Owens Corning Case Study

Owens-Corning Case Study

Table of contents

1. Case Study Questions........................................................................................................... 1

2. Owens-Corning's Enterprise System Struggle......................................................................1

1. Case Study Questions

Read the Owens-Corning Case Study and then consider the following questions:

1. Describe the problems Owens-Corning had with its information systems prior to

installing its enterprise system. What management, organization, and technology factors

were responsible for those problems?

2. What management, organization, and technology problems did Owens-Corning face in

putting their enterprise system into effect?

3. How did implementing an enterprise system change the way Owens-Corning ran its

business?

4. Was installing an enterprise system the right solution for Owens-Corning? Explain.

2. 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

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product ordered- one each for siding, roofing and insulation. The company operated like a

collection of autonomous fiefdoms.

Owens-Corning management believed that these problems could be solved by implementing

an enterprise system. The company selected enterprise software from SAP AG to serve as the

foundation for a broad company overhall. "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 it's 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