1- Why did Gateway choose not to carry any finished-product inventory at its ret
ID: 468856 • 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 choose not to carry any finished-product inventory at its retail stores due to the fact that it used its retail stores only for the purpose of letting consumers try the PCs and decide on the right configuration of the computers that they want to purchase. Once the consumer tried the computers and decided on their requirements, the PCs were manufactured to order.
Apple, on the other hand, carried inventory as its products had little variety and thus unlike Gateway it did not make sense for Apple to manufacturer on order.
2. Yes, a firm with an investment in retail stores should always carry some quantity of finished-goods inventory. If there is no inventory, there are chances that few or many customers would end up buying products being made by competing firms which are available in retail stores. Having no inventory of finished-goods can result in lost sales in some cases where customers prefer not to wait for the product to reach them.
3. The following are the relevant characteristics of products that are most suitable to be carried in finished-goods inventory: (i) the product should not have very high storage and carrying costs (ii) the product should not be perishable (iii) the demand for the product should be stable, otherwise its storage will keep the working capital tied up.
4. The following are the relevant characteristics of products that are best manufactured to order: (i) The product is such that customers prefer customization. (ii) The product is such that it is more cost effective to make it on order rather than carry it as a finished-goods inventory.
5. There is a direct relationship between product varieties and the level of inventory that a retail store must carry. This is because the store will have to carry units of the different varieties to cater to the requirements and preferences of the customers. For instance a retailer of HP laptops has to carry a higher level of inventory compared to a retailer of Apple laptops. This is because HP has a larger variety of laptops being offered and its retailer has to store the different models so that the demand of different consumers can be met.
In most cases a direct selling supply chain without retail stores will be less expensive when compared to a supply chain with retail stores. This is due to the fact that in case of retail stores there will be rental expenses and expenses towards storage.
6. Apple retail succeeded as it kept its business model. There were few varieties of products and this reduced the need of keeping high inventory. This reduced the carrying costs of inventory. Gateway failed as it overcomplicated things by trying to reach local markets, locate low wage areas, be near its suppliers and vendors all at the same time.
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