Oracle Sun is the product of a radical “makeover’

Following Oracle’s acquisition of Sun, the hardware manufacturer performed a dramatic one-year transformation by radically redefining its supply chain strategy.

Last week’s Supply Chain Council’s Executive Summit featured an engaging overview of the episode provided by Cindy Reese, senior vice president Worldwide Operations, Oracle Corporation (previously Sun Microsystems).

“The engineered supply chain model at Sun had become stagnant,” she recalled, “and was in need of a major makeover.”

The E&O inventory (Excess & Obsolete) had swelled to more than $20 million per quarter, said Reese, with parts and components spread everywhere in the four-tier global network. Sun was 90 percent reliant on outsourcing, and quality was just not a given at that point.

And quality, said Reese, was the one thing Oracle’s founding CEO Larry Ellison insisted upon.

“The first thing he said to us was that he wanted to be the best,” she said. “The best in everything. But he also wanted predictability, and that meant getting rid of a few products.”

Reese said that the Oracle culture is “simple,” and that part of the makeover meant cutting out low margin goods pressuring the value chain. All channel partners were soon told that inventory could not be returned, and that they would have to shed their distribution centers so they could build to order.

“Then we reduced our reliance on several 3PLs,” she said, “and went to just a few who could help us ship direct.”

The shorter lead time meant that partners would also have to keep their compliance house in order, said Reese, adding that Oracle Sun has zero tolerance for exporters who run into regulatory problems.

Meanwhile, Oracle Sun continued to move from a complex make-to-stock supply chain model to a simplified 100 percent make-to-order model. Using a “big bang” strategy, the company achieved this transformation in under 12 months using standard software while launching an entirely new product line.

“There are obvious pay offs when you do everything at once,” said Reese. “This was a situation that worked because failure was not an option.”

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