(Outsourcing) In an unusually sweeping “outsourcing” arrangement, Dell Computer Corp. [has decided to) hand over responsibility for all its shipping to a single management company. The contract with Roadway Logistics Systems is designed to improve distribution of DelVs products as well as transportation of inbound materials, and should help the mail-order personal computer vendor control shipping costs. Currently, 40% of the cost of a Dell product can be attributed to logistics. “We expect multimillion-dollar savings annually. ” As the company projected its growth, Dell would have been required to hire 1,000 to 2,000 additional workers for its distribution management. Instead, it turned to outsourcing.

[SOURCE: Scott McCartney, “Unit of Roadway to Do All Shipping for Dell Computer,” Wall Street Journal (Lebruary 15, 1995), p. B8. Reprinted by permission of The Wall Street Journal, © 1995 Dow Jones & Company, Inc. All Rights Reserved Worldwide.]

Prepare an oral report to the board of Dell Computer Corp. discussing the major risks and benefits of outsourcing compared to the alternative of having in-house distribution capacity.

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