The sting in the tale of Dells outsourced supply chain

In this month’s issue of Information Age, as part of the cover feature on new models of outsourcing, we examined how computer maker Dell outsourced its global supplier engagement processes to business-to-business service provider Inovis.

The fact that Dell’s supply chain has in the past been credited with the company’s success, that the project was a combined IT and business process outsourcing deal, and that the technology platform used to support it was described as “the largest hosted B2B cloud environment in the world” – all these identified the project for inclusion in our analysis of new ways to outsource.

But it would be irresponsible for us not point out that since the publication of the article, Dell has drawn heavy criticism for its supplier engagement practices.

This week, the company was entered into the Forum of Private Business’ ‘Hall of Shame’ after it told certain suppliers that it would be extending the time it takes to pay them by 15 days to 65 days, citing economic circumstances.

“Companies like Dell have a responsibility to pay promptly,” said a spokesman for the Forum. “Failure to do so can mean the whole supply chain seizes up.”

The decision to lengthen the payment window was not, however, made by Inovis.

“The 65-day payment term is being put in place on a global basis for Dell’s non-production procurement, which includes vendors such as telecommunications companies, insurance companies, financial services, services vendors,” the hardware manufacturer said in a statement. “The standard does not apply to certain exempted diverse suppliers, including many certified small vendors, whose terms can be shorter, generally ranging from 20 to 45 days.”

So rather than an indictment of its outsourcing practices, the news is just one more minor PR crisis for Dell. It is not even the worst one this week: a story in yesterday’s New York Times alleges that between 2003 and 2006, the company knowingly sold thousands of faulty machines to customers including the University of Texas – where, twenty years prior, founder Michael Dell had first started selling PCs from his dorm room.

Still, it reminds us that when a large organisation makes fundamental changes to its business operations – like, for example, outsourcing – the repercussions often stretch far beyond the organisation itself.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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