D states that Having in an organisation like inventory
Dell, its all about how fast running the production run the inventory moves smoother when a large through the cycle. Dell‟s order comes in. model helped in starting Evaluate:with the customer whose the order through pulls the According to the
inventory organisation channel the theories
following and and its low
resulting in the ability to characteristics days and this provided a role in Dell‟s But
deliver a computer in 3 inventory plays a crucial business when the
great deal of value and in success. reducing the inventory.
enough materials to meet customer requirements
without manufacturing too many, at the time of large order the production will not run smooth and can result in delay in product shipment. This can
ultimately result in huge business loss. Impact of inventory Respondent A, B, C and D According agreed that inventory researcher, to the inventory
management is having a management is playing its greater impact on Dell‟s crucial role on the efficient supply chain supply chain of Dell and
to A, lower inventory cost Effective
is an added advantage for inventory control helps Dell the firm that effectively in lowering the inventory controls Proper inventory minimises these its and inventory. cost, in proper delivery of efficient products to the customers control and thereby achieves
costs customer satisfaction, in an
because it minimises the economic advantage and in total amount of inventory speeding up the entire
needed to manage the supply chain process. business. Respondent B added that having of an GAP:- Referring back to a the literature review, where of review of the effects of
customer requirement is inventory management on crucial to both sales supply chain management
increases and customer is done; the respondents service. If the product is haven‟t mentioned anything out of stock, the sale is that is contradictory to the lost forever and customer literature and hence no approaches vendor. inventory system Dell‟s another GAP is found. good says
management Evaluation:-Theory identifies
sales that inventory management
trends and prepare for is much more complex in customer needs. manufacturing industries
Respondent C responded and the functions may not by saying that the low be very effective. So the inventory level in helps chances of material
them in attaining economic shortages and excessive advantage because of the inventories may be high. decline in the value of Dell has been successfully
component weekly. Hence overcoming this concern by there is no need to fund the use of Just-In-Time raw materials, D work in model and their pull-
inventory in Dell
helped them to reduce the stock out, improve pricing and management promotion and
ultimately in speeding up the supply chain process. Competitive advantage All the respondents have According stated that effective and researcher, efficient inventory to their the direct
and sales model and efficient
supply chain management supply chain management has been serving as the are the main competitive main competitive advantages for Dell. Their relationship with advantage behind Dell‟s direct success. respondent According A,
to suppliers and customers
reducing and virtual integration has
the cost of intermediaries also played its role. by the direct relationship with the customer and GAP:- The literature and
supplier has served as the the theories of competitive main advantage Moreover competitive advantage of by Dell. chain and with supply inventory have when views with review, been the were the the
dealing management and
directly with the customer, covered Dell gets a
knowledge of the trends in compared market. B adds that by literature
eliminating the need of a researcher could not find a
PC support engineer to gap. load the softwares, Evaluation:The theory
customer gains both time says that an enterprise and cost. According to C, gains the use of competitive
advanced advantage when it is able
technologies in Dell has to create more economical helped them to control and value than the marginal monitor inventory role in competitor in its product bagging profits and in market (Choudhary et al.,
customer service. This has 2008). According to the helped inventory effectively competitive them to use respondents, their Dell cost could in
management lower and as
a production and gain an advantage by
Respondent D adds that their whole inventory and although Dell could lower supply chain process. The their cost in production use of latest technologies efficiency managed to and gain they also helped them in gaining high a competitive advantage inventory
profit margins by keeping with internal costs low
and management. Moreover all respondents agreed
showed the effectiveness the of virtual integration.
that having a direct relation with the customer helped them in overall evaluation model and
performance. So as per the researcher‟s direct sales
supply chain management has been serving as Dell‟s competitive advantage. Effectiveness of various According to respondent The organisation‟s various processes A, the various supply processes has a greater
process are very much producing, effective for them
for inventory costs, and helps
years. With proper control in good ordering decisions and management over for the suppliers. The researcher
inventory stock, and quick GAP:-
fulfilments, Dell is able to could see a gap here when give comparative pricing to compared with the relevant their customers. As far as literature. The theory states respondent B is that effective control over stock help in alone giving
concerned, having proper inventory management various supply of the cannot
processes chain gives
in comparative pricing over a the products. The demand
competitive edge in the and supply of the product sales markets and helps in also shapes the price of the reducing inventory costs. product to an extent
Respondent C adds that (Friedman, 2008). suppliers inventory indirectly through own and pays for Dell‟s Evaluation:Dell competitive In market, a the
it price for a product varies
component until the demand by the equals supplied the by
pricing. The cost for this is consumers included in the final prices quantity
of the computer. Hence producers. Controlling the any reduction in inventory production process and the benefits Dell‟s customers inventory stock alone
by reducing the prices. cannot give the consumers According to D, sharing its a comparative pricing. The forecasts month with helps the correlation between price Dell‟s product is supplied to the is the supply
suppliers at least once per and how much of a good
suppliers in making good market
ordering decisions and it is relationship
serving as one of the most price is a reflection of effective processes. supply and demand.
