Trends in Food Innovation: More Than Secret Recipes

Speed-to-market and innovation are often associated with technology-focused

industries like high tech or automotive. But these KPIs are also important to one
of the oldest industries in the world: the food industry.
The food industry is as old as civilization; and many of its process operations are
thousands of years old, such as brewing (developed in Sumeria and Babylon) and
baking (developed in Egypt ca. 8000 BC). The modern food manufacturing
industry evolved during and after the Industrial Revolution and today the food
industry is going through another important change process. Several trends
impose new challenges on food manufacturers: global food regulations,
demanding customers who ask for sustainable products, the trend of functional
foods, new requirements for labeling and traceability, and much more.
Lets look at some of these trends:
Cutting food waste is the top trend in 2014. Waste not want not reflected
manufacturers efforts to reduce food loss and waste during the production
process. Due to poor practices in harvesting, manufacturing, storage and
transportation, as well as market and consumer wastage, it is estimated that 30
50% (or 1.22 billion tons) of all food produced never reaches a human stomach.
The UN Food and Agriculture Organization (FAO) works with the international
engineering community to ensure governments of developed nations put in place
programs that transfer engineering knowledge, design know-how, and suitable
technology to newly developing countries.
Food safety and traceability are demanded by customers. In China, a technology
firm recently launched a chopstick that tests your food and tells you if it is safe
to eat. It is not clear whether the smart chopsticks will go into commercial
production. The company had made only a limited run of prototypes, but there is
a huge interest according to discussions in social media forums in China. But
food safety should not start with the end consumer, it should start right at the
beginning during the innovation process.
Did you know that 3D printing has already arrived in the food industry? Read this
interesting blog in which my colleague Richard Howells talks about Hersheys
partnership with a 3D printing company and Barillas plans to position 3D
printers for pasta in restaurants. Imagine going to a lovely Italian trattoria that
prints your linguine just the way you want them. Well, does not sound very
romantic, but definitely interesting.
Long story short, food recipes and food processing instructions are no longer
kept in Grandmas secret cookbook, they are managed and developed in
complex, integrated IT systems.
For R&D experts in process industries, it is daily business to connect operating
silos, streamline the ramp-up to production, manage complex product data,
perform compliance checks, and much more. Their goal is to improve the value
of their brand by launching new, successful products. Product Lifecycle

Management software from SAP helps food manufacturers to develop formulas,

manage the reuse of ingredients, run analytics, and design the packaging in
one environment.
Rich Products Corporation, a family-owned frozen food manufacturer and
solutions provider based in Buffalo, New York, recently shared their experiences
with SAPInsider magazine. With the recipe development functionality in SAP PLM,
the finished product and all its components (recipes, formulas, ingredients,
packaging, specifications, nutritional, and labeling information) are linked
together. That integrated data is one in the same that is used for managing the
supply chain. Information feeds all the way down to the bill of material on the
shop floor, providing a tighter integration between R&D and Production. The
company expects some significant benefits from the implementation in the near
future: reduction in cycle time, increased revenue from new product
development, faster product delivery, valuable real-time information to users,
and workflow enhancements that improve user productivity and mitigate
compliance issues.
Tate & Lyle, a global food ingredient producer, a global provider of ingredients
and solutions to the food and beverage industries, implemented SAP Product
Lifecycle Management to standardize their innovation processes for new
ingredients, to have a central access point for all recipes and to link the R&D
team with production. Watch the video.
With all the new technologies that help food manufacturers develop sustainable,
traceable, high-quality products within shorter time, the food industry should be
able to focus on its core competence: delicious recipes like the ones that can
be found in my Grandmas secret cookbook.
See
more
at:
http://www.news-sap.com/trends-food-innovation-secretrecipes/#sthash.BM9xVKFV.dpuf

Business looks pretty sweet for Tate & Lyle. New global opportunities abound for the London-based company,
which makes its bread and butter supplying ingredients to the food and beverage industries; soon it could also
be providing the sweetener used on your dining room table.

SAP MaxAttention has helped Tate & Lyle go to

market faster with ingredients for new recipes,
as well as operate in different regulatory
environments across the globe.
Sweetening the pot, Tate & Lyle recently announced a shareholder dividend for this summer, and at least
one analyst firm has raised its price target on the companys stock.
But its not all cupcakes and candycanes for Tate & Lyle, which is still undergoing a transformation put
forward by the companys CEO in 2010. Making Tate & Lyle stronger and more diverse requires changing the
companys processes and increasing its efficiency.
We want to develop ingredients for new recipes and bring them to market faster ... and we need to operate in
global markets with different regulatory requirements, Tate & Lyle CIO Steve Byers told SAP in a company
video. We also wanted to take advantage of industry best practices.
Tate & Lyle is transforming with the help of SAP MaxAttention, an IT solution that enables the company run
more smoothly while remaining agile enough to work across the globe. Shortening the design debate about best
practices was MaxAttentions secret sauce, according to Byers.
I had to decide how to support two major business units in a common way across the globe, Byers said. That
established the strategy of a single global IT platform based upon SAP.
MaxAttention offers long-term high-level IT support to organizations that partner with SAP. The solution is
especially useful for lengthy activities -- such as Tate & Lyles transformation -- because it:

Collaborates with onsite support teams, enhancing technical expertise and account
management skills

Co-innovates with partners, deriving additional value from SAPs maintenance programs

Optimizes performance and simplifies maintenance of SAP solutions

We sped through the build process, meeting our deliverables on time, Byers said. And the biggest reason we
were able to do that is because the design was solid.
Tate & Lyle baked into its project an Innovation Control Center, which reviewed solution requests to minimize
custom resolutions -- optimizing best practices from the start. Dedicating company resources to work with SAP
was crucial to the value Tate & Lyle continues to derive from MaxAttention, according to Byers.

