NAME: M.

Ashar Anjum
Department: Management Sciences (BBA)
ENROLLMENT: 3673
SUBJECT: Supply Chain Management
ASSIGNMENT: 01
SUBMITTED TO: Ma’am Anum
Date: 13-02-2022
Gateway and Apple: Two Different Journeys into Retailing:

Question#01

Why did Gateway choose not to carry any finished-product inventory at its
retail stores? Why did Apple choose to carry inventory at its stores?

Answer: Gateway had a strategy to avoid carrying finished goods inventory in retail
stores. This way customers had the opportunity to customize the configurations they
needed by working with the sales reps as well as having the opportunity to try out
any sample product within the store. The company’s strategy aimed to design a
supply chain that would match supply and demand. The decision not to carry any
finished-product inventory at its retail stores was based on two factors: Allow for
maximum flexibility in product configuration and no need to keep inventory at the
retail outlets. This flexibility in product configurations would allow the company to
manage shifts in customer demand, since the final product would only be configured
after the customer places the order. It would also allow the company to implement a
Customer Relationship Management strategy, since the company would know the
specifics of the customer’s needs and would be able to target a customer for future
products. Apple on the other hand aimed to satisfy the customer’s need for
immediate purchase, plus provide him/her with the experience of a finished product.
Gateway strategy is easier to customize that means potentially offer wide variety of
products and higher delivery time it means since the product has to be configured
and produced. Gateway inventory costs is lower I think that’s the reason Gateway
choose not to carry any finished-product inventory at its retail stores. Apple strategy
is Better customer service since the customer has the experience of trying out the
finished product, and can walk out of the store with a product in hand.

Question#02

Should a firm with an investment in retail stores carry any finished-goods

inventory? What are the characteristics of products that are most suitable to
be carried in finished-goods inventory? What characterizes products that are
best manufactured to order?

Answer: The decision should be based on customer preferences and on delivery

times and costs. If a region’s customers prefer online shopping, then a retail store
does not need to carry finished goods. Otherwise, it should. Similarly, if the delivery
time with respect to the customer’s needs is deemed to be high then there is a need
to have finished goods inventory. On the other hand, if the delivery time is
reasonable or acceptable then the company could do without having finished goods
inventory.

Characteristics of products are most suitable to be carried in finished-goods

inventory

There are several characteristics of product that are most suitable to be carried in
finished goods inventory such as nonperishable goods that have least possible
storage cost, goods that have fluctuating or seasonal demand, retailers goods that
have stable demand in the local market, products that doesn’t need a producer
assistance or manufacturer, inventory that easily loses value upon storage or further
configuration, when there is a chance of the product price to increase, and products
that are fast moving and are of high value and there deficiency can make a big loss
to the firm.

Characteristics of best manufactured to order are products

There are four factors to consider in making a product manufactured to order.

1) When there is a demand from a customer for a product customization or direct-

customer assistance.

2) If it’s manufactured according to what the customer demand, it should be cost

effective.

Question#03

How does product variety affect the level of inventory a retail store must
carry?

Answer: Issues were perceived as to how product variety affects the level of the
inventory that retail stores carry. First, the increase of product variety also decreases
the inventory level for every product. Basically, if you have lots of product to sell, the
level of its inventory will also decrease. The owner or the store caretaker will have to
inventory each of the products carefully and it will also waste the substantial number
of time. And second, product variety can compromise on quality since there is a big
possibility that it increases the likelihood of misplaced products. If a store sells
various numbers of products in the same location, the products will usually be placed
from one product to the other that would lead to greater misplacement and mixture of
products. Misplaced products, other that it affects the level of inventory, it is also
analogous to defects in quality management that will also lead to decrease in sales.

Question#04

Is a direct selling supply chain without retail stores always less expensive than
a supply chain with retail stores?

Answer: If we look at it, it would seem that supply chains without retail stores are
always less expensive. Since knowing that supply chains with retail stores go
through a lot of different stages it would mean that distributors, retailers, and agents
would need to add an additional amount for them to be able to gain profit that would
lead to a more expensive product price. When opening a retail store we should also
consider the cost of rent, electricity, and other financial aspects. But, if we look at it
from a different perspective, retail stores could actually bring the company a higher
profit. This is because retail stores allow a wider range of consumers to purchase the
product that would increase the sales of a company.

Question#05

What factors explain the success of Apple retail and the failure of Gateway
country stores?

