Question

Dell company write in 500 words

1 Describe the role cost will play in your distribution method

2 Rationale for choice

Answer 1

1. Cost plays a very important role in Dell's success because of the relationship they share with their suppliers. Most of their suppliers are located very near to their factories. This means effective communication, as well as a very strong Supply Chain system reducing the cost for them because they don't have to hold the inventory in their own factories. Unlike usual trends, for Dell their suppliers keep the inventory in their own warehouses on their own expenses and deliver to Dell factories only when the demand is given by dell. This is an efficient warehousing solution for Dell and gives them a lot of leverage in distribution methods.

2. The reason behind this choice of distribution method is that, Dell knows that in Computer industry the prices of raw materials changes rapidly, and thus they believe in keeping a minimum inventory system, so that every week their cost or expenditure is dependent only on new market prices of raw materials which can help them be more efficient in gaining profits. Thus, this approach is market driven and very successful for dell.