LG (Oracle E-Business Suite)

Became LG Electronics the first global client who implemented the new version of the ERP system of Oracle E-Business Suite R12.

LG is one of the largest players of the world market of consumer electronics, and according to the strategic plan of development of the company, by 2010 it should enter into top three. Income of the company is  about 44 billion US dollars. 110 LG branches are located in 39 countries, and the total number of personnel is 82,000 people.

Implementation premises

In spite of the fact that the IT budget of the company in 2009 was reduced by 20 %, in LG decided first to test the new version of the ERP system from Oracle. Need of the project is caused by both external, and internal factors. At the time of the beginning of the project each of 83 separate divisions had various sets separate and often outdated information systems and DBMS. Information arriving from these systems often was incomplete and contradictory and to make the weighed management decisions on its basis, especially in the current difficult economic situation, became impracticable.

To reduce IT infrastructure operating costs, the company closely was engaged in projects on virtualization implementation, began to control ROI of all IT projects carefully. Implementation of uniform ERP should cut down expenses on maintenance even more.

Project Objectives

Before implementation in LG formulated four main objectives of the project:

• provide transparency of sales and the movement of trade stocks in real time in scales of all company. This task becomes complicated also the fact that the company should deal with 37 world currencies, and the existing supply chains, including communications with the largest world retailers, are incredibly difficult;
• considerable reduction of time for creation and output to the market of new products. This requirement is especially relevant now as the main markets at which LG works (mobile phones, consumer electronics) promptly develop. If earlier the cycle of creation of new goods made about two years, then now it was reduced to six months. The prices of consumer electronics fall, and it means that for increase in income it is necessary to increase sales much more in high gear. And the companies it is necessary not only to hold the positions, but also to provide gaining a market share of competitors;
• faster closing of financial periods. Only exact and operating financial control will help the company to endure recession and to continue development;
• reducing costs for support of a corporate system of management for 50 %, very ambitious task for IT service.

LG attaches great value to process management, permanent business process optimization (all in the company them is selected 1400). Preparing the global ERP project, 440 business processes which should be unified in all 83 divisions were selected and are implemented in a new ERP system. Standardization of these 440 processes affecting customer relations, sales management, discounts, purchases and production took 18 months, but, according to company management, the spent efforts were repaid.

Now a new ERP system already covers 25 divisions from 83. After the end of implementation the support service will need to provide the round-the-clock maintenance of a system in all national languages of those countries where the company does business. It will be difficult to perform all this from the central office in Korea therefore in the company consider the possibility of creation of one more center of support outside Korea.

All ERP project, from development and business process optimization before replication of the solution, will take about five years. Now it is already close to end. According to company management, in LG already feel benefits from implementation of new ERP. Especially it concerns process optimization of cooperation with retail chain stores, collaborative planning of stocks and demand forecasting. Also processes of vendor relation, the logistic companies, other partners, banks improve.