4.5 CONCLUSION Using thematic technique of qualitative data analysis, this chapter identified the different themes and analysed them in alignment with the research objectives. The detailed analysis on the themes provides the background for the results and discussions chapter. From this analysis, the findings will be derived and a complete evaluation will be done and the reasons for the gap will be discussed.
RESULTS AND DISCUSSION
5.1 INTRODUCTION This chapter focuses on the findings and discussion and moreover an in depth understanding of the objectives after analysis. The analysis which was done on the interview in the previous chapter in alignment with the objectives is the main background for this discussion. 5.2 Findings and Discussions 5.2.1 Maintaining low inventory Key Findings:- Low inventory can help in an improved supply chain. Discussion:- Today, maintaining the right inventory levels is a tough challenge to. If not properly managed, the inventory can result in a significant expense. The cost of carrying too much inventory can affect profitability. The cost of carrying inventory today has become a major expenditure and requires immediate attention. The benefits of inventory control far outweigh the costs. Any reduction in inventories, whether it is raw material, work-in-process, finished goods or supplies, can have a dramatic impact on the bottom line and ultimately help in an improved supply chain. Companies like to have very little inventory. When a firm relocates its inventory to another location because of poor space utilization or handle the inventory multiple times; it results in very high labour costs. Effectively managed inventory minimises these incidents and minimises the labour cost dealt with the inventory. The literature says that maintaining a balance in the demand and supply and having a little extra inventory can help in running the production run smoother. The researcher found a gap here when compared with the respondent‟s views. The reason for this is that maintain low inventory is Dell‟s strategy and they have been successful in this and it increases their profitability. So to be precise Dell follows „zero inventory‟ strategy and this has a greater positive impact on their supply chain and organisational success.
5.2.2 Impact of Inventory management on Dell’s success Key findings: - Effective inventory management gave Dell an economic advantage and enhanced the entire supply chain. Discussion:- Effective inventory control minimises the costs because it minimises the total amount of inventory needed to manage the business. An important role that inventory plays in the supply chain is to increase the amount of demand that can be satisfied by having product ready and available when the customer wants it. Another significant role inventory plays is to reduce cost by exploiting any economics of scale that may exist during both production and distribution. Inventory is a major source of cost in a supply chain and it has a huge impact on responsiveness. Inventory also has a significant impact on the material flow time in a supply chain. The proper method to inventory control can bring out great benefits in customer service with very little inventory, even if the network is very complex. The researcher interpreted that inventory management of Dell makes their supply chain efficient by lowering their inventory cost and by proper customer service thereby giving them an economic advantage based upon the respondent‟s views. The theory says that in large manufacturing industries the chances of material shortages and excessive inventories may be high, but effective inventory control can give an economic edge to the firm. The researcher couldn‟t find any gap here when a comparison was done with the respondents view and the relevant literature. 5.3.3 Competitive Advantage using Inventory and Supply chain management Key Findings:- The direct sales approach and Just In Time model provided Dell a competitive advantage over the competitors. Discussion:- With supply chains becoming more elongated as they become more global, the pace of demand changes increasing and product life cycles shrinking, the responsiveness of a company's supply and fulfilment networks to change is becoming a more substantial determinant of company success. As such, companies like Dell view their supply networks as a competitive weapon that can not only deliver low costs but impact top-line growth through superior responsiveness and best-inclass customer service. Dell matches supply and demand because its customers order computer configurations over the phone or online (Internet). These computer
configurations are built up from components that are available. Dell‟s strategy is to provide customised, low cost, and quality computers that are delivered on time. Dell successfully implemented this strategy through its efficient manufacturing operations, better supply chain management and direct sales model. Thus, Dell reduces the cost of intermediaries that would otherwise add up to the total cost of PC for the customer. Dell also saves time on processing orders that other companies normally incur in their sales and distribution system. Moreover, by directly dealing with the customer Dell gets a clearer indication of market trends. By eliminating the need of a PC support engineer to load software, the customers gain both in time and cost. Thus a direct relation with each and every customer is made and this serves as a great source of competitive advantage and finally in the organisational success. In the current global market, supply chain