The Sourcing Oracle? Making the Sun Deal Pay Might Not Be as Easy as it Looks

By Jason Busch on February 10, 2010

I found a recent article by Dave Hannon at Purchasing rather insightful in its examination of some of Oracle’s strategy to eke out every ounce of shareholder value possible through its acquisition of Sun. According to Hannon, “On a conference call … Oracle CFO Jeff Epstein outlined the company’s strategy for Sun, starting with costs. And Epstein was quick to emphasize that ‘the largest cost at Sun is cost of goods sold, the product cost, and so the way to save money is by figuring out a better way to produce products at lower costs.'” Dave goes onto suggest that, based on Oracle’s statements, “Two major components of Oracle’s cost reduction plans for Sun are SKU rationalization and consolidating its manufacturing operations, both of which will require some high-level sourcing strategy.”

Oracle appears poised to focus not only on unit-cost reduction through sourcing and supplier rationalization strategies, but also on working-capital management strategies based on a “build-to-order supply chain and not a build-to-inventory supply chain.” The bottom line, according to Charles Phillips — yes, that Charles of recent NYC-billboard-mistress fame — is that “Sun’s supply chain was very complicated … we are going to make it a lot more efficient.” While Oracle’s talk is great in this regard, truly getting the operational value out of its Sun acquisition might prove more difficult in practice…