Dell: Building a World-Class Supply Chain Solution

C A S E S T U D Y : M A N U F A C T U R I N G

Business ChallengeDell: Connecting with CustomersThe world’s No. 1 computer systems company,Dell, delivers desktops, notebooks, worksta-tions, servers and storage products for virtuallyany computing need. Dell’s competitive advan-tage is its direct customer focus. Interactingwith customers by telephone or via the Internet,Dell custom-builds each system and delivers itfaster than the competition can match.

With manufacturing facilities and sales officesthroughout North America, Europe, Asia and South America, Dell keeps its 34,400employees close to the customer, meetingtheir unique needs one at a time. Dell’s newOptiPlex* manufacturing facility is so efficientthat it can produce more than 20,000 custom-built computers per day—at prices that beatmany of its competitors’ off-the-shelf models.Dell’s customer-centered business model gen-erated US $31.8 billion in revenues over thelast four quarters of 2001, with about half ofits sales generated online at www.dell.com.

Extending the Connection from Customer to SupplierIn 2001, Dell officially became the No. 1computer systems company in the worldand earned the No.7 spot on the Fortune*magazine list of the world’s most admiredcompanies.

e-Business is just like any business in at leastone respect: you have to maintain your edge.Whether responding to a flood of newcustomers and products, or reducing costswhile maintaining customer loyalty duringperiods of economic decline, Dell believedthat a more efficient supply chain wouldcontribute significantly to its long-termsuccess. By extending its build-to-ordermodel all the way from materials andcomponent suppliers to the customer, Dellcould maximize both operational efficiencyand customer satisfaction while respondingimmediately to changes in the marketplace.

The company’s goal was to integrate thesupply and demand sides of the business inorder to eliminate the guesswork that leads

Solution SummaryChallenge How does the world’s No. 1 computer systems company streamline its supply

chain to further enhance planning and execution—reducing inventory levels fromdays to hours while responding immediately to incoming customer orders?

Solution Deploy supply chain solutions from i2 that enable Dell to pull materials into itsfactories every two hours based on real-time customer orders.

Server Platforms More than 120 clustered, multiprocessing Dell* PowerEdge* 2450, 6300, 6350 and 8450 servers running on Intel® Pentium® III and Intel® Pentium® III Xeon™

processors.

Operating Systems Microsoft* Windows* 2000 (desktops) and Windows NT.*

e-Business Software i2 Supply Chain Planner,™ i2 Collaboration Planner™ and i2 Factory Planner.™

Database i2 Active Data Warehouse™ and i2 Meta Data Warehouse.

Solution Provider i2

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to inventory shortages and overages. At the same time, Dellneeded to ensure that the right computer system componentswere always available—at the right time and place—to buildeach customer’s dream machine. And the savings from a moreefficient supply chain could be passed on to customers, help-ing Dell hold onto its solid lead over the competition in goodeconomic times, and in bad.

e-Business SolutionTo achieve end-to-end supply chain visibility and management,Dell chose solutions from i2, including components of i2Supply Chain Management™ (SCM). i2 SCM streamlines thesupply chain by providing component suppliers and Dellplanners with global views of product demand and materialrequirements. It also provides real-time factory scheduling andinventory management, so employees can generate keyreports based on accurate and timely data, pinpoint inventoryon the factory floor, and receive supplier deliveries on a truejust-in-time basis.

i2 SCM enables Dell to generate a new manufacturingschedule every two hours, reflecting the very latestcustomer orders, backlog numbers, stock status andsupplier commitments. Suppliers are then directed todeliver the needed materials to a specific building anddock door for assembly on a particular manufacturing line.

Intel® Architecture: A Proven Platform for e-BusinessChoosing the right software was only part of the solution.Dell planners also had to choose the underlying platform—a critical investment decision that would affect the company’sbottom line for years to come.

As the world’s leading provider of Intel® processor-basedPCs and servers, Dell already had a platform goal in mind. Ifthe solution could run on Intel architecture, Dell itself couldsupply all the needed servers—saving money, simplifyingdeployment and maintenance, and showcasing its ownproducts in an enterprise-class e-Business solution. So wheni2 deployment expert Lance St. Clair was brought on boardas Dell’s IT Director for Supply Chain Systems, he was shownan initial plan that was all Intel architecture, end-to-end.

St. Clair recalls his initial reaction: “Where’s the UNIX* box?”It was a natural question from someone who was used toseeing RISC-based machines used for mission-critical supplychain systems. “After all,” St. Clair notes, “Dell’s goal is tohave no inventory in its factories. That means if the i2Factory Planner application goes down, the factory itselfgoes down.” St. Clair was surprised that Dell would goagainst the “conventional wisdom” that UNIX is the onlyindustrial strength operating system (OS) for high-volume e-Business applications.