management plays a vital role for the business performance and the performance evaluation remains one of the biggest challenges for today's companies. This holds true for many individual companies as well as for the extended supply chain in which they participate. The researcher interpreted that the direct relationship with suppliers and customers and virtual integration serves as the main competitive advantage of Dell. When the respondent‟s views were compared with the literature, the researcher cannot find a gap. The theory says that an enterprise gains competitive advantage when it is able to create economic value. Dell could lower their production cost, the direct relationship with customers and suppliers, and the use of technology helped in achieving economic edge. Multi-national firms now realise the impacts that an organisation‟s plan is having on different supply chain areas. Dell has executed its supply chain strategies effectively and hence the business success. 5.4 Effectiveness of various processes Key findings:- The various processes in supply chain and inventory has a greater effect on product pricing and in reducing inventory costs. Discussions:- Dell is popular for its customized computers and it is quite cost intensive because each and every computer has various built in parts and this needs storage and inventory costs. Dell efficiently dealt with this problem and succeeded in overcoming it. Dell doesn‟t own any inventory because their suppliers take care of it and the related costs and risks. Dells supply chain is not complex because of the
direct relation with the customer. The production of a part is initiated without getting an order. Once the customer places an order, suppliers get the purchasing order and the parts are dispatched to the manufacturing parts in every two hours. They deliver the part every two hours to the manufacturing parts. The parts are then handed over to the production process without delay. The production is spread globally in strategic relevant places. These production facilities are standardized which facilitates best practise approaches. The production of the ordered product is in the nearest possible facility to the shipment location. Therefore are the delivering times as short as possible. The researcher interpreted that Dell‟s various processes helps them in product pricing, reducing inventory costs and in the process of ordering decisions. According to the literature the inventory management process in manufacturing industries is much more complex and the functions may not be effective. Moreover the theory states that effective control over inventory stock alone cannot help in giving comparative pricing over the products because it mostly depends on the demand and supply. So the researcher could find a gap here. The reason for this is that Dell has been doing comparative pricing based on their inventory costs and this has been their strategy. This strategy has helped Dell in achieving customer satisfaction and in increasing their profitability. 5.5 CONCLUSION The findings that were derived from the analysis were justified in this chapter in alignment with the objectives. The findings were related with the proper literature review and a detailed discussion is being done. The final objective is related to the recommendation and is being done in the next section.
6. CONCLUSION AND RECOMMENDATIONS
6.1 CONCLUSION In general, the research was completed successfully. The researcher was able to explain Dell‟s supply chain and effects of inventory management on it and to correspond to reality. In this research, the researcher got insight of the effects of inventory management on the supply chain of Dell by going through different stages which are explained through the different chapters in this research. The main aim of this research was to understand the effects of inventory management on the supply chain of Dell and to know how far the inventory management has been successful. For this, the literature review has acted as a strong background since the researcher was able to review different literatures related to the issue. This helped during analysis state where the strategies, theories, steps or procedures are mapped with those discussed in the Literature review to find the gap and to evaluate why the obstacles or hindrances occurred in the way of success by making possible assumptions. The analysis carried out are supported but the primary data collected and also with the reference to the secondary data. The semi-structured interview technique collected the data about the phenomena and so used interpretive philosophy in combination with case study as a strategy as it is on the organisation guided by inductive method for the research approach. The thematic qualitative data analysis technique helped to come to the different findings in-line with the objectives after critically analysing. The ultimate source of Dell's great historical success has been its direct sales model. By cutting out the middlemen, Dell benefits in many ways. Since it doesn't have to fill traditional sales channels, it doesn't have a lot of PCs sitting in inventory all over the place. Given the breathtakingly rapid price deflation of PCs, that's been a huge advantage. The current inventory and supply chain management practices at Dell are effective according to the researcher and suggest that they should employ latest technology to compete with their rivals. The researcher would like to suggest some of the things based on the entire research and for the main findings which is covered in the next session.
