1. What competitive advantage(s) does Dells working capital policies confer in 1995 and later?

Table A has information about Dells competitors and their inventory. Dell has reduced its days in inventory by 1995. Explain how that might help sell more computers.

Dell maintained an inventory of components. The cost of individual components, such as processor chips, comprised about 80% of the cost of a PC. As new technology replaced old, the prices of components fell by an average of 30% a year. Dell ordered components based on sales forecasts Components were sourced from about 80 suppliers in the mid-1990s down from a high of 200 or more. Dell issued "releases" for a certain amount of product from a suppliers inventory on a regular basis, depending upon the forecast. Suppliers, many of whom had warehouses close to Dell's Austin Texas and Ireland plants, delivered parts to Dell, often on a daily basis. As Michael Dell explained, "other companies had to maintain high levels of inventory to stock reseller and retail channels. Because we built only what our customers wanted when they wanted it we didn't have a lot of inventory taking up space and soaking up capital. As such, Dell's supply of a inventory was significantly lower than its competitors, providing a competitive advantage. Table A Days Supply of Inventory (DSI) 1995 1993 1994 Dell Computer 55 33 32 Apple Computer 54 85 Compaq Computer 72 60 73 IBM 48 57 Source: Dell Computer Corporation Fiscal 1993-1995 Annual Reports: case writer estimates from Apple Computer, Compaq Computer, and IBM Fiscal 1992-1994 Annual Reports. a DSI (Net Ending Inventory)/ (Quarterly COGS/90 Days) bDell's fiscal calendar ends in January; Apple's in September: Compaq and IBM's in December. The DSI for 1995 represents Dell's DSI for the quarter ended on 1/29/95, Apple's on 9/30/94, and Compaq's and IBM's on 12/31/94. September 1990- August 1993 In 1990, Dell had only 1% of the US. PC market share Michael Dell anticipated that the fragmented PC industry was ready for a consolidation and that Dell was too small to survive a consolidation. At the time Michael Dell explained, "I realized we had to decide whether we should stay the size we were and face the consequences or go for big time growth...Obviously, we went or growth in one big leap." On September 10, 1990, in an attempt to capture sales from small businesses and first time consumers, Dell announced it was breaking from its direct-only business model and would begin to