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September 14, 1998

Industry Rebound Centers On IT

Struggling electronics companies turn to technology to streamline business processes and drive down costs

By Jennifer Mateyaschuk

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ELECTRONICS

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With data from Hoovers Online

The economy may have been humming in recent years, but these haven't been boom times for the electronics industry. Devalued currencies in Asia are making imported products cheaper, putting pressure on margins, and competition is increasing at home and abroad. The most innovative electronics companies are turning to IT to improve business processes and help them compete.

Many companies are tossing their legacy mainframe systems and opting for client-server systems with enterprise resource planning software and data warehouses. They're also introducing Web sites, extranets, and intranets. Their aim: to cut costs, improve collaboration among employees and ties with business partners, better manage customer relationships, and boost sales.

"Top electronics companies are realizing that they can harness IT to reduce costs," says Russel Craig, a partner at Andersen Consulting. "If someone orders a product over the Web, they don't have to come in direct contact with a human being until they've proven that they are definitely inclined to buy. That can drive down the overall cost of sales."

Litton Industries Inc. is unifying the systems of its many business divisions, which include electronic navigation, guidance, and control; electronic warfare; information systems; and electronic components and materials for shipbuilding. The Woodland Hills, Calif., company purchased modules from three vendors: PeopleSoft Inc. for financial tasks, Baan Co. for manufacturing, and Oracle for ERP. "We're looking to provide synergy among our divisions in a less costly way," says Jeff Calisch, Litton's IS director.

The ERP software will let Litton's divisions communicate with each other more easily and effectively and share information from its data warehouse. For example, each division will be able to look up what IP, services, and parts other divisions possess, making it easier for them to share resources.

Analog Devices Inc., a Norwood, Mass., semiconductor company that develops, manufactures, and integrates circuits, has switched from older IBM mainframe systems to a Hewlett-Packard 9000 platform and an SAP R/3 data warehousing solution. It has standardized on R/3 for finance and order management, and is implementing R/3 modules for human resources and manufacturing to boost efficiency.

Cutting costs isn't the only goal of these IT innovators. Customer relationship management is the top priority of electronics company executives, according to a recent study by Andersen Consulting, and many new systems are aimed at improving customer relationships. For instance, Tektronix Inc., a Wilsonville, Ore., measurement, video, networking, and color printing company, recently replaced its mainframe systems with Oracle applications at all its facilities. Tektronix has standardized on Unix systems for its order entry, manufacturing, shipping, and accounting processes. "This lets us track our customers, providing us with better booking, billing, and backlog information," says CIO Bob Vance.

With this unified system, the company is able to produce documents in various languages and share them among facilities in more than 22 countries. "The completion of the systems' rollout has greatly improved our responsiveness to our customers," Vance says.

Other companies are using Internet and extranet technologies to get closer to customers and business partners. Johnson Controls Inc., a provider of automotive systems and building controls, is adapting its enterprise applications to let employees access information via the Web. It hopes the system will keep employees up to date with company information and let them better communicate with partners and customers.

The Milwaukee company is also putting its order-entry systems online. "This will let us make our products accessible throughout the world," says CIO Sam Valanju. When the system, which runs on Unix-based HP 9000 servers, is completed by year's end, customers will be able to enter orders online.

Tektronix is using Open Market software to let customers order replacement parts. The company is also looking to process customer orders via the Web, which will reduce costs and the burden on call-center personnel.

Earlier this year, Analog Devices revamped its Web site, which uses Open Market software running on an HP NT NetServer server, to boost the company's market presence in cyberspace. Lawrence Loh, CIO for Analog, says the company added a more powerful search engine and a more sophisticated product catalog that provides in-depth information.

Analog is also working to track customer information via its Web site. "We are just beginning to leverage all our various customer information sources by Web-enabling the different databases," Loh says. "There are a lot of questions concerning technical architecture, and we don't anticipate the technology maturing quickly."

Loh wants to make the company's databases ready for the Web within the next two years. This will give Analog better information about who its customers are and what their needs are, making it easier to suggest other products and services.

Tektronix is trying to cut customer-service costs by providing help online. "We want to give customers access to information that will let them troubleshoot problems," CIO Vance says. "If a customer has a problem that they can solve over the Internet, they'll be a lot happier than having to make a phone call-and even happier when we don't have to send someone out to fix the problem for them."

Johnson Controls is among the companies that are building extranets to reduce costs and improve their relationship with customers and suppliers. "We're Web-enabling our applications and providing access through our extranet to let our partners come into our systems," says CIO Valanju. The company plans to establish links that will let customers access information about products and place orders online.

The main purpose of the extranet is to develop a one-to-one marketing relationship with suppliers and resellers in order to make its business processes more efficient. For example, Johnson Controls' resellers can check on order status, eliminating the need for a reseller to call the company and have an employee look up the information.

Analog Devices is using its extranet to communicate with major accounts. "Ultimately, the extranet's purpose is to eliminate the white space between two companies in any kind of a business-to-business transaction," Loh says.

Tektronix uses its extranet to let resellers look up costs and lead times for certain products and parts. The intranet provides links to the catalogs of potential suppliers. The company would like to link preferred suppliers' catalogs to its existing online purchase requisition. "This will reduce costs and provide greater consistency and procurement," Vance says. The company also passes real-time test data from Tektronix factories to suppliers.

So far, few electronics companies have taken advantage of intranet technologies. Most provide only basic information about the company, such as news releases, financial information, and product information on their intranets. But Analog Devices is expanding its system to let employees collaborate online.

"Right now we're using the intranet for mostly internal employee communications, but we're hoping to begin to develop more workflow types of applications," Loh says. For example, the company wants to design an application that will let its design engineers collaborate on a single chip design via the intranet.

Because many electronics companies have already scrapped their legacy systems, they aren't overly concerned about the year 2000 date-field problem. "We don't have anyone in the company that has to look at code," says Tektronix's Vance.

Analog Devices has an enterprise year 2000 task force and is testing its systems. "I expect we will have completed all that needs to be done by the year 2000," Loh says. But, he admits, nothing is certain until that year actually arrives.

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