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


S&DCE: How were you thinking about return on investment in the project?

McCabe: We had two big selling points for the project. We previously had three large distribution centers — one in the United States, one in Europe and one in Japan — and the biggest cost savings were related to closing those, which we did actually last July [2004]. Then the second biggest selling point was reducing the inventory that had been in the distribution centers, which we have done as well. So the ROI was based on closing the centers and taking the inventory down, and based on that the project paid for itself in something like two months. And, of course, the single biggest "additional" ROI was that the predictability of our shipments has gone up dramatically.

S&DCE: Looking back, what might you have done differently in implementing the new process?

McCabe: The single biggest thing we would have done differently is to put "off switch" into the system. We didn't have an easy off switch because when we looked at the amount of data transfer necessary to make it come up, it was huge, and the IT people believed that once we ran a number of transactions, we could never reverse it and go back to the old system. So we brought it up without the ability to go backward. I would never ever again do that in my life, because a week after we brought this up, I would have happily turned it off just to give us a breather to fix some of the problems.

S&DCE: Could you point to some of the success factors that you see as being critical to making a project of this scope succeed?

McCabe: With a project like this, the biggest success factor is the willingness to drop functionality to hold a schedule. We held the January date come Hell or high water. And if something looked like it wouldn't make it, we backed-out that functionality rather than extend the schedule to incorporate it. The difficulty is, once you start slipping schedules other stuff gets worse — you try to add something else in to make up for it because you've got more time. But we were very, very rigorous on holding to the schedule.

S&DCE: Looking ahead, how is Sun building on the CFIT process?

McCabe: If you look at how computers are sold and integrated, the supply chain typically doesn't end when you ship a box. There's usually a lot of installation, configuration and software loading that happens at the customer site or maybe at an integrator somewhere downstream. We've also taken a look at that part of the supply chain, and we introduced a capability in some of the Sun factories where we could fully integrate and configure systems, load the software and ship it to the customer so that it's ready to use. Internally we call that "customer ready systems," or CRS.

In the future we want to put that capability back into our suppliers as well, so that the fully integrated product would go from our suppliers to our end customers, ready to be used, with all the software and everything working on it. We believe the combination of CFIT plus the CRS capability will actually change the supply chain for the computer industry, "virtualizing" a couple of steps in the supply chain — the warehousing, the rack integration and software configuration, and system integration — and taking two significant steps totally out of the supply chain. Internally we call it a "one step supply chain."

S&DCE: Talk about your own role in the program?

McCabe: The biggest role that I played was championing the project against resistance and the opinion that it was impossible because nobody had ever done it and it couldn't be pulled-off. After we brought it up, it really was painful for about two months, and my role in that period was to help with air cover and with driving rapid decisions to get fixes through the process. The other role I played in this was driving the concept that getting it 80 percent right now is significantly better than getting it 99 percent right in five years. That was probably the biggest battle in bringing this up, just getting it up and then fine-tuning it as you go.

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