Matt Johnson, Senior Director, Supply Chain Collaboration Product Strategy, Oracle, explored how a company can achieve more predictable lead times during his presentation at the 2016 Leadership in Supply Chain Think Tank in New York on June 23. In his presentation, “Our Path to a Modern Supply Chain in the Cloud,” Johnson discussed how Oracle was able to leverage a cloud-based supply chain.
According to Johnson, Oracle maintained a simple supply chain for its first 30 years. However, things changed after Oracle acquired Sun Microsystems in 2010.
“As a software company, we made software for supply chains, but we didn’t actually have to use that software very much,” Johnson noted. “Now, we [have] to eat our own cooking.”
The journey to using a supply chain system was a challenging one for Oracle.
For instance, the acquisition of Sun Microsystems brought about major changes for Oracle relative to supply chain operations.
Oracle previously offered software to customers, but the addition of Sun Microsystems enabled Oracle to extend its global reach into other areas, including cloud data centers.
“The nature of hardware businesses was changing, and cloud-based systems were growing,” Johnson said. “Now, instead of selling hardware boxes to customers primarily, we had a major internal channel of actually stocking the cloud data centers where people were actually subscribing to our systems.”
To ensure it could revolutionize its supply chain operations as well as meet customers’ needs, Oracle established service delivery goals.
“At the moment we committed to delivery, we would achieve 95 percent accuracy of our delivery,” Johnson pointed out. “We would have a standard lead time of five days. … We also would handle both expedited and standard orders.”
In addition, Oracle moved to an assemble-to-order model that would allow it to fix lead times, leading to more predictability.
“In our case, we had demand classes that were representing the customer segment of our business as well as the internal cloud data center of the business. … So what we did was create a global demand plan for each of those segments.”
At the same time, however, Oracle struggled to remain competitive. But to overcome this challenge, Oracle deployed a configure-to-order system that offered maximum flexibility and empowered the company to accomplish its goal of a standard lead time of five days.
“We have a much more streamlined product line that’s a fewer set of systems, but they are very purpose-built,” Johnson stated. “Today, the company uses a 100 percent direct ship from the assembly point to the customer, eliminating the distribution centers in between.”
A direct ship relationship requires a supplier to model the distribution point of the supply chain — something that can be exceedingly difficult for a company.
Fortunately, a company that remains disciplined can understand its supply chain operations and brainstorm solutions to distribution challenges effectively.
Between 2010 and 2015, Oracle was able to streamline its supply chain, which enabled the company to better support its customers as well.
So how was Oracle able to simplify its supply chain in only a few years?
Johnson pointed out that supply chain segmentation played a key role in his company’s efforts.
“In our case, we had demand classes that were representing the customer segment of our business as well as the internal cloud data center of the business,” he stated. “Each of them had different dynamics, demand patterns and priorities. So what we did was create a global demand plan for each of those segments.”
Furthermore, Oracle began to perform supply planning in terms of an extended supply chain.
“We have a much more streamlined product line that’s a fewer set of systems, but they are very purpose-built.”
Johnson noted Oracle evaluated its own facilities as well as modeled its contract manufacturers’ facilities as if they were its own.
“That way, we could isolate what aspects of the forecast and supply and demand work for each of the suppliers, and we would prevent consuming some of the supply that really had to be isolated to one contract manufacturer,” he said.
Lastly, Johnson stated collaboration was paramount as his company explored ways to develop a productive, efficient supply chain.
Getting everyone on the same page was difficult, particularly when it came to highlighting and understanding demand forecasts.
But with a consistent commitment process, Oracle was able to optimize the return on investment (ROI) in its supply chain efforts.
“We had an ongoing commitment process, and that feeds back into our demand forecasting and supply planning process,” Johnson said.
The end results of Oracle’s supply chain initiatives were significant, as the company was able to reduce its product lead time.
Oracle was able to accomplish its supply chain goals while reducing headcount and minimizing its resource consumption, too.
Supply chain management remains an ongoing priority, and Oracle will continue to explore ways to ensure it can make its supply chain operations efficient.
And with the right technologies and processes in place, Oracle or any other company will be able to find the best ways to streamline its supply chain operations day after day.
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