The transformation remains firmly on track, Tate & Lyle CEO Javed Ahmed told industry analysts last
month.
And as the company continues moving into new markets, such as tabletop sweeteners, its prospects still look as
sweet as ever.

Get maximum tailored support for the long haul

with SAP MaxAttention
Take advantage of the highest level of support and enter into a long-term engagement with SAP. This
customized, collaborative premium support partnership complements the SAP Enterprise Support offering and is
ideal for environments whose activities span multiple years and projects.

Work with your onsite support team to receive extensive technical expertise and overall in-depth
technical account management

Access ongoing co-innovation and co-value realization and derive additional value from SAPs
maintenance programs

Optimize the performance and maintainability of your SAP solutions

Shell and SAP Co-Innovate With the SAP HANA Platform

September 30, 2014 | SAP - Database Technology

SAP NEWSBYTE - SAP SE (NYSE: SAP) today announced that Shell and SAP have been collaborating to
develop a new well and reservoir facility management (WRFM) solution enabled by SAP HANA. Shell
recognizes the value of implementing SAP HANA as a single in-memory computing platform, which can help
accelerate analytics, business processes and sentiment data processing.
Customers such as Shell can capitalize on the opportunities that have been opened up through SAP HANA,
said Steve Lucas, president, Platform Solutions, SAP. By co-innovating with customers, we are seeing the direct
impact SAP HANA has on customer landscapes.
Building a Customized Solution powered by SAP HANA
Shell is an innovation-driven global group of energy and petrochemical companies, which is active in more than
70 countries worldwide. In order to enhance performance of existing applications, Shell and SAP plan to
collaborate to create the next-generation toolkit for well and reservoir reviews. The envisioned solution shall
deliver tools and best practices empowering users to build a professional understanding of their assets and
identifying opportunities in the operate phase. This aims to result in an increased early production and improved
optimization of resources.
The planned WRFM solution shall integrate information from over 20 data sources in SAP HANA. SAP
BusinessObjects Design Studio is planned to be used to build an intuitive, HTML5-based front-end with asset
hierarchy and geospatial navigation, dynamic report sets and enhanced charting features. The WRFM project is

the first step toward a renovated smart solutions platform in Shell and an excellent example for leveraging the
SAP HANA platform capabilities in a non-traditional SAP domain.

How ERP implementation builds

's world famous Supply Chain:

Virtual Integration: When ERP fits the Dell's Direct

model:
The introduction of enterprise resource planning (ERP) software improves the
coordination between firms. Before ERP, the each function in value chain had
separate organization with separate information system. Each function
performed its own tasks thus not globally optimizing the whole value chain. ERP
builds the "electronic nervous system" to links all units together and increases
overall productivity.

In some cases, firms found that they could eliminate most inventories by shifting
to faster but more expensive transportation alternatives (e.g. air cargo) that
replenished supply just in time. Simply put, ERP allowed information to replace
inventory.
The emergence of the Internet facilitated more and more information sharing
between firms, extending the benefits of ERP from the value chain of an
individual firm to the entire value system of firms and their suppliers and
customers. ERP can be a vital component in controlling complex supply chains
and in the fast developing world of e-business and B2B electronic exchanges.
Dell Computer's success in reducing inefficiencies establishes it as a model for
many other companies.
The Dell Model
Dell's success is based on realizing the strategic power of the supply chain. The
core of the Dell model is to deal directly with and sell directly to the customer,
and build products to order. Dell collapses the value chain and eliminates two
significant cost components: the retailer's mark-up and the costs and risks
associated with carrying large inventories of finished goods.
Texas-based Dell is the world's largest personal computer maker. Founded in the
mid-1980s by a university student, Michael Dell, the company leads the sector
with annual growth rates of 30 to 40 per cent. Dell has achieved its success in
large part due to its highly efficient value chain integration approach, supported
by ERP and - more recently - by the Internet. Dell produces custom-made
computers "just in time" for orders received directly from the customer via
telephone or the Internet. As Dell receives an order, it shares production
requirement information electronically with its suppliers world-wide for
immediate delivery to a Dell production facility, where the computer is
assembled and shipped directly to the customer within a week. The Dell model
relies on demand side pull rather than supply side push - no computer is
produced unless there is corresponding demand in the marketplace. Thus the
massive queues of inventory usually sitting idle within retail stores, distributors,
and factories are virtually eliminated. The productivity advantages of this
production model are profound. Dell is able operate with half the number of
employees and one-tenth of inventory of its traditional computer competitors.
Return on invested capital reached 195 per cent in 1999, compared to 10-20 per
cent for traditional manufacturing firms. Companies from around the world have
been flocking to Austin, Texas to understand the Dell production model, much as
firms had flocked to Tokyo and River Rouge earlier in the century. The opportunity
for productivity improvement was enormous; in the USA alone, the cost of goods
in inventory of all value systems was nearly $1 trillion in 1997. As the 1990s

