Owens Corning plans to go 80% paperless by end-2004
David Hannon -- Purchasing, 1/15/2004 2:00:00 AM
Owens Corning was ahead of the game when it started with hosted e-auctions in 1999 from Free-Markets and later moved to a self-serve tool from what is now Perfect Commerce. But the speed and cost benefits realized with shorter transaction cycle times were not enough for Owens Corning. The building supplies giant soon realized that benefits achieved by automating its bidding process were often offset by slow or manual post-transaction processes.
For a company with an annual spend of more than $3 billion and using e-auctions extensively, Owens Corning was still dealing with a lot of paper in late 2001. Invoices, purchase orders and acknowledgements were being sent back and forth to suppliers—including those in e-auctions—by paper and fax. With workflow improvements coming from e-sourcing, the members of the centralized purchasing team at Owens Corning headquarters in Toledo, Ohio decided it was time to eliminate the majority of the paperwork and truly maximize the process improvement benefits gained from e-sourcing.
The Owens Corning purchasing organization set up an initiative with a goal of wiping out 80% of its paper invoices by the end of 2004, leaving only the remaining 20% of invoices to be handled in hard copy. The 80% represents the percentage of total spend that Owens Corning's centralized purchasing organization controls, while the remaining 20% of spend is decentralized. Owens Corning wanted a tool that would simplify the process as much as possible for suppliers. There were some suppliers already working with the company via EDI, but to get 80% of the invoices, there needed to be an even simpler method of connecting suppliers electronically. After reviewing the available tools, in early 2002 Owens Corning signed on with Advanced Data Exchange (ADX), an outsourced provider of EDI and XML translation services. ADX takes whatever the supplier has to work with and translates it into a usable electronic format for Owens Corning. Using the ADX network in addition to traditional EDI allows Owens Corning to exchange purchase orders and invoices electronically with a wider range of its suppliers and eliminate more paper processes.
According to Jim Hawkins, e-sourcing process leader, Owens Corning had four major goals when it launched the ADX implementation: hard dollar cost reductions, supply chain visibility, business process integration, and a common, standardized process for all suppliers.
"In phase 1 in early 2002, we signed up 200 of our biggest suppliers in terms of number of invoices electronically through ADX and another 100 suppliers with traditional EDI," says Hawkins. "We then ran into a situation where we had a number of invoices that would not post electronically to SAP. The invoice has to post—that is the whole point. So we made some changes in our processes to clean that up."
Owens Corning was so impressed with the results of the early work with ADX, it has since moved into the next phase of the project, connecting another 225 suppliers to ADX in November and 100 more on traditional EDI. The goal is to connect up to 2,000 of its suppliers through either ADX or EDI by the end of 2004, which would represent 80% of the paper purchase orders and invoices the company receives.
Another major benefit of getting the information electronically, according to Hawkins, is the decreased need to rework invoices that are received in the wrong formats or with the wrong information on paper. Going back and forth electronically in that process is much more efficient and Owens Corning expects to cut the number of invoices it has to rework by 70% by the end of 2004.
The electronic invoicing initiative is working in step with Owens Corning's increasing use of self-service e-auctions from Perfect Commerce. Starting in early 2004, suppliers participating in e-auctions will be told that as part of their online auction bids, they must agree to exchange invoices and purchase orders electronically with Owens Corning if awarded the contract.
Hawkins says suppliers have had mixed reactions to moving the process online. "We've had suppliers who have jumped on and built a relationship with ADX and even done this with their suppliers. And others really struggle or are not comfortable with the idea of being charged a subscription fee just to send invoices."
And while using ADX makes the transition much easier for smaller or less technically advanced suppliers, Hawkins says, "E does not necessarily stand for easy. Moving to electronic interchange is never as easy as you think it will be at first. ADX has been a good partner to us, but if you don't have good processes internally, you may have a tough time [automating those processes]."
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