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CASE: OIT-34
DATE: 03/25/04
ESOURCING STRATEGY AT SUN MICROSYSTEMS
Introduction
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In May 2000, Sonia Syngal, director of procurement strategy and supplier relations at Sun Microsystems, needed to make a critical decision. Under Sonia’s leadership, the company had just completed its first “dynamic bidding” pilot tests and as a result, cut its sourcing costs by 30 percent. Given these results, the potential for cost cutting via the implementation of a dynamic bidding system on a widespread scale at Sun was enormous; on an annual basis, the company was currently spending about $9 billion in direct materials procurement.
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While the potential to significantly cut costs was clear, Sonia had several other issues to consider. First, Sun had invested heavily in developing strong relationships with its suppliers. How would these suppliers respond if Sun were to begin awarding its contracts via online auctions? Could Sun potentially damage its relationships with key suppliers? Also, at the time, the market demand for servers was extremely high, but the supply of the key direct materials Sun needed to produce its servers was so scarce that suppliers literally were choosing which customers to satisfy. Sonia worried that if the suppliers were unhappy, they would walk away from Sun’s business and elect to work with other server manufacturers. In addition to its
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rP
os
t
CASE: OIT-34
DATE: 03/25/04
ESOURCING STRATEGY AT SUN MICROSYSTEMS
Introduction
op
yo
In May 2000, Sonia Syngal, director of procurement strategy and supplier relations at Sun Microsystems, needed to make a critical decision. Under Sonia’s leadership, the company had just completed its first “dynamic bidding” pilot tests and as a result, cut its sourcing costs by 30 percent. Given these results, the potential for cost cutting via the implementation of a dynamic bidding system on a widespread scale at Sun was enormous;...