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LOCIS1ICS PRAC1ICES BY DELL

Our Dell Global FulIillment and Logistics (GF&L) organization aims to


develop and sustain a global transportation and logistics network that uses the most
eIIicient and eIIective means Ior us and our transportation providers to distribute
our products to our customers. Our job is to get the right product, to the right place,
at the right time. Furthermore, our Dell logistics teams must do this at the right
cost. We continue to optimize transportation costs while improving quality and
striving to exceed the service expectations oI our customers.
In Iiscal year 2011, many dynamic changes within the Dell IulIillment model
challenged our teams. As a result, there were and will continue to be reIinements to
our transportation and logistics processes that aIIect the entire liIe cycle oI our
products Irom the distribution oI inbound materials to our manuIacturing and
IulIillment centers, to the delivery oI our Iinished products to our customers, to the
disposal and recycling oI end-oI-liIe systems. During the past year, our teams
continued to do the Iollowing:
O Optimize our inbound, outbound, reverse and service transportation
networks, Iocusing on using the most eIIicient use oI air, land and ocean
modes oI transportation
O Work green initiatives that demonstrate that we recognize our roles and
responsibilities in being good stewards oI the environment
O ollaborate with the best logistics and transportation providers, who are
Iocused on providing our customers with timely and damage-Iree
deliveries and operate their businesses within the principles oI
environmental stewardship

Optimizing Transportation Networks

In every region across the globe, our GF&L teams strived to stay ahead oI
the challenges that were presented by the strategic changes within Dell`s
IulIillment model. We have exceeded our perIormance targets and this was done
while transIorming our supply chain and redesigning the end-to-end transportation
network. We accomplished this Ieat through the implementation oI globalized
processes and tools. That work has allowed us to deploy new capabilities to
support the timely and eIIicient distribution oI our products to our customers.


For example, in the Americas, when some Iacilities were closed or their
Iunctions changed, our logistics team modiIied the transportation lanes Irom those
Iacilities to our transportation and logistics partner networks and then to our
customers. Furthermore, as we increased the production level oI original design
manuIacturers (ODMs), we made more adjustments to the products. These
adjustments added new carriers and transportation lanes Irom those ODMs to
existing inbound transportation networks within those regions.

We expanded our relationships with more retail partners around the world.
In the Americas, we optimized our outbound transportation networks to deliver
retail products. In Europe, we have expanded IulIillment center distribution
network Ior mainland Europe retail orders. In addition to the retail initiative in
Europe, we were also able to reengineer our delivery model Ior accessories,
reducing truckload volumes and Iuel consumption. At a larger scale, the EMEA
parcel delivery program also achieved Iinancial and environmental success. In
Australia and New Zealand, our multipack program has had a positive impact
toward our global objectives by reducing waste. These examples can be viewed as
a sample oI global initiatives that support our objectives. These initiatives allowed
the consolidation and completion oI retail orders closer to end customers, thus
reducing the travel distance, Iuel consumption and carbon emissions across the
world.

Our Dell Logistics Teams continued to explore the use oI every mode oI
transportation and sought opportunities to ship more Ireight using modes that oIIer
greater reduction in Iuel consumption and carbon emissions. Our regional teams
examined the ability to upgrade the attach rates Ior Ireight that was best moved by
sea instead oI by air, and then executed the plan. Feasibility studies are planned Ior
various transportation modes, such as rail Irom Asia to Europe, and also Irom
hina to South Asia. In Asia-PaciIic/Japan (APJ), the optimal mode oI transport is
ocean shipment to countries such as Japan, Australia and New Zealand. In the
Americas, certain aspects oI our business dictate that we ship notebooks Irom Asia
to the United States. In the past, we relied primarily on air service. However, last
year we enjoyed improvements in our supply chain by shipping more Ireight Irom
Asia to the U.S. via ocean carriers. Furthermore, we have also implemented the use
oI rail transport Irom ocean terminals to Dell IulIillment centers within the United
States. This process has also become a standard practice to deliver notebooks to
customers in Latin America and EMEA.


To provide world-class logistics support Ior Dell and our customers, our
logistics teams must also leverage the best transportation and logistics providers
available in the industry. During the past year, we made changes to the
relationships we had with some oI our carrier partners, which again required
signiIicant adjustments to networks and processes, as well as great attention to
detail. As volumes shiIted Irom one carrier to another, we ensured that there were
no disruptions in customer service (such as delays in delivery times or an increase
in the number oI incidents with missing, wrong or damaged products) that would
have negatively aIIected our customers' purchase and delivery experience.
Dell's Logistics 1eams Creen Initiatives

In 2010, Dell was named Newsweek`s Greenest ompany in America. This is a
signiIicant accomplishment Ior the company, and the Global FulIillment and
Logistics team understands the responsibility that comes with such recognition. To
that end, Dell drives internal processes and external partnerships to ensure we
continue to drive improvement over time.

1railer/Aircraft/Sea Container Optimization:
Our Dell Logistics Teams continued to work collaboratively with
manufacturing and packaging teams to optimize transport mode utilization.
When we ship trailers and containers with higher densities, the amounts of
fuel consumed and carbon emissions are reduced. n the past year, we
examined and refined our processes to get better pallet build processes
and better trailer loading utilization, which helped optimize our trailer loads.

1ransportation Mode Conversion:
In the past year, we have reduced costs and our carbon emissions. While air
Ireight remains to be a necessity Ior speciIic segments oI our business, we have
witnessed signiIicant increases in eIIiciency by shipping to our international
destinations via ocean Ireight. By understanding more about customer
requirements and developing the right channel network to serve each type oI
customer, we now are able to reduce unnecessary Iuel consumption and carbon
emission by working with our ocean carriers. We have developed a network that
has reduced the carbon Iootprint in each region and we continue to expand our
service to more destinations.


