May, 2005  — Owens Corning, Toledo, Ohio, is a symbol of hope for every manufacturing company fighting to stay profitable in the face of what seem to be ever-shrinking gross margins on individual products.

The world leader in building materials and other products made from glass fiber has proven that it's possible to boost gross margins, even in highly competitive markets. All it takes is the right mix of corporate discipline and information technology.

"You don't just decide that you want to change gross margins," says Klaus Mikkelsen, global development leader, information systems at Owens Corning. "You must have a strategy for making it happen."

At Owens Corning, Mikkelsen says, that strategy involves giving everyone who has contact with customers "the right tools-and the accountability-to drive margins."

The central tool supporting this strategy is a pricing engine that Owens Corning purchased from Metreo. Mikkelsen says this system allows analyzing margins at nearly any level of detail, even "down to this customer, for this product, on this day."

Since installing the system, Mikkelsen says, Owens Corning knows exactly how much it earns from doing business with each of its customers. Its salespeople also know the profit margin associated with each deal they negotiate with a customer, before the deal is consummated.

Mikkelsen says arming salespeople with this information has changed their behavior. "They are making better decisions about what deals to make," he says, "because they can see how each deal affects targets not only for revenue, but for margin."

While the Metreo pricing engine generates this information, Mikkelsen is quick to point out that the engine does not work in a vacuum. It feeds off data generated by a host of other systems, and Owens Corning has built a technology infrastructure to ensure that the pricing engine gets the right data.

"When we installed the Metreo solution, we lacked the ability to feed it proper data," Mikkelsen recalls. That led to adoption of what is commonly known as an ETL (extract, transform, and load) tool from Ascential Software.

The ETL tool pulls data from the multiple ERP systems running at various Owens Corning facilities and validates it against a specific set of rules before loading it into a data warehouse based on technology from Kalido.

The warehouse puts all the data coming from the various systems into a standard format, and then moves it to the pricing engine. In general, the warehouse gives the pricing engine the information it needs to calculate margins, which would be cost and revenue data.

"We only put in information that we can actually do something about," Mikkelsen explains. "For instance, we wouldn't put in information about extraordinary costs, like a spill on a production line. But we do include the cost of freight when we have to ship product from one warehouse to another to fill an order."

Incomplete or inaccurate data does not make it to the warehouse, either. To ensure that, Owens Corning also has procedures for screening all data both before and after it goes into the warehouse.

"A data warehouse that doesn't have 100-percent accurate information has diminished business value," Mikkelsen says. "We are trying to mitigate that by putting strict rules in place."

Knowing its pricing engine gets good data gives Owens Corning confidence that it is making a profit on every sale. But Mikkelsen says proper pricing alone will not keep the company profitable.

"At the end of the day, if you don't prove your value to your customers, you won't win [at any price]," he says. "We have always focused on bringing superior value to our customers."

Mikkelsen won't divulge how much the Owens Corning profit picture has changed since this infrastructure was installed. He will only say, "The investment was in the high six figures, and the ROI has been in eight figures."

That's a margin almost any manufacturer could live with.