How Dell Saved $50 Million A Year Through Software Rationalization

uncaptioned In 2008, we started an initiative to rationalize the systems in Dell ’s manufacturing and supply chain facilities. We looked at the options out there and decided that Microsoft Dynamics AX was the right fit.

Since then, we have driven the implementation of Microsoft Dynamics AX across seven of our facilities, replacing around 75 highly customized applications, and we are now in the process of completing the final rollout in Poland. Over this period, we have reduced manufacturing IT costs by $96 million a year, with the Microsoft solution contributing to around $50 million of those savings. The other savings came from standardizing our manufacturing processes and implementing lean manufacturing principles.

While the primary goal was to reduce the IT cost of running our Dell factories, the second goal was to drive business process consistency across our manufacturing operations. The culture at Dell has always been best-in-class. In an effort to drive innovation, the factories were often developing new products or processes on different platforms. By standardizing on Microsoft Dynamics AX, we have been able to streamline our development teams, reuse testing across factories, and fix defects across the whole business in one big swoop.

The last goal of the project was to improve the reliability and stability of the environment. When we started the project, we were seeing downtime in the region of two percent of man capacity which added up to significant IT downtime over a month or a year. Since deploying Microsoft Dynamics AX, we have seen a massive reduction from where we were back in 2008. We are now at three 9’s reliability—approaching four 9’s (99.99 percent) reliability in our most mature factory, and we are on target to achieve that across the other Dell factories.

But perhaps the most important thing we’ve been able to achieve with our ERP deployment is the evolution of our business model. The consumer market has moved away from configure-to-order (CTO) products; now, they want more standardized products in different form factors, such as tablets. While Dell maintains the CTO model for our enterprise and large customers, there are definitely efficiencies and cost-savings to be realized in our factories with the shift in the consumer market. By leveraging the Lean module in Microsoft Dynamics AX, we were able to change our business processes to take advantage of these market changes.

We’re also receiving great feedback and a boost in morale from our staff with this change. Now operators only have one screen to look at, rather than the five or six of the past, and they don’t have to sit around waiting for the systems to come back online. The results have been so positive that the first factory we deployed the software to in India refers to Microsoft Dynamics AX as the “Magic Energy System,” which is a play on the term MES (Manufacturing Execution System). It is really fulfilling to have the system accepted so rapidly by the factory floor operators.

Matt Griffiths is Executive Director of Manufacturing IT at Dell