1- Why did Gateway choose not to carry any finished-product inventory at its ret
ID: 468550 • Letter: 1
Question
1- Why did Gateway choose not to carry any finished-product inventory at its retail stores? and Why did Apple choose to carry inventory at its stores?
2-Should a firm with an investment in retail stores carry any finished-goods inventory?
3- What are the characteristics of products that are most suitable to be carried in finished-goods inventory?
4- What characterizes products that are best manufactured to order?
5-How does product variety affect the level of inventory a retail store must carry? Is a direct selling supply chain without retail stores always less expensive than a supply chain with retail stores?
6-What factors explain the success of Apple retail and the failure of Gateway country stores?
Explanation / Answer
1. Gateway chose not to carry finished-product inventory at its retail stores to decrease inventory holding costs, equipment and facility costs, decrease obsolete product costs.
Instead, it chose to ship products directly from manufacturing units to customers. It used Make to Order strategy for fulfillment. Its retail stores were used to display the products to customers and provide specifications of products.
Apple chose to carry inventory at its stores to maintain customer service levels by delivering products to customers on time in full. This avoids loss due unfulfillment of customer orders.
2. If the customer can't wait long for the product to be delivered, there is a need to have storage of inventory to immediately fulfill the customer order. If the customer can wait for sometime for the product to be delivered, there is no need to have the store.
3. Characteristics of finished goods inventory -
i) Low storage costs
ii) Fluctuating/seasonal demand
iii) Make to stock products
iv) Non-perishable products
4. Manufacture to order products -
i) Customizable products
ii) Products manufactured as per customer demand
iii) Products that have longer lead times to deliver and customer can wait.
5. Depending on the product variety, the level of inventory carried by a retail store can be maintained. If the product has lesser shelf life but doesn't move quickly from stores, level of inventory maintained is less. If the product has higher shelf life and sold quickly, more inventory is maintained.
6. Apple has maintained its inventory at its retail stores though in lesser quantities. As its products are hitech and are perceived by customers as high valued, even lesser products sold through its retail stores are highly profitable as measured in dollars per square foot of space they occupy.
Contrary to this, Gateway depended on Make To Order model and failed to cater to various configurations as chosen by customers. It had limited options to provide directly through its production units. Hence, customers chose to prefer other products over Gateway's.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.