In recent posts on the requirements for Supply Management 2.0 and value-based sourcing, I banged the drum loudly about how it is imperative for supply managers to move beyond their cost focus and find new ways to contribute value to the business. A recent Purchasing magazine feature on the key role supply management plays in product development at Sun Microsystems is a great example of how to drive value for the business.

The must-read article highlights the impact Sun’s supply management group has on new product development in the following areas:

• Early supply involvement: Sun’s supply base development managers are involved at product inception, allowing them to impact product costs and performance and recommend innovative technologies from suppliers. This is in stark contrast to most manufacturing organizations, which don’t involve purchasing until after the design is locked down.
• Consumption management: Sun Vice President of Supplier Management Kurt Doelling says that his supply base development managers “are actively engaged with the design organization for the selection of suppliers and components,” ensuring that the product group “follows the proper technology roadmap” and avoids unnecessary and costly specifications. For example, the managers ensure that high-end, high-cost memory is not speced into a low-end server. This improves product costs and helps Sun maintain competitive pricing and market share for its low-end devices.
• Risk management and design for supply: Sun’s supply base team also suggests alternative parts based on performance requirements and supply availability. Says Doelling: “If a supplier is building a million standard power suppliers and Sun buys 100,000, Sun can double its demand and the supplier could easily support that increase.” Yet, suppliers would be challenge to meet such large volume boosts for a custom part.
• Target costing: Sun’s value engineering group — which is part of its supply team – also sets cost targets for new designs, suggesting different designs or materials to both meet performance requirements and beat cost targets.

Sun’s value-based supply management approach is a model for other organizations to emulate.