How Dell and FedEx Supply Chain Reinvented their Relationship

Dell and FedEx Supply Chain

For more than 28 years, Dell has empowered countries, communities, companies, and people everywhere to realize their dreams through the use of information technology.

Success also brings great challenges - especially in areas of non-core competencies such as reverse logistics.

Dell had worked with GENCO since 2005 (GENCO was acquired by FedEx in 2015 and rebranded as FedEx Supply Chain in 2017).

As customary in the fast-paced high-tech industry, Dell operated under a procurement strategy of “every dollar, every year,” meaning that it used frequent competitive bidding processes to drive down prices.

By 2011, the honeymoon was over in the relationship.

Dell was driving for the lowest cost, but FedEx Supply Chain believed Dell’s short-term thinking was putting capabilities at risk.

A major tension point was that Dell wanted FedEx Supply Chain to drive proactive innovations and assume the cost of investments.

FedEx Supply Chain resisted because it had no guarantee of return on investment within the existing contract structure and constantly faced hard-driving cost reductions.

One thing was abundantly clear: Neither party was content with the current contract. The existing contract structure and relationship dynamics placed a wedge in the trust level between the two companies.

A better way was needed.