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

13
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

14
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

15
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,

16
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.

17
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

18
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.

24
 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

28
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.

29
 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

Research Topic

Research Objectives

Literature Review

Research Philosophy
(Interpretivism)

Qualitative Analysis

Inductive

Methods of data Collection

(Semi-structured Interview)

Data Analysis

Finding and Recommendation

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
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 According to the responses
is one of the toughest from the respondents, the
challenges for any researcher has interpreted
organisation. Respondent that maintaining low
A said that companies like inventory has been serving
Dell always use very little as one of the key factors
inventory as possible. behind Dell’s business
According to him, when a success.
firm relocates its inventory Theory:- The general
to another location theory on ‘low inventory’ in
because of poor space the literature review is
utilization or handle the based on balancing
inventory multiple times; it between demand and
results in very high labour supply and moreover the
costs. Efficient inventory expenses in carrying
management of Dell inventory and the possible
avoids these issues and lead outs due to shortage
minimises the labour cost in inventory (Bose, 2006).
related with the inventory. Even a costly item that
Respondent B and C add sells slowly results in
that low inventory has a additional opportunity costs
greater effect on Dell’s for whoever holds the
overall performance. Both inventory Helfert et al.
respondents agree that its (2008).
because computers GAP:- There is a GAP here

43
 depreciate at a very high according to the
rate and sitting in researcher. Low
inventory, a computer inventories could point to a
loses a ton of value. scarcity of materials.
Respondent D states that Having a little extra
in an organisation like inventory can help in
Dell, its all about how fast running the production run
the inventory moves smoother when a large
through the cycle. Dell’s order comes in.
model helped in starting Evaluate:- According to
with the customer whose the researcher, the
order pulls inventory organisation is following
through the channel the theories and its
resulting in the ability to characteristics and low
deliver a computer in 3 inventory plays a crucial
days and this provided a role in Dell’s business
great deal of value and in success. But when the
reducing the inventory. 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 Respondent A, B, C and D According to the
management agreed that inventory researcher, inventory
management is having a management is playing its
greater impact on Dell’s crucial role on the efficient
supply chain supply chain of Dell and

44
management. According thereby its success.
to A, lower inventory cost Effective and efficient
is an added advantage for inventory control helps Dell
the firm that effectively in lowering the inventory
controls its inventory. cost, in proper delivery of
Proper and efficient products to the customers
inventory control and thereby achieves
minimises these costs customer satisfaction, in an
because it minimises the economic advantage and in
total amount of inventory speeding up the entire
needed to manage the supply chain process.
business. Respondent B
added that having an GAP:- Referring back to
adequate supply of a the literature review, where
particular product of review of the effects of
customer requirement is inventory management on
crucial to both sales supply chain management
increases and customer is done; the respondents
service. If the product is haven’t mentioned anything
out of stock, the sale is that is contradictory to the
lost forever and customer literature and hence no
approaches another GAP is found.
vendor. Dell’s good
inventory management Evaluation:-Theory says
system identifies sales that inventory management
trends and prepare for is much more complex in
customer needs. manufacturing industries
Respondent C responded and the functions may not
by saying that the low be very effective. So the
inventory level in helps chances of material
them in attaining economic shortages and excessive
advantage because of the inventories may be high.
decline in the value of Dell has been successfully

45
 component weekly. Hence overcoming this concern by
there is no need to fund the use of Just-In-Time
raw materials, work in model and their pull-
process. D adds that approach.
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.
Competitive advantage All the respondents have According to the
stated that effective and researcher, their direct
efficient inventory and sales model and efficient
supply chain management supply chain management
has been serving as the are the main competitive
main competitive advantages for Dell. Their
advantage behind Dell’s direct relationship with
success. According to suppliers and customers
respondent A, reducing and virtual integration has
the cost of intermediaries also played its role.
by the direct relationship
with the customer and GAP:- The literature and
supplier has served as the the theories of competitive
main competitive advantage with supply
advantage of Dell. chain and inventory
Moreover by dealing management have been
directly with the customer, covered and when the
Dell gets a clear respondents views were
knowledge of the trends in compared with the
market. B adds that by literature review, the
eliminating the need of a researcher could not find a

