Effective Inventory Management: Apple Versus Dell

Introduction

Apple Inc. is an American-based manufacturer of computers, tablets, smartphones, computer accessories, and computer software. It is popular for being the first company to develop a computer with a graphical user interface. Established in 1976 by Steve Jobs and Steve Wozinak, the company has grown and become a leading technology company. Today, it is among the leading multinational companies specializing in computer software, electronics, and online services. Besides being a leading technology company, Apple has reached greater heights as far as effective inventory management is concerned.

Dell Inc. is an American-based computer manufacturing company that was founded by Michael Dell in 1984. With headquarters in Rock, Texas, Dell is one of the leading global suppliers of personal computers and other computer-related products. Its main customers include individuals, corporations, and government institutions. Today, it is among the leading multinationals in the technology industry developing high-tech personal computers and other related products. Dell has also put in place effective inventory management systems that allow it to take control of its supply chain.

Company inventory

Apple’s main products that constitute a major percentage of its inventory include Macintosh computers, iPhones, iPads, iPods, Apple watch, computers, mac, and software such as iTunes and iWork. The iPhone and iPad are the most popular devices in the consumer market (Lockamy, 2017). For example, the iPhone is better than Android smartphones in terms of processor speed, hardware integration, and ease-of-use. The iPad, on the other hand, is ideal for playing video games, watching movies, and playing music, among other functions. Due to its large screen, portability, and improved battery compared to other mobile devices, the iPad is the most preferred entertainment device.

Besides the laptops, Dell’s inventory includes desktops, network servers, workstations, projectors, and storage devices. Due to their high functionality, speed, and convenience, Dell’s devices are widely used globally. The high performance of Dell laptops and desktops allow the business to perform their daily routine jobs with a lot of ease (Parvez et al., 2018). The storage devices have huge storage space that provides for massive storage of data and easy retrieval. Corporations and government institutions also use Dell’s projectors to effectively deliver presentations.

Being technology-based companies, Both Apple and Dell products have a short shelf life. This implies that holding huge stocks of these products puts both companies at a higher risk of obsoleteness and dead stock (Singh & Verma, 2018). Another characteristic of inventories of these two companies is that they hold huge volumes of products at any particular period, so they must have in place an effective inventory management application. In addition, due to the complexities involved in managing such huge inventories, effective techniques for inventory management are applied in both companies.

Goods and Services Design Concept

AppleCare products is a service program involving Apple experts who provide technical support to the users. The service program integrates the one-year warranty period with technical assistance when a customer buys an Apple product (Lockamy, 2017). This implies that a customer can contact AppleCare support online or through a call when they experience an issue with any device. Apple has thousands of technical experts working round the clock to provide real-time support to the users. When a device is beyond repair, the one-year warranty allows for immediate replacement.

Dell’s PC Diagnostics is a unique design feature that helps in resolving performance-related issues that users may experience. This service address all slowdowns, start-up issues, and possible freezes that computers often experience (Parvez et al., 2018). Further to this service, Dell’s technical team provides online and remote support to the users. For example, they provide assistance such as full system diagnostic that examines the whole system to identify and address hardware or software issues.

Inventory and Role in Performance

Inventory plays a key role in the productivity and overall performance of an organization. Applying higher levels of inventory management practices results in enhanced competitiveness and improved performance (Singh & Verma, 2018). Effective inventory management practices include recording and tracking inventory movement, estimating future orders, and proper storage. Achieving optimal inventory is the goal of every organization and involves maintaining an adequate supply of inventory at a minimal cost. Simply put, optimal inventory is making a maximum profit while bringing storage and holding costs to a minimum.

Achieving operational efficiency in inventory management means eliminating supply chain challenges. With no supply chain issues, customer orders are fulfilled on time, leading to customer satisfaction. Efficiency in the supply chain has to do with ensuring the inventory gets to where it is supposed to be on time and efficiently (Singh & Verma, 2018). When a company manages its inventory efficiently, it gets additional resources to grow and expand. Overall, employing modern technology and techniques in the management of inventory is critical to achieving efficient inventory management.

Layouts for Each Company

Apple applies the just-in-time (JIT) system of inventory management to handle its huge inventory. With this system, Apple only what the inventory that it needs at any particular point in time. For JIT to succeed, it required highly dedicated suppliers (Lockamy, 2017). To achieve this, Apple resorted to contracting manufacturers, so the company has outsourced the manufacturing of hardware components from China, the USA, and Ireland. Apple has also contracted different companies to assemble the different components and to test the final products. For the distribution of finished devices, Apple takes advantage of both regional and national retailers. It also utilizes phone network companies, wholesalers, and direct selling, especially for corporations and government institutions. Similarly, Apple employs third-party facilities to hold inventories and review the inventory levels regularly based on sales, product lifecycle, and cost patterns.

