Gateway: A Direct Sales

Manufacturer

Presented By
S/Lt Danish Ramzan PN
S/Lt Hamza Khan PN
S/Lt faiq Ali Shah PN

Copyright © 2009 Pearson Education, Inc.

Publishing as Prentice Hall Slide 9-2
Copyright © 2009 Pearson Education, Inc.
Introduction
 Gateway is a manufacturer of PCs that was founded in
1985
 Gateway was one of the first PC manufacturers to start
selling PCs online
 company 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

Slide -3
Introduction
 Gateway 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 1999
 By November 2002, Gateway shares had dropped to
less than $4m

Slide -4
Introduction
 Gateway 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.

Slide -5
 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 gateway

 No inventory stores direct supply no contract with any
shipping company

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Disadvantages
 Operating cost is important consideration
 More professionals required
 cost increases
 Difficult to manage quality
 Different polices for employees

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Advantages
 Low labor cost
 May be un available because of disaster
 Low price raw material
 Cheaper logistics
 Shipping
 Tax Incentives

Slide -9
What factors did Gateway consider
when deciding which plants to close
 The 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

Slide -12
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)

Slide -13
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 inventory
 Suppliers inflexibility
 Ineffective assembly line

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Thank you

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