LG Innotek Saves US$7.7 Million Annually in IT Investment Costs and Standardizes Business Processes
 
 

LG Innotek Saves US$7.7 Million Annually in IT Investment Costs and Standardizes Business Processes

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.

 
Saves US$7.7 Million Investment Costs Using Single Global Instance

A word from LG Innotek

  • "We have great confidence in Oracle E-Business Suite Release 12 because of its master data management and good reputation in the global IT components industry. We have significantly increased business process efficiency, and cut US$2.9 million in costs due to staff productivity gains, enabling us to retain our competitiveness.” ‒ WooSang Lee, Division Leader, LG Innotek Information Strategy Division, LG Innotek

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.

 
Integrates Purchasing and Supply Chain Management to Improve Strategic Decisions

 
Strengthens Risk Management with Enhances Credit Data Accuracy

 
 

 
 

Challenges

  • Consolidate four domestic and two international production systems for a single view of enterprise data and enhanced data integrity
  • Improve workflow efficiency between all departments to avoid data duplication and overproduction of LCD displays, automotive parts, and the company’s other products
  • Improve supply chain for faster response to market demands and better customer service
  • Reduce data conversion time and costs, cut IT management burden, and provide better analytic support to improve competitiveness

Solutions

  • Saved US$2.9 million with increased data visibility across six material- and component-production systems globally, which increased productivity
  • Reduced US$7.7 million in projected annual IT investment costs by standardizing 473 processes and consolidating 78 legacy systems into 48 on a single upgrade
  • Cut time for data collection and processing by 50x, allowing more focus on data analysis and better analytic capabilities to support business growth
  • Improved supply chain management with a single view of purchasing and logistics transactions, enhancing competitiveness and reducing costs
  • Minimized credit risk by automating data collection and consolidation and sharing a single view
  • Increased IT productivity by centralizing governance, responding faster to user requests globally and providing a more reliable and stable ERP system
  • Reduced implementation costs and time by completing the upgrade in 20 months, rather than 36 months

Why Oracle

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.

Implementation Process

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.

Partner

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.