closed, the 'Dell model' began to spread from high technology to traditional
manufacturing sectors such as automobile production. Recently, General Motors,
Ford, and Daimler Chrysler announced they were moving to electronic supply
chain management systems similar to Dell Computer. If successful, the Dell
Model could be every bit as revolutionary to the production structure as Ford's
vertical integration and Toyota's lean production models were in earlier eras.
Dell's originality lay in the approach that it adopted in implementing the direct
business model. In particular, unlike other computer manufacturers, Dell sells
directly to all of its customers and not just to large corporate clients. Through
developing a direct relationship with all of their individual clients and building its
computers to order, Dell was able to build a highly efficient just-in-time process,
eliminating most of its inventory in the process. A further advantage to the Dell
approach is the instant, current and continuous market research that it produces.
In knowing exactly what individual customers want in a personal computer or
computer network, Dell is able to anticipate market demand and shape the
technological and competitive parameters of the computer industry. Dell argues
that the direct model creates the most compressed PC supply chain by
eliminating all intermediaries. Moreover, compared to a traditional supply chain
structure, the direct model can reduce inventory investment by 50 to 70 per
cent.
The concept behind Dell's drive to reduce inventory inefficiencies "has nothing to
do with stockpiling and everything to do with information". Due to its made-toorder approach, Dell is able to see on a daily basis if, for instance, customer
preference is shifting to larger PC monitors. The company can also discern
whether this is happening for certain customer segments or across the market.
Dell immediately relays its assessment of this information to its suppliers,
allowing them to adjust their inventory accordingly and rapidly meet demand. It
stands to reason that the more information a company has about what a
customer wants and how much he/she requires, the fewer inventories the
company needs to maintain.
Fewer inventories mean less inventory depreciation. In an industry such as
computer manufacturing, component prices are constantly falling-- typically 1525 per cent per annum. Six days of inventory (Dell's norm) compared with 34
days (standard at Compaq) can therefore result in significant cost savings on
inputs. Furthermore, reduced stockpiles can offset the risk of being caught with
large amounts of obsolete inventory if technology shifts and there is a transition
to a next-generation product - as often happens in high technology sectors. It
therefore comes as no surprise to learn that Dell's competitors such as IBM and
Compaq are constantly striving to cut their inventory levels but have yet to
match Dell's success in this area.

The Dell Direct Model and Virtual Value Chain Integration

The notion of 'linkages' between supply chain participants is not new and was
traditionally referred to as 'vertical integration'. Unlike the Dell model, though,
vertical integration implies ownership of both upstream suppliers and
downstream distributors. Firms such as Ford habitually controlled all elements of
the value sequence, vertically integrating the information, decision, financial and
operational dimensions of the strategic supply chain.
The spread of Internet-based commerce during the 1990s resulted in the
emergence of "virtual" supply/value chain linkages. This approach was perceived
by many companies as a way of realizing the benefits of supply chain integration
while avoiding the perceived negative impact of integrating vertically. By
seamlessly integrating supply chain suppliers, manufacturers, distributors, and
retailers into a single virtual enterprise serving the customer, companies are
achieving huge competitive advantages. The emergence of the virtual value
chain - or "extended enterprise" - has brought about a rethinking of traditional
supply chain relationships and has fundamentally transformed the nature of
competition.
In addition to the previously discussed inventory and disintermediation costs
saving, there are other advantages associated with the direct business model. In
particular, as Michael Dell states, `you actually get to have a relationship with
the customer'. A direct link to the individual customer provides a manufacturer
such as Dell with a wealth of marketing and product development information.
This information enables the company to build a position of strength relative to
both its customers and its suppliers. When that information is combined with the
technology of the Internet, it allows a company to develop a revolutionary new
value
chain
infrastructure
and
business
model.
This is what Dell has done through its "virtual integration of the value chain"
approach. "Virtual integration" means a blurring of the conventional value chain
boundaries and roles between suppliers, manufacturers and end users. Michael
Dell defines "virtual integration" as "the idea of interweaving distinct businesses
so that our partners are treated as if they're inside our company". This results in
gains of efficiency and productivity, as well as significant gains in return to
investors. Higher returns on investment are gained by concentrating resources
on activities where value can be added for the customer and not in activities that
simply need to be done. By this logic, Dell argues that a computer company, for
instance, does not have to actually make computers. If fabricating
semiconductor chips or even placing them on motherboards does not result in
significant profit margins, then the computer company should consider
outsourcing such activities. In Dell's case, this meant focusing instead on its
distinct core competency - delivering solutions and systems to customers.
Dell's virtual integration is referred as the model of "the digital value chain"
which means the use of technology/the Internet to create a faster, more efficient

and more flexible version of the traditional supply chain. Within a digital value
chain, one company serves as the "anchor", i.e. "the power player around which
the digital value chain is organized and often optimized". The "power player" is
identified as such because it either provides the major share of the value
delivered to the customer; it is the dominant supplier; or it is the owner of a
product or service that cannot be replicated by any other member of the value
chain. Dell is a classic digital value chain anchor. Through its control of the
consumer relationship, it establishes the rules and shapes the competitive
dynamics
of
the
value
chain.
In 2001, Dell Computer was the PC market leader in the United States, with a
nearly 18 per cent share, about three per cent ahead of second-place Compaq.
Gateway was third with 9 per cent, followed by Hewlett-Packard with 8 per cent
and IBM with 7 per cent. Dell overtook Compaq as the U.S. sales leader in the
third quarter of 1999 after moving past IBM into second place during 1998.
Remarkably, Dell has been able to replicate its direct sales approach in dozens of
other countries. During 2001, Dell Computer was almost equal with Compaq in
terms of global PC sales (each had about 12 percent of the market). IBM ranks
third worldwide, with an 8 percent share that has steadily declined over the last
few years. Since 1995, Dell had been gaining market share quickly in all of the
world's markets, growing about three times the 16% average annual rate of
global
PC
sales.
Dell's sales at its website (www.dell.com) surpassed $50 million a day in early
2002, up from $5 million daily in early 1998 and $25 million daily in early 2000.
In its fiscal year ending January 31, 2002, Dell Computer posted revenues of over
$31 billion, up from $ 3 billion in 1994 -- a compound average growth rate of
about 50 percent. Over the same time period, profits were up from $150 million
to $2 billion-a 65 percent compound average growth rate. Since its initial public
offering of common stock in June 1988 at $8.50 per share, the company has seen
its stock price split seven times and increase 40,000 percent! Dell Computer was
one of the top ten best-performing stocks on the NYSE and the NASDAQ during
the 1990s. In recent years, Dell's annual return on invested capital had exceeded
150
percent.
However,
it
has
been
hit
hard
by an overall slowdown in PC sales that begin in the second half of 2000. The
result has been a sharp fall in Dell's stock price and a reminder that Dell is not
immune to the cyclical demand and brutal price competition that has
characterized
the
PC
industry
since
the
1980s.
The table below shows the competitive advantage of supply chain
management of the Direct model by Dell. The selling and administration and
research and development are low compared to the industry. This is because the
virtual integration that Dell chose to sell directly to customer and the fact that
Dell considers the strategic alliance as within the boundary of the company and
thus Dell herself does not heavily invest in R&D such as making its own chip
because it is making the money but instead adopt the partners who is best in the
field. Inventory turnover is extremely high, 64 per year, compared to other

