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Assignment 1 SCM - 19BBA10015

Gateway initially chose not to carry finished goods inventory in its retail stores to allow for custom configurations and manufacturing to order. This strategy failed and Gateway closed its retail stores. In contrast, Apple chose to carry inventory in its stores to provide an immediate customer experience and grew its retail sales to $10 billion by 2010. Product variety, delivery times, and customer experience affected whether companies succeeded with a retail strategy and inventory levels.

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158 views

Assignment 1 SCM - 19BBA10015

Gateway initially chose not to carry finished goods inventory in its retail stores to allow for custom configurations and manufacturing to order. This strategy failed and Gateway closed its retail stores. In contrast, Apple chose to carry inventory in its stores to provide an immediate customer experience and grew its retail sales to $10 billion by 2010. Product variety, delivery times, and customer experience affected whether companies succeeded with a retail strategy and inventory levels.

Uploaded by

Kartik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Assignment 1

Supply Chain Management


Kartik Sharma
19BBA10015
WORKSHEET 1:
Gateway and Apple: 8th September 2021
Two Different Journeys into Retailing Gateway was founded in 1985 as a direct sales
manufacturer of PCs with no retail footprint. In 1996, Gateway was one of the first PC
manufacturers to start selling PCs online. After many years of selling its PCs without a retail
infrastructure, Gateway introduced an aggressive strategy of opening Gateway retail stores
throughout the United States in the late 1990s. Its stores carried no finished-goods inventory
and were primarily focused on helping customers select the right configuration to purchase. All
PCs were manufactured to order and shipped to the customer from one of the assembly plants.
Key Point Within a firm, all supply chain activities belong to one of three macro processes: CRM,
ISCM, and SRM. Integration among the three macro processes is crucial for successful supply
chain management.

Initially, investors rewarded Gateway for this strategy and raised the stock price to more than
$80 per share in late 1999. However, this success did not last. By November 2002, Gateway
shares had dropped to less than $4, and Gateway was losing a significant amount of money. By
April 2004, Gateway had closed all its retail outlets and reduced the number of configurations
offered to customers. In August 2007, Gateway was purchased by Taiwan’s Acer for a price of
$710 million. By 2010, Gateway computers were sold through more than 20 different retail
outlets including Best Buy and Costco. As you can imagine, this was quite a transition for the
company to experience.
In contrast, Apple has enjoyed tremendous success since it opened its first retail store in 2001.
By 2010, Apple had more than 300 stores worldwide, and retail sales represented about 15
percent of the company’s total net sales. Unlike Gateway, Apple has always carried product
inventory at its stores. Given its product designs, Apple has relatively little variety that it carries
in its stores. Each of its stores has a relatively high level of sales with its Regent Street store in
London reaching sales of 2,000 pounds per square foot in 2009. In the 2010 annual report,
Apple listed retail sales totaling almost $10 billion, a growth of 47 percent relative to the
previous year.

Answer the following questions:


1. Why did Gateway choose not to carry any finished-product inventory at its retail stores?
Why did Apple choose to carry inventory at its stores?
Ans. Gateway applied a strategy to avoid carrying finished goods inventory in retail stores.

By this way customers had chance to customize the configurations according to their
mean of work. Moreover, there was also opportunity to try any sample product with in
the store. By this strategy gateway had an aim to design a supply chain design that would
match this demand. The decision of gateway not to carry finished goods inventory at
retails stores are related to these factors allow more flexibility in product configuration.
This flexibility would allow gateway to manage customer's demand, since the final product
would only be configured after customer's order. This would also allow the company to
imply a Customer Relationship Management strategy, since the company would know the
specifics of customer's needs and would be able to target customer for future products.
On the other hand, Apple had aimed to fulfill the customer demand immediately and with
provide the experience of finished product to customer. There is low shipment cost,
because bundle of product shipped to retails stores and customers can pick from these
stores.

2. Should a firm with an investment in retail stores carry any finished-goods inventory?
What are the characteristics of products that are most suitable to be carried in finished-
goods inventory? What characterizes products that are best manufactured to order?

Ans. The decision should be based on customer preferences and on delivery times and costs. If
customers prefer online shopping, then there no need to carry finished goods at a retail
store. If the delivery time with respect to the customer’s needs is deemed to be high
(groceries), then there is a need to have finished goods inventory.

On the other hand, if the delivery time is acceptable, then the company could do without
having finished goods inventory.
Characteristics of product to carried in finished goods inventory:

• Low inventory cost products


• Products with extra inventory life
• Products for less waiting time (groceries)
• High demand product in market
Characteristics products that are best manufactured to order:

• Low inventory life


• High-cost inventory products
• Low demand product in market
• Products for which customer can wait
• Products with certain demands.

3. How does product variety affect the level of inventory a retail store must carry?
Ans. The variety of product related with inventory cost and varies with physical Inventory at
store for each and individual product.

Higher variety of products implies that more products must be keeping at the store and
subsequently, the amount of each product will be smaller. With high product variety the
products and quantities put away at the store must be exceptionally carefully. Otherwise,
there will be risk of low-level inventory and low sales.

4. Is a direct selling supply chain without retail stores always less expensive than a supply
chain with retail stores?
Ans. Yes, the direct selling supply chain without retail is less expensive.
Because it saves the cost of retail store operation. Shipping cost is also less in this
channel. It avoids the infrastructure cost between two configurations. This is also easy to
handle return policy between two configurations.

5. What factors explain the success of Apple retail and the failure of Gateway country
stores?
Ans. The customer experience that Apple has been providing is a crucial factor of
differentiation in contrast Gateway was not providing such a level of customer service
and experience. Delivery time was another significant factor that helped Apple, since the
customer was able to get the product while at the store, gateway also fail to deliver
product to customer in short delivery time. Eventually Apple was the only retailer of their
products, that guaranteed excellent service across the board.

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