Alternatives to Wood Pallets:
Last year, the logistics, packaging and procurement teams continued their
evaluation oI pallets made Irom alternative materials, such as Ioam. There are
numerous reasons to use a Ioam pallet as a means to ship products (especially
those that we ship using aircraIt). Weight reduction and reduced logistics costs are
the most signiIicant reasons. We have implemented this program, and we are
realizing beneIits in Ireight cost and O
2
e emissions. We are launching more
programs with our suppliers to gain cost and operational beneIits Irom an 'inbound
transportation perspective (Ireight transported Irom an Asia based Iacility to a
Dell regional IulIillment center). This initiative has proven to signiIicantly reduce
the number oI wood pallets consumed by Dell in the logistics process. And most
exciting Irom a green perspective, the pallets are reusable and recyclable.

Packaging:
We continued our eIIorts Irom previous years to reduce the volumes oI
paper consumed in the processes oI shipping our products. In addition to reducing
paper and corrugated materials used Ior packaging and shipping, we continue to
search Ior new areas to reduce the use oI paper. In each region, there are ongoing
initiatives to engage with logistics IulIillment centers in recycling packaging
dunnage and reducing material volumes that end up in landIills. Dell has driven
innovation in the packaging arena. One example is the program to increase the use
oI bamboo packaging Ior lightweight consumer products. For servers, which are
much heavier and have diIIerent requirements, we have worked on a pilot program
with major customers that introduced the use oI mushroom based packaging.
Innovations in this arena have very beneIicial implications to the environment.

Reverse Logistics:
Our global Logistics team leverages reverse logistics as a key strength in
our sustainability eIIorts. We start by reducing transportation and IulIillment
activities through the elimination oI the root causes oI returns. We then look to
reuse as much oI the return assets as possible, with over 90 percent oI our returned
product being made available through our Dell Outlet. We use Iully recyclable
packaging, including innovative sling boxes Ior notebooks. And, by shipping
products Irom our Dell Outlet Irom a strategically located shipping point, we
reduce our carbon Iootprint.


Dell's Logistics and 1ransportation Partner Initiatives:

We rely on the best logistics and transportation partners in the industry to ship our
products to our customers. We ensure that our transportation and logistics partners
are as committed as we are to being outstanding stewards oI the environment. Our
partners meet and exceed these requirements by engaging in initiatives such as the
Iollowing:

SmartWay/ISO141/Creen 1erminals:
We work with our carrier partners to capitalize on their eIIiciencies and to
transport our products in an environmentally sound manner. To achieve this goal,
we participate in the SmartWay program and expect our carrier partners to
participate in this program as well. For example, UPS has been a long-time partner
oI many voluntary programs sponsored by the U.S. Environmental Protection
Agency (EPA). These include a charter partner oI the SmartWay Transport
Partnership program in 2003, the Green Power Partnership, Waste Wise and the
Energy Star program.

Furthermore, many oI our partners voluntarily comply with the standards oI ISO
14001, which provides requirements Ior environmental management systems and
conIirms its global relevance Ior organizations wishing to operate in an
environmentally sustainable manner. And like us, many oI our partners strive to
ensure that their Iacilities are operated as 'Green Terminals. Our carrier partners
have their own initiatives to comply with ISO 14001 in their Iacilities. For
example, they are using electronic data interchange (EDI) standards to transmit
shipping documents and reduce paper use and are also using recycled cardboard as
shipping dunnage to protect Ireight.

Creenhouse Cas Protocol:
In addition to Smart way, Dell also participates in programs such as the GHG
Protocol Initiative. As they state on their website: 'The Greenhouse Gas Protocol
(GHG Protocol) is the most widely used international accounting tool Ior
government and business leaders to understand, quantiIy, and manage greenhouse
gas emissions.



leet Optimization/Energy Efficiency/Innovative 1echnology:
For our transportation and logistics partners to remain viable and proIitable within
their own industry, they must also demonstrate best practices throughout their
operations. Our Dell Logistics Teams have worked aggressively to identiIy and
collaborate with those carriers who have demonstrated that they are doing the best
to improve their Ileets and to achieve and sustain the levels oI energy eIIiciencies
in their operations. This strategy ensures that our partners are able to provide us
and our customers with the best price Ior the best service and do so while
maintaining high-service standards.

Several oI our partners are charter members oI global organizations that aim to be
recognized Ior their innovative initiatives. As an example oI how one oI our
partners is demonstrating its continued commitment to sustainable business
practices, UPS announced its participation in the EPA's limate Leaders program.
UPS is the Iirst shipping company to join the program. The limate Leaders
program is an industry/government partnership that works with companies to
develop comprehensive climate change strategies. Partner companies commit to
reducing their impact on the global environment by completing a corporate-wide
inventory oI greenhouse gas emissions, setting aggressive reduction goals and
annually reporting their progress to the EPA.

Changing Behavior/Sharing with Customers

Our transportation and logistics partners strive to be environmental leaders in the
transportation industry. They participate in the development oI sound
environmental policies and the promotion oI eIIective environmental management
by their suppliers and contractors. Our carrier partners maintain their own robust
corporate responsibility programs. Like us, they publish their own sustainability
reports to share those activities that are a part oI their corporate commitment to
social, economic and environmental responsibilities. Look at some oI these carrier
partners' Web sites to see Ior yourselI that we have chosen partners within the
transportation and logistics industry that take their responsibilities oI global
citizenship and environmental stewardship seriously: