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Advice and Information for Finance Professionals

Why One Global Manufacturer Chose One Cloud

Guest Author

By Margaret Harrist, Director of Content Strategy and Implementation, Oracle

Whether you’re watching TV, chatting with a virtual assistant, staring at a tablet, or checking your fitness or medical wearable, it’s likely that one unifying force behind all of that technology is a company called Cohu, which makes the equipment used by semiconductor companies to manufacture and test the underlying chips.

But until a few years ago, Cohu itself was anything but unified, having grown globally over the years in part through myriad acquisitions. When Craig Halterman joined Cohu as CIO in 2016, all of its acquired companies not only still used their own legacy back-office systems; they also still thought of themselves as separate entities.

“We duplicated everything,” Halterman recalls. “We had five accounting teams, five accounts payable groups, different manufacturing supply chains for every business unit. There were no efficiencies.”

And so began the quest for One Cohu: a unified company with a single identity, common cloud-based systems and processes, shared services, and the ability to scale quickly.

“Now systems aren’t written for IT people. They’re written for a business process,” he says. “As an IT organization, we want to first provide service, then move into enabling the business, and ultimately use IT as a tool to differentiate the company.”

One Cohu, One Cloud

What’s more, those legacy back-office systems—on-premises applications from the likes of SAP, Glovia, and Syspro—were out of date and heavily customized. “IT was isolated from the business, and the philosophy was to just keep building customizations for everything and try to make it work,” Halterman says. “But my attitude was to focus on where we want to go as a business.”

Cohu decided to move to a single cloud platform for ERP and supply chain after it considered integrating a range of best-of-breed cloud solutions.

“That was what we had been doing with our on-premises solutions, and transferring that same philosophy to the cloud just didn't make sense,” Halterman says. “We also didn't want partnership relationships with third-party products, like SAP pushes a lot. And if you look at who is leading the push in the cloud, it’s Oracle, not SAP, which is focused on HANA. We wanted to partner with a company that was investing in a strategy that aligned to what we wanted to do—which was, get ourselves out of being responsible for building and constructing software and getting onto something modern and future-focused without customizations.”

Cohu selected Oracle Cloud ERP financial applications, Oracle Cloud SCM supply chain applications, and Oracle CPQ (Configure, Price, Quote) sales applications, starting the implementations with partner Inspirage in 2018. Cohu went live on those applications in February 2020. (Under a separate project in 2015, the company’s HR organization moved to Oracle Cloud HCM apps.)

If Workday, SAP, and Salesforce really want to continue to nip at the heels of Oracle Cloud, they're going to have to invest in developing more comprehensive and more integrated suites.
Craig Halterman, CIO, Cohu

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The ERP, SCM, and CPQ implementations were delayed six to nine months to allow time for Cohu to clean up its data, rationalize country-by-country variations, and add new data. For example, the company was bringing in a product lifecycle management (PLM) system for the first time, and some of the data that system needed had to be created. Also, changing to a process whereby parts numbers were generated automatically rather than manually, in part to avoid duplication, meant employees had to let go of a long-established way of doing things.

“The strategy with Oracle Cloud is a complete transformation. It’s not just the back office,” Halterman says. “For us, it’s an integrated environment from product development all the way to customer feedback. If Workday, SAP, and Salesforce really want to continue to nip at the heels of Oracle Cloud, they're going to have to invest in developing more comprehensive and more integrated suites.”

Integration, Security Improvements

Cohu, based in California, sees one comprehensive supply chain system making it easier for its engineering design houses in Germany, Switzerland, and the US and its main manufacturing facilities in Malaysia and the Philippines to increase efficiency and integrate with suppliers worldwide.

“One system and one process means that production managers in Malaysia won’t have to work with three or four different processes and workflows when engineering change orders come through,” Halterman says. “And as we extend this supply chain solution to our suppliers, we can capture information about the components they make early so we don’t find out that a piece didn’t pass inspection or was made outside of a certain control limit when we’re putting our machines together. Any time we can reduce the quality issues coming in our door that we have to pass back to the supplier is going to be a major improvement.”

While data security is always a big concern for Cohu, Halterman says he feels safer transferring a lot of that work to Oracle. For example, the Active Directories of the company’s customers and suppliers are integrated into the Oracle environment for single sign-on. Instead of Halterman’s team getting emails about someone leaving the company or needing a new password, Oracle manages those credentials.

“That’s a cybersecurity risk and an audit nightmare that we don’t have to deal with,” he says. “I’ve also transferred a lot of the operational issues, infrastructure, and scalability to Oracle, which is an enormous advantage of partnering with a Tier 1 cloud provider.”

‘Big Cultural Change’

One of the reasons Cohu moved to a single cloud platform was to be able to integrate acquired companies faster, a capability it put to the test early on: As its ERP and supply chain implementations were just beginning in 2018, Cohu acquired Xcerra, one of its largest rivals.

Rather than incorporating yet another set of systems and processes into the Cohu application environment, Xcerra employees are moving to the Oracle Cloud applications.

Within IT, Halterman says Cohu’s move to the cloud required his team to stop seeing themselves as builders of custom software and start seeing themselves as integrators and business strategists. “It’s a big cultural change to have updates every 90 days and, instead of focusing on whether the technology would work, focusing on how to use the system’s capabilities and transform Cohu,” he says.

While the company is still learning how to use the new systems, it’s already seeing results. Executives and managers can now run reports and see company-wide information they couldn’t before—from work orders in play to invoices to receivables to purchase orders.

“The harmonization is really starting, and the slope is upward as far as efficiency and value,” Halterman says. “We want to focus our business on what's important to us, which is being an engineering manufacturing company. We’re not a back-office software design company. Let Oracle be the experts in that area, and we will handle our niche and continue to focus on semiconductor equipment.”

Originally published on Forbes.

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