Interview with Cindy Reese of Sun Microsystems, Inc.

By Nancy Ellen Dodd, MPW, MFA

As Sr. Vice President for Worldwide Operations, Cindy Reese runs Sun's supply chain, manufacturing and logistics programs, which are recognized by the industry for delivering high quality and cost effective product execution to Sun's global customer base. Previously, as Sr. Vice President for Systems Operations, Reese was responsible for overseeing the manufacturing, supply chain management and operations engineering for the company's Systems products.

Cindy Reese's career spans more than 25 years in operations with experience in procurement, strategic materials management, manufacturing, distribution, and logistics. Since joining Sun in 1999, Cindy has held numerous leadership roles including: VP Storage Operations, VP Scalable Systems Manufacturing Operations, VP High End Operations, Executive Lead for the StorageTek integration, and various Director positions.

In 1999 Cindy joined Sun as Director of Global Supply Management where she managed the architecture of Sun's strategic supplier strategies and commodity management. In 2001 Cindy was promoted to senior director of Newark Site Operations, overseeing the manufacture of Sun's flagship Enterprise Server and Network Storage products. In 2003 Cindy was promoted to the position of VP High End Operations, responsible for Sun's three manufacturing sites in California, Oregon and Linlithgow, Scotland. In 2004 Cindy assumed the new position of vice president of Sun's former Scalable Systems Manufacturing Operations handling all SPARC-based products. In 2005 when Sun acquired StorageTek for $4 billion dollars, Cindy was asked to take on an executive role and was instrumental in leading the integration of 7,000 StorageTek employees into Sun.

After the successful integration of StorageTek, Cindy moved over to the Storage business as the VP of Storage Operations. Cindy had operations responsibilities for material procurement, supply management, operations engineering, internal and external manufacturing and re-manufacturing for all Sun products. In this role Cindy had responsibility for Sun's internal manufacturing sites in Hillsboro, Oregon and Linlithgow, Scotland, where Sun's high end server products are manufactured as well as Customer Solutions Integration operations for Sun's entire product line.

In May of 2008 Cindy was promoted to Sr. Vice President for Worldwide Operations.

Prior to joining Sun, Cindy was VP of Worldwide Materials with Silicon Graphics (SGI) and held executive leadership positions at RightWorks and Convergent Technologies.

Cindy's outstanding leadership has been recognized by prestigious awards such as the YWCA tribute to Women in Industry (TWIN) Award, which she has received twice: first in 1995, while at Silicon Graphics, and most recently in 2003 for her achievements at Sun Microsystems, along with Leadership Awards from both SGI and Sun. The TWIN awards are given throughout the country to recognize successful women executives for their outstanding achievements and leadership.

Cindy received the 2009 Top 25 Supply Chain Executives Award from the Global Supply Chain Leaders Group.

How important is supply chain management to Sun Microsystems' overall business strategy?

At Sun our goal in supply chain management is to make sure we are finding ways to grow both the top and bottom line results. We want our supply chain to be viewed as a strategic differentiator for the company.

What primary areas of focus (or key initiatives) should Sun Microsystems be looking at for Supply Chain Management?

We have been focusing on three main initiatives over the last year. The first is in the cost area. Our focus is not only in ongoing cost reduction programs but also in cost avoidance. Reductions come from commodity cost trends or new technology. We have two key terms we use in our cost management approach.

Design it right: Am I designing the lowest cost solution for the functionality being delivered?
Buy it right: Am I paying the best possible price for the solution?

Design it right targets consist of the following:

1.	Lowest cost design solution for a given function within the constraints defined by the product specifications
2.	Lowest known available cost (or estimated cost) for components based on the best in class sourcing strategy and available volume forecasts
3.	Generated early in the program (before first prototype builds, when possible)
4.	Represents product cost goal for production builds, NOT prototypes

Buy it Right targets consist of the following:

5.	Lowest cost purchasing or procurement solution for a given product or component based on the selected sourcing strategy, final design and current volume forecasts
6.	Generate at or immediately after the first prototype builds (once all design decisions have been finalized)
7.	Represents the cost goal for production volume builds

Cost targets are not stagnant and are subject to normal price erosion factors and commodity trends. Why do we need cost targets? Design it right cost targets provide an early estimate for marketing and design teams.

