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 Page 1
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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...
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