Personal Computer Industry: Sales Models Lucas Lanting Ernesto G. Rodriguez EC 521, Winter 2007

Retail Sales Retail Sales Model Retail Sales Model Involving face-to-face or one-to- one contactInvolving face-to-face or one-to- one contact

Direct Sales A form of retail sales A form of retail sales Product is shipped directly from manufacturing to the customer (via telephone or internet) Product is shipped directly from manufacturing to the customer (via telephone or internet) Examples: Examples: Mail-order (ex. Sears catalog)Mail-order (ex. Sears catalog) E-commerse (ex. amazon.com)E-commerse (ex. amazon.com)

Pros & Cons Retail Stores Retail Stores Allow customers to experience product and purchase item immediatelyAllow customers to experience product and purchase item immediately No lead time requiredNo lead time required Requires inventory (most carry 3-4 months)Requires inventory (most carry 3-4 months) Lack of customer customizationLack of customer customization

Pros & Cons Direct Sales Direct Sales Skip the middle man and provide product direct from supplier to customerSkip the middle man and provide product direct from supplier to customer Usually requires lead timeUsually requires lead time Reduces inventory costs (saves 3-5 percent)Reduces inventory costs (saves 3-5 percent) Allows for customer customizationAllows for customer customization

Direct Sales Model Dell Inc. Dell Inc. The Dell Corporation was founded by Michael Dell, while still a student at the University of Texas at Austin in 1984 with just $1000. The goal was to sell IBM-compatible computers built from stock components from his dorm room.The Dell Corporation was founded by Michael Dell, while still a student at the University of Texas at Austin in 1984 with just $1000. The goal was to sell IBM-compatible computers built from stock components from his dorm room.

Direct Sales Model What makes Dell Direct different? What makes Dell Direct different? Supply Chain ManagementSupply Chain Management The oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumerThe oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer Maintains 3-5 days of inventory vs of competitorsMaintains 3-5 days of inventory vs of competitors Just-In-Time Inventory SystemJust-In-Time Inventory System The ordering of goods or products so they arrive just in time for you to use them. This reduces the costs of storing excess and unwanted stock (reduces overproduction).The ordering of goods or products so they arrive just in time for you to use them. This reduces the costs of storing excess and unwanted stock (reduces overproduction). Negative Cash Conversion CycleNegative Cash Conversion Cycle

Direct Sales Model Demand-Pull Company Demand-Pull Company The pull of products and materials through the supply chain after the consumer places the orderThe pull of products and materials through the supply chain after the consumer places the order The System signals suppliers every two hours with updated quantities needed based on the number of orders received The System signals suppliers every two hours with updated quantities needed based on the number of orders received

Supply Chain for a Direct Sales Manufacturer

Direct Sales Model Current Consumer Trend Current Consumer Trend Want/need it now attitudesWant/need it now attitudes This is hurting Dell because they do not have any retail store where consumers can stop by and purchase a new computer.This is hurting Dell because they do not have any retail store where consumers can stop by and purchase a new computer. Dell is experiencing with a form of retail store salesDell is experiencing with a form of retail store sales Challenge of new markets & productsChallenge of new markets & products

Retail Sales Model In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called store. Retailers are at the end of the supply chain. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called store. Retailers are at the end of the supply chain.

Retail Sale Model Hewlett- Packard Hewlett- Packard In 1934, the HP company originated in a garage in nearby Palo Alto while Bill Hewlett and Dave Packard were post-grad students at Stanford during the Great Depression.In 1934, the HP company originated in a garage in nearby Palo Alto while Bill Hewlett and Dave Packard were post-grad students at Stanford during the Great Depression. Personal Computers is just one of their major divisions.Personal Computers is just one of their major divisions.

Retail Sales Model Supply Chain Management Supply Chain Management The oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumerThe oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer Supply-Push Company Supply-Push Company The production of standardized commodities and pushing them in large volumes through the supply chain and finally into the hands of consumers.The production of standardized commodities and pushing them in large volumes through the supply chain and finally into the hands of consumers.

Retail Sales Model The System signals suppliers monthly or weekly on bulk purchases of material or units based on the monthly or weekly demand for their end product by the consumer. The System signals suppliers monthly or weekly on bulk purchases of material or units based on the monthly or weekly demand for their end product by the consumer. The Retail model does not leave much room for user customization demand The Retail model does not leave much room for user customization demand

Typical Supply Chain for a Manufacturer

Retail Sales Model Current Consumer Trend Current Consumer Trend Want/need it now attitudesWant/need it now attitudes This has benefited HP because they already have their products in retail stores where consumers can stop by and purchase a new computer.This has benefited HP because they already have their products in retail stores where consumers can stop by and purchase a new computer. In addition to retail stores, HP is also now implementing direct salesIn addition to retail stores, HP is also now implementing direct sales