This article originally appeared
in the February 1997 issue of PDBPR
SUN MICROSYSTEMS' EARLY SUPPLIER INVOLVEMENT
PROGRAM CONTINUES TO TAKE ROOT DESPITE LEADERSHIP CHANGE
As it continues to take root, Sun Microsystems' Early Supplier Involvement
(ESI) program offers proof positive that bringing vendors into the product development
game early pays off with improved results. When we first reported on ESI just over a year
ago (see BPR, December 1995), the still-new initiative looked promising, especially in a
company that earmarks about half its annual revenues for supplier purchases. But the jury
was still out. In the ensuing year, the program has continued to build up a head of steam
despite losing its original manager and operating for a period without a single
coordinator.
With a long history of close vendor
relationships, Sun views supplier management as a core competency. By keeping quarterly
scores of its top 40 suppliers to track such factors as quality, lead time, and technology
investment, it looks for ways to leverage those relationships into building better
products for less.
Sun conceived of ESI as a way to position
suppliers nearer the start of the new product development process. Sun's Supplier Council,
bringing together a group of Sun VPs with five suppliers (out of the top ten) represented
at the executive level, lies at the heart of its supplier strategy. The Council offers
high-level direction for supplier involvement, and monitors product pilot projects
throughout the company that incorporate ESI. These pilots help Sun to evaluate, on a
product-by-product basis, the effectiveness of innovative ESI processes, such as early
supplier awards and integrating suppliers into product development teams. The pilots give
the company a chance to test which supplier strategies work best by product.
An ESI manager helps to keep the Supplier
Council abreast of the lessons learned from the product pilots and to design the road map
for future ESI implementation. When the program lost its manager within its first year,
some six months passed before Sun was able to find a ready replacement. The experience
provided the company with an opportunity to see just how much ESI had penetrated the
product development process. ESI's new program manager, Kevin O'Loughlin, talks about the
program after coming on board.
Key Player Leaves; the Music Continues
What happens when a highly-visible new program
loses its day-to-day manager's voice? Until O'Loughlin stepped in, ESI continued to
function without a single coordinator. Nonetheless, O'Loughlin reports, by the time he
arrived the program had acquired sufficient momentum to stay the course. "Even
without an ESI manager, different people across the product teams were taking it upon
themselves to still drive the philosophy."
During the hiatus, the Supplier Council
continued to meet on a regular basis, with the manager of Sun's Programs group
pinch-hitting to fill the coordinator's void. In addition to seeing that the Supplier
Council received a steady flow of ESI data, he (as well as council members) provided an
audible drumbeat of support for the program at forums throughout the company. O'Loughlin
credits the Council with keeping the ESI message visible.
O'Loughlin acknowledges that going without an
ESI coordinator represented a hardship for product team managers and their teams. For one
thing, they lacked a significant source of ready-to-hand information and assistance, a
real problem given their need to focus attention on the product itself rather than a
program like ESI that supports it. Nonetheless, he credits his predecessor with
successfully instilling the fundamentals of ESI across the organization. While awaiting
the selection of a new manager, says O'Loughlin, different members of the pilot
teams--especially from operations and engineering--took over pieces of that function in
addition to their other responsibilities. Steady executive support for ESI sent a clear
message.
"When we began ESI, each particular
product had a pilot program. For example, we picked a PC interface board to pilot using
ESI. Within a year from starting, offshoots-- other product projects--began without being
formally initiated by an ESI manager. That tells us that support for the program was
sufficiently ingrained across the board throughout Sun that it didn't matter who
determined whether a project would fall under ESI. We see that as a sign that different
product managers have bought into this strategy."
Sun took several months before successfully
finding a new coordinator. David Hearn, manager of Sun's Programs group, explains that the
delay reflects the unique nature of the job and the difficulty in finding a manager with
all the right skill sets. Sun decided that it needed someone with a background in both
operations and engineering, as well as wide breadth of experience across the spectrum of
new product development processes.
