Saturday, September 14, 2013

Companies Benefit from Low Inventory

Last week’s article left me cursing Dell’s poor business practices of downplaying problems their faulty products.  This week’s Dell article renewed my confidence in why Dell has a business model to study.  “Living in Dell Time”, describes the fast nature in which Dell can react to missteps in their supply chain—far better than that of their competitors.  Having products filled with several technical parts from multiple suppliers and still being able to turn its inventory 107 times per year -- an astounding advantage over HP and IBM, which flip their inventories 8.5 and 17.5 times per year, respectively.

Another company that implements ideas and themes from this coming week is Urban Outfitters, “Lean Inventories and High Turnover Key for Urban Outfitters.”

Urban Outfitters is a primarily young women and men’s store that also owns Anthropologie.  The article states that the high turnover and lean inventories are the reasons that these stores can better weather economic lows.  The turnover supports customers desire to see more new products more frequently. [1] These practices, as in the case with Dell, gives them a high advantage against competitors who rely on large inventories, slowing their timeline of inventory turning into cash.  I can tell you as an Urban Outfitters customer, sales are rare.  Opposite are competitors such as Gap, Banana Republic, Abercrombie and Fitch, who frequently discount merchandise at large percentages.[2]

Another interesting way Urban Outfitters can respond to customer demand is by using software that maintains a virtual warehouse.  “Virtual Warehousing allows for inventory to be physically house anywhere – including a distribution center, a temporary facility, or the back room of a store – and distributed on an as-needed basis.”[3]

[2] Ibid 2

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