Supply chain strategy and optimization in an outsourced environment

Abstract

Sun Microsystem's Network Storage (NWS) Division provides computer network storage hard disk arrays to accompany Sun's core server products. In recent years, all of the incumbent network storage providers, including Sun, have been squeezed by the combination of competitors encroaching on the low-end of the business and the increased commoditization of storage products. As a result, these incumbents are under pressure to reduce costs significantly, and are scrutinizing their supply chain to identify opportunities to improve performance. Most of the production of these storage products is outsourced through either OEM relationships or contract manufacturing, creating numerous challenges for managing the supply chain. This thesis sets forth a framework for improving supply chain performance, and applies it to the Sun's Network Storage group. The supply chain analysis framework used in this thesis suggests improving a supply chain by analyzing six key elements: Metrics, Benchmarking, Inventory Management, Cycle-Time, Design for Supply Chain, and Supply Chain Structure. Metrics were developed to improve supplier delivery. Benchmarking revealed Sun's competitive position.

(cont.) Inventory management was improved with the implementation of a min-max inventory scheme to select products. Cycle-time was investigated via a direct shipment initiative and test time investigations. The upstream component led to product development recommendations. And the supply chain strategy of postponement of customization concept was developed. Key learnings include the relevance of metrics, the difficulty of moving down market, and a greater understanding of the impact product development has on operations. The research for this thesis was conducted during an internship at Sun Microsystems, within the Worldwide Operations group, in affiliation with the Leaders for Manufacturing program at the Massachusetts Institute of Technology.