Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 9-2Copyright © 2009 Pearson Education, Inc.

Gateway: A Direct Sales Manufacturer

Presented By

S/Lt Danish Ramzan PN

S/Lt Hamza Khan PN

S/Lt faiq Ali Shah PN

IntroductionGateway is a manufacturer of PCs that was founded in

1985Gateway was one of the first PC manufacturers to start

selling PCs onlinecompany had three plants in the United States, a plant in

Ireland, and one in Malaysia.In the late 1990s, Gateway introduced retail stores

throughout the United States. By January 2002, 280 retail stores in the United States

Does not carry any finished inventory only used for order

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IntroductionGateway utilizes three main sales channels

for the consumer market:– telephone sales, online sales, and company-owned stores. These are referred to as “call, click or come

in.”this strategy and raised the stock price to

more than $80 per share in late 1999By November 2002, Gateway shares had

dropped to less than $4mSlide -4

IntroductionGateway was losing a significant amount of

money. Plants in Salt Lake City, Ireland, and Malaysia were closed down.

The company was looking to sell its PCs through electronics retailers such as Best Buy and Circuit City.

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Why did Gateway have multiple production facilities in the US? What advantages or disadvantages does this strategy offer relative to Dell, which has one facility?

What factors did Gateway consider when deciding which plants to close?

Why does Gateway not carry any finished goods inventory at its retail stores?

Should a firm with an investment in retail stores carry any finished goods inventory?

Is the Dell model of selling directly without any retail stores always less expensive than a supply chain with retail stores?

What are the supply chain implications of Gateway’s decision to offer fewer configurations?

Why did Gateway have multiple production facilities in the US? What advantages or disadvantages does this strategy offer relative to Dell, which has one facility?

US was main market of gatewayNo inventory stores direct supply no contract

with any shipping company

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DisadvantagesOperating cost is important considerationMore professionals requiredcost increasesDifficult to manage qualityDifferent polices for employees

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AdvantagesLow labor costMay be un available because of disasterLow price raw materialCheaper logisticsShippingTax Incentives

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What factors did Gateway consider when deciding which plants to closeThe markets which were saturated showing poor results, specially Malaysia plant were have high

loses

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Why did gateway choose not to carry any finished product inventory at its retail stores?

Gateway was really clever in deciding whether to keep such items in inventory or not. As gateway knew that people don’t wait for FMCG product for the alternative but when its about computers, customers could wait. Doing so, they had no inventory on risk.

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Should a firm with an investment in retail stores carry any finished goods inventory

Yes, it can

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Is the Dell model of selling directly without retail stores always less expensive than a supply chain with retail stores?

 Yes, the DELL model of selling directly without retail stores is always less expensive than a supply chain with retail stores because of a number of cost cutting factors which make the product available to consumers at a cheaper cost, few of which are:Manpower (it is always the largest cost in

running a buisness)Retail outlets (rents, energy, law and order

situation)Logistic support ( transport, display items)

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What are the supply chain implications of Gateway’s decision to offer fewer configurations?

Supply chain is not of the view of fewer configurations, extra ordinary configurations help the product reach masses and grow bigger.

Few implications are as follows:Holding a fixed inventorySuppliers inflexibilityIneffective assembly line

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Thank you

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