St. Clair decided to put the conventional wisdom to the test in a head-to-head benchmark between UNIX runningon a proprietary architecture and Microsoft* Windows NT*running on Intel-based servers from Dell.

Benchmark ResultsDell put together a selection team to evaluate the followingplatform configurations for Dell’s global SCM system:■ UNIX-heavy, with UNIX systems handling all functions

except the Web-based components■ Intel-based servers from Dell running Windows NT

exclusively■ A hybrid solution incorporating both UNIX and

Dell/NT servers

“We didn’t want to just take a big leap of faith and goDell/NT/Intel. We wanted to make sure it would performwell and allow for future growth,” says Victor Koncaba,Senior Logistics Manager for Dell Worldwide Operations.“Our solution had to be capable of driving current andfuture Dell volumes, meeting uptime needs, being highlyavailable and recoverable, supporting flexible maintenancewindows and scaling sufficiently. The solution also had to becost-effective, supportable, effective as a worldwide solution,and upgradeable to new server and storage technologiesand possibly even a new OS if needed.”

The selection team performed benchmark tests designed to evaluate system performance in light of all of Koncaba’srequirements. To ensure that the system would providescalability for worldwide growth, the test platforms weresubjected to far higher loads than Dell’s existing operations

Compared to the UNIX* box, the Windows NT* and Intel® architecture

platform achieved equal or better performance across the board.Prashant Soral,

Project Lead, i2

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required. “We started using i2’s tools that simulate clientactivity as well as some other database tools that simulatebatch updates and other database activities,” Koncabaexplains. “We tuned the system by adding more Web and application servers until the test platforms werehandling three times the volume we expected to see at actual deployment.”

The Intel-based system from Dell passed the test with flyingcolors. “We confirmed that the Dell/NT platform met Dell’sperformance requirements and that the solution was scalableand upgradeable,” says i2 Project Lead Prashant Soral. “Wewere surprised by the performance under a full load. Comparedto the UNIX box, the Windows NT and Intel architecture plat-form achieved equal or better performance across the board.”

Outstanding Business Value at a Fraction of the CostExtensive benchmarking proved that the Windows NToperating system and Intel-based servers from Dell provideample performance for all of the i2 applications, alongwith the headroom and scalability needed for future growth.Servers can be configured for appropriate volumes, andbecause all of the i2 modules and components aredecoupleable, they can easily be moved to other serverswhenever necessary.

The Intel platform also offers rock-solid reliability, combinedwith simple maintenance and upgradeability. “There’s acommon misconception that one big server is better than two smaller ones,” says St. Clair. “But then again, havingmore servers enables the system to keep running as you doroutine maintenance, or even if a particular piece of hardwaredoes fail.” And that’s a big “if.” Since Dell’s Supply Chainsystem went live on June 26, 2000 with more than 120 Intel-based servers, “there hasn’t been a single hardware failure,”says St. Clair. “Our servers are all failover-capable and disaster-recoverable, but so far not a single box has gone down.”

Best of all, the Intel-based platform offers great businessvalue, with lower initial hardware costs and lower long-termmaintenance expenses. “We think our infrastructure costsare about one-third as much as a UNIX environment withsimilar capacity,” says St. Clair.

With the Intel architecture-based platform winning on everyfront, the choice was obvious. Today, Dell’s entire supplychain is powered by Intel-based hardware from Dell runningMicrosoft Windows NT:

■ On the Demand Fulfillment side, i2 Collaboration Planner™

runs on Dell* PowerEdge* 6350s using WLBS to supportthe application layer; PowerEdge 6350s using MSCS andOFS for the database, backed by Dell* PowerVault* 650Fand 630F storage; and PowerEdge 6350s for the batchupload/download TCP server.

■ The infrastructure for i2 Factory Planner™ includesPowerEdge 6350s using a HOTSWAP backup method forthe engine layer, and PowerEdge 6350s with PowerVault650 using MSCS and OFS for the staging databases.

■ On the Global Supply Planning side, i2 CollaborationPlanner runs on PowerEdge 6350s using WLBS for theapplication layer; PowerEdge 8450s using MSCS and OFS for the database, backed by PowerVault 650F and630F for storage; and PowerEdge 6350s for the TCPupload/download batch server.

■ The i2 Supply Chain Planner™ function uses PowerEdge6350s for the Supply Planner engine. The i2 Active Data Warehouse™ database includes a combination ofPowerEdge 6350s and PowerVault 650F/630Fs for storageunder MSCS and OFS. The i2 Meta Data Warehouse runs

SUPPLY CHA INPLANN ING

FACTORYPLANNER

REPORT INGSOLUT ION

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REAL -T IME ACCESS AND TRANSACT IONS

FP Users

Dell uses Intel architecture-based i2 solutions. The diagram aboveshows Dell’s i2 architecture for the Americas region.