Dell, on the contrary, applies the built-to-order system of inventory to effectively handle its inventory. As such, it deals with several suppliers across the world and different processing facilities where its products are manufactured. Once a customer places an order, Dell processes it after evaluating the customer’s financial credibility (Parvez et al., 2018). The order is then sent to the assembling plant to assemble the product for testing and packaging. The next step is to ship the product to the customer within 5 days since the receipt of the order. Dell’s manufacturing process involves assembling the different components, software installation, testing the final product, and quality check. Using the built-to-order system coupled with external suppliers allows the company to achieve cost efficiency. It also allows the company to concentrate on its core business of selling.

The layouts applied by Dell and Apple clearly show that the two companies depend heavily on their suppliers to succeed. It implies that a slight disruption from the contract manufacturers and suppliers can result in unexpected delays in orders fulfillment. However, Dell’s layout is more customer-friendly given that the company has more control over its inventory. Apple has to first buy the finished products from the contract manufacturers in order to sell to their customers.

Metrics Used in Evaluating Performance

Inventory turnover and days in inventory are two special metrics that can be used to evaluate the supply chain performance for Dell and Apple. Inventory turnover shows the number of times that a business has sold and replaced its inventory at a particular period (Bhat et al., 2019). A higher turnover rate is considered better and indicates a higher performance of the supply chain. As of 30^th September 2021, Apple had an inventory turnover of 40.3, while Dell had an inventory turnover of 16.59 during the same period (Morningstar.com, 2021). Comparatively, it shows that Apple can sell its existing inventory faster than Dell. Days in inventory is an efficiency metric that measures the number of days that a company potentially holds its inventory prior to selling it. A lower metric is preferable and shows that a company is performing well in its supply chain. As of 30^th September 2021, Apple’s days in inventory stood at 11.13, while Dell’s days in inventory stood at 14.06 during the same period (Morningstar.com, 2021). Thus, Apple is also better than Dell in terms of days in inventory.

The above two metrics can effectively be used to establish demand patterns and indicate weaknesses in inventory management. Both Apple and Dell should utilize effective forecasting models on top of these metrics to predict demand. Extensive research and development is needed to find the most relevant and effective model of forecasting

Improvements

Both companies can significantly improve their inventory management practices without affecting operations and customer benefit packages. For example, adopting lean inventory management practices is essential to eliminate inefficiencies in the supply chain. Practicing lean management practices will not only enhance value in these companies’ inventory management but also identify and eliminate waste of time, effort, and resources (Yang & Campbell, 2020). Lean inventory management advocates for continuous improvement and the pursuit of perfection. In the end, both Apple and Dell will experience massive cost reductions since there will be little or no wastage or losses arising from dead stock.

Conclusion

In summary, effective management of inventory is essential for the growth and expansion of an organization. Growth cannot occur without considering how to effectively manage the increasing inventories and complexities along the supply chain. Implementing advanced forecasting models and building close relationships with contract manufacturers, suppliers, and third parties in the supply chain is essential for overall organizational performance.

References

Bhat, N., Kale, S., & Shrivastava, P. (2019). A study of efficiency of inventory management using financial ratio. Think India Journal, 22(33), 213-217.

Lockamy III, A. (2017, July). An examination of external risk factors in Apple Inc.’s supply chain. In Supply Chain Forum: An International Journal (Vol. 18, No. 3, pp. 177-188).

Morningstar.com. (2021). Apple Inc. Retrieved November 25, 2021, from Morningstar: http://financials.morningstar.com/ratios/r.html?t=AAPL&region=USA&culture=en_US

Parvez, M., Ullah, N., Sabuj, M. A., & Islam, S. (2018). Profit Maximization of DELL Inc. through Build-to-Order Supply Chain for Laptop Manufacturing. American Journal of Industrial and Business Management, 8(06), 1657.

Singh, D., & Verma, A. (2018). Inventory management in supply chain. Materials Today: Proceedings, 5(2), 3867-3872.

Yang, L., Li, H., & Campbell, J. F. (2020). Improving Order Fulfillment Performance through Integrated Inventory Management in a Multi‐item Finished Goods System. Journal of Business Logistics, 41(1), 54-66.