O'Loughlin came to the job having already seen
ESI in action as a new product team member. During his nine years with the company's
operations division, he worked in the logistics and materials organizations as a buyer and
master scheduler. These jobs, plus experience as a new product program manager (including
a stint with an ESI pilot) equipped him with a close working knowledge of ESI. "I
came with a clear sense of what my concerns and issues were, and what I wanted an ESI
manager to bring to the table. Needing to know the new product development cycle in
general is essential to this job."
New Models From Experience
O'Loughlin began by interviewing as many players
involved with ESI as he could: suppliers, engineers, commodities managers, operations
project managers, and supplier engineers. His previous participation in an ESI pilot
guided him as well. He admits that he met initial frustration at the lack of progress, and
quickly developed a plan to build on what they already knew.
From his own experience, O'Loughlin reports that
he had an initial leeriness about what ESI could do to enhance new product development.
From that experience, he also observed that implementing ESI in the same way to every
product development project can cause problems. An ESI strategy, Sun has learned, works
differently for different products, depending in part on how much of the design and
development process the company sees it's in its interest to retain.
Notes O'Laughlin, "Each type of product
we make, be it a PC board or a whole system, will have a different set of assumptions
supporting its development strategy. When we initially developed ESI here, we started with
a model for how it might work. As you evolve the program across different types of
products, you learn that that model has to change, too. That's a major challenge we're
working with now. Do we develop one ESI strategy for boards, for complete systems, for
mass storage? We're finding that there's not one generic model that will fit every
product. I'm not sure we began with that understanding."
This insight helps explain why Sun is still in
the pilot stage with ESI. O'Loughlin also points out that pilots are in different stages,
and may get delayed, for reasons unrelated to ESI. As the pilots cross the finish line,
Sun looks to define ESI models for each business unit. The Desktop unit, for example, has
recently begun incorporating ESI in all its products.
For example, Sun works collaborates with some of
its prime suppliers on the design and development of ASICs, a highly complex product where
collaboration allows it to leverage its suppliers' best expertise. On the other hand, Sun
may choose to design on its own a PC board for a whole system, leaving it to the supplier
to purchase the materials and carry on from the design phase forward. This approach lets
Sun and its suppliers determine which competencies make the most sense for them to develop
by product, and where a supplier's involvement can make the most difference.
ESI Puts the Focus on Core Competencies
O'Loughlin points to two factors that decide
which approach to use. "One factor we consider is the manufacturing sophistication of
the supplier. Another is what we determine are the competencies Sun wants to develop for
itself. In the case of boards, Sun is determining which products it will continue to
design. Manufacturing may be a competency it wants suppliers to enhance. With regard to
ASICs, we've still determined that we don't want to farm out the design completely, but we
also want our suppliers to have input there since they perform the manufacturing--ASICs
are complicated products, and that complexity bears on our strategy."
As Sun incorporates this shift into its ESI
program, it is also moving to implement what O'Loughlin refers to as a multi-tier approach
to supplier relationships. Sun aims to de-centralize its supplier structure by working
most directly with its prime suppliers--say, external manufacturers--and leaving it to
those suppliers to manage the relationships with the vendors on the 'sub-tiers."
Suppose a key supplier serves as external manufacturer for a whole product system. Sun
will expect it to manage the relationships with suppliers who provide the disk drive,
boards, and sheet metal, all of whom need to know the system's components and specs. The
external manufacturer coordinates the cross-talk with the sub-tier vendors.
At the moment, notes O'Loughlin, Sun continues
to interact with sub-tier suppliers, depending on the product program, as well as to gain
their input for making the new decentralized model work effectively. For this, he says,
Sun will need to ensure that it provides the external manufacturer with all of its product
criteria, "all of our quality requirements, everything that bears on what the
supplier needs in order to give us a final finished product to send to the customer."
