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.


For those Owens Corning suppliers that were not already EDI capable, the company enlisted ADX to recruit its targeted suppliers 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, in addition to a group of 100 suppliers with which the company was doing traditional EDI. 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. In some cases, when Owens Corning took a closer look at the business case for signing up a particular supplier, the company decided that it really didn't make sense for the vendor, which was then removed from the list of target suppliers. In other cases, Owens Corning was able to demonstrate the value to the supplier and get them onboard with the initiative. In any event, the concerns of the reluctant suppliers made it more difficult for Owens Corning's category managers and commodity leaders, the folks on the ground managing the relationships with these vendors, to sell the idea of signing onto the ADX network, which in turn made it more challenging for Hawkins and his two project staffers (plus one IT staffer) 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: "We wound up stepping back and saying, you know, this business model doesn't really work for the number of suppliers that we're trying to go after and the criteria that we're using, so let's change the business model a bit. Essentially what we wound up doing is changing it 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 more easily 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 have better visibility into incoming invoices, purchase order acknowledgements and ASNs, so they can check that orders have been received or shipped more easily and without having to get on the phone to the supplier, an efficiency gain for both buyer and vendor. And, Hawkins notes, moving to a shared-cost structure has helped win over Owens Corning's own buying community: "Since we changed the business model, we now have great buy-in internally. Everybody's saying, 'We agree, it's the right business model, and we'll back you up in saying [to suppliers] that it must be done.'"

The Process Focus

Perhaps the most significant benefit for Owens Corning has been that, in undertaking the project with ADX, the company has had to focus on its own internal processes and how it handles each of the documents it was seeking to e-enable. "It's really done wonders for us," Hawkins says, "just in terms of cleaning up our process and being consistent, even in our manual processes, because we've shed light on how things are really being done."

As an example, Hawkins points to how Owens Corning handles freight charges. The company has a number of different ways that it manages freight: It may send out a purchase order on which freight is included, or the freight charges may be additional to what is listed on the purchase order; in some cases, freight should be included in the cost of the product, but not in other cases. The same inconsistencies could turn up on the invoice returned to the company, too. When Owens Corning began considering how to automate its PO process, the company realized that it was not being consistent in how it handled freight either on the purchase side, among its buyers, or on the A/P side, among the shared services staff handling the invoices. Sometimes, during the PO-invoice matching process, the invoices would be allowed to fly through the system, regardless of possible inconsistencies, and other times the invoice would be sent back to the buyer to resolve a mismatch. The company's efforts to automate that process have prompted Owens Corning to take a closer look at how it is handling freight, Hawkins says, leading to more education for the buying and A/P communities to drive consistency in how freight is handled.

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