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SUPPL IERS SUPPLY HUBS

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SUPPL IERCOLLABORAT ION

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We think our infrastructurecosts are about one-third as much as a

UNIX* environment with similar capacity.Lance St. Clair, IT Director

for Supply Chain Systems, Dell

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on PowerEdge 8450s using MSCS and OFS, backed byPowerVault 650F and 630F for storage.

■ The Web layer consists of 2450 (WLBS) servers, supportingboth TCP for Demand Fulfillment and TCP for GlobalSupply Planning.

■ Two-way, four-way or eight-way servers are used, allbased on Intel® Pentium® III processors and Intel®

Pentium® III Xeon™ processors. St. Clair believes that Dell has the largest installation of i2 solutions on Intelarchitecture in the world.

At the Forefront of a Paradigm ShiftDell’s new Supply Chain system connects suppliers with Dell’sSupply Logistic Centers (SLCs or “hubs”), providing a globalview of the long- and short-term materials needs in each Dell factory. Every link in the chain is connected, so everyparticipant is working with accurate, timely information. That means supply chain operations are based on facts ratherthan forecasts, reducing waste, improving efficiency andresponding immediately to customer needs.

Dell has transformed its supply chain process, purchasingmost of its components and materials online. Shipments of essential materials are never more than two hours away. This setup allows the company to increase efficiency andminimize risk by minimizing inventory. As St. Clair notes, “Globally, Dell has about 4 days of inventory in the systemat any one time. Compare that against our competitors,which typically have inventory in the range of 30 to 40 days.We can continue to support customer choice, withoutpulling component inventory into a factory until we have afirm customer order in hand. It’s a complete paradigm shift.We get components at today’s best price, spend nothing tostore them, and pass the savings on to the customer.”

Minimizing risk while increasing efficiency—that’s a textbookformula for success in any business plan. “I’d definitelyrecommend this solution for any company that’s looking for better integration between its supply chain and manu-facturing processes,” says St. Clair.

Dell’s new Supply Chain system literally has “Dell” written all over it. But that’s not all. It also demonstrates thatcompanies can have the best of both worlds: massiveperformance, without massive hardware and server costs. i2 solutions optimized on Windows and Intel architectureenable Dell to achieve the scalability and flexibility needed for future growth, and a lower risk of scheduled or unplanneddowntime through redundant systems.

Investing in a sophisticated, worldwide Supply Chain system is just one of the ways Dell has remained competitive. Just asimportantly, when economic up-cycles increase the strain onits supply chain, Dell can respond and capitalize—withoutmissing a beat.

This document and related materials and information are provided “as-is” with no warranties,express or implied, including but not limited to any implied warranty of merchantability,fitness for a particular purpose, non-infringement of intellectual property rights, or anywarranty otherwise arising out of any proposal, specification or sample. i2 and Intelassume no responsibility for any errors contained in this document and have no liability orobligations for any damages arising from or in connection with the use of this document.

i2 Technologies and i2 are registered trademarks of i2 Technologies, Inc. i2 Active DataWarehouse, i2 Collaboration Planner, i2 Factory Planner, i2 Supply Chain Management and i2 Supply Chain Planner are trademarks of i2 Technologies, Inc. Copyright © 2002, i2 Technologies, Inc. and its affiliates.

Intel, the Intel logo, Pentium and Pentium III Xeon are trademarks or registered trademarksof Intel Corporation or its subsidiaries in the United States and other countries.Copyright © 2002, Intel Corporation. All rights reserved.

*Other names and brands may be claimed as the property of others. Images providedcourtesy of Dell Corporation.

C Printed on recycled paper with soy-based inks. Printed in the USA/0102/5K/DC/KG/HOP • Order number: 298455-002

■ Be process-oriented. Make sure that distributed projectteams have access to the appropriate resources. Takeadvantage of i2’s knowledgeable consultants. Andchoose Intel architecture to simplify deployment foryour own organization, suppliers and trading partners.

■ Lay the foundations. Each of Dell’s manufacturingregions completed key tasks prior to deployment. Envi-ronments were created for each i2 module to supportdevelopment, testing, production and training. A “sand-box” environment was used to test patches and up-dates without disturbing the live system.

■ Deploy in stages. By deploying in strategic stages, youincrease efficiencies while setting the stage to bring onthe rest of the extended enterprise. Affordable, flexible,Intel-based components allow the solution to groworganically.

lessons learned

We can continue to supportcustomer choice, without pulling component

inventory into a factory until we have a firm

customer order in hand.Lance St. Clair, IT Director

for Supply Chain Systems, Dell

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