Owens Corning's Enterprise System Struggle

Owens Corning's Enterprise System Struggle

In the early 1990s Owens 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. The company had only two possible paths to growth: offering a fuller range of building materials, and/or becoming a global force. To increase its range of products Owens Corning decided to acquire other companies. To become a global force, management realized the company would need to become a global enterprise that could coordinate the activities of all of its units in many different countries.

Headquartered in Toledo, Ohio, Owens Corning had been divided along product lines, such as fiberglass insulation, exterior siding, roofing materials. Each unit operated as a distinct entity with its own set of information systems. (The company had more than 200 archaic, inflexible, and isolated systems.) Each plant had its own product lines, pricing schedules, and trucking carriers. Owens Corning customers had to place

separate telephone calls for each product ordered---one each for siding, roofing, and insulation. The company operated like a collection of autonomous fiefdoms.

Owens Corning management believed that implementing an enterprise system could solve these problems. The company selected enterprise software from SAP AG to serve as the foundation for a broad company overall. "The primary intent with SAP was to totally integrate our business systems on a global basis so everyone was operating on the same platform with the same information," answered Dennis Sheets, sourcing manager for the insulation and roofing business. Sheets wanted to centralize purchasing. "Prior to

SAP," he said, "we were buying widgets all over the world without any consolidated knowledge of how much we were buying and from whom. Now [using SAP's R/3 software] we can find out how many widgets we're using, where they're being purchased, and how much we paid for them, [allowing] us to consolidate the overall acquisition process." Now, he added, "we can. . . make better business decisions and better buys." Sheets expected the company's material and supply inventories to drop by 25 percent as a result.

However, the project to install SAP's enterprise system would ultimately cost Owens Corning about $100 million and take several years, too expensive and time consuming to be justified only by the reasons given by Sheets. The company hoped that the new system would also enable it to digest acquisitions more easily. Owens Corning wanted to acquire other companies to expand its product line so it could increase sales from $2.9 billion in 1992 to $5 billion within a few years. That meant that Owens Corning would have to digest the archaic, inflexible systems from the companies it purchased. If Owens Corning were to become a global

enterprise, it would need a flexible system that would enable the company to access all of its data in an open and consolidated way. ERP experts point out that simply converting to ERP systems does not solve

companies' problems. "Unless a company does a lot of thinking about what its supply chain strategy is and articulating what its business processes are, these tools are going to be of little use," explained Mark Orton, of the New England Supplier Institute in Boston.

Owens Corning's project began with its insulation group, and those on the project team understood this. They undertook a redesign process before implementing SAP's R/3. They set up cross-functional teams because "We had to identify the handoffs and touch points between the various functions," said Moke Morey, the division's ERP implementation project manager. He explained "My team, for example, had accountability for the process that runs from the time we need to buy something through the payment issuance to the supplier. Other areas, such as logistics and accounting, touch this process." The teams also kept in close touch with suppliers who needed to know what Owens Corning would require of them. As a result of the redesign, purchasing decisions were moved from the plants up to a regional level, enabling commodity specialists to use their expertise and the leverage of buying for a larger base to improve Owens Corning's purchasing position. The teams also decided to require that all suppliers have a capability to send the company digital information that could be fed directly into its enterprise system.

How did the first ERP project go? Over a weekend in March 1997 a team of about 60 people transferred legacy data into the SAP system, and on Monday morning the company went live. That morning Domenico Cecere, president of the roofing and asphalt unit, called the manager of his Medina Ohio plant to asked how it was going. "Better than expected," was the report. However, Owens Corning's director of global development, David Johns, later concluded, "When we first went live with SAP, it was a tough time."

He said that overall productivity and customer service dropped sharply during the first six months. "When you put in something like SAP, it's not a mere systems change," he said. "You're changing the way people have done their jobs for the past 20 years."

The first problems that surfaced were technical. According to Johns, application response time had increased from seconds before ERP to minutes under the new system. Other technical problems also emerged. For example Johns said, "The functionality wasn't working the way it was supposed to."

Johns believes the source of these problems was inadequate testing. "The first week [after going live] we just focused on the technical issues," said Johns. The team further tuned the software and over the next weeks response time reduced to an acceptable speed, and slowly the software

began operating smoothly.

However, "after we fixed some of the technical problems, we started peeling back the onion and saw that this was much bigger than a technology problem," explained Johns. "We saw that there were problems in the business, problems with the way people's new roles had been defined, communication and change management issues, and business process issues." For example, the SAP system demanded that the entire corporation adopt a single product list and a single price list. Staff members initially resisted. Owens