Welcome back to my 5-part series on supply chain levers! I've explored Toyota's capacity mastery, Walmart's inventory innovation, and Zara's time-based dominance. Today, I dive into what might be the most transformative lever of all: information.
Here's a statistic that stopped me in my tracks: In 1998, Dell achieved an inventory turnover of 55.5 times per year. Their competitors? Gateway managed 27.9%, Compaq struggled at 12.9%, and the industry average was just 23.6%. Dell wasn't just better—they were playing a completely different game.
The secret wasn't superior manufacturing or lower costs. Dell had discovered something revolutionary: they could substitute information for inventory. While competitors stockpiled components based on forecasts, Dell built computers based on actual orders. The result? They needed only 6 days of inventory when others required weeks or months.
This isn't just a technology story—it's a fundamental shift in how supply chains operate. Information doesn't just support your other levers; it amplifies them. The right data at the right time can eliminate bottlenecks, reduce inventory, compress cycle times, and enable dynamic pricing.
The companies that master information don't just have better supply chains—they have intelligent supply chains.
The Foundation of Modern Supply Chains
"Good information can help improve the utilisation of supply chain assets and the coordination of supply chain flows to increase responsiveness and reduce costs" (Chopra and Meindl, 2016, p. 65).
Defining processes as push or pull is crucial in supply chain design because each phase uses different information. Push systems rely on forecasts to develop the Master Production Schedule (MPS) and develop supplier schedules (detailing parts, amounts, and dates). Conversely, pull systems react to actual demand. They depend on the rapid transmission of real-time demand data across the entire supply chain to ensure production and distribution precisely match current customer needs (Chopra and Meindl, 2016).
The Information Revolution
While leading firms have always recognised that information systems are vital for supply chain success, we now see a revolutionary capability. These systems enable real-time matching of supply and demand across diverse markets for customised products and at unprecedented speeds.
This information flow collapses traditional barriers of time and distance by connecting customers directly to suppliers, allowing near-instant adaptation to market shifts (Christopher, 2016).
The Technology That Changed Everything
Electronic Data Interchange (EDI) is where two or more business partners exchange information in the form of business documents from one computer to another in a standard electronic format. EDI eliminates the need for manual data entry and reduces the costs and time associated with paper-based processes.
But here's the deeper insight: Information is fundamental to supply chains because it integrates the other key drivers (like production, inventory, and transportation). It acts as the 'glue,' enabling coordinated processes and informed decision-making.
Without clear information on customer demand, inventory levels, and production needs, managers lack the visibility required to optimise performance. IT systems, including their hardware, software, and users, function as the essential sensory and analytical tools for supply chain management. They gather and interpret information, acting as the eyes, ears, and partial brain, to provide the insight managers need for sound decisions (Chopra and Meindl, 2016).
Master Class: Dell's Direct Sales Model Revolution
Dell's direct sales model and sophisticated information flow enable it to substitute information for inventory, leading to significantly higher turnover rates compared to its competitors and the industry average.
The numbers tell the story: In 1998, Dell achieved an inventory turnover of 55.5, which was higher than Gateway's 27.9, Compaq's 12.9, and the industry average of 23.6. This remarkable efficiency is attributed to Dell's ability to share information on orders and production in real-time within the company and throughout the supply chain.
The Magic of Just-in-Time Information
This timely information flow means Dell does not need to hold as much physical inventory, as components are delivered just-in-time. For instance, Dell's days of inventory dropped from 32 in 1994 to only 6 by the end of 1998. This was the lowest in the industry at the time (Kraemer et al, 2000).
Scale of Coordination
The sophistication of Dell's information systems enabled massive coordination efforts:
Boeing was one of Dell's 50 relationship customers in 1997, a Fortune 1000 company that purchased at least $1 million per year from Dell. A team of approximately 30 Dell representatives managed Boeing's 140,000 PCs, performing functions like those of Boeing's internal PC department (Kraemer et al, 2000).
In 1998, Dell purchased $1.6 billion in systems, parts, and components from Taiwanese companies. This demands tight coordination and seamless information sharing with suppliers (Kraemer et al, 2000).
Key Takeaways for Your Operations
Information Is Infrastructure: Treat data systems as critically as you treat physical assets
Real-Time Beats Forecast: Systems that respond to actual demand outperform prediction-based systems
Integration Amplifies Everything: Information connects and optimizes all other supply chain levers
Visibility Enables Velocity: The faster you can see problems, the faster you can solve them
Coordination Creates Competitive Advantage: Superior information sharing with partners becomes a strategic moat
Coming Next: Part 5 explores our final lever—price—and how companies like Amazon use strategic pricing to balance supply and demand while creating competitive advantages that go far beyond just revenue optimization.
The Information Imperative
We live in an age where data is abundant, but information is scarce. The difference? Data is what you collect; information is what drives decisions. The companies that master this distinction don't just have better supply chains—they have predictive supply chains that respond to signals others can't even see.
Every inefficiency in your supply chain is ultimately an information problem. Excess inventory? Poor demand visibility. Production bottlenecks? Inadequate process data. Customer complaints? Insufficient quality information. The solution isn't always more data—it's better information, faster.
Here's your challenge: Look at your biggest supply chain problem right now. What information do you need to solve it? How quickly can you get that information? How quickly can you act on it?
The companies that answer these questions fastest win.
What information gaps are holding back your supply chain performance? Are you still making decisions based on yesterday's data, or do you have real-time visibility into what's happening right now?
