ERP plan cuts costs at factories

In the late 1990s, manufacturing operations at Corning's display technologies division were aligned with customers on a regional level for example, the plant in Japan served Japanese customers; the U.S. plant served U.S. customers. But when customers wanted more computer displays than ever, the business model wasn't scaling.

"As we looked at the plan, we learned that our existing model just wasn't cutting it," says Corning CIO and Vice President Richard J. Fishburn.

In 1999, Corning set about improving supply chain efficiency, but technology was the last aspect discussed. In fact, when brainstorming better models, Corning first asks managers to "listen to what their operational people are saying," says Fishburn. Only then are opportunities defined, followed by business benefits and, finally, mechanisms to determine whether goals were met.

Corning was a pioneer in putting business processes first rather than following the classic enterprise resource planning (ERP) philosophy of making business fit the technology. Jill Jenkins, an analyst at Current Analysis Inc. in Sterling, Va., says the old thinking was, " 'If I optimize one piece and optimize another piece, when I put it together, it will be optimal' but it wasn't."

Technology

At Corning, the approach was different. In the case of display technologies, "we needed to create the virtual factory," says Fishburn. Display glass is manufactured in two stages: The melting process takes raw silica and produces sheets of glass, and then a finishing line cuts those down to various sizes. Since a melting line costs 10 times as much as a finishing line, Corning decided to keep its melting operations one in the U.S. and one in Japan but use its global finishing lines more strategically. Only then was technology assigned to solve the problem: a supply chain module was added to Corning's PeopleSoft Inc. ERP software.

Business benefits

The project has stayed on schedule and under budget, and is paying for itself, even though the rollout won't be completed until next year, says Fishburn. And the project costs less than a new melting operation. "It used to take us five days to do the planning for tomorrow's production. Now we can do it in an hour," he says.

Bottom-line payback

Improved planning efficiency meant Corning didn't have to build excess capacity. And instead of using whatever inventory is on hand, which creates leftover glass that's expensive to dispose of, it can now manufacture only what's needed, in the most optimal sizes. Also, fewer orders have to be rushed to reach customers on time.

Lessons learned

Fishburn says he knew he had business sponsorship from the beginning. In senior management meetings, for example, one former critic "would very clearly articulate the fact that this was the premier project that exists for this division," he says. "As the CIO, your greatest success is to sit in the background and let your operating peers talk about their projects."

Schwartz is a freelance writer in Arlington, Mass.

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