Essay: The Inventory Management of Dell Computers

Although Dell computers spend quite little on research and development yet it balances and manages the supply chain quite effectively and efficiently. The production process of Dell computers is considered to be near to perfect. The value chain of the organization is designed in such a manner that one worker is responsible for the design of a single PC so that it becomes quite easy to check if problem arises in the value chain. Similarly, the inventory management of Dell is considered to be the main strength of Dell computers and the company sells 90 percent of the products through its direct selling model.

The organization receives payments from its customers immediately through online transactions with the help of credit cards. After that the order is placed on the component of vendors and it enters the assembly line. The company pays the suppliers after 36 days when the actual product is shipped to the customer.  This results in a negative cash conversion ratio of 36 days and on the other hand the PC makers pay suppliers immediately after the product is developed and they immediately receive payments from customers at the time of delivery. This entire process takes 30 days and the cash conversion ratio becomes positive for other PC makers (Barney 2006). Thus, maintaining low levels of inventory is quite beneficial for the organization and Dell has developed a huge list of tangible capabilities that results in financial and competitive advantage for the firm. Carrying out the strategy of low inventory and eliminating wholesalers and retailers from the value chain can be extremely beneficial. Dell transfers its 20-30% savings of intermediaries to its customers and ultimately gains a sustainable competitive advantage.