chloeveltman.com > features

Supply Chain Collaboration Case Study: Sun Microsystems
5 December 2001

Technology companies do not come much more sprawling than Sun Microsystems. With offices in 170 countries, 43,700 employees, and $9bn of materials sourced from third-party suppliers each year, the California-based network computing behemoth would soon lose its status as the number one maker of Unix-based servers if its supply chain systems were not as slick as chief executive Scott McNealy's sales pitch.

"A couple of extra weeks delay in the supply chain can lead to horrendous consequences," says Kurt Doelling, Sun's vice president of strategy and programs, worldwide operations. That is one of the reasons why Sun is on a mission to streamline its supply chain processes, digitalising every step, from selecting a circuit board supplier to tracking a shipment of high-end servers on their route from Amsterdam to Auckland.

The impetus stems from the industry-wide migration towards outsourcing in the last five years."We are constantly seeking to align Sun design and technology core competencies with the products and service offerings of the world's best component, subsystem, manufacturing services and logistics suppliers," says Martin Chorich, a Sun spokesperson.

However, outsourcing can create problems, from communications glitches and increased paperwork to missed deadlines and inventory backlog. "The potential for l atency [delays] in the system has increased dramatically since we started outsourcing," says Mr Doelling.

Given the challenge of integrating all the strands of its complex network, Sun has distilled its supply chain automation program, known as eOps, into four goals: to reduce latency, reduce costs, reduce inventory exposures, and improve visibility between Sun and its suppliers.

The company uses a range of software packages to help achieve its goals. Third-party providers include i2, Rapt and Informatica. Sun's in-house software developments go by such names as Kaptur, a system for facilitating product transitions, and the LeadTime Predictive Tool (LPT), which identifies potential causes for late shipping and what action to subsequently take.

With the new technologies in place, the process for planning, building and shipping a typical order has, at least in theory, become more efficient. For example, EDI and XML signalling as well as encrypted e-mail messaging enable Sun's computers to talk directly to those of its suppliers without anyone having to re-enter data, saving time.

Meanwhile, on the shipping side, Sun's partnership with FedEx, known as eMerge, leverages FedEx's tracking capabilities. If a supplier misses a deadline on part of an order, eMerge puts all the rest of the ordered items "on hold", wherever they have got to in the shipping process, so the customer still receives their entire order in one go.

A comparison with previous years suggests that automation is indeed impacting Sun's supply chain efficiency: Mr Doelling says that two years ago, volume products required a lead time of ten days. Now they require just one day. A high-end server that took 15 days to ship two years ago, takes only five days today. Sun operates a round-the-clock system that Mr Doelling says meets its shipment deadlines 90 per cent of the time.

Meanwhile, the paper-trail is disappearing. "Only one and a half years ago, every order on the shop floor came with a paper envelope stuffed with a kit list," says Tom Wasilczyk, Sun's director of worldwide operations, IT. "The only paper you usually get now is a bar code on the side of the box."

But great tools alone will not necessarily ensure Sun's chances of supply chain success. Companies need to have as much of an understanding of the collaborative nature of today's fast-moving, multi-faceted networks, as they do of technology.

"The answer does not always lie with a system or tool, but in business processes and human behaviour factors," says Chris Holt, a supply chain management consultant and vice president of UPS Consulting.

The executives at Sun do seem to be aware of the need to think beyond the computer console. For example, keeping careful track of supplier relationships is high on Sun's agenda. "We believe giving constant feedback to a supplier is very important," says Mr Doelling.

The company's performance-related supplier "score-carding" system and its annual Supplier Awards ceremony are part of Sun's drive to keep its contractors on their toes. Similarly, Sun's Dynamic Bidding platform, a web-based private B2B marketplace, allows a range of suppliers to bid for Sun's work.

According to Sonia Syngal, director of Sun's procurement strategy and supplier relations, contracts are not simply awarded to the cheapest bidder - the system is set up to factor in such decision-making elements as performance history and delivery time.

Sun still has a long way to go. One of the major challenges facing the company is to find a way to integrate product design into the collaborative supply chain network. "The challenge is to get engineers to follow internal processes consistently across geographies," says Mr Wasilczyk.

Sun will also have to find ways to cope with a highly volatile marketplace. Whereas ten years ago it was easier to predict order patterns, today's dynamic sales network makes it very difficult to know what orders are going to be placed from day to day. "Demand is driven by yesterday's order, so it's much harder to predict," says Mr Wasilczyk. "You have to be able to source things very quickly."