Dell is the largest computer-systems company in the world in terms
of global market share. The company was founded by Michael Dell based on a (then) novel business model of bypassing retailers and selling directly to consumers via phone or Internet thereby shortening the company's supply chain. With this direct sales approach Dell focuses on speeding components through its supply chain to meet customer demand as it arises, thus eliminating inventory. After Dell receives an order and processes it (through financial and technical evaluations), it is sent to an assembly plant in Austin, Texas, where it builds, tests, and packages a product within 8 hours. Dell's direct-sales model is dependent on its arrangements with its suppliers, many of which are located in Southeast Asia with shipping times to Austin from 7 to 30 days. To compensate for these long lead times, Dell requires its suppliers to keep specified (i.e., target) inventory levels— typically 10 days of inventory—on hand at small warehouses called "revolvers" (short for revolving inventory). In this type of vendor managed inventory (VMI) arrangement, Dell's suppliers determine how much inventory to order and when to order to meet Dell's target inventory levels at the revolvers. To help its suppliers make good ordering decisions, Dell shares its demand forecast with them on a monthly basis. Dell uses a six-month rolling forecast developed by its marketing department that is updated weekly. Buyers receive weekly forecasts from commodity teams that break the forecasts down for specific parts and components. These forecasts reflect product-specific trends and seasonality. For home computer systems, Christmas is the major sales period of the year. Other high-demand periods include the back-to-school season and the end of the year when the government makes big purchases.
-Why do you think many companies don't want to share their forecasts with their suppliers? What do you perceive to be the risks and drawbacks of sharing forecasts with suppliers?
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