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Vested Outsourcing a Win for Dell’s DC

With Dell and its 3PL at odds, vested outsourcing helps the companies embrace the idea of sharing risks and rewards, rather than battling over every penny.

(Boonton, NJ, May 16, 2014) — For seven years, before they discovered a kinder and gentler approach to doing business, computer maker Dell and third- party logistics provider Genco ATC had a typically hard-nosed relationship.

As Dell continued to tighten the vise on costs and Genco kept pushing back, the relationship devolved into something akin to a marriage on the rocks.

Instead of splitting, the companies made a last-ditch effort to reconcile.

Kate Vitasek, a researcher at the University of Tennessee Center for Executive Coaching, and author of “Vested Outsourcing,” blames the problems on the conflict inherent in the companies’ contract.

As the talks wore on, both sides realized that they needed to change their approach. They settled on a new arrangement that, rather than simply paying the 3PL for activity, would rewarded Genco for results.

The facility in question was a reverse logistics operation, but Vitasek says the principles of Vested Outsourcing that they used apply to any type of DC. The five principals are:

  • Embrace outcomes, not transactions.
  • Focus on the what, not the how.
  • Clearly define and measure desired outcomes.
  • Add incentives.
  • Embrace a mode of insight vs. oversight.

The May issue of Distribution Center Management provides details on the five principles as well as outcomes for Dell and Genco.

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