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Dell Six Sigma

This semester we chose to develop a Six Sigma analysis on the manufacturing process of computers at Dell, Inc. Our goal was to take the manufacturing process currently in place for the production of laptops and desktop PCs and maximize quality, efficiency, and the longevity of the computers. Historically, Dell has been known as an industry leader in supply chain management. They have been credited with developing supply chain processes that have come to be recognized as some of the most innovative not only in their industry but throughout all business sectors.

All f these accolades made Dell an unlikely choice since there didn’t appear to be much room for improvement, at least from a supply chain standpoint. However, over the past few years Dell’s once firm lead on the personal computer market share has begun to deteriorate and they have since lost their hold of the leading market share to top competitor Hewlett-Packard. They are currently in second place in market share but Just over the past fiscal year revenues have fallen 33% from the second quarter of 2009 compared to the second quarter of 2010.

Some of this drop-off may e attributed to the economic recession; but regardless of external factors a 33% loss is not something to be ignored especially at a time when these types of losses could potentially become a growing trend. Our research indicated that over the past few years the amount of complaints Dell has received regarding faulty manufacturing and shortened life spans for their computers has been continuously growing; so we decided to focus our analysis on determining how to improve on Dell’s quality without diminishing their industry-renowned built-to-order process which is based pon speed and efficiency.

Dell’s recent losses are a result of decreased quality and these have subsequently created a lack of trust in Dell’s brand. We set out to not only determine specifically what hardware or software issues these errors can be attributed to; but also in the process, re-strengthen Dell’s brand identity by increasing quality for their products. When we were choosing a company to study and run analysis on, Dell was not necessarily any of our group members’ first choice, primarily because of how successful their supply chain methods had been in previous years.

We initially assumed there would be little we could do to improve the process. We began developing a decision by choosing three companies to pick from; Dell, Inc. , Nike, and Herr’s Potato Chip Company. We made a decision after entering several different characteristics into the Decision Lens software and evaluating how strongly we felt about each. Our analysis was based on five criteria which we determined to be the most important for the success of this project. The first criterion was the availability of data. For this project, it was critical to have access to nformation with as much detail as possible.

Such data includes process descriptions, mission statements, business plans, financial earnings, sales, marketing strategies and customer feedback. Without such data, it would have been difficult to evaluate and identify a process that would benefit from a Six Sigma project. All participants in this project recognized the importance of this criterion as evidenced by a 0. 41 weight rating, the highest weight given to any of the criteria. The second criterion was the scope of potential improvement. If the company is already excelling in their mprovement. One of the companies that we initially considered was Coca-Cola.

We subsequently dropped the company from the list because as we could not find many areas we could improve upon. The next criterion was our familiarity with the product. We felt it was important to have at least some knowledge of the company and process before we began the project. Prior experiences with the company or product could be used to assist in our process improvement. Also, we felt a certain level of awareness could provide us with a better understanding of the company from a customer perspective. Our fourth criterion was complexity of the processes involved.

In our analysis, the more complex processes often result in higher chances for imperfection or failure. We also felt that processes that require a trained specialist to enhance would not benefit from our analysis because of our lack of understanding the methods. The fifth criterion was personal interest. This was to ensure we were all engaged and interested in working on the decided project. Our criteria were given weights of . 41 for availability of information, . 35 for scope of improvement, . 1 for familiarity of the product, . 8 for complexity of the process, and . 6 for personal interest. Under these criteria out alternatives returned values of . 47, . 4 and . 125 for Dell, Herr’s, and Nike respectively with an inconsistency of . 017. Prior to conducting the analysis, we felt Herr’s would be the best company for the project due to our familiarity with the company’s products, its nearby headquarters and the availability of a tour of the manufacturing process. However, Dell made a much larger amount of information more easily accessible to the general public which we determined would be more beneficial for us during this project.

