Exam Case. 2 - Owens Corning's Enterprise System Struggle In the early 1990s, Owens Corning was Corning was a United States leader in the production and sale of such building materials as insulation, siding, and roofing, but management wanted the company to grow. he company had only two possible paths to growth! offering a fuller range of building materials, and"or becoming a global force. o increase its range of products Owens Corning decided to ac#uire other companies. o become a global force, management management reali$ed the company would need to become a global enterprise enterprise that could coordinate the acti%ities of all of its units in many different countries. &ead#uartered in oledo, Ohio, Owens Corning had been di%ided along product lines, such as fiberglass insulation, insulation, e'terior siding, roofing materials. materials. (ach unit operated as a distinct entity with its own set of information information systems. )he company had more than *00 archaic, infle'ible, and isolated systems.+ (ach plant had its own product lines, pricing schedules, and trucing carriers. Owens Corning customers had to place separate telephone calls calls for each product product ordered--ordered---one one each for siding, siding, roofing, roofing, and insulat insulation. ion. he company company operated operated lie lie a collection of autonomous fiefdoms.
Owens Corning management management belie%ed that implementing implementing an enterprise enterprise system could sol%e these problems. he company selected enterprise software from S/ to ser%e as the foundation for a broad company o%erall. he primary intent with S/ was to totally integrate our business systems on a global basis so e%eryone was operating operating on the same platform with the same information, information, answered answered 2ennis Sheets, sourcing manager for the insulation and roofing business. Sheets wanted to centrali$e purchasing. /rior to S/, he said, we were buying widgets all o%er the world without withou t any consolidated nowledge of o f how much we were buying and from whom. 3ow 3o w 4using S/5s 6"7 software8 software8 we can find out how many widgets we5re we5re using, where they5re being purchased, purchased, and how much we paid for them, 4allowing8 us to consolidate the o%erall ac#uisition process. 3ow, he added, we can. . . mae better business decisions and better buys. Sheets e'pected the company5s material and supply in%entories to drop by * percent as a result.
&owe%er, the pro:ect to install S/5s enterprise enterprise system would ultima ultimately tely cost Owens Cornin Corningg about ;100 million and tae se%eral years, too e'pensi%e and time consuming to be :ustified only by the reasons gi%en by Sheets. he company hoped that the new system would also enable it to digest ac#uisitions ac#uisitions more easily. Owens Owens Corning wanted to ac#uire other companies to e'pand its product line so it could cou ld increase sales from ;*.9 billion in 199* 19 9* to ; billion within a few years. hat meant that Owens Corning would ha%e to digest the archaic, infle'ible systems
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from the companies it purchased. If Owens Corning were to become a global enterprise, it would need a fle'ible system that would enable the company to access all of its data in an open and consolidated way. (6/ e'perts point out that simply con%erting to (6/ systems does not sol%e companies5 problems. Unless a company does a lot of thining about what its supply chain strategy is and articulating what its business processes are, these tools are going to be of little use, e'plained
Owens Corning5s pro:ect began with its insulation group, and those on the pro:ect team understood this. hey undertoo a redesign process before implementing S/5s 6"7. hey set up cross-functional teams because >e had to identify the handoffs and touch points between the %arious functions, said
&ow did the first (6/ pro:ect go? O%er a weeend in hen we first went li%e with S/, it was a tough time. &e said that o%erall producti%ity and customer ser%ice dropped sharply during the first si' months. >hen you put in something lie S/, it5s not a mere systems change, he said. ou5re changing the way people ha%e done their :obs for the past *0 years. he first problems that surfaced were technical. ccording to Bohns, application response time had increased from seconds before (6/ to minutes under the new system. Other technical problems also emerged. Dor e'ample Bohns said, he functionality wasn5t woring the way it was supposed to. Bohns belie%es the source of these problems was inade#uate testing. he first wee 4after going li%e8 we :ust focused on the technical issues, said Bohns. he team further tuned the software and o%er the ne't wees response time reduced to an acceptable speed, and slowly the software began operating smoothly. 2
&owe%er, after we fi'ed some of the technical problems, we started peeling bac the onion and saw that this was much bigger than a technology problem, e'plained Bohns. >e saw that there were problems in the business, problems with the way people5s new roles had been defined, communication and change management issues, and business process issues. Dor e'ample, the S/ system demanded that the entire corporation adopt a single product list and a single price list. Staff members initially resisted. Owens Corning employees had not been properly trained and they were o%erwhelmed, resulting in a lot of errors. Bohns e'plained that at Owens Corning we underestimated the impact that swapping out all our old systems would ha%e on our people. Users had indeed been properly trained on their own functions, but (6/ systems are integrated, and the users did not understand the impact their wor was ha%ing on other departments.
