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Dell Uses a New Production-Scheduling Algorithm to Accommodate Increased Product Variety

Dell, Inc., Americas Process Engineering, 1 Dell Way, Round Rock, Texas 78682
Graduate School of Business and Public Policy, Naval Postgraduate School, 555 Dyer Road, Monterey, California 93943
McCombs School of Business, University of Texas at Austin, 1 University Station, Austin, Texas 78712
jennifer_loveland{at}dell.com
skheath{at}nps.edu
morrice{at}mail.utexas.edu

Early in 2003, with continually increasing product variety and production volumes, Dell, Inc. had reached the designed capacity limits of one of its main production facilities, the Morton L. Topfer Manufacturing Center (TMC). In 2004, TMC was facing a doubling of the number of product families it produced, with an anticipated degradation in production rates of nearly 20 percent. To help assuage this problem, we developed a new production-scheduling algorithm, which contains both optimization and heuristic components. The algorithm schedules product families on parallel, identical kitting lines to minimize the number of setups required and to reduce downtime and slow time during setups. Because of our work, Dell was able to accommodate the twofold increase in product variety, as well as an effective production-volume increase of over 35 percent. Furthermore, Dell realized a conservative cost avoidance of more than {$}1 million annually, primarily because it saved overtime costs that it would have required, in the absence of our solution, to handle the increases in production volume and product variety. This solution has been in operation at TMC since June 2004.

Key Words: production scheduling; heuristic; optimization; product families; parallel lines; assemble-to-order