Essentially, our goal for this project was to first identify those aspects of the Dell manufacturing process that were not operating properly with regard to efficiency and quality and then develop ways to improve them by decreasing the amounts of money and time necessary to complete them while not further decreasing quality. At one time, Dell had control of the market share with its successful “direct-to-customer” sale and complex supply models. Rather than manufacture the components it uses to build computers, Dell uses an intricate supply model that consists of almost zero stock inventories.

The ompany has built strong, trust-based relationships with its suppliers. Each supplier is carefully chosen based on predetermined criteria which range from quality to warehouse location. However, Dell has recently lost ground in the computer market. This is due primarily to increased competition and rising computer component defects. These issues have occurred in both Dell’s hardware and software, most recently with defective batteries and motherboards. For our Six Sigma project, we selected the design defect issue because of the large number of complaints as well as the high rate of defect reoccurrence.

These issues caused frustration among Dell’s customers and support centers. Also to date, Dell has failed to come up with a long- term solution that has effectively reduced the number of defective products. The name we chose for this process is “Design Quality Control. ” This is because Dell, as mentioned previously, doesn’t manufacture computer components but rather orders them from its suppliers. Therefore, the design of the product and the assembly of the components are the major areas that Dell fully controls. The design is the first step of Dell’s production process.

Dell engineers design and develop different styles and should be adequate and have undergone sufficient quality control procedures. A good design doesn’t necessarily result in a product free of defects but it helps to significantly reduce their occurrence. Over the past several years, the trust and reliability that Dell has built with its customers has eroded. During this time, competitors such as HP and Apple have made significant gains. Unfortunately, replacements sent to customers also often contain the same or new defects.

Fixing the design defects adds additional costs to the users who need to ship the defective omputers back to Dell as well as to the company itself that will have to replace the component or the product. Customer service and technology support teams are also spending considerable time troubleshooting flawed components and dealing with dissatisfied customers. It is important that Dell respond to the defect issue because, in a recessionary economy, customers are paying more attention to the Quality/Price ratio. Currently, Dell is running the risk of becoming known primarily as a company with faulty products.

Such a reputation can damage sales, especially in a period hen purchases of computers and other big ticket items are down overall. For this project we used the same concept of improvement used by Motorola and we targeted a 100-fold improvement. The starting point of the project is when Dell’s engineers begin gathering requirements for the new computer model or option. The process ends when the suppliers of all parts or software are selected and an execution plan is created. We did not set out to change the assembly process but through our results we feel it should be addressed under a separate six sigma process.

Our first constraint was the completion time for this project. We felt it needs to be started quickly so the company can start effectively competing again. The second constraint was that our project should not increase the design time. This is important as technology advances quickly and Dell needs to keep up with the developments at the same pace of its competitors or faster. The Design Quality Control project will have an important impact on Dell and its customers. By improving the design and engineering of Dell’s computers, there will ultimately be a lower work load for Dell’s repair and customer service departments.

This will lead to reduced operating costs or these departments. The project will also have a positive impact on the cost of production. With a successful implementation, Dell will be able to reduce the cost of product maintenance in addition to cutting down on the repair or replacement of defective units. It will also be possible for the company to decrease the number of employees in their call centers. This will permit Dell to focus on production and innovation at lower costs while increasing revenues.

Statistics show that three of every five computers sold in the United States are defective or will have defects in less than one year of operation. This is a defect rate of (http:// answers. google. com/answers/threadview? id=304307 ). According to an independent study, the average cost of repairing a defective computer is $200. In the third quarter of 2008, Dell had 13. 6% of the global PC market (http://retailindustry. about. com/od/ topusretail- companies/p/dellincprofile. htm) and about 176. 8 million customers (13. 6% of 1. 3 billion PCs http://news. zdnet. com/2100-9584_22-140272. html ).

Based on the statistics above, the cost of fixing all of Dell’s defective units would be approximately $21. 2 billion (176. 8M*60%*200=$21. 2 billion). The project would cost related to a higher call volume in the customer service departments. In addition, it would reduce the cost of warranties and reassembly of products. The design process was split into six parts: concept or idea creation, research and market study, feedback and development, testing and evaluation, product finalization, and finally action plan creation. Dell is currently using PTC Windchill software to design almost all of its product line from the concept to servicing.

