Manufacturing the Xbox 360
Supply chain heroes make process a smash hit
The Microsoft Xbox 360 video game and entertainment system immerses gamers in a world where a split second can mean the difference between crashing into a Tokyo skyscraper, scoring a touchdown against the Dallas Cowboys, or getting blown up by grenadiers.
But when it comes to making great game units—not just playing them—even a day means a lot. For the Microsoft team bringing the revolutionary Xbox 360 to the marketplace, a new supply chain process shaved one full day off the time needed to identify and correct errors in the supply and manufacturing chain. That's an especially big gain in the case of the Xbox, for which the entire manufacturing process is outsourced.
"A one-day increase in responsiveness is huge in outsourced manufacturing," says Robert Meshew, IT systems group program manager in the Microsoft Home and Entertainment division. "It means you have the time to respond to problems, potentially saving thousands of dollars in unnecessary air freight and expediting costs."
 | A one-day increase in responsiveness is huge in outsourced manufacturing … It means you have the time to respond to problems, potentially saving thousands of dollars in unnecessary air freight and expediting costs. |  | | Robert Meshew
IT systems group program manager
Microsoft Home and Entertainment | |
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Fast response helps overcome write-downs
Responding more rapidly to manufacturing glitches is just one benefit of the new business process solution that Microsoft developed to assist with the launch of the dynamic new Xbox 360. Overall, the new system is expected to boost on-time deliveries, slash inventory costs, improve productivity, and reduce development time. The Microsoft solution also helps overcome handicaps encountered during production of the first-generation Xbox system (for example, the inability to gather real-time visibility into the supply chain, leading to supplier inefficiencies and inventory write-downs).
These are problems Microsoft was determined to avoid with the Xbox 360. Yet bringing the new console to market posed daunting challenges because Microsoft decided early that the entire manufacturing and delivery process would be outsourced. This step enabled Microsoft to focus on the high-value design and development aspects of creating the new console, but it put enormous pressure on its supply chain to deliver products in a timely, efficient manner.
To achieve this goal, Microsoft designed a Business Integration and Intelligence (BII) Framework that employs off-the-shelf Microsoft products and technology including Microsoft Business Solutions-Axapta, Microsoft BizTalk Server 2004 and BizTalk Accelerator for RosettaNet. The BII framework was designed to work with software systems often used by manufacturers and subcontract suppliers. The BII solution manages manufacturing progress, shipping status, purchase orders, and inventory—all in a way that gives suppliers and managers tremendous visibility into the manufacturing and delivery status of everything from game controllers to the Xbox 360 elegant new box.
Real-time visibility reduces errors
Visibility into production of the all-important graphics processing unit (GPU) at the heart of the Xbox 360 hair-raising, you-are-there play experience was crucial. "Microsoft is on the hook for supplying its contract manufacturers with the GPUs that go into Xbox 360," says Meshew. "Without real-time visibility into the semiconductor manufacturing process, we're steering a ship with a blindfold on."
The Xbox business integration tool confirms orders, tracks inventory, handles billing, and even monitors vendor performance for on-time delivery and other measures. Now, when the console manufacturer needs more GPUs, an order is relayed to Microsoft via a software package called a PIP (partner interface process). The PIP enables Microsoft and its vendors to communicate over the Internet without specialized code. The order travels through Microsoft servers that act as gateway and hub to the manufacturing network. The order is processed by Microsoft back-end servers, and then is relayed to the appropriate vendor. The system automatically checks orders for mistakes, and met a key requirement that vendors readily accept it. And it's flexible so new vendors are easily added as product requirements change.
The system is fast, reduces errors, and improves efficiency. Microsoft expects to see a 126-percent return on investment in the first year of system use largely due to slashing $500,000 US from inventory carrying costs. The system is forecasted to increase productivity in the Microsoft manufacturing staff by 20 percent, while also boosting IT productivity.
The use of Microsoft technology simplified development and installation of the order system, reducing the time needed to build the tool by six months and saving another $500,000 US. "We didn't have a lot of time to get the system up and running," says Larry Hamlin, supply chain manager of silicon operations for Microsoft Home and Entertainment. "We needed development to move quickly in order to initiate production on schedule."
When gamers fire up the new Xbox 360, they won't know about the work it took to deliver the powerful new game console to them. But Microsoft vendors and members of the Microsoft Xbox team know that a great gaming experience is only part of the story of how the Xbox 360 came to be.
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Doug Gantenbein is a journalist based in the Seattle area who has contributed to many leading business publications including The Economist, The Wall Street Journal, and Business 2.0. |
