This manufacturing story was an odd press release. It came about the time of Dell Technologies’ annual user conference Dell Technologies World. But it has no relationship to that event. It deals with implementing Lean with an MES, but doesn’t really mention the supplier who sent the release.
Dell has sold and manufactured based on Configure to Order since its beginnings. But we all know that CTO while holding prices down contains a unique set of challenges. As a part of its high-volume, high- variability, configure-to-order manufacturing model, the company established its eight manufacturing facilities completely differently. Each factory relied on different processes to produce the same products.
By 2010, it was a new world of higher competition and lower prices and this disparity added considerable IT challenges to the business. Each factory, for instance, had a unique IT footprint, with as many as 600 physical servers per facility. And across facilities, operations relied on more than 70 highly customized applications to guide each unit on its path through the factory and out the door to the customer.
Around this time, the global PC market was shifting towards standard product configurations instead of the traditional CTO model. To maintain competitive in a challenging market, Dell needed to transform its manufacturing operations, simplify its infrastructure and re-engineer its manufacturing processes from end to end.
Matt Griffiths, Executive Director of Manufacturing IT for Dell, says, “While the CTO model still worked for our enterprise and large customers, consumers were looking for a simpler product portfolio. We had to ask ourselves how we would react to that shift and drive the efficiencies of a simpler product portfolio into our factories and supply chains, so we could realize the cost savings and benefits of doing that change.”
A New Vision for Manufacturing
The first step in Dell’s business transformation was manufacturing simplification. Dell re-engineered its manufacturing processes based on lean principles, including just-in-time delivery of components from hundreds of suppliers. The new manufacturing model also required Dell to rationalize its technology infrastructure and ultimately rearchitect nearly all systems based on the new, simplified processes.
To support this transformation, Dell implemented Microsoft Dynamics AX. Leadership understood that a Microsoft Dynamics solution would enable them to standardize business processes around industry best practices and a single, global business model. The solution would also enable Dell to maintain maximum flexibility within each facility, allowing the company to respond quickly to changing market conditions. To further ensure flexibility, the company adopted a hub-and-spoke model, setting up each factory as an individual manufacturing business, with financials rolling up to the financial systems in place at Dell’s headquarters.
While flexibility at the plant level was important to Dell, the company opted to use much of the Microsoft Dynamics AX functionality out-of-the-box to allow for a rapid deployment. Griffiths says, “We were able to roll out Microsoft Dynamics AX to seven of our eight facilities over the last three years and we are now completing the final rollout in Poland.”
Griffiths notes that while the initial deployment took six months to complete, subsequent implementations were faster; the following deployment took only four months, and the three most recent deployments were performed simultaneously.
System Overview
Microsoft Dynamics now acts as Dell’s core Manufacturing Execution System (MES), while allowing the company to streamline operations using lean principles and industry best practices.
The MES uses the Lean, Production, Inventory, Quality, and Trade modules built into Microsoft Dynamics to manage more than one million transactions each day and all of Dell’s factory operations.
“We use Microsoft Dynamics end-to-end. It handles everything from raw materials coming in the front door, to kitting and material handling, all the way to our burn process through to shipping out the back door to our customers”, Griffiths says.
Allowing for a seamless connection and alignment with the company’s outsourced manufacturing network, Microsoft Dynamics AX also connects to Dell’s other enterprise applications using open, flexible communication methods.
Results
Implementing Microsoft Dynamics helped Dell dramatically simplify its IT infrastructure and realign its manufacturing processes based on lean principles—all while maintaining the flexibility the company needs to quickly retool its facilities to meet consumer demand for new or different products. With the new MES in place, Dell has realized considerable IT cost savings, while increasing efficiency and boosting agility.
40% Reduction of IT Costs of Goods Sold
Through the implementation of Microsoft Dynamics AX and adoption of lean manufacturing principles, Dell decreased manufacturing IT costs of goods sold by approximately 40%. This savings equates to about $50M, which is an estimated 6-month payback on its Dynamics investment—a timeframe in which the company was also able to fully recover its factory throughout efficiency.
75% Reduction of IT Footprint and Downtime
In conjunction with its Dynamics implementation, Dell retired almost 2,000 physical servers and 75 custom- developed applications for an overall reduction of its IT footprint by about 75%.
At the same time, this highly simplified environment has seen vast improvements in uptime. Griffiths says, “In 2008, we saw downtime of about 2% of man capacity. Now, our most mature factory is at about 0.5% in downtime. That’s a 75% reduction.”
Streamline Manufacturing to Remain Competitive
With an MES in place, Dell was able to standardize its manufacturing processes across its global manufacturing facilities. While enabling the company to implement lean principles, this change has also helped the company to remain a leader of customized products, manufactured just in time.
With all of these processes now happening on a single system, Dell can fulfill customer orders in a much timelier fashion, while maintaining complete visibility and control over its manufacturing operations.
More importantly, this new manufacturing environment has enabled Dell to adapt to a new way of doing business. Griffiths says, “As the manufacturing industry evolved and shifted away from each unit being completely different, we changed our business processes to take advantage of that. Microsoft Dynamics, with its Lean module, was fundamental in helping us to do that.”
Drive Agility
Griffiths goes on to say, “Now as new products or processes are being introduced into our facilities, we only have to develop them once and roll them out across all locations. Before Microsoft Dynamics, we had to literally develop our processes seven different times. Today, our development teams are significantly streamlined. We can reuse our testing across factories, and any defects we find we can fix once and apply across the whole business in one big swoop.”
This story was sent to me by a company called MCA Connect. I was intrigued by the story and wrote with a number of questions to follow up. I have not heard another word. But I like the idea of using software to supplement, not subvert, Lean.