46
 PC support engineer to gap.
load the softwares, Evaluation:- The theory
customer gains both time says that an enterprise
and cost. According to C, gains competitive
the use of advanced advantage when it is able
technologies in Dell has to create more economical
helped them to control and value than the marginal
monitor inventory role in competitor in its product
bagging profits and in market (Choudhary et al.,
customer service. This has 2008). According to the
helped them to use respondents, Dell could
inventory management lower their cost in
effectively and as a production and gain an
competitive advantage. economic advantage by
Respondent D adds that their whole inventory and
although Dell could lower supply chain process. The
their cost in production use of latest technologies
efficiency and they also helped them in gaining
managed to gain high a competitive advantage
profit margins by keeping with inventory
internal costs low and management. Moreover all
showed the effectiveness the respondents agreed
of virtual integration. 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 According to respondent The organisation’s various
processes A, the various supply processes has a greater

47
chain and inventory effect on their product
process are very much producing, reducing
effective for them for inventory costs, and helps
years. With proper control in good ordering decisions
and management over for the suppliers.
inventory stock, and quick GAP:- The researcher
fulfilments, Dell is able to could see a gap here when
give comparative pricing to compared with the relevant
their customers. As far as literature. The theory states
respondent B is that effective control over
concerned, having proper inventory stock alone
management of the cannot help in giving
various processes in comparative pricing over
supply chain gives a the products. The demand
competitive edge in the and supply of the product
sales markets and helps in also shapes the price of the
reducing inventory costs. product to an extent
Respondent C adds that (Friedman, 2008).
suppliers own Dell’s Evaluation:- In a
inventory and Dell competitive market, the
indirectly pays for it price for a product varies
through component until the demand by the
pricing. The cost for this is consumers equals the
included in the final prices quantity supplied by
of the computer. Hence producers. Controlling the
any reduction in inventory production process and the
benefits Dell’s customers inventory stock alone
by reducing the prices. cannot give the consumers
According to D, sharing its a comparative pricing. The
forecasts with the correlation between price
suppliers at least once per and how much of a good
month helps Dell’s product is supplied to the
suppliers in making good market is the supply

48
 ordering decisions and it is relationship and hence
serving as one of the most price is a reflection of
effective processes. supply and demand.

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.

49
 CHAPTER 5

RESULTS AND DISCUSSION

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.

50
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.

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

51
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
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

52
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
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.

53
6. CONCLUSION AND RECOMMENDATIONS
6.1 CONCLUSION

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.

54
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
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

55
 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
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.

56
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 Appendix 1 Interview Questions
Question 1
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?

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Question 9

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’?

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 Appendix 2

PERSONAL DEVELOPMENT PLAN

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 High

Analytical 
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 High

Analytical 
Time Management skill 
Finding of relevant literature 
Research Methodology selection 
Questionnaire Design 
Interview 
Presentation Skill 

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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
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.

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 Research Proposal

MBA DISSETATION MODULE

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.

66
 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
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.
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 4. To recommend the possible to reduce the inventories and hence improve
the supply chain management of Dell.

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.

68
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
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.

69
Data Analysis

Softwares like EVIEW, ATLAS and NVIVO are available for the data analysis.
ATLAS (Automatically Tuned Linear Algebra Software) is the software of
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 22nd Sept—15th Oct Skype, Soundcloud
collection
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

References
BarcodesInc. (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

70
 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.

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

71
 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.

72
Any actions to be discussed with Local Tutor

As above in the feedback.

Proposal Not Approved / Approved

Name A Watson

Date21/09/2011

73
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.

Local Tutor Comments

74
75