6.2 RECOMMENDATIONS This section is all about the improvements which can be recommended for the organisation for better functioning by looking into and rectifying the issues. The supply chain and inventory system at Dell is properly designed and is very successful in reducing (or even eliminating) inventory. Moreover, some
recommendations are given for the company to enhance its inventory management system. Accuracy of the inventory is a crucial part of an organisation‟s attitude and maintaining this accuracy is necessary. Dell should give accuracy equal significance and made everyone‟s responsibility and promoted throughout the firm like quality and customer service. This should start at the top level. Moreover having a little inventory at hand may help Dell when a large order comes in. This in turn will have a positive impact on the inventory process and will enhance the supply chain and ultimately result in the organisational success of Dell. By its direct sales model, Dell helps their customers to customize its products. However, Dell has got a partnership with Intel, the chip maker and this limits the choice of consumers. The customers who prefer to have AMD chips in their computers are unable to do so. So Dell can give more configuration choices to the customers by establishing additional suppliers and thereby strengthen their customization position. But Dell should make sure that the new suppliers will be able to integrate with the supply chain of Dell. This strategy will help Dell in giving more choices for its customers and at the same time they will be able to maintain production. This can give Dell an added competitive advantage over the others. For many reasons, the direct sales model does not succeed well in markets where internet is inaccessible and where credit cards are inactive. Dell can plant retail showrooms and this can increase their business. In such emerging markets, Dell can combine their direct sales model with its experience from retail partnerships and this can help them in bagging great profits from emerging markets. Customer can be given a chance to test and use the computers before they order and should be given an opportunity to order from the showroom
itself. This tactic calls for Dell to develop showrooms in which displays are available for customers to test and use products before they place an order. Once a customer has decided to purchase an item, they may use an in-store phone or internet connection to place their order. This strategy can help Dell in bringing its products to customers in the booming markets by keeping its direct sales model alive. This retail partnership and its processes can boost the whole supply chain of Dell. Use of advanced technologies in various processes will also be effective. Dell should keep optimizing the supply chain management system so as not to lose out on competition in falling prices and help suppliers keep up with shortages. Rather than sharing forecasts with the supplier once in a month, the company should communicate with them weekly. This can help in their business because the trends in market changes very rapidly. 6.3 FUTURE RESEARCH This research represents an initial study of the supply chain and inventory management practices of Dell. Had the researcher given more time and flexibility, the research could have been done on a large scale. However this research seem to be a very fruitful for future research since this research has thrown up many questions in need for further investigation. It is recommended that further research be undertaken in the use of just in time model and lean manufacturing and its effects on various stages of supply chain.
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Appendix 1 Interview Questions
Dell is invariably discussed when it comes discussing about low inventory levels. How does carrying little inventory helps in the supply chain of Dell? Question 2 If Dell carries almost no inventory, its suppliers might be holding much more inventory than was needed to provide desired customer service. How can you overcome this concern? Question 3 What impact does the inventory management make on the supply chain of Dell? Question 4 What does Dell do to help its suppliers make good ordering decisions? Question 5 Companies started to view their supply networks as a competitive weapon. What should be done by them to achieve competitive edge through supply chain management? Question 6 How does supply chain as a competitive advantage helps Dell in increasing business success? Question 7 What are the various processes associated with inventory management in Dell? Question 8 It has been a cumbersome task for most companies to integrate the processes and associated tools. Does Dell have been successful in it? If yes, how do you achieve it?
Question 9 How effective are the processes in the supply chain of Dell from your viewpoint? Q10 How does Dell maintain inventory savings at all levels and produce comparable supply chain savings? Q11 In your opinion, does the organisation adequately use inventory management as a tool to gain competitive advantage? Q12 What are the inefficiencies that you see in Dell‟s inventory management process? Question 12 What do you recommend in order to further develop Dell‟s inventory management system? Question 14 What are the main challenges in front of Dell in reducing inventory and maintain their successful „Direct sales model‟?
Appendix 2 PERSONAL DEVELOPMENT PLAN
Before starting the research At the time of research topic selection, I had already inculcated some skills. The assignment completions were very challenging and that motivated me to improve my skills in different manners. My analytical and time management skills have always been good. But deep in my mind I was aware that I need to improve them more. I had a pragmatic approach and always follow theory than the practical. I was not good in finding relevant literature and in research methodology selection. I never had an idea of how to design questionnaires; but was quite good in interviewing people and was completely aware that I need to improve more.