Answer:

One factor that attributed to the success of Apple is placing retail stores in major
urban centres. Location is one important aspect to the success of a retail business.
Opening retail stores in a busy area offers variety of potential customers that can
improve revenue and increase marketing exposure. Another factor is that Apple is
staffing retail stores with well-trained personnel. They have customer service that
attends to customer problems and complaints. Ensuring that a client is satisfied with
every point of interaction is a process that leads to loyalty. Loyal customers are good
for one’s business because they become their best advocates. They will recommend
your business to other people which leads to increase in sales, thus ultimately
results to higher profits. Lastly, Apple has retail stores that are well stocked with
ample amounts of product inventory as well as wide selection of software products.
An advantage of this is that the store is able to easily and quickly fill all customer
orders as soon as they come in, without having to worry about waiting on the stock
to come in to ship their order out. Unlike Apple, Gateway carried no finished goods
inventory. The customer experience that Apple has been providing is an important
factor of differentiation; Gateway was not providing such a level of customer service
and experience. Delivery time was another factor that helped Apple, since the
customer was able to get the product while at the store.

Zara: Apparel Manufacturing and Retail

Question#01

What advantage does Zara gain against the competition by having a very
responsive supply chain?

Answer: In an industry where the customer demand is unpredictable, Zara having a

responsive supply chain has enabled it to enjoy greater customer turnover due to its
5 to 6 weeks cycle time leading to more profits as mostly the products are then sold
at full price. Moreover being responsive has also enabled Zara to reduce its
inventories and also the forecast error.

Question#02

Why has Inditex chosen to have both in-house manufacturing and outsourced
manufacturing? Why has Inditex maintained manufacturing capacity in Europe
even though manufacturing in Asia is much cheaper?

Answer: To be responsive in the rapid changing world, Inditex opted for both
outsourced manufacturing, for the production of products with predictable demand,
and in-house manufacturing, for the production of products with highly uncertain
demand. Inditex has maintained large fraction of manufacturing capacity in Portugal
and Spain (Europe) despite the higher cost there because this allows Zara to
respond quickly to changing fashion trends in Europe.

Question#03

Why does Zara source products with uncertain demand from local
manufacturers and products with predictable demand from Asian
manufacturers?

Answer: Zara’s main competitive advantage is responsiveness and to retain it Zara

source products with uncertain demand from local manufacturers because local
manufacturers offer fast and flexible sourcing and such products are to be delivered
quick instead of at low-cost (with greater lead time as it is manufactured in
Asia).Whereas products with predictable demand are sourced from Asian
manufacturers because outsourcing is cheaper that is products are manufactured at
a low-cost.

Question#04

What advantage does Zara gain from replenishing its stores multiple times a
week compared to a less frequent schedule? How does the frequency of
replenishment affect the design of its distribution system?

Answer: This makes sure that store inventory is always up to date and those new
designs can be introduced often to meet trends. It also means that products can be
replenished if demand is high and can be taken away if demand is low. Furthermore,
it is responsive to the fickle nature of the fashion market if a new trend comes into
fashion zara need to be able to adapt their quickly and change their in store
merchandise to meet customer demand. The frequency of replenishment has made
zara increase the size and also centralise its distribution design by handling its global
operations through 8 Distribution canters based in Spain. This centralised structure
means that products can be distributed rapidly from in house manufacturing in order
to meet worldwide demands in as little time as possible.

Question#05

Do you think Zara’s responsive replenishment infrastructure is better suited

for online sales or retail sales?

Answer: Whilst its quick distribution system allows zara to respond to trends very
quickly its lack of decentralised distribution means that it is better suited to retail as
online sales tend to have more a diverse product demand and customers expect
quicker delivery times. Companies such as amaazon are able to respond quicker to
online sales due to the fact that they have distribution centres all around the world
and can offer same day delivery. Zaras 24 hour delivery times from Spain to outlets
all around the world may not be as efficient with online sales as it is with retail sales.
Toyota: A Global Auto Manufacturer

Question#01

Where should the plants be located and what degree of flexibility should be
built into each? What capacity should each plant have?

Answer: Toyota can implement their global complementation for the location of their
plants. For a company like Toyota that has a market in numerous countries, a global
approach seems more appropriate. It can provide maximum efficiency in its supply
chain. They can implement 'Think global, act local' to encounter any issues that can
cause their regional supply chain to break down. Hence, they can have plants in
separate geographical locations to produce different parts to different countries over
the world. This can increase flexibility as every plant can supply globally and cater
locally. The capacity can be adjusted for regional levels with global complementation.

Question#02

Should plants be able to produce for all markets or only specific contingency
markets?