companies. This is the confirmation of the advantage gaining from the Dell's
Direct Model.
If ERP software does not fit the model, we don't want it:
The sentence above best describes what happened at Dell Computer in the early
implementation of ERP. From the above discussion, the "virtual integration" of
Dell is the core competitive advantage and it will be accomplished with or
without the existence of ERP software. Dell Computer aggressively gained
market share and already succeeded even before the implementation of ERP
system by selling via telephone or using web for the first to sell computer via
internet. ERP just makes it more smoothly to facilitate the implementation of the
Direct model: the philosophy of the company. Therefore, there is no reason that
Dell will consider changing its unique business model just to fit the ERP
implementation and it is against the common wisdom we see in practice.
In 1997, Dell Computer abandoned their ERP program only after several months
of detail planning and implementation when they realized that is was
inappropriate in their environment.
Dell
Computer
cancelled
their
ERP
contract
in
January
1997
after spending $115 million dollars (The original cost of the project was
estimated at about $150 million). Dell determined that the system could not deal
with the needed sales volume. Analysis had focused on inefficiencies caused by
multiple home-built, unconnected, information systems that inhibited information
flow across the company. This analysis led them in to choose an integrated suite
of applications. Even as the decision was being made, two Dell executives were
providing sufficient information to invalidate the ERP decision.
At one of their Platinum Council meetings where Dell executives meet with key
customer account CIO's, Kevin Rollins, Dell's Vice Chairman, talked about the
critical need for every aspect of the company to be capable of changing its
process rapidly. He referred to this as an essential part of what he called velocity
or the continuous speeding up of every business process. At that same meeting,
Michael Dell described his business as being a virtually integrated system of
processes and products extending from suppliers through Dell's manufacturing
and distribution processes, on to end customers and the support of the product
on their desktops. He also talked about the company's distributed management
style and how continuous process improvement was a way of life throughout the
company.
What makes Dell's Supply Chain run?:
Consider: The company manufactures more than 50,000 computers every day,
but carries only four days' worth of inventory, when many of its competitors
carry between 20-30 days of inventory. Roughly half of its annual revenues
approximately
$16
billion
come
from
online
sales.
What's more, Dell has been quite forthcoming as to identifying the "secret sauce"

responsible for its direct model success, it's the supply chain. Dell has a singleminded dedication to supply chain excellence, which means establishing
relationships so tight with its suppliers and vendors that they border on
incestuous in the words of chairman and CEO Michael Dell, "Keep your friends
close, and your suppliers closer." The company keeps what it calls a supplier
report card on every supplier, and tracks each supplier's performance against a
set of metrics maintained by Dell.
Against the charge that Dell's remarkably low inventory levels come at the
expense of its suppliers, Dick Hunter, vice president for Dell's Americas
Manufacturing Operations, points out, "About 30 suppliers provide 75% of our
direct material purchase spend and most of them maintain eight to10 days of
inventory in nearby, multi-vendor hubs. If those levels exceed 10 days, we work
with suppliers to lower them since excess and obsolete components are not
acceptable to Dell, our suppliers or customers." Dell also works with its supplier
to prevent inventory levels from becoming too low, Hunter adds. "For Dell and
our suppliers, information is increasingly replacing inventory, and we are
regularly identifying, gathering and sharing new types and levels of data."
Trading inventory for information is a key to Dell's supply chain success, and in
this day of point solutions aimed at tackling small problems quickly. Dell again is
proof that following its own course rather than joining the rest of the pack is the
way to go.
Dell runs what is said to be the world's largest implementation of i2 Technologies
Inc.'s software, running its Dell-specific DSi2 solution on 120 servers, managing
more than 250 suppliers responsible for delivering over 3,500 components.
Dell took an industry that used to be make-to-stock and shifted it into make-toorder. In this industry companies lose a price premium every day. Anytime they
make to stock, they're tying up capital, which is the classic supply chain crime.
They tie up in inventory, but even worse they lose price advantage for every day
they maintain on-hand inventory.
About half of Dell's more than 50,000 orders each day come through the
Internet. Those orders flow through the company's legacy order management
system, which records all the orders and releases them to manufacturing. "We
schedule production lines in every factory globally every two hours," Hunter
explains. "We have no inventory and no warehouses in any of our factories.
Instead, we're able to pull material into our factories based on actual orders. "We
literally push a button and two things happen," Hunter continues. "We lock in the
schedule by actual order and order number into the factory. At the same time we
send a message over the Internet to our third-party logistics providers, supplier
logistics. These hubs have 90 minutes to pull material out of the racks, and
deliver it to Dell's back door.
To make that happen, Dell's Austin, Texas- and Nashville based hubs use
technology from V3 Systems for inbound, outbound and inventory management.
This V3 order allocation application supports Dell's individualized consumption
profiles, as orders come in from anywhere phone, web, e-mail, etc. The software

