Body Shop

In: Business and Management

Submitted By vishaaal69
Words 489
Pages 2

They allowed to customize, experimented to overtook nest loss 76 million.
High rates of obscolence or perishable low level of inventory but easy supply

1. Is Dell's working capital management a competitive advantage?

Dell introduced built-to-order manufacturing to the PC industry. This manufacturing process allowed for customers to have customized PCs with the latest technology, and Dell was able to keep its work-in-process (WIP) and finished goods inventory at very low levels. So less capital is spent in inventory and storage. WIP and Finished goods percent to total inventory was 10-20 while IBM e.g. 50-70. See Exhibit 2 DSI is constantly reducing and therefore storage cost as well which affects finally reducing CoGS

The company markets its computers directly to its customers and builds computers after receiving a customer order. This build-to-order model enables Dell to have much smaller investment in working capital than its competitors. (same as Just in Time)

It also enables Dell to more fully enjoy the benefits of reduction in component prices and to introduce new products more quickly.

Low Inventory led to quick adoption of changing technology- e.g. flaw in Intel chip.

Dell has grown quickly and has been able to finance that growth internally by its efficient use of working capital and its profitability.

2. How did Dell fund its 52% growth in 1996? ews In 1996, their operating margin increased from 4% to 5% (in 1996)…Operating assets as percentage of sales also reduced….from 31.94% to 29.40% (in 1996)…(operational efficiency) so sales increased using less assets, this generated extra working capital to fund growth.

3. Assuming Dell sales will grow 50% in 1997, how might the company fund this growth internally? How much would working capital need to be reduced and/or profit margin increased?…...

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