I have a part of the yard fenced off for the dogs. The area is about 30 feet by 50 feet. The grass is gone and it's turning into a dust bowl and with the rains a mud hole. I've put in several yards of wood shavings, but was looking for suggestions on a better alternative.

As much as you might want grass, etc, if your dogs are loose to run, dirt would be your best alternative. I have found that my dogs will eat the wood shavings, and the dog leftovers are difficult to clean up with the wood or rock. I keep my dirt free of leftovers as possible, and I rake the dirt once a day to keep it looking nice. Anything else in my opinion is too high maintanence.

Depends on the size of the yard - but for keeping down the dust and mud and keeping a nice appearance you can't beat gravel. I have two very large dog yards and for the most part it is grass but I have put in gravel in the areas of highest traffic and wear and tear - up along the front fence, in front of the kennel runs and on the chain-out areas, the area on front of the gate etc. I like the look of gravel and really keeps the mud down in rainy times - I hate mud! mostly because it is so darn slippery and I hate wiping out when carrying full buckets. I used a fairly small size gravel and clean-up is easy.
I also think it stays better smelling than pure dirt but it depends on the type of soil you have.
Sandy soil drains really well if you are lucky enought to have it - we have a nice gumbo that can suck the boots clean off your feet- hence my love of gravel! If you use gravel in kennels you can always but wire underneath so they don't dig into the soil. I went with patio stones over gravel(8") for good drainage in the kennels.

I agree, if the gravel is small enough clean-up wouldn't be so bad, and it does smell better.

I live in a rainy climate, and for my dog yard I chose pea gravel (aka "buckshot") as a ground cover. I find it really helps reduce, though not completely eliminate, the mud and it is easy to poop scoop (using the bag on the hand method; I have yet to find a contraption that I like.).

It sounds like pea gravel is the way to go. Thank you for your help.