talks to the DSi2 system thanks to enterprise application integration software

from webMethods Inc., and the systems work together to optimize the assembly
lines. The solution helped reduce inventory flip from 20 days to six.
Dell also employs i2 modules to communicate materials requirements and to
schedule the factories once they receive the components. Dell's Worldwide
Procurement division is responsible for negotiating contracts and pricing deals
for
all
material
consumed
by
Dell
globally.
The company teamed with Ariba Inc. to overhaul a procurement system that
once required completion of a three-part paper form, which involved hand
coding information about suppliers, part numbers and item costs, not to mention
manually collecting as many as 10 approval signatures. These procedures which
could take weeks to complete were costing the company $110 per requisition.
Dell implemented Ariba Buyer over a seven month period, interfacing the
procurement solution with nearly 20 of Dell's legacy systems, including links to
Oracle Financials for purchase order, cost centre and accounting code data. The
result called Dell Internet Requisition Tool provides automated processing of fully
validated orders. The system reduced the time to complete a requisition by 62%
and the cost by 61%, in addition to reducing the number of errors.
On the product lifecycle management side, Dell uses Agile Anywhere from Agile
Software Corp. as the technology backbone to improve communication with its
internal divisions as well as its supplier network, nearly all of Dell's top 50
suppliers are also Agile users. Picking up orders steadily and having them fulfilled
instantly gives you a lot less demand uncertainty. Demand uncertainty is what
really creates the inventory. Dell orders provide a steady stream of material and
capacity, which offer far greater visibility of demand. The clock speed of order
fulfilment is so short that Dell and its suppliers are not dealing with a ton of
uncertainty and the speed at which the company adapts is what makes Dell's
supply chain so productive. Dell calls it transition management.
With its use of i2's demand planning technology, Dell has visibility into supply
and demand trends. The company posts its hub-level inventory on the web,
enabling suppliers to check their inventory levels at the hubs, since materials
suppliers aren't necessarily the same set of companies as those at the hub. Dell
issues forecasts through its extranet Valuechain.Dell.com and suppliers commit
back to Dell, based on those forecasts. Dell then works from that information,
covering any deviations from what it asks for against what a supplier or a set of
suppliers
can
promise.
As soon as Dell issues a forecast, it's wrong so if the demand is going up and it is
going to outpace the supply, Dell will first try to fix the problem with more supply
possibly by expediting. Other than processors, Dell buy only from Intel Corp.
almost every component has two or more sources. If Dell can't solve the
demand/supply problem with supply, and demand is shooting up, eventually Dell
is facing a shortage. Dell strives to recognize those problems before they get out
of hand. "We sell what we have, and we don't sell what we don't have," Dell
executive says. "Most people don't get that. It sounds easy, but they don't know
how to execute that." In practical terms, that may mean selling an 80-gighard

drive at the same price as a 60-gig hard drive if the smaller drive becomes a
supply issue. Dell can offer a promotion on the Internet literally within a couple
hours of realizing it has a demand/supply problem. Dell has become an expert at
ensuring it has the right components at the right time, and it knows where to go
when the usual sources dry up. PartMiner, for example, is a supplier of hard-tofind electronic components to Dell and its contract manufacturers. The company
helps meet unplanned upside demand for components essential for production.
In addition, Dell utilizes Part Miner's CAPS database information to manage risk in
the supply chain within its component engineering and procurement groups.
Dell's reputation for excellent customer service extends to its reverse logistics
operation as well. The company's Americas Service Delivery division, for
instance, uses World Chain Inc.'s Network Repair Logistics solution to handle
roughly $1 million a day in repair volume. The solution provides total visibility of
inventory throughout the repair cycle, including real-time and historical reporting
on supplier and repair vendor performance. Within 30 days of the rollout the
average repair cycle time dropped from 43 days to 24 days, and today the time
is
down
to
about
17
days.
On the field services side, Dell uses a supply chain event management solution
from Viewlocity Inc. to monitor and manage the return of non-functioning
products, coordinated with a third-party logistics provider. Ultimately, all of Dell's
supply chain activities aim at improving visibility. The more Dell knows about the
capabilities of the supply chain and our suppliers, the better decisions Dell can
make for our customers.
i2 TradeMatrixTM Global Implemation:
Dell's highly efficient build-to-order business model enables customized
computer systems to be built and delivered quickly. As part of the company's
continual efforts to improve its supply chain processes, Dell recently deployed
i2 TradeMatrixTM supply chain tools to provide global views of forecasted
product demand and materials requirements, as well as improved factory
scheduling and inventory management. With the new supply chain tools, Dell
suppliers and Supply Logistic Centers (SLCs), or hubs, have a global view of
short- and long-term materials requirements in each Dell factory. Dell employees
can view materials requirements, forecasts, and factory schedules and generate
key
reports
from
real-time
and
near
real-time
data.
The global i2 deployment included software tools, servers, and storage to
support global supply planning and demand fulfilment functions. Platform
selection was a key component in the deployment. After a comprehensive
benchmarking and selection process, Dell chose to run its entire i2 supply chain
system on a Dell and Windows NT platform.
The solution leverages the strengths of the Windows NT operating system, the
Microsoft Cluster Server (MSCS) tool, the Microsoft Windows Load Balancing
Service (WLBS) tool, and the Oracle Fail Safe (OFS) facility, coupled with the
high performance and scalability of Dell servers, to create a reliable and costeffective
supply
chain
infrastructure.

