Case Study of Dell's Working Capital

In: Business and Management

Submitted By ericqi
Words 1319
Pages 6
Case Study of Dell’s Working Capital
Jianduo Guo, Shihao Qi, Michael, Yitsik
1.

Big picture:
With or Without external financing to meet the need of rapid growth
Timeline of Dell is showed as follows:
Calendar Year

Fiscal Year

Note

1990

1991

Expand indirect distribution channels

1993

1994

August: loss from sell-off of excess inventory
September: growth to liquidity & profitability

1994

1995

July: exit low margin indirect channel

1995

1996

Inventory control, notebook market, new tech

2.

Analysis



Benefit and Cost of just in time manufacturing system
Thanks to just in time manufacturing system, Dell built its brand as an efficient and flexible company which keeps pace to leading technology. As Dell’s competitive advantages, this system benefits Dell a lot, along with some costs and limits.

Internally, in time manufacture lowers inventory, which benefits in many ways. Smaller amount of inventory takes less space for storage, thus lower the PP&E. And computers are easy to depreciate just like groceries, so less inventory leads to reducing expenses of depreciation. Also, it shortens DSI and then indirectly shorten Dell’s CCC performance, benefiting its liquidity. In addition, this enables Dell to simplify its supply chain by cutting off some suppliers.

This system at the same time brands Dell as a flexible company to the customers.
Without the burden of large amount of inventory, Dell is able to shift flexibly due to the anticipation of market demand, and act quickly in application to new technology.

However, it limits Dell’s growth in market to some extent, and may cause great loss due to its disability to deal with critical incidents, as we can see from the loss of 1993.

So shortly after the recovery of the loss in 1993, now the key objective is to finance the future growth by a fast…...

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