However, the software can only be as good as the data input and it cannot eliminate the need for testing and product valuation. For this project, the Critical to Quality (CTQ) parameters required that a detailed, upgraded design plan be first completed and tested prior to following through with the project. Using these results, we determined to move forward with the project. Furthermore, all stakeholders, including shareholders, all employees, customers, and suppliers needed to be informed and consulted on the details of the plan prior to and during its completion.

Also, employees that work directly in the customer service and repair divisions of the company needed to be reassured that hese improvements are necessary for the continued growth of the company. In order for the project to be successful, they needed to know that no employee’s Job is necessarily in Jeopardy as a result of the project. Finally, to ensure continued quality after the completion of the project, the objectives needed to be synthesized with the overall strategy of the company. It is important to have a fairly specific cost estimate as well as a timetable for completion prior to beginning the project.

We estimated that a full overview and re-engineered design could be completed, tested, and entered into mass production within one year. However, since this is not a new device or even a completely new design, we felt that we should aim for project completion in approximately eight months. Timing is critical because the longer people continue to purchase potentially defective devices, the more the brand suffers. The goal was to deliver the improved model to the public as soon as possible but without rushing it through quality testing.

Finance measurements also play a key role in the success of the project. The cost of this project cannot exceed the amount that the problem is currently costing the company. Given the potentially enormous ost of these defects, this project should be considered as more of a reinvestment in the companys dedication to quality as opposed to another company cost. In design matters, Dell takes advantage of Small and Medium Business (SMB) feedback, historical purchasing data, and analysis of technology and industry trends to define the appropriate specifications for the majority of its notebooks and computers.

The key to producing cost-effective notebooks and computers, while still incorporating some of the same primary design tenets as high-end models, lies in understanding how specific components can affect the cost and complexity of the system. For example, each memory slot, hard disk drive, PCI slot, rear or front 1/0 feature requires the incorporation of the connectors as well as the associated electrical components, motherboard space, reserve power capacity, cooling capacity, and associated mechanical structures.

Similarly, each hard drive bay requires many of those same components in addition to a backplane board space for hot-pluggable configurations. Furthermore, each motherboard requires supporting electrical components and motherboard space. Notebooks and computers are designed to help meet the needs confgurations that incorporate the minimum feature set. The basic problem of the design begins when incorporating the components of the computer. The lifetime of the components largely depends on the way the notebook or computer has been designed.

For example, space should be provided for the motherboards to cool down. If the cooling capacity is not sufficient there is a chance that the components on the motherboard might fail. In setting up our process maps for testing during the initial run for our current state we did not expect to find optimal results. It was after this first run where we determined what our “current state” is and what our “desired state” would be. More specifically, this phase revealed to us exactly how much improvement is necessary for Dell to achieve their desired state.

Once the initial run of testing was completed we were also able to more clearly determine the major fault-points. By indicating which aspects of the product and assembly are creating the most frequent trouble we were then able to establish the best strategy to catch and avoid those issues during future production. This would also give us a much more accurate estimation of total cost for the implementation of this process. As of right now we can only make rough estimations of what this trategy would cost Dell but after getting a better idea of how severe the problem is we could make a better projection.

Upon being implemented, we expect the reliability of Dell’s hardware components to significantly improve ultimately leading to the overall advancement of Dell’s computers. We fully expect this process to be pivotal in the reshaping of Dell’s product quality and as a result of that improvement their image will also improve. In the long term, implementing continuous and consistent components reliability testing will force Dell to improve their product. More products will be tested and ore products will show up as containing errors.

A larger variety of errors will be tested for and more errors than ever before will be detected. The more problems Dell looks for and identifies the more prevention they will be able to do for future production and this will ultimately lead to a decrease in problem errors. Overall, this process was designed to make Dell money through decreasing product repair costs and improving sales through brand enhancement. By improving Dell’s quality, we improve Dell’s image and this will lead to a return to a number one spot in industry market share trough increased sales.

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