(6/ systems are comple' and errors ripple throughout the system. >hen using the old systems, employees had time to correct data entry mistaes, and if they were not caught, they only affected the local function. &owe%er, now that they were using 6"7, the databases are immediately updated. hus, for e'ample, the data flows instantly from sales to purchasing, production and logistics systems. Bohns offered another e'ample. If you5re at a warehouse, and you don5t tell the system when a truc is lea%ing the doc, the truc can still lea%e, but the customer will ne%er get an in%oice for the goods. ccounting won5t find out later because the transaction will ne%er get to them. Such errors can be costly. Users needed to be more careful as they did their :obs. o moti%ate users to wor with more care, they needed to understand the comple'ities of the system. hey had to now how their errors would affect other worers and e%en company profitability.
o address this problem the company #uicly instituted a new training approach. raining now would include information on the larger system and its comple'ities so users would understand the impact of their wor. Under the new training regimen, all employees were denied access to the system until they had passed a test and became certified. hose who failed the test had to return to training until they could pass it. bout *0E of Owens Corning employees ne%er passed the test and had to change :obs. his :ob shifting was massi%e and timeconsuming, causing organi$ational disruption. >hereas the original pro:ect training was budgeted for @E of o%erall costs, training e%entually consumed 17E of the budget.
Customers also suffered. Owens Corning had been nown for its e'cellent customer ser%ice, but the #uality of that ser%ice declined sharply after the S/ system went li%e.
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a great deal of personnel time rebuilding relations with its customers while simultaneously ha%ing to repair both its organi$ation and the software installation.
(6/ implementation problems of this type are common. ccording to =arry >ilderman of the hy? =ecause (6/ systems are so comple'. he company may not understand all that needs to be done in preparation.
&ow successful was the whole pro:ect? e made each mistae only once. (ach deployment 4in the rollout8 got better. Dor instance, >e do a lot more testing now before we go li%e, he said, to mae sure that all the different pieces of the system wor together. ith our old system, we didn5t now what in%entory we had in stoc. >e would ha%e to chec around and get bac to the customer. oday, he continues, we can see what in%entory is a%ailable, when it will be produced, and who is the lowest-cost carrier. >e can commit to the customer before we hang up the phone. &e noted, howe%er, that the changes ha%e been massi%e. &e estimates that about 10,000 people were in%ol%ed with the reengineering effort. Bust about e%erybody5s role in the organi$ation has changed.
he (6/ systems rollout was completed in *000. 2uring those years, Owens Corning ac#uired and integrated 1@ companies, successfully e'panding their product offerings. Company sales ha%e reached ; billion annually. =ecause of the new system, Owens Corning has been able to reduce its in%entory significantly, while centrali$ing coordination of %arious functions and di%isions. Fot si$e and machine allocations ha%e become more efficient. he company can perform production planning and control globally because it has one uniform system to wor with. he integrated system lets the company le%erage common carriers and tae ad%antage of o%erlapping transportation routes.
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Organi$ationally the role of Owens Corning5s information systems department has changed dramatically. /rior to the enterprise system pro:ect, the information systems department saw its role as limited to technical support. It used to be that if there were problems with the system, the IS staff would chec it to see if it was running properly, and if it was, it would throw the problem bac to the business units to sol%e. Since transactions flowing through the enterprise system impact the entire business, the information systems department has become responsible for the entire business problem. &owe%er, the information systems department does not try to sol%e business problems alone. hey only act on them if they ha%e the full in%ol%ement of the business units.
Unfortunately, Owens Corning is facing a ma:or problem unrelated to its information technology. On hursday, October , *000, Owens Corning filed a petition for reorgani$ation under Chapter 11 banruptcy protection. ccording to Owens Corning, the company too this action in order to address the growing demands on its cash flow resulting from its multi-billion dollar asbestos liability. he filing will enable the company to refocus on operating its business and ser%ing its customers, while it de%elops a plan of reorgani$ation that will resol%e its asbestos and other liabilities and pro%ide a suitable capital structure for long-term growth. he company claims it will emerge from banruptcy by *007. &owe%er, Owens Corning has continued to build for the future. Dor e'ample in 2ecember *001, it purchased 2en%er Colorado5s >all echnology. 3onetheless, we will be unable to :udge its I success until after it emerges from banruptcy.
Sources! >all echnology =ought by Owens Corning, The Denver Business Journal , 2ecember G, *001. (ileen
Colin, Owens Corning Uses =roadHision Software o /ersonali$e >eb Site, InformationWeek.com, Buly *@, *001 6a:agopal /alaniswamy and yler Dran, (nhancing or! Integration, Information >ee, September **,199@ im
Bohn (. (ttlie, he (6/ Challenge, $utomotive Manufacturing % !ro"uction , Bune, 199K and Boseph =. >hite, 2on Clar and Sil%io scarelli, /rogram of /ain, The Wall Street Journal ,
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