Anatomy of the Zero Touch Supply Chain

Eugene McCabe, architect of Sun Microsystems' Customer Fulfillment in Transit process, discusses the challenges and rewards of taking links out of the company's supply chain


McCabe: It took about 18 months from concept to the first shipment in January 2004. We started out with a mindset of getting it done quickly. There had been several attempts to do it previously in Sun, but they got stuck because they became overly complex. We started this version with the idea of getting it 80 percent right, bringing it up and then fine-tuning it. We took a "big bang" approach to rolling it out, all products and all geographies at one time, because most of our customers' orders are a mix of products from different sources, different areas, and we decided it was easier to bring everything up at once than to try to bring up, for instance, one product in one geography.

But it was an interesting big bang because we hadn't thought about several things ahead of time, and it took us a month of scrambling to get it all right. For example, we hadn't foreseen the impact of suppliers not being exactly precise around when they shipped. We had a process whereby, the day before the supplier was due to ship, they confirmed that they could ship it, and that dispatched the third-party logistics people to pick it up. But in some cases the supplier didn't actually have it ready at the time he said he would. As a result, you might have five out of six units in transit, but one hadn't left the supplier. You couldn't bring the other five back, so you had to figure out what to do with them in transit. We had to put in a synchronization process that didn't let anything leave until all the shipments were ready.

S&DCE: How did Sun bring its team together to create and implement the program?

McCabe: Mostly it was operations people on the team, but we had to bring in finance, for obvious reasons, around invoicing. There was a lot of export compliance work we had to do, since the product wasn't physically leaving a Sun site and going to a customer. Also, you need to do a lot of checking around denied party lists and countries you can and cannot export to. We had to maintain a very rigid control over that versus leaving it to our suppliers, so we formed a team of export compliance, finance, operations people, and then brought in people from our third-party logistics companies.

When we were ready to roll it out, we did a very large training exercise with all our suppliers such that they were ready to be able to do this. One of the things that made this a little easier for us is that we have a very rigorous supplier-consolidation process in the company that continuously reduces the number of companies with which we do business. When you look at several of our competitors who have high hundreds or several thousand suppliers, it would be nigh-on impossible to set up an environment like [the CFIT process].

S&DCE: Could you expand on how your suppliers were brought into the process, and how they were enabled to take part in this process?

McCabe: Each of the suppliers has computer access to our systems on their premises, so they can actually act like a Sun shipping dock — Sun doesn't have shipping docks any more, but the suppliers make the transactions as if they were a Sun facility. When they're finished with the product and it's ready to ship, they run the transaction that generates the customer invoice and allows them to get paid, and we buy the product and then invoice it. All that happens on the supplier's premises, and there was an extensive training exercise with our suppliers to enable them to use those systems.

S&DCE: From the customer's perspective, was anything different once you flipped the switch and the CFIT program took over?

McCabe: The predictability of our shipments — in other words, the percentage of time that we shipped on the day that we scheduled it — has actually increased significantly to record heights for the company, and the lead times for products actually have gotten shorter. So from a customer point of view, it should have been invisible, but the reality was it looks better now because there are fewer steps and fewer opportunities for error. One of the interesting side effects is that this process has enabled us to ship some of our products directly to our distributors' customers instead of shipping it first to our distributor's warehouse, so it's made our distributors more efficient as well.

S&DCE: Was there any pushback from Sun's suppliers?

McCabe: Some of the suppliers actually saw it as an opportunity because they thought they could leverage this capability across other customers. But some suppliers did see it as a burden because it was different, harder, more work for them. We did a lot of education, a lot of selling around the benefits of it, and after a couple of months they all came to view it as a better process.

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