October 14, 2008

Dell looks to 3PLs

By DC Velocity Staff

Dell Inc., the world's second-largest PC manufacturer, is seeking proposals from third-party logistics providers (3PLs) to manage its fulfillment centers in the Americas, according to sources at the conference.

The move represents a significant shift in Dell's supply chain strategy and reflects a need to reposition Dell's operations to support its return to the retail store end market. Dell abandoned the direct-to-store model in the mid-1990s in favor of selling direct to customers via the Internet. However, it recently returned to the retail channel in an effort to build volumes and regain market share lost to, among others, Hewlett-Packard Co. Currently, Dell's three largest retail partners are Wal-Mart Stores, Best Buy, and Staples.

By reaching out to the 3PL community, Dell hopes to find a specialist with deep understanding of inventory management strategies to fit the needs of the retailing channel. Dell's traditional direct-to-customer model eschewed finished goods inventory in favor of pulling parts from suppliers within hours of assembly, building the finished products at its DCs, and shipping from there. Selling into the retailing market will require experience in managing in-stock inventory flow, expertise Dell believes it lacks.

Sources say Dell is also exploring the possibility of using more contract manufacturing and lessening its near total reliance on in-house manufacturing.