20 March 2007

Sun Microsystems sheds light on streamlined web supply chain model

Sun Microsystems is making money, growing margin and looking healthy again, following its tough years – due to supply chain savings of more than 40% and inventory savings of another 40%.

It seems that while the world has been talking up the Dell supply chain model, Sun was quietly re-engineering its own systems – streamlining and shaving serious time and cost out its operation.

Says Eugene McCabe, executive vice president of worldwide operations for Sun: “Our philosophy has been to remove as many steps as possible – touch product as little as possible and drive towards a one stop supply chain.”

And it’s been successful. Most product now goes from one of Sun’s suppliers to the customer without Sun ever touching it. “That’s significantly reduced cycle time as well as the inventory tied up in our business,” comments McCabe.

And it’s being applied to all elements of Sun’s supply chain. “[Suppliers] can now do a lot of the configuration and software download work in their own factories,” he says. “As product goes through the test process, software is loaded from the website onto the product and customised at the manufacturer’s site. S we’re no longer adding hardware and unpacking, repacking and installing software.”

McCabe says Sun basically looked at the software configurations customers typically buy and ensured that its suppliers had what they needed to eliminate the need to ship product to a consolidation point for this step.

And the other part of Sun’s lean equation has been supplier consolidation. “We’re not as big as some of our competitors so their purchasing power gave them an advantage on component prices. So we went through a tough process to reduce the number of suppliers – and now 25% of our suppliers account for 90% of our spend,” says McCabe.

“Over three years we’ve reduced our overhead for this work by 40%: we expected 20%. And we’ve kept on seeing more steps to take out and more value add we can implement throughout the programme. We’re pretty lean now,” he adds.

Now the company is working on further reducing lead times to customers. “Our objective is to ship volume products in four days or less,” McCabe.

Like many manufacturers in the electronics and hi-tech sector, Sun puts a percentage of its product through resellers, who hold stock related to lead times and forecast usage. “But things are changing all the time, so our ability to forecast is nothing short of pathetic,” says McCabe.

“Reacting fast is the way to do it. We used to have a process where we gave suppliers weekly or monthly forecasts, but they were consistently wrong. So we’ve connected our systems to our suppliers’ so that the instant we get an order they have live visibility. That’s allowed suppliers to start manufacturing sooner, but it’s also given them new visibility of our order patterns.”

Sun manages IP issues using web identity management and security software so that each supplier only sees its part of an order. “The more visibility everybody has of what’s really happening the faster they can all react.”

It also works across multiple ERP systems, with a standardised web-based communications path interfaced to all systems running on top of EDI. “EDI covers the commercial transaction, but order visibility is via a portal – and that includes plans, forecasts and product transitions. It’s quicker that way,” explains McCabe.

Brian Tinham

Supporting Information

Sun Microsystems plc

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