October 27, 2004 10:32 AM PDT
Inside Dell's manufacturing mecca
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That's the number of desktops Dell was trying to produce per hour in the Mort Topfer Manufacturing Center here earlier this month. Put another way, that's roughly 1 PC every 1.5 seconds, 40 a minute, or 23,500 per shift.
The company was initially vague about output figures, but they were written on a whiteboard at the entry to the factory floor. "I was hoping you wouldn't see that," laughed Steve Lawton, one of the engineers who helped design the facility and part-time tour guide.
For manufacturing and logistics fanatics (and really, who isn't one?) a tour of the Topfer facility is sort of like visiting Stonehenge or the Flatiron Building. Here is where direct fulfillment, just-in-time production, took flight. It's like safety goggle heaven.
The 300,000-square-foot facility begins to buzz around 8 a.m. and churns solid for a 10-hour shift (12 hours on Friday, Saturday and Sunday). On the ground level, a line of component specialists fill plastic bins with parts--hard drives, processors, memory-- to assemble a PC that has already been ordered.
When filled, the bin then gets shuttled upward by a cage elevator to a web of conveyor belts circulating about 15 feet above the floor. When it hits its destination, another elevator scoots the parts bin down to a cell of PC assemblers.
Although the parts are stuffed into bins in an assembly line fashion, PCs get completed by an individual. "The highest paid employees are the PC assemblers," Lawton said. Nonunion employees here start with a salary of about $12 an hour and participate in profit-sharing plans.
Three to five minutes later, PC assembly is complete. The computer returns to the freeway interchange of conveyor belts, where it will next visit an army of barcode scanner-wielding employees who double-check and pack every order and then send it off to logistics and shipping.
From when the parts come into the facility to when a shipping company takes away the box, it's a four- to six-hour process, Lawton estimated.
And everywhere, there are subtle reminders of the tension between management and labor. Company posters exhort employees to follow the five lessons: "Pick, Pack, Press, Place and Press" and "Sort, Set, Shine, Standardize and Sustain." Meanwhile, the 1,600 employees buck cheerleading with "Smile, Surprise Someone" and tie-dye T-shirts. Safety regulations--such as the "Weapons are Not Permitted on Dell Property" sign on the front door--are everywhere.
Technically, the Topfer facility isn't where the Dell story started. It only opened four years ago, replacing another facility here that Dell outgrew. The old factory is now an empty shell across town, Lawton said.
Still, the facility is a physical embodiment of the ideas animating the company and why Dell consistently grows far faster than its competitors.
One of the first things that sticks out is that these guys love numbers. Everything at Dell gets honed by mathematics.
The company, for instance, recently redesigned the build table--where PCs get assembled--for greater efficiency. Among the improvements, the new table shaves 20 seconds off the build time, reduces long reaches by 50 percent, and lessens turns (as in an employee turning his or her torso to get a part) by 80 percent, Lawton said. Overall, this should improve costs and cut down on injuries.
The factory schedule also has been tweaked through data feedback. One group of employees works four 10-hour days. The weekend shift works three 12-hour shifts, but gets paid for the full 40 hours. The company finds it more efficient than the traditional five-day schedule. Other fast facts from the factory tour: half the orders come in from the Web site, which is posted in 80 countries and published in 27 dialects.
The numerical obsession comes down from the top. Unlike some other PC companies, many of the executives didn't come out of the engineering or sales departments. Instead, they came from outside consulting firms. CEO Kevin Rollins hails from Bain & Co., as did Paul Bell and John Hamlin, the chief operatives, respectively, for Europe and U.S. consumer business. Chief Marketing Officer Mike George came from McKinsey & Co.
Compared with competitors, Dell probably has a "disproportionate" number of former consultants, said Stephen Meyer, vice president of marketing for services and another McKinsey alumnus.
Granted, consultants aren't known for their originality--usually it's the opposite--but they certainly know how to drive down costs.
Second, the direct sales model does come with strong, inherent advantages. In a dark office on the second floor of the factory, a team of people assemble a list of components Dell will need for the next two hours of manufacturing, based on incoming orders. The warehouse has one hour and 45 minutes to complete the shopping list and get it to the factory.
Contrary to popular opinion, Dell does not take possession of components when the boxes get put on a forklift in the warehouse. Instead, the components remain the property of the supplier until the forklift crosses a white painted line at the entrance to the manufacturing site. This little meridian eliminates the inventory costs that have plagued others.
"We don't bring in any material to the factory until it has been ordered by the customer," Lawton said. Control over manufacturing also makes recalls cheaper and lets Dell run product specials on the Web site on some products if other similar items suddenly begin to run short at the warehouse.
A number of Asian companies have rediscovered manufacturing lately too. Samsung asserts that component manufacturing has been one of the keys to its success. "In Japan, companies are coming back to manufacturing. Now they recognize how important it is to make things," Akira Yamanaka, corporate vice president of Fujitsu's server group, said in a recent interview.
With Dell announcing another factory in North Carolina soon--and every other U.S. PC maker going the other way--the people in Round Rock will have bigger numbers to play with.
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