Abstract

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.

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LIST OF FIGURES

Figure 2.1 Direct and Extended Supply Chain

Figure 2.2 Dell’s Direct Distribution Channel

Figure 2.3 Dell’s Supply Chain

Figure 2.4 Just-In-Time Models

Figure 3.1 Research Process Diagram

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Table of contents

Title Page no

Abstract...................................................................................................................... 1

Acknowledgements...................................................................................................... 2

List of Figures............................................................................................................. 3

Chapter 1: Introduction ......................................................................................... 7

1.1 Background ......................................................................................................... 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 ................................................................................. 12

2.1 Introduction.......................................................................................................... 12

2.2 Supply Chain Management (SCM)...................................................................... 12

2.2.1 Importance of SCM .............................................................................. 14

2.3 Inventory Management...... .................................................................................. 15

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

2.4.1 Supply Chain as a Competitive Advantage............................................. 21

2.4.2 Inventory Management as a Competitive Advantage............................. 22

2.5 Dell’s Supply Chain and Inventory Management................. ................................ 23

2.5.1 Direct Sales Model................................................................................... 23

2.5.2 Build To Order.......................................................................................... 24

2.5.3 Supply Chain and Inventory Management Processes............................. 25

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

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2.7 Conclusion......................................................................................................... 30

Chapter 3: Research Methodology ..................................................................... 31

3.1 Introduction ..................................................................................................... 31

3.2 Research Objectives ........................................................................................... 32

3.3 Research Philosophy ..................................................................................... 33

3.4 Qualitative and Quantitative method .................................................................. 34

3.5 Research Approach ........................................................................................ 35

3.6 Data Collection Methods ................................................................................. 36

3.6.1 Primary and Secondary Data..................................................................... 36

3.6.1.1 Quantitative Methods for Data Collection........................................ 37

3.6.1.1 Qualitative Methods for Data Collection............................................. 37

3.7 Data Analysing Methods ................................................................................. 38

3.8 Sampling Techniques.... .................................................................................. 38

3.9 Research Limitations ..................................................................................... 39

3.10 Validity & Reliability......................................................................................... 39

3.10 Ethical Issues..................................................................................................... 39

Chapter Summary ........................................................................................ 40

Chapter 4: Data Presentation and Analysis............................................................ 41

4.1 Introduction ..................................................................................................... 41

4.2 Data Collection Design ................................................................................... 41

4.2.1 Semi-Structured Interview............................................................................... 42

4.2.1.1 Interview Question Design..................................................................... 43

4.3 Qualitative Data Analysing Techniques.............................................................. 43

4.4 Interpretation of Semi-Structured Interview....................................................... 45

4.5 Conclusion......................................................................................................... 51

Chapter 5: Results and Discussion ...................................................................... 52

5.1 Introduction ....................................................................................................... 52

5.2 Findings and Discussions ................................................................................. 52

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

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5.3.4 Effectiveness of Various processes.................................................................. 54

5.5 Conclusion ............................................................................................. 55

6. Conclusion and Recommendations ................................................................ 56

6.1 Conclusion ........................................................................................................ 56

6.2 Recommendations .............................................................................................. 57

6.3 Future Research..................................................................................................... 58

References ............................................................................................................... 59

Appendix 1 Questionnaire.......................................................................................... 64

Appendix 2 Personal development Plan................................................................... 66

Appendix 3 Project Proposal....................................................................................... 67

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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 co-

operative 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

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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

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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

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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.

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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.

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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

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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

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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

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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

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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-to-

day 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

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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,

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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.

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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

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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.

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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 win-

win relationship and allow the supply chain related parties to minimise efficiencies.

Moreover the companies using their supply chains for advantage may build large

20

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.

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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.

22

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

23

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.

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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-managed-

inventory (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

25

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

26

the last stage in assembly which fulfils the customer orders(Accounting For

Management, 2010).

Figure 3.2 Just-In-Time Model adopted from

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

27

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

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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.

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CHAPTER 3

RESEARCH METHODOLOGY

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, re-

arranging 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.

30

RESEARCH PROCESS DIAGRAM

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

31

Research Topic

Research Objectives

Literature Review

Research Philosophy(Interpretivism)

Qualitative Analysis

Inductive

Methods of data Collection(Semi-structured Interview)

Data Analysis

Finding and Recommendation

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

32

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 in-

depth 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

33

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

34

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

35

employed a few secondary data collection methods for primary data support. Data

and information from websites, books, news papers, journal articles etc were used.

