Sun Microsystem: Managing

the Supplier Relationship

Group 1
Shubham Gupta
Rahul Sadhu
Kaushal Seth
Avneesh Bansal
Suraj Kandoi
Ameya Shire
Suman Sarkar
Company Background
• It is the leading supplier of enterprise computing products and
network workstations etc.
• It has 34% market share worldwide and some of its competitors
include HP,IBM, DEC, etc.
• They are highly cost focused company and is growing at a rapid pace
• There is significant pressure on SUN because of continuous
technological advances of personal computers
Business model
• They use a mix of standard industry components and 2 to 3 key
differentiators on which they are leading edge
• Standardization leads to lower cost due to economies of scale
• key product differentiators are: Scalability, Open System and
Proprietary Sun Technologies
• They use leverage model for manufacturing
1. Buy components/ Systems; assemble in house
2. Make and buy components/systems; assemble in house
3. Buy fully finished systems
 Supplier Management
• Supplier management side comprises of VP of supplier management,
GCM, CM
• GCM heads multiple commodity managers and have 10-30 years of industrial
experience
• CM are responsible for managing relationship with suppliers, understand
there technological and manufacturing capacity
• CM’s are also responsible for maintaining score card of suppliers, act as point
of contact and internal advocate of the suppliers

Identification of Supplier Supplier Logistics

Negotiation Supplier Liaison
needs Identification communication Management
Identification of needs:
• Establish product requirements
• Understand technical direction
• Formulate 3-5 years strategy
Supplier Identification
• Determine make vs buy
• Pick sole-vs.-multiple suppliers
• Understand supplier capabilities; technical & manufacturing
Supplier communication
• Document product requirement
• Formulate an RFQ
Negotiation of Terms
• Develop contract agreement
Supplier Liaison
• Manage the scorecard
• Communicate with suppliers
Logistics Management
• Convey forecasts
• Control inventory costs
• Manage end-of-life cycle
 Lead-time rating Scheme
Demostration lead time Award points for lead time (max = 10)
At or below committed lead time 10
Less than 5% above committed lead time 6.6
5% to 9.9% above committed lead time 5
10% to 14.9% above committed lead time 3.3
15% to 24.9% above committed lead time 2
25% or more above committed lead time 0
Calculation of Lead-time award point and site roll-up score
Difference
Average Award point of Site roll up
Sun Part Number of compared to % above target
demonstrated lead time (Max score for lead
Number line items comittment of 30 of 30 days
in days = 10) time
days
17560 20 30 0 0% 10 0.95
17575 70 30 0 0% 10 3.33
17585 10 45 15 50% 0 0
17590 30 37 7 20% 2 0.29
17595 80 30 0 0% 10 3.81
Total 210 8.4
Price Index, as determined by ratio of Target Price to Actual Price
(Target Price)/(Actual Price) is (Target Price)/(Actual Price) is
Greater than or equal to less than Price Index
1.00 n/a 1.00
0.99 1.00 0.99
0.98 0.99 0.97
0.97 0.98 0.94
0.96 0.97 0.91
0.95 0.96 0.88
0.94 0.95 0.85
0.93 0.94 0.83
0.92 0.93 0.81
0.91 0.92 0.80
0.90 0.91 0.79
0.89 0.90 0.79
0.88 0.89 0.78
0.87 0.88 0.77
0.86 0.87 0.76
0.85 0.86 0.75
0.84 0.85 0.74
0.83 0.84 0.73
0.82 0.83 0.72
0.81 0.82 0.71
0.80 0.81 0.70
0.00 0.80* Target/Actual - 0.12
* Minimum price index is 0.50
Sample Calculation of the Scorecard
Score
Category Global Scores
Quality 27
Leadtime/ Delivery/ Flexibility 26
Technology 20
Support 15
Total for Performance Matrix 88
Price Index 0.98
Score Score 86.24

Total Cost of Ownership (TCOO) is calculated:

TCOO= [(100 – Score)/100]+1
 SMCC Scorecard- Electrical Components Quarter:
SUMMARY - SUPPLY UNIT or GLOBAL RESULTS FY:
Scorecard for: Commodity Rated: Done on:

Category Subcategory Data or Comment Max Points Actual Points Score

Receiving Inspection   -8.00   

Total Failure Rate (RPM/DPM)   20.00   

Failure Vertification/ Retest   2.00   

Quality
FA/ Corrective Action   8.00   
Purge or Stop Ship   -10.00   

PPA, DOA, or Field Problem   -10.00   

Quality Subtotal:  30.00  pts

Lead/ Delivery/ Flexibity Leadtime   10.00   

On-time delivery   15.00   
Flexibility   5.00   
L/D/F Subtotal:  30.00  pts
Product   9.00   
Technology Manufacturing   16.00   
Technology Subtot:  25.00  pts

Materials/ Purchasing   10.00   

Support Sustaining Technical   5.00   
Support Subtotal:  15.00  pts
Performance Matrix Total 100.00   
Price Index 1.00   
Score = performance matrix*price index 100.00   
Total Cost of Ownership = [(100- Score)/100]+1 Goal: 1.00  
Prior Performance Matrix Score:
Prior Price Performance:
Prior Total Cost of Ownership:      
Thank You