Agile Supply Chain Gets Xbox 360 into Eager Gamers' Hands

Microsoft collaborates with DHL on multi-mode logistics operation to ensure timely deliveries of the video game console

Microsoft collaborates with DHL on multi-mode logistics operation to ensure timely deliveries of the video game console

Plantation, FL  February 15, 2006  For video gamers eagerly anticipating the launch of Microsoft's Xbox 360 gaming platform last year, the wait ended with the November 22 U.S. product launch and the December 2 European rollout of the new game console.

But for Microsoft and its long-time logistics partner DHL, the game's debut marked the culmination of a year's worth of planning and execution dedicated to one objective: moving thousands of Xboxes across three continents, on time and on schedule, into the hands of the game's fans.

The lesson: an agile supply chain, employing a variety of transportation modes, is a critical component of ensuring a smooth global product launch.

Long-time Collaboration

"Microsoft set specific deadlines and promised the world it would meet them," said Jane Sabin-Pass, global customer manager for DHL Global Customer Solutions. "In so doing, Microsoft challenged DHL to think creatively and to anticipate the unpredictable scenarios that often accompany a major product launch during peak season. The precise delivery schedules were a testament to the skill of both companies to link the global supply chain with flawless accuracy and transparency."

The Xbox 360 project drew upon 15 years of collaboration between Microsoft and DHL, which included the rollout of the first Xbox console in November 2001. According to DHL, knowledge of each other's systems and processes played a vital role in expediting Xbox 360 launch schedules, reducing implementation lead times and meeting strict deadlines.

Launch planning began in November 2004 when both companies mapped out shipping strategies and laid the foundation for the information technology (IT) network that would serve as the project's central nervous system. By August 2005, with the first of the Xbox 360s ready to ship, the project shifted into high gear.

Executing to Plan

EDI messages from production sites in southern China enabled Microsoft and DHL to update status information and maintain real-time visibility as Xboxes rolled off assembly lines onto barges bound for Hong Kong's Chek Lap Kok airport. As consoles and peripherals were loaded aboard charters, the DHL system automatically triggered advanced ship notices to the U.S. and European distribution centers, providing the receiving points with the time to preplan their capacity needs.

At each step in the process, DHL's automated systems validated shipment load information, helping to ensure that the appropriate volumes of Xbox 360 units were delivered to the proper destinations at the agreed-upon times. To ensure proper redundancy, DHL created backups of each message transmitted.

Supporting the initial launch phase, DHL's regional team in Singapore led the implementation project, deploying multiple Boeing 747 freighters procured by Microsoft to transport consoles from Hong Kong to the main distribution centers in Memphis and Dueren, Germany, 60 kilometers from Cologne. DHL staff in Hong Kong also arranged for commercial airlift to ship thousands of kilos of Xbox 360 peripheral equipment such as controllers, cables and other Xbox 360 accessories to North America and Europe.

DHL in Seattle and Cologne performed custom clearance and synchronized deliveries with Microsoft's distributors to ensure sufficient high-security trucks were positioned to deliver the consoles from the airport to Microsoft's distribution centers in Memphis and Dueren. DHL Cologne then organized truck deliveries from Microsoft's distribution center to retailers across the continent.

Lessons Learned

DHL cited the following milestones of the Xbox 360 project:

  • Enhancement of a trans-Pacific rail-steamship service where ocean freight shipments entering the Port of Los Angeles from Hong Kong were met at the docks by dedicated trains that carried consoles and accessories directly to Microsoft's North American distribution center in Memphis, Tenn. The service shaved several days off the standard transit times and ensured predictable and cost-effective deliveries to support the initial rollout and subsequent replenishment of inventory.

  • A unique aircraft loading solution for European air consignments enabling Microsoft to fully optimize the space aboard each aircraft without compromising the integrity of Xbox 360 units. Because the pallets' original height prevented them from fitting in the lower deck area of the aircraft, DHL Danzas Air & Ocean developed a program to "down-stack" each pallet at origin, load them securely into the aircraft belly for flight and then rebuild the pallets into their original SKU configuration at destination.

  • The enhancement of DHL's event management tool that connected Microsoft with suppliers, contract manufacturers, carriers and even other transportation providers to deliver near real-time visibility of in-transit inventory.
The joint Xbox 360 effort is far from over. Charters continue to arrive in the United States and Europe. DHL said it has purchased significant ocean freight capacity to move consoles and peripherals long after the initial launch and will continue to support the Microsoft rollout of the Xbox 360 around the world. Microsoft and DHL are also now working jointly on implementing a new warehouse in Southern China to support fulfillment of Xbox 360 in Asia during 2006 and beyond.

"What we learned from Xbox 360 is that an agile supply chain  one that employs a mix of transportation modes  is an effective solution to the challenges of executing a global product launch and ongoing replenishment activities," said Bill Best, senior logistics manager at Microsoft. "DHL's sophisticated IT tools will be leveraged in future projects to power Microsoft's supply chain and enhance its competitiveness. We see DHL's solution as an enabler of future success, and we envision a deep integration of DHL into our processes as a result."

"The Xbox 360 project is another step forward in our long and successful collaboration with Microsoft," said Eric S. Vargas, head of global project coordination and program management at DHL Global Customer Solutions. "Through the years, we've learned from each other, tested and challenged each other and, in the process, grown together."

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