The implementation of Owens Corning's new treasury management system
For decades, Owens Corning has been the world-leading innovator of glass fiber technology. Headquartered in Toledo, Ohio, the American company has now expanded to 28 countries on five continents, employing about 15,000 people. With an upgrade to SAP ECC 6.0, the company’s international financial sections are now configured for enhanced efficiency.
An iconic character symbolizes the global leader in fiberglass technology. The Pink Panther – an idiosyncratic, elegant, aristocratic yet cuddly cartoon character – is the off cial corporate mascot of Owens Corning. How much success the character has brought is difficult to quantify. But the fact remains that the American company, with sales of USD 5.3 billion, has been the global frontrunner in the fiberglass market for decades. Applications include building, insulation, wind blades, hockey sticks, tennis rackets, sailboats and much more.
With a company the size of Owens Corning, it is a challenge to arrange all treasury administration, in various currencies, properly and efficiently. “Our previous treasury management system was outdated,” says Isabelle Badoux, European treasury & credit leader at Owens Corning. “It was not a global implementation, and at the end of the day we used the system in Europe and North-America in two different ways. Also, the system did not support all transactions. In addition, the company had decided to upgrade to SAP 6.0 as a general ERP.” ERP is Enterprise Resource Planning, a system which integrates all (financial) processes within a company.
The industrial fury of the 19th and early 20th centuries gave birth to innumerable revolutionary ideas and inventions, including the creation of fibers from glass. In 1935 two companies, Corning Glass en Owens-Illinois, joined forces in the production of glass fiber. In 1938 this cooperation resulted in a separate company: Owens Corning Fiberglas® Corporation, reporting sales of USD 2.5 mln and having more than 600 employees in its first year. Owens Corning became publicly traded on the New York Stock Exchange in 1952. Annual sales grew to USD 5.3 billion in 2011.
What can a company do with its current treasury management system and the interface to the old SAP-version 3.1i, including posting the accounting entries of treasury transactions? In other words: how was Owens Corning going to integrate a new SAPupgrade to its system? Badoux explains: “We had to consider whether we were going to use the interface of the old treasury system, or choose the fully integrated approach? It became clear that the development of a new interface would be a large investment, and would have considerable consequences, although it would not achieve a full integration. We then made a strategic decision to go for the integrated version of the SAP treasury, migrating to one global integrated version for Europe and North America, which could be implemented in Asia Pacific and Latin America too.”
This was 2010, a period in which Owens Corning was looking at ways to increase efficiencies within its department. “The new treasury system created an opportunity to review all our processes, aligning them with all global activities,” says Badoux. The company sent out a request for a proposal (RFP) to a number of specialized companies. Two of these, Zanders and the American company e5 Solutions, combined an offer for global design and implementation. “We were having partnership discussions with e5 Solutions at the same time both of us received the RFP,” says Laurens Tijdhof, who manages Zanders’ international offices in Brussels, London and Zürich.
“Our presence here, and that of e5 Solutions in the US, made it easier to have quick, local decision lines. The partnership worked well for Owens Corning, and we have continued this partnership in other fields as well.” Badoux acknowledges: “For global implementation it helps to have consultants with local knowledge. And we liked the offer. It was very efficient for us.”
For several years
In the RFP process you need mutual understanding of the scope, says Tijdhof. “It starts with a proposal but, while discussing the scope in detail, the proposal changes and you end up with a document describing exactly what you’re going to do. That way the number of uncertainties are reduced and the result is clear for both client and consultant.” Owens Corning required help from both a specialist and a generalist, says Badoux. “Since this field is very technical, we really needed a specialized consultant in treasury. I knew Zanders from the interim management perspective of my previous company, and I knew that they have consultants for implementing systems as well. In Europe Zanders is recognized for its consulting expertise within treasury and during the project the cooperation between both Zanders and I was always ‘straight to the point’. That made decision-making much easier. Good documentation has been very valuable in the process too, as it shows all pros and cons of all options. Configuration is key. You need to conf gure well from the start, as the system will be there for several years. There is only one chance to do it right.” The planning was aggressive. The project kicked off in January 2011 and five months later, in July, Europe went live.
"The system will be there for several years. There's only one chance to do it right"
At the end of 2010, a month prior to the kick-off , one of the employees left Owens Corning’s treasury department. Badoux says: “One of the Zanders treasury consultants joined us for interim support and advice on daily treasury operations. After that he was transferred to a new department to assist in treasury accounting, now segregated from the treasury area.” In Brussels, five people are managing Owens Corning’s treasury, foreign exchange (FX) management and cash management in Europe, including Badoux, who is also responsible for the company’s credit management. The treasury department in Brussels is like an in-house bank for the European entities of the group.
“Structure was crucial,” says Badoux. “Treasury also performs a number of services for hedging the foreign exchange exposure centrally for the entities in Europe. This used to be a manual process, as we had to look at the individual ERP’s of the entities and their balance sheet exposures. Then we had to consolidate it in an Excel template before taking action. That’s now facilitated. We also do the processing of most of the internal and external payments centrally. Not all, but we are centralizing the platform for the electronic banking system. SAP ECC 6.0 is now connected to our electronic banking system.”
The same language
The concept of in-house banking has been common for some time in Europe, but not yet at Owens Corning’s U.S. offices. Badoux explains: “One of the advantages of the global design is that we now have in-house banking in the U.S. as well as in Canada. The advantage is that you can set off some flows and avoid some bank transfers, like internal loans – so as to optimize your management of cash on a global scale.” Owens Corning is now aiming to increasingly centralize the FX exposures in North America, hedging the exposures of Latin America and the Pacific from there. Europe was an example. “Asia is much less centralized than we are, so there the challenge is clear. We are looking at other companies to see what would be the best way to implement it. But SAP’s treasury functionality has made our life a lot easier; in the US they have access to our data and we are working together much more now. A huge advantage is that it is standardized and configured in the same way. We speak the same language, due to the global design.”
"Due to the global design we speak the same language"
Change and training
In order to achieve the global design, OC Europe had several design sessions with colleagues from the US. Badoux says: “We discussed process by process and made various decisions in terms of elements fitting the overall blueprint. It was a short time-line, but all resources from both Europe and the U.S. were dedicated. And having a good resource on the consulting side is then of great importance too.” On behalf of Zanders, consultant Laura Koekkoek managed the project. “In particular, the full-time availability, of both Nicolas Van de Maele and the Information Services (IS) resources in Europe, were very efficient and kept the momentum going”, she says.
After going live, it became clear that two elements should not be underestimated. “Change management is key in post project implementation”, says Badoux. “People need to have the commitment to work with the system. They have to get to know the system and be curious about it.” Also, the training of people involved is essential after implementation. Within Owens Corning, Nicolas Van de Maele appeared to be the appropriate trainer for his colleagues. And he could work without external assistance. “In the final stage of a project, it’s important to be able to work independently, without an external consultant”, says Tijdhof. Badoux agrees: “A treasury system changes, it is a living system, so you definitely need internal resources for the configuration maintenance.” According to Tijdhof, the main aim is to achieve a stand-alone client. Badoux adds: “And a happy one.”