8.	Provides early cost estimates for product business justification
9.	Provides design teams with potential lower cost alternatives
10.	Enables design team to include product cost and supply chain impact in making design decisions
11.	Provides supplier management with cost alternatives and goals for supply chain decisions and negotiation purposes
12.	Enables competitive comparisons across products

Buy it right cost targets provide on-going goals for the supply team

13.	Provides data to continually drive down component or system level costs
14.	Provides goals for negotiation purposes

The second area is execution. Having a very predictable supply chain based on fixed lead time scheduling that is very flexible and cost effective is key in today's marketplace. The third area is quality. We have a very robust quality management system that measures our quality throughout the supply chain.

How has outsourcing enabled Sun Microsystems to be successful with these initiatives?

We are 96% outsourced. The focus on outsourcing has definitely helped us reduce costs. However this does not mean we have walked away from the areas we have outsourced. What we have learned about outsourcing is you have to pick the right suppliers and develop strong relationships with them. We trust our suppliers but also have a very focused verification process to make sure our suppliers are doing what we want them to do. Lastly we measure our suppliers against strict criteria across core areas of the partnership including cost management, quality, execution and NPI. If suppliers are not meeting our requirements we are not afraid to make a change.

The external manufacturing business can be a very sticky business. It's very expensive to change an external manufacturing partner, so we are highly focused on managing, measuring and improving our suppliers.

How is Sun Microsystems addressing the market's increasing focus on 'green' supply chains and reducing a company's carbon footprint?

This is an area of focus for Sun and one that the Company has been investing in for some time. We are quite proud of our progress. Sun's supply chain is truly global; our products are developed, designed, and manufactured by suppliers in more than 30 countries around the world. To ensure that Sun's suppliers conduct business in a way that is consistent with Sun's values, we instituted our Supply Chain CSR (Corporate Social Responsibility) program three years ago. The core component of this program is Sun's Supplier Code of Conduct, which mirrors the Electronics Industry Code of Conduct. Adherence to the Code is a contractual requirement for suppliers and drives Sun's supplier risk assessment process and Sun's supplier CSR audit program. Sun also requires that Suppliers are ISO 14001 certified and that they provide data on their greenhouse gas emissions.

In addition to ensuring that Sun's products are built under socially and environmentally responsible conditions, Sun works to ensure that products are handled responsibly at the end of their life. Sun's global product take back program increased the amount of product taken back from FY08 to FY09 by 57%. Of this product, only 0.5% ended up in a landfill; the rest is reused or recycled. While Sun is working diligently with its suppliers, customers, industry organizations and other stakeholders there continues to be a lot of work to be done to ensure that conditions all the way down to the raw material level meet Sun's standards.

What are the biggest INTERNAL challenges for manufacturers to achieve supply chain excellence?

Our biggest challenge as a company focused on innovation is managing the unique product line requirements that result from that innovation along with the varying levels of complexity.

What are the biggest EXTERNAL challenges in achieving supply chain excellence?

Making sure we can provide competitive costs given the number of unique products we offer and the volumes we ship.

Who is responsible for planning your company's business continuity when facing natural disasters, major disruptions or other geopolitical issues?

We have a formal Corporate Crisis Management & Business Continuity group that leads our risk management activities. Supply Chain Management is a key member of the management team.

What are the main skills and personal attributes that have helped you reach your current position?

Relationship management has been the key to my success. I'm very direct. I make it a point to look for the win/win solution. I'm very fair in my decision making, and I can pretty much work with anyone. I strongly believe in building a great team of people who are smarter than I am. I'm very metrics driven so everyone understands where they are at all times. I believe in constant investment in learning. Most importantly I love what I do. I look forward to coming to work every day, which keeps me focused and always looking for new opportunities to solve our challenges.

How do you grade Sun Microsystems' supply chain overall performance in client satisfaction?

We have an excellent reputation in the industry, most notably in the telecommunications sector. In this space we have actually taken over many of our customers' extended supply chains. We buy their third party components, load their custom designed cards, and load their software. Basically we build and test their entire solution. We rack and stack everything for them, and do their acceptance testing on our production floor. Many of our top telecommunications customers rate us as number one or two in our Quarterly Management Reviews (QMR's).

During this economic downturn, how do you keep your entire organization motivated?

