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How Oracle Chose a Five-Day Lead Time for Servers

Oracle Corp. is widely recognized as one of the largest software companies in the world. Founded in 1977, Oracle has developed and sold database management programs, applications, and other software products for decades, amassing more than 147,000 customers in 175 countries. In its 2019 fiscal year, Oracle posted $39.5 billion in revenue.
But less well known is that Oracle also manufactures computer hardware. The company got into the hardware business in 2010 when it acquired Sun Microsystems, which at that time was considered one of the leading makers of engineering workstations and servers.
With revenues today of about $2 billion, Oracle’s Sun server business represents only a fraction of the company overall. Still, its production volume of about 6,000 server units per year feeds both the commercial market as well as Oracle itself as the company continues to grow its data center footprint worldwide.
Most notably, Oracle quotes a five-day lead line on server orders. How it is able to do so was the subject of a Manufacturing Leadership Council plant tour earlier this month at Oracle’s 80,000-square foot manufacturing facility in Hillsboro, Ore.
MLC members learned about Oracle’s production model, its supply chain management operation, its emphasis on quality, and saw the company’s first steps into employing Internet of Things technology on the factory floor.
The Hillsboro factory, which assembles and tests more than 70 different types of server products including Oracle’s Exadata database server, traces its roots to the early 1970s under a company called Floating Point Systems, a manufacturer of attached array processors and so-called mini-supercomputers. FPS was sold to Cray Research, a maker of supercomputers, in 1991.  In 1996, Silicon Graphics acquired Cray, and shortly thereafter Cray’s Business Systems Division was sold to Sun. In addition to server assembly, the Hillsboro facility also plans for other products such as Oracle’s Micro POS equipment.
Over time, the factory’s fixed lead times have evolved. In 2005, for example, lead times stretched from 10 to 50 days. By 2010, the factory was able to offer eight- to 12-day lead times. And in 2015, a decision was made to fix lead times at five days.
“The five-day lead time was a choice,” said an Oracle executive during the tour. “The prior model had a lot of variability. But we wanted to increase customer satisfaction. And It is much easier to communicate a fixed lead time to a worldwide sales force.”
The Hillsboro factory employs a build-to-order assembly model that encompasses six external manufacturing partners. The internal process consists of mechanical assembly, cable assembly, testing, packing, and shipping. Data center standard 78x24x40-inch servers, each with up to 32 racks, are assembled in the factory. Oracle software is loaded into the systems and engineered to work with the hardware.
Customers order servers using Oracle’s Configure Price Quote Configurator system, which enables assembly instructions and testing specifications. The factory’s supply chain management process embraces a classic design, source, plan, make and deliver model. The supply chain is managed using Oracle’s supply chain cloud-based applications.
The entire manufacturing and assembly process, including supply chain partners, spans 20 to 24 weeks, Oracle officials said.
In one area of the production process, Oracle recently implemented an IoT application it calls “digital bins”, plastic box-like structures that are filed with components used in assembly whose weight is monitored by sensors that convert weight to piece counts. The technology is from a company called, appropriately enough, of Long Valley, N.J.
When components are used and the bin’s weight is reduced, the bins send out a replenishment signal. Managers receive an e-mail alert when a signal is sent. Factory officials said the digital bins are more accurate than physical counts of a bin’s components.
Oracle officials said the digital bin implementation is just the first step they are taking with IoT. “This is something that we really want to leverage to a full extent,” said one Oracle executive of the IoT. “We are looking to connect with our other manufacturing partners and get a better understanding of systems and data around our ecosystem.”
Asked about any “unintended consequences” that occurred as it was establishing its five-day lead discipline, Oracle officials said a measurement called the “atrocity metric” was set up to monitor mistakes that happened more than once.
“There were a lot of surprises that you didn’t think would pop up,” said one Oracle official. “Often times it would be an area of the supply chain that didn’t deliver and created a lot of problems on execution. If you have to reschedule an order twice, that’s an atrocity.”
The atrocity measurement worked, Oracle officials said, because it challenged the “will power” of staff members and enabled them to understand that they can overcome any challenge or obstacle.
A highlight of the tour was Oracle’s discussion of its sustainability efforts. The Hillsboro plant recycles 95% of its waste. In June, Oracle won the Manufacturing Leadership Council’s High Achiever Award in its Sustainability Leadership awards category for its Take-Back Sustainability Program.
Looking forward over the next few years, Oracle officials said they would like to see a number of supply chain advances take place, including tighter data integration in the chain.

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