The
i2
solution
connects
Dell
partners
Dell selected i2 TradeMatrix supply chain management tools to improve
inventory planning, forecasting, and execution systems. On the global supply
planning side of its operation, the company runs TradeMatrix Supply Chain
Planner (SCP), which creates supplier materials forecasts. The i2 Active Data
Warehouse and Metadata Warehouse support the SCP module and Dell's
reporting solution. Brio and Active Server Pages (ASP) custom reports
supplement the reporting solution. TradeMatrix Collaboration Planner (TCP)
provides
a
worldwide
view
of
materials
requirements.
On the demand fulfillment side, Dell runs TradeMatrix Factory Planner (FP), a
single-threaded, memory-resident tool, to develop build schedules for factories
based on current demand priorities, factory capacities, and materials positions. A
second instance of TCP communicates the factories' immediate materials needs
to
SLCs.
These i2 tools were deployed for each operational region, with some components
residing in Austin and others in regions around the world. All of the worldwide
view reporting tools reside in Austin. Approximately 250 of Dell's largest
suppliers will be using these tools. Most of these suppliers conduct business with
the SLCs, which provide inventory management and are located near the Dell
factories to ensure timely delivery. These SLCs then orchestrate materials
requirements with Dell. The i2 tool set connects all three partners in this
relationship.
Selecting
the
platform
The platform selected to run the i2 modules needed to support current and
predicted Dell volumes, meet uptime needs, be highly available and recoverable,
support flexible maintenance windows, and scale sufficiently. For the initial
deployment in the Americas region, the deployment team evaluated platforms
based on Windows NT on Dell hardware and UNIX on Sun hardware. The
four
general
platform
types
included:
?
A
Dell
and
Windows
NT
platform
? A UNIX-based platform running most database and application components
on
UNIX
? A platform running database components on UNIX combined with Windows
NT
upper
tiers
? A platform running the i2 SCP, FP, and database components on UNIX with
the other Web and transactional components on Dell and Windows NT
The team's goal was to examine the performance and capacity of each i2 module
in each platform environment and recommend hardware platforms based on
empirical test results and assumptions about future production needs. Once each
module was examined, the complete architecture could be designed and tested.
In this first phase of benchmarking, the team evaluated each hardware platform
based
on
the
following
criteria:
? The performance of the i2 modules on various configurations of Dell and Sun
equipment
?
Potential compatibility issues between i2 modules and software products
including Windows NT, Oracle, JRun, Java Database Connectivity (JDBC) Kona for
Oracle,
and
other
tools
used
by
Dell

?
Availability, recovery, performance, cost-effectiveness, time-to-delivery,
resource
needs,
and
scalability
?
Stress
points
in
the
application
architecture
?
Preparation
for
future
regional
and
worldwide
rollouts
Evaluating
module-by-module
The team decided early in the process to use Windows NT and WLBS for the Webbased functions in order to align with Dell's existing internal system, which
provides firewall security and Internet portals. The team focused on evaluating
Windows NT and UNIX systems for each of the non-Internet-based i2 modules
and
non-Web
tiers.
i2 tools and application business data models simulated client activity at the Web
and application layers, while other database tools simulated database I/O load.
These models were not the final ones deployed, but provided the closest
simulation
available
at
the
time.
First, the team tested components including the database layers and the
memory-resident engines on the Sun EnterpriseTM 5000 server and the Dell
PowerEdge 6300, 6350, and 8450 servers. They also tested the application
and Web layers by adding and removing servers to evaluate the performance
and scalability, and to locate breaking points in the architecture tested.
Factory Planner and Supply Chain Planner are both single-threaded, memoryresident applications. For these modules, the difference in performance between
the UNIX and Windows NT systems was unsubstantial in our test cases. To test
Factory Planner on Windows NT, the team began by running twice the volume of
Dell's largest factory. The Windows NT platform handled three plants at this
volume. A maximum of three concurrent FP engines could run on a PowerEdge
four-way
server
without
degradation.
The team concluded that Factory Planner runs effectively on Windows NT, both at
the engine and database levels, on separate servers. The FP engine and the
database could run on one server, but Dell internal support team standards do
not allow an application and database to run on a single server. Moreover, the
team felt confident that multiple FP databases can run on one database cluster
under MSCS and OFS, providing a high level of failover protection.
For the TradeMatrix Collaboration Planner instance for the SLC solution, the team
tested Dell four-way and eight-way servers and a Sun UNIX server for the
database layer. The application and Web layers were sized for Windows NT. The
team generated production-equivalent test beds plus a factor of 150 percent
more for growth on both the transactional and batch upload/download
capabilities
of
the
TCP
tool.
On the global supply planning side, the team performed side-by-side tests of
Supply Chain Planner on Windows NT and UNIX systems and found that running
Windows NT was noticeably faster than UNIX. The team also tested a TCP
instance for the suppliers and found similar results to the TCP SLC testing, except
that the hardware needed to be sized larger. Windows NT is strong in memory
management, so the SCP i2 code on Windows NT may be taking advantage of
this better than on UNIX, explaining part of our test results. However, another
model or different volumes (other than the Dell test models) might have shown
different results. This is the nature of the SCP and FP tools, which are designed to

