Corning - Supply Chain Relationship Management

Sometime around 1960, scientist at Corning made a significant advance while experimenting with ways to strengthen glass. Using a recently developed method that involved dipping glass in a hot potassium salt bath, they discovered that adding aluminum oxide to the glass before dipping produced a product with never-before-seen strength and durability. The scientists hurtled everything they could think of at this new super glass, including frozen chickens at high speeds, and even dropped it from the top of their nine-storey building. They found that the new glass could withstand 100,000 pounds of pressure per square inch (normal glass can only handle about 7,000).

This super glass, Corning assumed, would surely be embraced by manufacturers of products ranging from eyeglasses to phone booths, prison windows, and automobile windshields. Corning named the glass Chemcor and put it on the market. But most potential customer companies did not deem the strength benefits of Chemcor worth the premium price mandated by its high costs of production. Making matters worse, when it did break, Chemcor had the potential to explode, leading the few companies that had placed orders to recall their products. When Corning realized that it had created an expensive upgrade nobody wanted, it shelved Chemcor in 1971.

Getting by with a little help from Suppliers ...

When Amory Houghton, Sr., founded Corning in 1851, not even he could have foreseen the vast array of products his company would develop - products that would literally revolutionize the twenty-first century. Most people in the 1850s thought of glass as, well, just glass. But Corning thought differently. It went on to develop innovative products that would change the way people live, including light bulbs, television tubes, cookware, ceramic substrates, optical fibre, active-liquid crystal displays, and even missile nose cones. Corning achieve these feats because Houghton established research and development as the company's foundation.

From its origins, Corning has relied upon sound relationship with suppliers and customers to keep the innovative machine churning. On the supply side, producing the quantities of glass that pour off the Corning production lines requires massive amounts of sand (silicon dioxide). But because sand has such a high melting point, other chemicals - such as sodium oxide - are used to lower the melting point, making glass easier and cheaper to produce. Corning also relies on many elements and chemicals to give different types of glass their useful qualities. For example, Chemcor contains not only silicon dioxide, but also aluminum, magnesium and sodium.

To keep the right kinds of chemicals and other raw materials flowing, price and quality are only baseline criteria at Corning. To maximize long-term success for itself and for its suppliers, Corning has also established a Supplier Code of Conduct. The Code ensures that all supplier operations are conducted within the laws, customs, and cultural norms of the regions where Corning does business. It also ensures that they comply with the company's own corporate values. Corning invests considerable energy in selecting suppliers. The Code of Conduct includes specific criteria regarding ethics, labour, health and safety, and environmental concerns. On the surface, such criteria seem to have little to do with making glass, but Corning knows that such factors can ultimately affect the quality, price, and availability of the raw materials the company needs for making its products.

.... And from the Supplied

Some of Corning's products are consumer products. For example, take Corningware. Corning scientist Don Stookey found that product by accident when a faulty temperature controller allowed a sample of the photosensitive glass to reach 1,600 degrees rather than the intended 1,100 degrees. He thought the result would be a blob of melted glass and a ruined furnace. On closer inspection, however, Stookey discovered that he had a milky white plate that was lighter than aluminum, harder than high-carbon steel, and far stronger than regular soda-lime glass. When he dropped it on the floor, instead of shattering, it bounced. When Corningware hit the market in 1959, it was a space-age wonder.

But most of Corning's products are supplied to manufacturers as components or raw materials in other products such as televisions and automobiles. That's where successful outcomes depend most on good supplier relationships. In this case, however, Corning is the supplier. Always on the lookout for ways to forge new relationships with manufacturing customers, Corning came up with an idea in 2005 when Motorola released the Razr V3, a mobile flip phone that featured a glass screen instead of the usual high-impact plastic. Maybe Chemcor - the super strong glass that Corning shelved in 1971 - would make a good glass for mobile phones. The company quickly formed a team to explore the possibilities and codenamed the project Gorilla Glass. Its team's main goal was to reduce the thickness of the glass from its current 4 millimetres to something that could be used in a phone.

As the team was making progress on the thickness issue, Corning CEO, Wendell Weeks received a phone call that would give Gorilla Glass its big chance. That call came from late Apple founder Steve Jobs. Jobs and Weeks had collaborated previously. In fact Weeks had pitched to Jobs the idea of using laser-based microprojection technologies - something Corning scientists were toying with - to provide largest screens for increasingly smaller phones. Jobs said the idea was dumb and that he was working on something better - device whose entire surface was a display. The world would soon know that product as the iPhone.

Jobs was relentless in getting the iPhone's design just right. A plastic face just wasn't good enough, he insisted. The iPhone would need a "silky, tough, smooth piece of glass." The problem was that no such glass product was commercially available. However, Jobs had heard about Corning's Gorilla Glass and thought it had potential. So he put in the call to Wendell Weeks.

Jobs explained that he needed a piece of smooth, clear glass that would resist scratches and breaking and act as a conductor for touch-screen technology. It also needed to be 1.3 millimetres thick. Weeks explained that Gorilla Glass might meet Jobs' needs but was nowhere that thin. Undaunted, Jobs gave Weeks a seemingly impossible mandate - make millions of square feet of Gorilla Glass, make it ultrathin, and have it ready in six months, because the iPhone would be on store shelves in seven months.