Before Dissertation: Skills Analytical Time Management skill Finding of relevant literature Research Methodology selection Questionnaire Design Interview Presentation Skill Low Medium High
The table above shows the key areas which I focused at the beginning to successfully achieve by the end of MBA programme. After the completion of research
Skills Analytical Time Management skill Finding of relevant literature Research Methodology selection Questionnaire Design Interview Presentation Skill Low Medium High
Once the research was done, I realised that my analytical and time management skills are improved. I was able to prioritize the research and could complete it before the deadline. I realized the significance of data collection and the analysis of right data by relating to the relevant literature. I was also able to improve my interviewing skills by some practice sessions and after the interview with the managers. The well designed questionnaires helped me to ask proper and accurate questions which in turn motivated the interviewees to provide accurate and precise information. The research also helped me in having a pure understanding of the supply chain and inventory management practices of organisations through the study of one of the top supply chain firms in the world, Dell. I could also overcome my weaknesses as a pragmatist and can easily balance between theory and practice.
MBA DISSETATION MODULE RESEARCH PROPOSAL Inventory Management of Dell
Candidate Name :- Arjun Thekkadavan Enrolment Date:- August 2011 Registration No:- 119072790 Research Title: - Effects of Inventory management on the supply chain—A case study on Dell. Anticipated Hand in Date of Dissertation:- December 13 Research Background:Supply chain management is all about managing the materials and information across the complete chain. It includes suppliers to producers, distributors, retailers, and customers. It is the systematic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole (Mentzer, 2001). Inventory management is all about controlling the transfer in of units in order to prevent the inventory from becoming too high or dwindling to levels that could put the operation of the company into jeopardy (BarcodesInc, 2010) and it regards a supply chain as a multi-echelon inventory system. Each and every company performs purchasing, production and marketing processes independently and hence it is difficult to make an optimum plan for the entire chain. Inventory can be anything including raw materials, cash, finished products etc. Inventory management must tie together the company’s strategic goals, sales forecasting, sales and operational planning, and production and materials requirement planning and make sure that there is continuity between functions (Indian Institue of Materials Management, 2010). Effective inventory management can optimize the supply chain, can help in eliminating cash flow and can ultimately help in optimizing supply chain management to meet the company’s strategic goals.
Dell is known worldwide as a top personal computer producer and one of the most successful organizations in the world. Much of Dell’s success is attributed to its quality products and strategic management. The company realized that its products depreciate in time and keeping them in warehouses will cause them tremendous loses. In order to avoid this, the company established a revolutionary supply chain strategy which targets very minimal (almost close to zero) inventory. The inventory management of Dell plays a major role in their supply chain (Dell, 2011). Rationale for selection The process of inventory management and its effects on supply chain management has been only given ample attention by the researchers. The researcher believes that a research on inventory and supply chain management can help in having a clear understanding of the whole supply chain processes. This study is both theoretically and practically relevant because it involves a working procedure of how to be more cost effective within inventory management. According to the optimization of inventory management, production manager can easily coordinate other department so as to improve supply chain to enhance the competition of the firms. Dell is known worldwide as a top personal computer producer and one of the most successful organizations in the world. While the computer industry has grown tremendously over the past decade, firms in this industry face their own challenges. The researcher has an engineering academic background and managerial work experience and hence hopes that a research on the inventory and supply chain management can boost his future career.
Research Aim:- To investigate the effects of inventory management on the supply chain of Dell. Objectives 1. To analyse the impact of inventory management on the supply chain management 2. To find out how high technology firms use supply chain management to gain competitive advantage and increase business success. 3. To evaluate the effectiveness of the various processes associated with inventory management in Dell.
4. To recommend the possible to reduce the inventories and hence improve the supply chain management of Dell. Scope of the Research The scope of inventory management concerns the fine lines between carrying costs of inventory, asset management, inventory forecasting, inventory valuation, future inventory price forecasting, quality management, returns and defective goods and demand forecasting. Balancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment. A study on the effects of inventory management on the supply chain of Dell can help them to achieve procurement goal quickly and reduce the inventories and there by improve the whole supply chain process. Procedures: Research Methodology Methodology is the way that meets and delivers or implements functions or processes. Research methodology delivers the principles for arranging, planning, designing and conducting research. It provides a time tested, proven means of producing new effective and efficient and reliable knowledge (Ethridge, 2004). The objective is to formulate such a design which will be used to reach certain conclusion in the research. The two types of methods are qualitative and quantitative. Here qualitative research is being used because the research contains data which will be collected through structured and semi structured interviews of experts belongs to certain business groups who are working in the supply chain management industry. Accumulations of a variety of empirical materials like case study, personal experience, interview, observations etc will also be used. Hence the research methodology will be qualitative with inductive methods. Inductive because it is all about reasoning from specific methods and deriving a general rule. The observations become the raw materials for developing propositions that in time may be combined to create theories and then for further testing (Buddenbaum & Novak, 2001). Interviews will be conducted with the supply chain managers of Dell to get a clear picture about the various processes involved in inventory management.