be
configured
or
modeled.
After completing the benchmark testing, the team chose to run all the i2
modules on Dell hardware running Windows NT. This architecture provides high
performance and scalability. The Dell and Windows NT architecture provides the
opportunity for maintenance and upgrades without system downtime. Since
most of the i2 modules and instances can be uncoupled, components can be
adjusted
if
necessary.
Deploying
i2
globally
Deployment of the i2 solution began with demand fulfillment and global supply
planning in the Americas (excluding Brazil) in the first half of 2000, then moved
on to regional deployments of demand fulfillment and global supply planning in
Asia and China and global supply planning in Europe in the second half of the
year. In 2001, Dell is focusing on deployment of demand fulfillment for Europe
and
enhanced
functionality
for
all
the
modules
worldwide.
Each region was required to complete key prerequisite projects before the new
system could be deployed, including establishing an operational data store to
centralize legacy information and a sales forecasting system to work with the i2
solution.
For demand fulfillment, the team decided to deploy Factory Planner and the
instance of TradeMatrix Collaboration Planner used to communicate with the
SLCs in each region. One advantage of a modular architecture is that additional
instances
can
be
deployed
if
necessitated
by
regional
growth.
Hardware
infrastructure
For the TradeMatrix Collaboration Planner component for demand fulfillment, the
infrastructure includes two PowerEdge 6350s running WLBS to support the
application layer, two PowerEdge 6350s using MSCS and OFS for the database,
PowerVault 650F and 630F storage, and an additional PowerEdge 6350 as a
batch upload/download server. The Web layer of four PowerEdge 2450 servers
running WLBS supports TCP for both demand fulfillment and global supply
planning.
The infrastructure for Factory Planner includes PowerEdge 6350s using a hotswap backup method for the FP engine layer and two PowerEdge 6350s and a
PowerVault 650F using MSCS and OFS for the staging databases.
On the global supply planning side, TradeMatrix Collaboration Planner is powered
by four PowerEdge 6350s using WLBS for the application layer, two PowerEdge
8450s using MSCS and OFS for the database, a PowerVault 650F and 630F for
storage, and a PowerEdge 6350 as a batch upload/download server.
The Supply Chain Planner function uses a PowerEdge 6350 as the engine. The
Active Data Warehouse database includes a combination of PowerEdge 6350s
and PowerVault 650Fs and 630Fs for storage under MSCS and OFS. The Metadata
Warehouse uses two PowerEdge 8450s using MSCS and OFS, backed by a
PowerVault 650F and five PowerVault 630Fs for storage. Figure below illustrates
this
architecture
as
it
was
deployed
in
the
Americas
region.
i2 Factory Planner and the integration with the existing systems:
As part of a larger deployment of i2 TradeMatrix solutions, Dell implemented
Factory Planner, a supply chain management module in the TradeMatrix suite.

Striving to enhance and broaden the Dell Direct business model, Dell recently
deployed a suite of software from i2 Technologies. The project's goals were to
boost the efficiency of Dell's supply chain and production planning and extend
the scope of Web-enabled information available to factories and suppliers.
Typical of such projects, Dell needed to overcome challenges such as constrained
timelines, limited resources, and investments in legacy systems with established
interface
requirements.
Factory
production
workflow
To provide relevant information and optimized production schedules, the i2
solutions needed to adapt to the existing production workflow, procedures, and
IT systems in Dell factories. This production workflow begins as orders are
received and assigned to factories and extends to the picking of parts (kitting),
building, and boxing of ordered systems on the factory lines.
Dell assigns orders to factories based on two criteria: geography and product
type. Geographic assignments primarily aim to minimize transportation
expenses, but also involve considerations such as import/export laws and
country-specific product requirements. The second criterion, product type,
results from factories that specialize in producing a single type of product:
desktops,
laptops,
servers,
or
storage
subsystems.
Once orders have been assigned to a factory, the challenge becomes weighing
what should be built?or orders on hand?against the available supply of parts and
manufacturing
capacity.
The availability and delivery of materials can complicate the decision of exactly
what to build. Independently owned and operated Supply Logistics Centers
(SLCs) or hubs usually deliver materials to factories. An SLC coordinates the
delivery of components to maintain a timely, damage-free, and controlled flow of
supplies to the assembly line. Figure below illustrates the factory production
workflow, from the delivery of materials through the shipping of finished
products.
Figure
.
Factory
production
workflow
at
Dell
SLCs help improve efficiency and reduce inventory, but also introduce planning
challenges. An SLC can service multiple factories; each factory makes materials
requests independently of the others. For planning purposes, each factory
assumes an unlimited supply at the SLC in making materials requests. This
procedure allows each SLC to track materials availability, determine which
requests it can and cannot meet, and commit (or refuse) to deliver the requested
materials.
Dell's
existing
IT
infrastructure
The IT landscape at the beginning of the project included five major applications
that needed to integrate with Factory Planner. Figure below illustrates the
architecture
of
these
five
systems.
Figure.
Existing
manufacturing
IT
systems
Dell Order Management System (DOMS). This legacy application records all
orders and releases them to manufacturing. Accessed via character-based
terminal screens, several distinct systems actually fulfill DOMS functions,

