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Case Study:

Dell deploys Dynamics AX

Karen McCandless explores how Dell has revamped its manufacturing processes globally with Dynamics AX

From its humble beginnings at the University of Texas, Dell has grown into one of the most well-known technology brands in the world. The company was one of the first to sell directly to consumers, custom assembling each unit according to the buyer’s specifications. But building a brand based on custom configuration and low prices carried a unique set of challenges. By 2010, rising US manufacturing IT costs and growing competition from abroad were testing Dell’s high-volume, high-variability, configure-to-order (CTO) manufacturing model.

As a part of this model, the company had established its eight manufacturing facilities completely differently. Each relied on different processes to produce the same products, and they were often pitted against one another as a means to drive productivity and innovation. This disparity added considerable challenges to the business. Each factory had a unique IT footprint, with as many as 600 physical servers per facility and more than 70 highly customised applications. The complexity of the IT environment contributed to high IT costs. Because nearly every application had been custom developed, facilities experienced high downtime and incompatibilities made it extremely difficult to interchange data with their outsourced supply chain.

But more significantly, the global PC market was experiencing a shift toward standard product configurations, as the retail channel and ships-fast sales displaced the traditional CTO model. To stay competitive, Dell needed to profoundly transform its manufacturing operations, simplifying its infrastructure and reengineering its manufacturing processes.

“While the CTO model still worked for our enterprise and large customers, consumers were looking for a simpler product portfolio,” says Matt Griffiths, executive director of Manufacturing IT for Dell.

As a result, three years ago Dell started an initiative to rationalise the IT systems in its manufacturing and supply chain facilities. The company wanted to reduce IT costs; drive business process consistency and standardisation into manufacturing facilities and improve the reliability and stability of the environment, while escaping the constraints of its Oracle legacy systems.

Since deploying Microsoft Dynamics AX, we have reduced manufacturing IT costs by US$50M

Matt Griffiths, Dell
The first step in Dell’s business transformation was manufacturing simplification based on lean principles, including just-in-time delivery of components from hundreds of suppliers. To support this transformation, Dell implemented Microsoft Dynamics AX. The deployment spanned from 4,000 to 5,000 employees and the company aims to add another 1,500 users, as it expands its ERP deployment to Western China.

The company partnered with Microsoft Consulting Services (MCS) and Dynamics AX consultants mcaConnect to carry out the implementation, which began at Dell’s plant in India.

Mike Kavanagh, IT director at Dell, says: “We were highly tied in with MCS on our first factory implementation. They were a great partner.”

“MCS was honoured to help Dell maximise the value of its Dynamics AX investment through collaboration on a lean manufacturing solution that increased operational performance while lowering total cost of ownership,” says Laura Preslan, general manager at Microsoft Services. “Our consultants teamed up with mcaConnect to simplify and standardise Dell’s business processes for a single, global solution to be rolled out by Dell Services team.”

“mcaConnect were fundamental to the journey of implementing AX in our factories,” says Griffiths. “They met with our business partners, understood the business processes and customisations, as well as the uniqueness about Dell and our business model. And they were able to translate those business processes into how we would implement that in AX. ”

The company opted to use much of the Dynamics AX functionality out of the box to allow for 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 just 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.

“After India, Dell Services carried out 90 per cent of the implementation at the other factories themselves,” says Doug Bulla, vice president at mcaConnect. “After Brazil, we fell back further, as their team took 99 per cent of the workload for deployments in China and Poland.”

Dynamics AX is now in place at seven of Dell’s eight manufacturing facilities. The solution acts as the company’s core manufacturing execution system (MES). It uses the Lean, Production, Inventory, Quality, and Trade modules in Dynamics AX to manage more than one million transactions each day and all factory operations. Griffiths says: “Dynamics AX handles everything from the raw materials coming in the front door of the facility, to kitting and material handling, all the way to our burn process through to shipping out the back door to our customers.”

Bulla adds: “Dell implemented Dynamics AX as an MES, but there is so much more functionality in the solution a traditional MES wouldn’t offer. This includes inventory management, advanced warehouse and quality capabilities and an enterprise portal that shows how well plants are operating.”

Allowing for a seamless connection and alignment with the company’s outsourced manufacturing network, Dynamics AX also connects to Dell’s other enterprise applications using open, flexible communication methods through Microsoft BizTalk Server. “This was Dell’s first use of BizTalk inside the organisation,” says Bulla.

Implementing Dynamics AX helped Dell dramatically simplify its IT infrastructure and realign its manufacturing processes based on lean principles while maintaining the flexibility the company needs to quickly retool its facilities to meet consumer demand for new or different products. “The key for us was to drive the business process to match what the Dynamics product was offering out of the box versus the historical approach that we’ve taken, which was to change the software to match the business process,” says Griffiths”

With the new MES in place, Dell has realised considerable IT cost savings, while increasing efficiency, boosting agility and standardising its manufacturing processes across its global facilities. Dell decreased manufacturing IT costs of goods sold by approximately 40 per cent. Griffiths says: “Since deploying Microsoft Dynamics AX, we have reduced manufacturing IT costs by US$50M,” Griffiths adds that this equates to an estimated six-month payback on its Dynamics AX investment.

In conjunction with the implementation, Dell retired almost 2,000 physical servers and 75 custom-developed applications for an overall reduction of its IT footprint by an estimated 75 per cent. At the same time, this highly simplified environment has seen vast improvements in uptime. “Back in 2008, we were seeing downtime of about two per cent of man capacity but downtime in our most mature factory is now 0.5 percent,” says Griffiths. “That’s a 75 per cent reduction in downtime. We’re now approaching four nines reliability in some of the factories where we first implemented AX.”

With all of these processes now happening on a single system, Dell can fulfil customer orders in a more timely fashion, while maintaining complete visibility and control over its manufacturing operations. Dynamics AX also helped the company’s global network of facilities to run as one lean and flexible machine.

Griffiths says: “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 Dynamics AX, we had to 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.”

Company leadership also now gains real-time visibility across departments, enabling the optimisation of financial, human, and material resources as a whole, while user adoption has been strong. “Users have gone from using a complex environment to a much more streamlined, single-user interface for running their business,” says Griffiths. “It was really fulfilling to have the system accepted so quickly and so rapidly by the factory floor operators.”

“User adoption was straightforward, as employees were already familiar with the AX interface and the rest of the Microsoft stack such as SharePoint,” adds Bulla. “They also didn’t have to learn proprietary systems, which often happens with implementation of an MES.”

Bulla continues: “The timeframes this was achieved in were absolutely remarkable and; it’s one of the most successful projects I’ve worked on and a testament to the strength of Dynamics AX and the Dell team. But the work doesn’t stop here, now that Dell has standardised its global operations, we can continue to improve business functions across its entire facilities.”

“Our manufacturing customers are increasingly reaching out to Microsoft to help them optimise and connect their operations,” concludes Melissa Cook, manufacturing industry senior director for Dynamics. “Microsoft is very well positioned to apply our leadership position in personal productivity to the manufacturing industry, connecting the shop floor to the top floor through the fabric of Dynamics using our full stack of products.”

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