Global CIO: LG Transforms Global Operations With New Oracle ERP
After mapping and standardizing 440 critical business processes across 83 global subsidiaries, the CIO of $44 billion LG Electronics is making his company the first ever to implement Oracle's newest ERP platform.
And with LCD prices falling 50% every year, he added, the need for speed is even greater so that a company is not offering today's products at yesterday's prices. "We must move very very fast to be able to compete and to grow," Kim said. "And we also need to get better processes in place very fast as well—we are now at a stage where we can do much of this with 'one click of a mouse,' if I may exaggerate a bit."
From revitalized product development and distribution, LG's next priority is to improve all phases of its engagements with its major retailers around the world. When I asked Kim if the Oracle ERP project has allowed him to spend more time with customers, he said those connections have been coming together better than he had planned.
"That's happening a lot, particularly with CPFR [collaborative planning, forecasting, and replishment], because lots of our customers are fully expecting us to help them with inventory control, management, and forecasting—in fact, they want us to step forward and take responsibility for replenishing automatically," Kim said.
"The same is happening on the supply-chain side, so we from the IT organization go out with our purchasing managers into the field to tie our key suppliers and 3PL (third-party logistics) partners into the system. And we're doing the same with banks for all financial transactions."
To those who still try to make the argument that IT doesn't matter, or it's just a commodity: think about the competitive gap that makers of high-tech devices such as mobile phones will face in dealing with major retail chains if those manufacturers have great products but crappy IT systems and processes. Do you think the retailers will tell you oh, what the heck, don't even worry about it, because we'll be tickled pink to do all of your back-office inventory-management and price adjustments and returns and warranties for you because we've got tons of extra workers sitting around with nothing to do?
Yeah, they might say that—and you might be the #1 selection in the NBA draft next year, too.
My point is that we've got another item for the Life Is Not Fair Department: just as Mr. Kim and his team mapped out and standardized 440 essential business processes across the globe, so too must you and your team not only do a killer job with the internal implementation but you've also got to really earn your money on the external side by integrating all that capability deeply within your demand-chain partners. And then go back and re-optimize with them when new products come out and new sales programs come together, and as you understand more fully this thing that we've come to call "ERP" but that is in fact the digital intelligence system on which your entire business runs, from the farthest-flung supplier in China to your most-demanding 18-year-old consumer in Oslo or Rio de Janiero or Bangalore.
And what LG has learned as it nears the end of its 5-year adventure into the wild unknown, the key components are not just the applications and the databases and the servers and the networks but the very human behavior that all of those things animate: the business processes that determine whether your company thrives, or just survives, or starts the death-dive.
"CIOs must understand industry trends and business processes better," Kim says. "We CIOs need to have that knowledge before we can expand our role. If we help innovate our processes through expanded business knowledge and capabilities, then we can make the chief information officer become the chief innovation officer.
"I always tell my team: you must understand all the business processes, even better than the business owners understand them," Kim says. "Sometimes business owners are too submerged in the daily operations to be able to see what kind of future innovations are possible—and IT people are better situated to see those possibilities and opportunities than anyone else because we work across the entire enterprise, so we must see them and then suggest them to the business owners.
"That's our role: to suggest and drive innovation, and to work with business owners to let them take full advantage of that innovation in our business."
A perfect description, particularly after the adventures Kim has undertaken as CIO at LG for the past four tumultuous years. And if the company reaches its objectives laid out in its Vision 2010 strategy, CIO Kim Tae Keuk and his team will not only have survived an unprecedented journey with a brand-new and highly sophisticated Oracle platform, but they'll have transformed LG's IT operations and its competitive capabilities along the way.
Bob Evans is senior VP and director of InformationWeek's Global CIO unit.
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