depending on the geographic region and type of order. DOMS manages several
different types of transactions, from individual credit card transactions to
business purchase orders. The largest customers frequently create blanket
purchase orders and use Premier Dell.com to select products from a list of
approved configurations. These orders are internally approved and then sent to
Dell
via
the
Internet.
Work-in-Progress Tracking Coding System (WTCS). This system lies at the heart of
the manufacturing process. Moving an order from DOMS to WTCS releases it to
manufacturing. WTCS creates a bill of materials (BOM) and a unique service tag
number for each system. The BOM and service tag number are printed on a
production order called a "traveler," which follows the order through the
production process. The service tag number is also burned into each product and
used
for
warranty
and
maintenance
purposes.
Engineering Materials Process and Cost Tracking (EMPACT). This inventory control
program governs on-hand inventory. Generally, EMPACT tracks small parts that
are ordered in quantity rather than delivered on demand by an SLC. These parts
range
from
inexpensive
screws
to
Intel
processors.
Value Chain (valuechain.dell.com). This extranet portal for suppliers provides
direct, Internet-based access to Dell documentation, forms, tools, and supplier
rating
scorecards.
Operational Data Store (ODS). This database is optimized to support nearly realtime manufacturing decision support queries. Typical queries might ask the
location of a particular order on the manufacturing floor or what systems
compose the order of a particular customer. Materials-related queries could
include the quantity of a part on hand or in transit from an SLC. Because
production plans were previously based on this data, the data used as input by
Factory
Planner
is
already
"cleaned."
Several characteristics made ODS a successful tool. First, it contains only
information about the current day's production. Although substantial effort is
made to update data in near real time, in practice, periodic updating is sufficient
for successful operation. Second, the granularity of the ODS data is the same as
the data in the transaction systems. Other true data marts aggregate data and
integrate it with historical data for forecasting, sales trend analysis, and other
queries across time. Next, the user interface supports several means of
accessing data, such as reports and spreadsheets. Finally, because ODS is
optimized as a read-only database, only a minimal number of operations write
new
data.
New
i2
applications
deployed
Factory Planner/Advanced Scheduler, a client-server tool, optimizes the planning
and scheduling of manufacturing production. Dell deployed Factory Planner
version 4. Users access numerous FP functions through a graphical user interface
(GUI). Complex but efficient algorithms simultaneously consider materials and
capacity constraints and propose appropriate production schedules. Providing
proper values to hundreds of "switches" tailors the algorithms to an individual
customer, which simplifies implementation and future upgrades. The resulting
configuration
is
referred
to
as
the
model.
TradeMatrix Collaboration Planner was initially deployed as the workflow and

communication application to provide supply chain visibility across multiple

enterprises. TCP allows manufacturers and suppliers to collaborate dynamically
on materials delivery agreements. A three-tiered application, TCP consists of a
Web-based
GUI,
a
business
logic
tier,
and
a
database.
Creating
an
integrated
architecture
To design the architecture, Dell first needed to determine the number of Factory
Planner instances to run, or conversely, the number and type of orders to be
handled by each instance. Dell decided to run an instance of Factory Planner in
each factory, in part because orders are routed to factories based on general
business decisions, such as product type or geographic location.
The high-performance, cost-effective systems now available made implementing
Factory Planner in each factory possible. During the last 20 years, computing has
evolved from room-sized, water-cooled mainframes with 32 MB of memory
running at 40 MHz to multiple servers per rack, each with gigabytes of memory
running at gigahertz speeds. This level of technology allows managers to use FP
as a decision support tool-they can quickly perform several "what if" scenarios to
solve
particular
problems
before
finalizing
the
production
plan.
Next, the input to Factory Planner needed to be assembled in the required flat
file
format.
Data
is
grouped
into
three
categories:
? consists of orders released to manufacturing, which are sorted by associated
priorities or the promised or target ship date. WTCS pulls these orders from
DOMS.
? consists of work in progress from WTCS, on-hand parts from EMPACT, and SLC
inventory
for
both
on-hand
and
in-transit
materials
from
TCP.
?
includes the BOMs from WTCS, the FP plan or model, and other current
information about the factory. This factory information covers routings,
resources, factories, operations, stockrooms, and base type codes used to route
different
products
on
WTCS.
Creating and implementing an FP model is a significant project, involving more
than 500 flags. Extensive skills and experience are required to create an
accurate model of the products, materials, logistics, and manufacturing facilities.
Effective and accurate modeling, which often requires the assistance of
experienced consultants, can shorten the development time and allow the
modeling to be done in conjunction with other integration and deployment tasks.
The following steps provide an overview of the Factory Planner cycle:
1. Snapshots are taken of demand data, structure data, and inventory, based
on data from the SLCs and EMPACT, which is updated periodically.
2. FP generates an infinite capacity plan, which filters out orders with missing
parts and creates an exception report. Users can make adjustments by selecting
different
systems
to
build
or
substituting
materials.
3. FP generates a detailed schedule with an exception report that identifies
capacity and resource-loading issues. Users can rerun FP repeatedly to resolve
these issues-until the production schedule is satisfactory. Any orders left in the
exception report remain in the system but are pushed into future production
cycles.
4. After a particular plan has been saved in FP, a detailed schedule is sent to
WTCS
to
use
on
the
factory
floor.

5. Materials requirements, or build plans, were forwarded to the SLCs via TCP.
Each SLC picks these up by accessing an account on Value Chain, which provides
a single point of record for Dell and its suppliers. Each SLC then responds with a
commitment to deliver all or a portion of the requested materials. If an SLC has
not responded in the required time, a text page notifies production control.
The Dell deployment of Factory Planner identified several best practices that help
ensure
a
successful
project:
? Use Factory Planner as a decision support system to empower those running
the factory, rather than using it as a transaction system. This is facilitated by
technology that requires minutes for actions that once took hours.
? Use data that is "good enough." While sophisticated tools need good data,
data will never be perfect in a complex and fast-moving operation. For Dell, this
was
adequate
to
produce
successful
production.
?
Create a loosely coupled system by keeping information flow as
asynchronous as possible. Such a system will be robust and flexible as new
components and applications are added.