Cleaning up the Paper Trail

In working to reduce the 40,000 paper invoices it receives from its supply base every month, Owens Corning has learned that the three most important elements of automating data exchange with suppliers are process, process and process.


Finally, the supplier responds back to the large enterprise through the network.
ADX typically charges a transaction fee to the enterprise's suppliers. The fees usually get rolled into a cell phone-like plan: A "starter plan" could run $69 per month for 25 transactions, plus $3 per transaction over that limit. Andy Duncan, CEO of ADX, says that the plan fee covers the entire cost of doing business with the solution provider, and ADX charges no additional fees for software, connecting to additional trading partners or support fees.

For those Owens Corning suppliers that were not already EDI capable, the company enlisted ADX to recruit and get them on the network. The company initially went after its top 200 suppliers, based on the number of invoices that they sent to Owens Corning, and this group was up and running by early 2002. By the end of 2003, a total of 425 suppliers were connected to the network, along with 200 doing traditional EDI, and in 2004 Owens Corning was aiming to connect with a total of 2,000 suppliers via ADX or EDI, representing 80 percent of its total previous volume of paper invoices.

Tweaking the Business Model

Certainly ADX's revenue model was attractive from Owens Corning's perspective, at least initially, since the company just had to pay a small fee to get connected to ADX, and then its suppliers would pick up the subsequent costs. But, according to Hawkins, while some larger suppliers were willing to sign onto the initiative, the transaction fee structure presented a problem for other vendors, who balked at covering the fees. Their concerns also made it more difficult for Owens Corning's category managers and commodity leaders to sell the idea of signing onto the ADX network, which affected the overall effort to fully engage the company's buying community in promoting the project to the supply base.

Ultimately, in order to meet its broader objective of e-enabling a large portion of its supply base, Owens Corning realized it would need to take a different tack. Explains Hawkins: "Essentially what we wound up doing is changing [the business model] so that the supplier pays a monthly subscription fee, which handles their support, and then we pick up each of the transaction fees for documents going back and forth."

By sharing the costs, Owens Corning was able to demonstrate the value for the suppliers in signing onto the program. And Hawkins says that suppliers do, in fact, enjoy benefits from joining the network. "We've already had suppliers comment on their payment being more consistent because we're better able to handle their invoices," he says. With the exchange of documents automated, Owens Corning employees also have better visibility into incoming invoices, purchase order acknowledgements and ASNs.

The Process Focus

Perhaps the most significant benefit for Owens Corning has been that it has had to focus on its own internal processes and how it handles each of the documents it was seeking to e-enable. For example, the company's efforts to automate the process of managing freight has lead to more education for the buying and accounts payable communities to drive consistency in how freight is handled.

With a target to automate 80 percent of its invoices this year, Owens Corning will still be left with some 10,000 paper invoices to process manually. However, the company figures it has achieved cost reductions through the project with ADX in both savings from automating invoice-related processes and from eliminating manual processes for handling PO acknowledgements and ASNs. But Hawkins emphasizes that a primary benefit of the project has been in improving the company's processes. "It's a good way to pull out the flashlight, find out what the processes are, clean them up and automate them," he concludes.

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