Since the research follows qualitative analysis, the researcher is going to chose interpretivism (philosophy) for the research. Interpretivists favour qualitative data - they try to analyse human's behaviour in depth and from the point of view of the individual. That's why they prefer unstructured interviews, where the researcher can ask more about the question you are interested in and ask for details, and participant observation, which helps to understand the behaviour of the studied group by doing the same things and being in their atmosphere all the time. The researcher can interpret data based on the available information (Miles & Huberman, 1994). It is also influenced by the situation of the individual researchers. Since different investigators bring different perspective to their analysis, there is a chance of different truths emerging from the same phenomenon. Data Collection: Primary Data Methods of Primary data collection include Observation Interview and Questionnaire. Primary data includes conducting telephonic/Skype interview with senior management. Interviewing is most suitable to understand how effectively the inventory and supply chain management of Dell works and the effectiveness of various processes associated with Dell. Secondary Data Secondary data includes online resources, authority text books, information from company websites, journal articles and online news are being used for my research. The primary data will be combined and supplemented with secondary data to evaluate the effects of inventory management on the supply chain of Dell. The researcher is aware of the difficulty in getting access to some documents and sometimes to prove their credibility. Data Recording Valuable and resource data collected will be presented and recorded. Interviews conducted will be recorded using ‘Sound cloud’ or ‘Dictaphone software’. After collection of data from sources it will be recorded and present in the report format so that it will be very easy to analyse the study.
Data Analysis Softwares like EVIEW, ATLAS and NVIVO are available for the data analysis. ATLAS (Automatically Tuned Linear Algebra Software) is the software of choice of professionals when it comes to productive data analysis and this will be used in this research.
Key Activities Topic Selection Research Proposal Literature Review Plan of Action 22nd- 27th Aug 28th Aug- 9th Sept 10th sept—21st Sept Data 22nd Sept—15th Oct 16th Oct-25th Oct 26th Oct- 20th Nov 20th Nov-5th Dec 5th Dec-12th Dec Resources
Interviews & collection Data Analysis Report writing Reading/Editing
Books, journals, articles, library visits, online resources Skype, Soundcloud Computer, Software MS word Spell checker, Dictionary
BarcodesInc. (2010). Inventory Management. Retrieved 2011, from BarcodesInc: http://www.barcodesinc.com/articles/what-is-inventory-mangement.htm Buddenbaum, J. M., & Novak, K. B. (2001). Applied communication research. USA: Blackwell. Dell. (2011). About Dell. Retrieved 2011, from Dell: http://content.dell.com/us/en/corp/aboutdell.aspx?c=us&l=en&s=corp Ethridge, D. E. (2004). Research methodology in applied economics. Oxford: Blackwell. Indian Institue of Materials Management. (2010). Purpose of Inventory Management. Retrieved 2011, from Indian Institue of Materials Management: http://www.iimm.org/knowledge_bank/6_purpose-of-inventory-management.htm
Mentzer, J. T. (2001). Supply Chain Management. California: Sage Publications. Miles, M. B., & Huberman, A. M. (1994). Qualitative Data Analysis. London: SAGE Publication. Pradhan, S. (2008). Retailing Management. New Delhi: Tata McGraw-Hill. Waters, C. D. (2003). Inventory Control and Management. Chichester: John Wiley & Sons.
Local Tutor Comments (This section must be completed before proposal is submitted)
Satisfactory topic and objectives, weak methodology
Feedback on Project Proposal The topic selected for study is accepted. The objectives are clear and provide direction. The literature review has given some insight into the quality of resources being used. Try to include more academic texts, journals and articles. This will provide different views of the concepts and the organisations operation. The methodology was too brief. The method was selected however consideration needed to be given to the limitations also. What will the sample size be? Has access to these people been obtained? What ethical issues need to be considered etc? The timescales appear to be manageable.
Any actions to be discussed with Local Tutor As above in the feedback.
Proposal Not Approved / Approved Name A Watson Date21/09/2011
Section below to be completed by Local Tutor if Dissertation Proposal is Not Approved. Resubmission should not be sent to the University of Sunderland for consideration.
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