We are making investments in our people, investing in training and cross training our team members. People love a challenge. Keeping your employees challenged and busy is key in a downturn. Our best motivation tool is engaging our team members in our improvement plans so they can feel that they are part of the solution.

Who do you rely on for advice?

I have many mentors with whom I have built relationships over the years. Some are external to Sun as well as the internal mentors I have. I also have built a strong network of peers who have similar jobs to mine in many different industries that I rely on for advice.

What have you learned as Sr. Vice President for Worldwide Operations that has surprised you or changed the way you do business?

The more you outsource the more you need to worry about places where suppliers hide costs. You cannot discount how creative people can be at hiding costs. During my early outsourcing days I believed when you outsourced something you completely disinvested in that activity. I quickly learned you are still accountable for the activities you outsource. You need a very tight verification process to watch everything you outsource or you will quickly find the savings you achieved from outsourcing have gone away.

Turbulent times should be the best time to implement changes. However, companies tend to paralyze due to uncertainty in the market or their human capital. What is your advice to maximize the opportunities to implement changes during tough times?

In every organization we have budgets which we get to control. I'm a firm believer there is always money and resources to manage that can lead to improvements. It's all about our choices as managers to make the right calls and not hide behind budgets or lack of resources as an excuse. We have to limit and focus what we are able to work on given our constraints, and make the most of managing excellence within them.

What attracted you to supply chain management?

I believe people who are in supply chain management are a different breed. I find with myself I don't do well with a project that takes three years to get it actually working or developed and ready. I work much better with something that I can see the start and the end, and I know exactly how to break it up into chunks to get the work done.

What would you say is the biggest challenge you have faced in your career?

In the 80s it was the big DRAM crunch where the whole industry went into this huge shortage in supply and no one could get their hands on any parts. I had contracts with suppliers that they weren't fulfilling. One of the outcomes from that big shortage, which basically shut all of the electronics industry down, was we found out we didn't have the right kind of agreements and contracts or the right strategic relationships in place that protected us. Back then we were all buying parts based on the best price at the date that we had to make the purchase.

We've had several challenges like the big dot.com bust. You basically didn't have to work hard to sell product-orders just came in. You couldn't build product fast enough. When the bust happened and things started to slow down, we didn't have the ability to react fast enough. There were small companies that had built their product around your needs and when your ordering stopped, it put them out of business.

In the 2000s we have had the recession. In a downturn it's said that people don't spend money, so you have to figure out how to do the same amount of work at a lower volume with a lot less people. Even though it was very difficult and many companies went out of business, we're starting to see recovery. People reacted much faster to the change and had different agreements and relationships with their suppliers in place. It's a whole different feeling from those other two events. I think the changes that we've seen and the investment that's gone into the supply chain and building professional careers over the last 20 years really showed in this last recession.

What would you say is the most rewarding experience you've had in your career?

By far, the most rewarding thing is that I have been blessed to work for companies that have put total trust in me, let me make mistakes, and have given me a safe landing to learn from those mistakes. The things that have shaped me and grown me into the leader I have become today are things that I've done wrong and the ability I've had to learn from them. Also fulfilling for me has been to be able to provide that same kind of leadership to people that I'm mentoring.

What are your thoughts regarding globalization?

I think it's a two-sided story. It's helped us really learn more about what total cost of ownership means, and it's given us a reason to be really competitive. At the same time it's helped us learn other things we need to think about. Is it always the right decision to go for the lowest labor cost? How many of your people it is going to take to manage them? What kind of language barriers do you have? If you're building it there, but the whole supply chain and all the parts are coming from some other place in the world, this is not going to be your best total cost solution. It's about understanding the full capability you need in the process and making sure you get the lowest total cost and not just the lowest labor cost.

How do you balance your work life with your personal life?

I'll be honest, I don't. I put in a lot of hours. I made different trade-offs when my children were young and I focused myself differently, but the minute it got to the point I didn't need to do that, I went right back into supply chain jobs because those are the ones I was excited to get up in the morning and go to work to do. I have global manufacturing going on all over the world and they work three shifts a day. I get phone calls every weekend. I check my email all the time. I've been able to balance it to where it works for me.

March 2011

See the recipients of the 2009 Top 25 Supply Chain Executives Award.