3.6.1.1 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.

3.6.1.2 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

36

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

37

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

38

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.

39

CHAPTER 4

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

40

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).

4.2.1.1INTERVIEW 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

41

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

42

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

is one of the toughest

challenges for any

organisation. Respondent

A said that companies like

Dell always use very little

inventory as possible.

According to him, 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. Efficient inventory

management of Dell

avoids these issues and

minimises the labour cost

related with the inventory.

Respondent B and C add

that low inventory has a

greater effect on Dell’s

overall performance. Both

respondents agree that its

because computers

depreciate at a very high

According to the responses

from the respondents, the

researcher has interpreted

that maintaining low

inventory has been serving

as one of the key factors

behind Dell’s business

success.

Theory:- The general

theory on ‘low inventory’ in

the literature review is

based on balancing

between demand and

supply and moreover the

expenses in carrying

inventory and the possible

lead outs due to shortage

in inventory (Bose, 2006).

Even a costly item that

sells slowly results in

additional opportunity costs

for whoever holds the

inventory Helfert et al.

(2008).

GAP:- There is a GAP here

according to the

43

rate and sitting in

inventory, a computer

loses a ton of value.

Respondent D states that

in an organisation like

Dell, its all about how fast

the inventory moves

through the cycle. Dell’s

model helped in starting

with the customer whose

order pulls inventory

through the channel

resulting in the ability to

deliver a computer in 3

days and this provided a

great deal of value and in

reducing the inventory.

researcher. Low

inventories could point to a

scarcity of materials.

Having a little extra

inventory can help in

running the production run

smoother when a large

order comes in.

Evaluate:- According to

the researcher, the

organisation is following

the theories and its

characteristics and low

inventory plays a crucial

role in Dell’s business

success. But when the

organisation produces

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

management

Respondent A, B, C and D

agreed that inventory

management is having a

greater impact on Dell’s

supply chain

management. According

to A, lower inventory cost

According to the

researcher, inventory

management is playing its

crucial role on the efficient

supply chain of Dell and

thereby its success.

Effective and efficient

44

is an added advantage for

the firm that effectively

controls its inventory.

Proper and efficient

inventory control

minimises these costs

because it minimises the

total amount of inventory

needed to manage the

business. Respondent B

added that having an

adequate supply of a

particular product of

customer requirement is

crucial to both sales

increases and customer

service. If the product is

out of stock, the sale is

lost forever and customer

approaches another

vendor. Dell’s good

inventory management

system identifies sales

trends and prepare for

customer needs.

Respondent C responded

by saying that the low

inventory level in helps

them in attaining economic

advantage because of the

decline in the value of

component weekly. Hence

there is no need to fund

raw materials, work in

inventory control helps Dell

in lowering the inventory

cost, in proper delivery of

products to the customers

and thereby achieves

customer satisfaction, in an

economic advantage and in

speeding up the entire

supply chain process.

GAP:- Referring back to

the literature review, where

review of the effects of

inventory management on

supply chain management

is done; the respondents

haven’t mentioned anything

that is contradictory to the

literature and hence no

GAP is found.

Evaluation:-Theory says

that inventory management

is much more complex in

manufacturing industries

and the functions may not

be very effective. So the

chances of material

shortages and excessive

inventories may be high.

Dell has been successfully

overcoming this concern by

the use of Just-In-Time

model and their pull-

45

process. D adds that

effective inventory

management in Dell

helped them to reduce the

stock out, improve pricing

and promotion

management and

ultimately in speeding up

the supply chain process.

approach.

Competitive advantage All the respondents have

stated that effective and

efficient inventory and

supply chain management

has been serving as the

main competitive

advantage behind Dell’s

success. According to

respondent A, reducing

the cost of intermediaries

by the direct relationship

with the customer and

supplier has served as the

main competitive

advantage of Dell.

Moreover by dealing

directly with the customer,

Dell gets a clear

knowledge of the trends in

market. B adds that by

eliminating the need of a

PC support engineer to

load the softwares,

customer gains both time

and cost. According to C,

According to the

researcher, their direct

sales model and efficient

supply chain management

are the main competitive

advantages for Dell. Their

direct relationship with

suppliers and customers

and virtual integration has

also played its role.

