LG Innotek develops leading-edge products and breakthrough technology for the materials and components sector. It specializes in liquid-crystal displays, printed circuit boards, mobile, displays, networking, and automotive parts. Founded in 2000, the company was formed through the merger of LG Micron and the PCB division of LG Electronics. It is also a subsidiary of the South Korean multinational electronics company, LG.
Consistent with its corporate vision of becoming the preferred partner for international corporations, the company needed an efficient global enterprise resource planning (ERP) system to improve enterprise data visibility, customer service, and its competitiveness.
In January 2013, LG Innotek upgraded its ERP system to Oracle E-Business Suite Release 12, and consolidated four domestic and two international production systems into a single global enterprise application platform. This enabled the company to standardize 473 processes and consolidate 78 legacy systems into 48, saving approximately US$7.7 million in annual IT investment. Productivity gains resulting from the IT upgrade produced additional savings of US$2.9 million. Finally, the company reduced by 50% the time for data collection and processing from different systems.
LG Innotek ran several disparate domestic and international production systems. Each management system operated separately, and it was impossible to integrate the manufacturing and stock control data due to lack of standardization between the systems. For example, unlike the rest of the organization the PCB division had never before used an ERP system.
Segmentation of business systems also created customer and supplier information duplication, resulting in overproduction of certain parts, products, and product lines. Poor product data and file management also made it difficult to recognize discontinued models and identify terminated or suspended accounts. This lack of visibility had a negative impact on the company’s ability to sustain its leadership position and continued growth.
By upgrading to Oracle E-Business Suite Release 12, the company consolidated four domestic production systems and two international production systems into a single, global-instance, ERP platform and standardized 870,000 documents, such as models and parts descriptions, and customer records.
LG Innotek also standardized 473 processes and consolidated 78 legacy systems into 48. This enabled the company to cut US$7.7 million projected annual IT investment costs for the system upgrade. It saved another US$2.9 million through standardization of workflow systems such as purchasing and production, increased enterprise data visibility, and improved staff productivity.
LG Innotek also cut the time to collect and process nonstandard data by 50%. It can now devote more time to data analysis, such as identifying market trends in the component industry, instead of focusing on data conversion and management. As a result, the company has improved its ability to respond quickly to changing customer needs.
“Through global data standardization, we can easily see which parts or models are discontinued or in high demand. Management now makes faster, better informed decisions—strengthening our market position,” said WooSang Lee, division leader, information strategy division, LG Innotek.
LG Innotek needed a standardized system for purchasing data accuracy and increased buying power. It also wanted to effectively track the exchange of parts and materials through overseas branches prior to transaction completion, ensuring constant inventory visibility and improving customer service.
By integrating Oracle Purchasing with LG Innotek’s existing supply chain management system, it was able to access integrated inventory data across all divisions, ensuring a better negotiating position with suppliers, and faster, smarter purchasing decisions. The company expects to reduce extraneous logistics costs and has strengthened supply chain processes. Improved network communication with customers and suppliers also promoted stronger, more productive stakeholder relationships.
“With more accurate enterprise data, we’ve improved our purchasing competitiveness and gained a single view of purchasing and logistics transactions. This was the first major improvement for our supply chain management, and without a robust supply chain, it’s just not possible to deliver quality customer service,” Lee said.
With the legacy ERP system, LG Innotek made manual changes to customer credit information, such as account payment terms and unsecured debt. This data was also subject to the individual discretion of supervisors, creating inconsistencies in credit accounting and increasing credit risk.
Using Oracle E-Business Suite Release 12, the company improved risk management by automating credit data collation and consolidation, enabling a single view of credit data between departments. It eliminated data inconsistency, and minimized credit risk with better access to customer insolvency predictions.
In addition, the company improved IT management efficiency by centralizing governance and simplifying its overall infrastructure, globally. IT can now respond faster to service requests from various departments in different countries.
LG Innotek was confident in upgrading to Oracle E-Business Suite Release12 because of its high-quality, master data and metadata management and Oracle’s solid reputation with global, IT-component companies. In addition, LG Innotek was encouraged by its previous positive experience with Oracle E-Business Suite and the promised reduction in implementation time from 36 to 20 months.
“We were attracted by the promised shorter implementation timeframe and associated cost reduction for both implementation and long-term maintenance of the new ERP system. We have great confidence that Oracle solutions will continue to deliver cost-effective results, enabling us to retain our industry-leading position,” Lee said.
LG Innotek began its implementation with a two-month strategy phase, in which it mapped out the initiative and its objectives. It then launched a project-innovation stage, in which it standardized enterprise data and business processes.
In December 2012, the company completed development and testing and provided training to users. Finally, in January 2013, it launched the integrated domestic production and sales systems and conducted further stability testing. The new system went live in March 2013.
LG Innotek engaged LG CNS, a leader in global IT services, to provide IT systems and process consulting during the implementation process. The company also used EMRO, a purchasing-management solutions company, to develop purchasing-related solutions.
“The advanced skills and optimized solution that LG CNS and EMRO delivered enabled us to efficiently implement a tailored and cost-effective ERP system, saving time and costs over the life of the project,” Lee said.