Answer: Manufacturing plants should generally produce products that can be

supplied to all the markets. However, primarily it has to cater to the needs in the local
market for sustainability and to avoid transportation costs. However, considering the
needs of the global markets, the plants can be ensured to export their products
whenever the local market is down or gone bad or the challenges that the Asian
financial crisis in the 1996-97 scenario brought to Toyota.

Question#03

How should markets be allocated to plants and how frequently should this
allocation be revised?

Answer: Considering how Toyota is present globally, the market allocation can be
standard. However, it is to be noted that they faced a key issue with global
production and their distribution network. Therefore, it can be wise to serve every
market hence; the allocation of the market can be revised frequently to meet their
demands in a financial year.
Question#04

What kind of flexibility should be built into the distribution system?

Answer: This flexibility investment of global complementation is that the parts are
manufactured everywhere and supplied globally can be applied. To value it, they can
understand what the cost is when a plant goes down in emergencies like in the Asian
financial crisis in 1996-97. How much the costs can rise when they have to meet the
demand and the sales that were lost.

Amazon: Online Sales

Question#01

Why is Amazon building more warehouses as it grows? How many

warehouses should it have and where should they be located?

Answer: The Company keeps growing so it is only logical to build more warehouses
to cater to every customer with the appropriate delivery response to ensure they get
their orders on time. Considering it is an expanding company and trying hard to
expand its set of products that it sells online, it should expand its warehouse's
numbers according to their growth to cater to their customer faster. They can
strategically place their warehouse near big metros and population hubs to ensure
that supply can meet demands. Mini warehouses can be made in smaller areas
where the customer orders can be delivered faster regardless of the purchase.

Question#02

What advantages does selling books via the Internet provide over a traditional
bookstore? Are there any disadvantages to selling via the Internet?

Answer:

ADVANTAGES

 Wider reach of customers/market. eCommerce is now the preferred way of

purchasing goods in the new normal.

 Easier for customers to search for specific books and their availability

 A physical bookstore is not required. No operational expenses in running a

physical store e.g. (Rent, wages)
 DISADVANTAGES

 Increase in packaging material costs to ensure the books are not damaged
during transportation/delivery

 Need capital investment for maintaining an Online Portal or eCommerce

Platform where customers can browse, buy, and track the status of their
purchases. This includes the website and network equipment/ infrastructure
costs.

Question#03

Should Amazon stock every product it sells?

Answer: As a growing company that is trying to increase its sales figure, Amazon
does not need to stock every product it sells, rather they can just stock the most
popular and most selling products. It is because popular products can be sold based
on their higher demand otherwise stocking every product can cause large inventory
and incur carrying costs.

Question#04

What advantage can bricks-and-mortar players derive from setting up an

online channel? How should they use the two channels to gain maximum
advantage?

Answer: These are the advantages that brick and mortar players can derive from
setting up an online channel:

 It can facilitate faster transactions.

 The transactions are available 24/7.

 The business may not need to be bound by geographical limitations.

 It can provide a much wider customer reach.

 It can provide higher customer demand as customers get the convenience of

buying from anywhere.

In the following ways, they can set up the two channels to gain a maximum
advantage:
  They can save on shipping costs by keeping high demand stocks on brick and
mortar stores.

 Customers who prefer to have the convenience factor can be provided the
option of buying through the e-commerce platform.

 Different marketing strategies can be applied to get the maximum advantage

when targeting higher customers concerning both the channels.

 Brick and mortar can provide more enhanced customer relationship

management and E-commerce can provide data on customers to help them
segment and target better.

Question#05

What advantages/disadvantages does the online channel enjoy in the sale of

shoes /diapers relative to a retail store?

Answer: Advantages of the online channel in the sale of shoes and diapers when
compared to retail store are:

Advantages:

 Reduced marketing costs

 Wider opportunity when it comes to selling overseas.

 It can provide a wider customer reach.

 It can provide greater transparency

Disadvantages:

 A lack of physical contact is present when buying products like shoes or

diapers.

 Lack of confidence as customers can get fussy.

 Delivery time and cost can also be taken into consideration, as these can be
much lower in a retail store.

Question#05

For what products does the online channel offer the greater advantage relative
to retail stores? What characterizes these products?
Answer: There are certain types of products where online channels can provide a
greater advantage rather than a retail store. These products can be the ones that
have larger varieties as they can find larger audiences through the online channel.
They can also include products that are less in demand to get more sales and
products that are very hard to predict. Examples of such products are electronics,
clothing, household goods, and more.