Posted: December 16th, 2015

If you were Dell, discuss how you would ensure that the holding costs are actually reduced, not just transferred

Consider Dell which is famous for its low inventory of parts (from Dell’s suppliers) and finished products (assembled at Dell’s manufacturing facilities). If Dell maintains low inventory of parts, and if Dell wants the suppliers to ship the parts soon after it places an order for them, does it mean that the suppliers shall maintain a high inventory of parts? And if the suppliers shall maintain a high inventory of parts, do the suppliers incur high holding costs? And if the suppliers incur high holding costs, who will eventually pay for those costs? Dell? Or its suppliers? Or ultimately the customer? If you were Dell, discuss how you would ensure that the holding costs are actually reduced, not just transferred