When discussing a company's prospects for growth or cost savings, supply chain efficiency is rarely first on the list. However, at Sun Microsystems, we have found that by streamlining and increasing the efficiency of our supply chain, we have not only improved customer response times, but also bettered our business.
Back in 2003 we realized that, like most global manufacturers, we needed to find a way to increase the efficiency and predictability of our supply chain in order to cut costs and satisfy customer demand for fast delivery of low-priced, high-quality products. In an industry where competitors buy the same components from the same vendors, improvements to the supply chain's shipping and handling function was critical to removing unnecessary costs from the process and improving our competitive advantage.
By developing a process that is now known as the "one-touch supply chain," we were able to work with our vendors to completely overhaul and restructure the manufacturing process. We opted to shut down costly warehouses and move to a process in which customers' orders are routed directly to suppliers. We enabled significant new capabilities for our partners -- extensively training them on Sun systems and providing access to our servers from their premises.
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By integrating our systems with suppliers who build products and third-party logistics providers who move products from multiple suppliers to end customers, we fundamentally changed the process. Sun now moves information to the product, rather than moving the product to an "information-convenient" location. Products previously held at distribution centers awaiting customer orders are now sent directly to suppliers, who then ship directly to the customer.
To facilitate the coordination between Sun and its suppliers, we give the suppliers real-time access via a portal to planning information. Development of the one-touch supply chain brought with it many challenges including the development and integration of several "add-ons" to the ERP system because no existing ERP system had the capability to do what was needed.
Additionally, we had to synchronize the order scheduling, the product build and logistics processes to get the order fulfilled.
The software and services to make the one-touch supply chain work were developed using Sun's standard software and application integration tools. The total development time from concept to shipments was 18 months. The one-touch program now spans all aspects of the fulfillment supply chain, from order entry to customer acceptance. And since the configuration process is largely automated and copyright protected, there is little fear that our partners will at one point become competitors.
We have realized enormous benefits from this investment. Logistics costs have been reduced by 20% and finished goods inventory has been reduced by as much as 40%.
In the coming year, we plan to further enhance our one-touch supply chain by allowing customers to select and customize system software through a Web portal in advance of shipment. Our goal is to fully configure systems at the supplier site, rather than at the point of installation so that systems arrive ready to use out of the box.
Through these ongoing efforts, we continue to increase customer satisfaction, improve our business and differentiate ourselves from the competition.
Eugene McCabe is executive vice president of Santa Clara, Calif.-based Sun Microsystems Inc.