GAP:- The literature and

the theories of competitive

advantage with supply

chain and inventory

management have been

covered and when the

respondents views were

compared with the

literature review, the

researcher could not find a

gap.

Evaluation:- The theory

says that an enterprise

gains competitive

46

the use of advanced

technologies in Dell has

helped them to control and

monitor inventory role in

bagging profits and in

customer service. This has

helped them to use

inventory management

effectively and as a

competitive advantage.

Respondent D adds that

although Dell could lower

their cost in production

efficiency and they

managed to gain high

profit margins by keeping

internal costs low and

showed the effectiveness

of virtual integration.

advantage when it is able

to create more economical

value than the marginal

competitor in its product

market (Choudhary et al.,

2008). According to the

respondents, Dell could

lower their cost in

production and gain an

economic advantage by

their whole inventory and

supply chain process. The

use of latest technologies

also helped them in gaining

a competitive advantage

with inventory

management. Moreover all

the respondents agreed

that having a direct relation

with the customer helped

them in overall

performance. So as per the

researcher’s evaluation

direct sales model and

supply chain management

has been serving as Dell’s

competitive advantage.

Effectiveness of various

processes

According to respondent

A, the various supply

chain and inventory

process are very much

effective for them for

years. With proper control

and management over

The organisation’s various

processes has a greater

effect on their product

producing, reducing

inventory costs, and helps

in good ordering decisions

47

inventory stock, and quick

fulfilments, Dell is able to

give comparative pricing to

their customers. As far as

respondent B is

concerned, having proper

management of the

various processes in

supply chain gives a

competitive edge in the

sales markets and helps in

reducing inventory costs.

Respondent C adds that

suppliers own Dell’s

inventory and Dell

indirectly pays for it

through component

pricing. The cost for this is

included in the final prices

of the computer. Hence

any reduction in inventory

benefits Dell’s customers

by reducing the prices.

According to D, sharing its

forecasts with the

suppliers at least once per

month helps Dell’s

suppliers in making good

ordering decisions and it is

serving as one of the most

effective processes.

for the suppliers.

GAP:- The researcher

could see a gap here when

compared with the relevant

literature. The theory states

that effective control over

inventory stock alone

cannot help in giving

comparative pricing over

the products. The demand

and supply of the product

also shapes the price of the

product to an extent

(Friedman, 2008).

Evaluation:- In a

competitive market, the

price for a product varies

until the demand by the

consumers equals the

quantity supplied by

producers. Controlling the

production process and the

inventory stock alone

cannot give the consumers

a comparative pricing. The

correlation between price

and how much of a good

product is supplied to the

market is the supply

relationship and hence

price is a reflection of

supply and demand.

48

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.

CHAPTER 5

RESULTS AND DISCUSSION

49

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.

50

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-in-

class 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

51

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

52

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

53

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

54

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

55

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

Question 1

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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

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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

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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 Low Medium HighAnalytical Time Management skill Finding of relevant literature Research Methodology selection Questionnaire Design Interview Presentation Skill

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 Low Medium HighAnalytical Time Management skill Finding of relevant literature Research Methodology selection Questionnaire Design Interview Presentation Skill

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

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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.

Research Proposal

MBA DISSETATION MODULE

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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

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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.

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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

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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

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choice of professionals when it comes to productive data analysis and this will be used in this research.

Research Plan

Key Activities Plan of Action Resources

Topic Selection 22nd- 27th Aug

Research Proposal 28th Aug- 9th Sept

Literature Review 10th sept—21st Sept Books, journals, articles, library visits, online resources

Interviews & Data collection

22nd Sept—15th Oct Skype, Soundcloud

Data Analysis 16th Oct-25th Oct Computer, Software

Report writing 26th Oct- 20th Nov MS word

Reading/Editing 20th Nov-5th Dec Spell checker, Dictionary

Binding /Submission 5th Dec-12th Dec

ReferencesBarcodesInc. (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/about-dell.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.

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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

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FEEDBACK SHEET

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.

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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. Re-submission should not be sent to the University of Sunderland for consideration.

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Local Tutor Comments

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