Product Data Management: ESI Opens the
Door
Sun does not intend to tell its prime suppliers
how to manage the sub-tier vendors, looking to them to keep the channels operating
smoothly in a way that works best for the suppliers in that sub-system. At the same time
says O'Loughlin, Sun is paying more attention to the value of developing an
effectiv electronic network that will allow for across-the-board information sharing
throughout the entire product development process.
This will need to be a network accessible to a
wide variety of supplier-partners that permits easy transfer, say, of CAD files, as well
as e-mail connections and file upgrades. O'Loughlin explains that Sun expects to have only
its prime suppliers directly hooked up with it in the electronic loop, although sub-tier
vendors will need to participate in planning the system. Sun expects to define electronic
product data exchange as a criterion for relationships between key suppliers and those on
the sub-tier.
Before ESI can truly come of age, O'Loughlin
says Sun needs to define satisfactory metrics that allow it to evaluate ESI's overall
impact on ne product development, a task he is working to complete with Sun's financ
community. Metrics under review include cost of ownership, time to market, material
cost, and product quality.
While acknowledging that the company is still
trying to define an objective way to measure the program, subjective evidence of ESI's
impact keeps rolling in. "We find our suppliers much more eager about ESI. We se
them taking the initiative on many different fronts, coming to us with problems and
issues, as well as new ideas for strategic direction." O'Loughlin observes that
Sun, in turn, is becoming much more open to going to suppliers with information than was
the case a year ago. A supplier will now find, for example, much more open sharing of
product design and technology road maps.
Visibility Brings Acceptance
O'Loughlin reports that Sun now has resident
suppliers serving on-site to monitor material demand and plan materials purchases based on
first-hand interaction with Sun teams. Design engineers, in particular, showed initial
hesitancy about ESI. That attitude is changing, says O'Loughlin: "Suppliers have
done a good job of proving they have expertise in certai areas where they can
actually add value to our engineering community. I think that's bee slow
sell that can only come with experience, and a place where the pilots have made a huge
difference." Start-up of a highly integrated electronic data exchange network
should accelerate that process, because it will make the suppliers and their expertise
even more visible, as well as available.
His job, says O'Loughlin, is to focus on mapping
out the ESI vision based on input from the pilots, and understanding the tactical
processes that support it To get there he is creating a small steering committees to
focus on clarifyin specific ESI issues and processes, such as defining ESI impact on
produc development costs, CAD layout, and resource levels. These are needed, he
says, to separate out ESI from specific product development problems, ncluding the
inevitable delays that make it more difficult to evaluate an ESI issue because it is tied
directly to a product development project. Membership on the steering committees is
balanced between Sun and suppliers; O'Loughlin looks for at least one high-level ESI
champion on each.
While ESI at Sun evolves, O'Loughlin says its
objective remains steady: leveraging Sun's supplier relationships to give the customer
best product value in the least time. By making best use of its vendors' expertise,
spreading product development information across its Sun-supplier product teams, and
aligning its own strategic interests with its suppliers' to reduce cost, Sun aims to make
its suppliers true product development partners.
Key Learnings:
Don't rely on a program manager alone to keep
alive the message about a key program like ESI.
Look for ways to separate out ESI process
issues from product development issues.
Don't assume that one ESI model works for
every product.
Use ESI to build competency strategies for you
and your suppliers.
Use pilot product development projects to test
ESI before applying it across the board.
Quotes:
"We found that when we got to certain stages in the new product cycle that it's
very hard to develop ESI strategies. Everyone's primarily focused on getting the product
out. We wanted to develop separate forums where we could work on the processes, then apply
them later to a product project. Our steering committees should help us get there
faster."
"When I first interviewed suppliers
about ESI to find out what was lacking, they focused on the issue of risk. Suppliers were
ready to take on risks, but they wanted a process that would involve risk-sharing with
Sun."
"Within the new product development
cycle, there will be certain competencies where Sun will want its suppliers to take the
lead, for example, manufacturing. Design will remain a core competency at Sun, with some
of our suppliers helping us develop that competency collaboratively."
Kevin O'Loughlin, Sun Microsystems
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