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Challenges in Supply Chain for Gateway

Essay by   •  October 4, 2011  •  Essay  •  418 Words (2 Pages)  •  1,359 Views

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Challenges in Supply chain for Gateway

Gateway had a means of distribution via online ordering and later changed into selling through sales agents with a downsized configuration, without the actual presence of the product. This has had a deteriorating effect on the organization itself. As in the modern era, product display serves a very important purpose towards encouraging the consumer towards purchasing the product. Therefore this is both a flawed marketing and supply chain strategy.

The orders are first made in the outlets and then are forwarded to the manufacturing plants and then the modified computers are sent to the consumer on his/her address. This inventory process is more time consuming than the regular traditional distribution method (via retailers/wholesales) and also has the problem of communication. With this delayed timings, the consumer can easily switch to competitors (Del etc) as they have proper show rooms and instant buy facility.

At the current scenario, the competition level in the technological industry is very high and consumers are more demanding than ever and have many different choices to buy from, therefore, Gateway would have to vigorously compete with its rivals (DEL, APPLE, SONY) in terms of factors such as price and unique selling point. With the rapidly changing demands in the technological sector, organizations would need to come up with newer upgraded products off and on (to match the competitors), therefore the life cycle of products are very short.

As mentioned earlier on, competition level is very high, and as many competitor giants enjoy economies of scale (such as DEL, which purchases raw materials in bulk and assembles the product when demand is raised), they can reduce their costs and ultimately the final price for the customer. This can put immense profit pressure on Gateway and due to the nature of its operations (getting personalized orders before manufacturing) it cannot rely on economies of scale. Gateway has 280 outlets in the Unites States (which means high fixed costs) and they don't keep inventory within the outlets, this means that the contribution made is less and the profit margin declines therefore a challenge for supply chain management..

Another major challenge for the supply chain management of Gateway is the usage of IT. IT usage can have its benefits such as ease in communication and flow of information between gateway's manufacturing units and outlets. Additionally, IT can help gather useful marketing information. Nonetheless, it is worth noting that introduction of IT can result is massive rise in costs and can hammer the profit level very badly.

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