The mandate posed many unknown for Gorilla Glass. The product had never been mass-produced, and it was unclear that a process could be developed to produce the quantity of glass that Apple needed. Weeks was also uncertain whether Gorilla Glass could be made so thin and still retain its strength. Even if these issues could be ironed out, how long would it take? So in responding to Jobs, Weeks did what any risk-taking CEO would do. He said, "Yes". Then he formed a team to make it happen.

With such a tight deadline, Corning had no time to develop a new manufacturing process. Instead, the team adapted a process the company was already using called fusion draw. This process could produce thinner glass wile also speeding up the process. To maintain the desired toughness characteristics, the team tweaked the existing Gorilla Glass receipt. It changed the levels of several of the glass's seven individual components and added one new secret ingredient. But there was still one hitch. Corning only had one factory - in Harrodsburg, Kentucky - capable of producing glass by means of fusion draw. That plant's seven production lines were already going full blast to meet the demand for sold-out LCD glass for TV panels. However, the factory was somehow able to squeeze Apple's initial Gorilla Glass order into one of its production lines. Incredibly, and ahead of schedule, Corning produced enough 1.3 millimitre Gorilla Glass to cover seven football fields.

The rest, as they say, is history. Every iPhone and iPad that Apple has ever sold features Gorilla Glass. Beyond that, the state-of-the-art Corning material is featured on nearly 3 billion devices worldwide across 2,450 different product models, including smart phones, tablets, notebooks, and TVs. In all, Corning supplies the glass to devices to 33 different companies. If you regularly touch or swipe a gadget, you have already touched Gorilla Glass. In 2007, Corning sold $20 million worth of Gorilla Glass. Today, it accounts for over $1 billion of the company's $8 billion total revenues. In fact, display technologies as a whole contribute 37 percent to Corning's total revenues and 78 percent to its bottom line.

But quantity doesn't begin to characterize the impact of Corning's relationships with manufacturers. In only a handful of years, a simple thing like a glass display has gone from a component to an aesthetic. When a user touches the outer layer of Gorilla Glass, the body closes the circuit between an electrode beneath the screen and the glass itself, transforming motion into data. It's a seamless partition that connects people's physical selves with the infinite digital world - so seamless, in fact, that most people have a hard time determining exactly where that partition exists.

The Ongoing Need for Good Supplier Relationships

The Corning Harrodsburg factory continues to churn out Gorilla Glass in five-square-foot panels. Robotics arms put the panels in wooden crates that are trucked to Louisville, Kentucky, and loaded onto a westbound train. When they reach the coast, they are loaded onto freighters and shipped off to a Corning facility in China, where they receive a finishing bath and are cut into gadget-sized rectangles.

But Corning's partnerships with customers like Apple are more important today than ever. For starters, Gorilla Glass isn't entirely unbreakable. Manufacturers roundup broken devices that get returned and send them back to Corning where a team tries to replicate the activities that caused the breaks. The research provides vital information for developing new glass. If Corning learns how Gorilla Glass typically breaks, it can try to prevent those breaks in future products by altering the composition of the glass or tweaking the chemicals the strengthen it.

And Corning needs customer help in developing new versions of Gorilla Glass. New designs require evermore-stringent specifications. A few years after the first iPhone hit the market, Corning released Gorilla Glass 2 - 20 percent thinner and stronger than the original - in response to the demands of Apple, Samsung, Google, and others who desired to make thinner devices. Just over a year later, Gorilla Glass 3 was introduced - 40% more scratch resistant than Version 2. "Today, glass still breaks, and glass still scratches,", says Dave Velasques, director of marketing and commercial operations for Gorilla Glass, "Until those things go to zero, the customer is not going to be happy."

Future designs will call for even more radical glass. Corning now has an antimicrobial version of Gorilla Glass. And then there's Willow, a product born out of Gorilla Glass. Willow is durable and light - a 100 micron thick sheet of glass that bends and flexes like transparent paper. This is glass, not plastic. Corning is working with manufacturer for possible product platforms such as flexible smartphones, roll-up OLED displays (organic LED displays), and even flexible solar cells. And for applications that require a threedimensional shape, Corning now has the capability to form Gorilla Glass into any 3D shape. While this may sound like a gimmick, experts predict that the market for flexible and 3D displays will reach $41 billion by 2020. For Corning, that represents incremental revenues of $3 billion.

It's these customer partnerships that have kept Corning on the cutting edge of innovation. Corning has had a successful partnership with Samsung in the TV display industry dating back to the early days of television itself. That partnership continues today in the form of Samsung Corning Precision materials, a joint-venture that combines Samsung's display technology and Corning's glass expertise in the production of OLED displays - displays used by Samsung and sold to other companies. If partnership lie this are any indication, it doesn't take a looking glass to see that the future looks very bright for Corning.

Questions for discussion

1. As completely as possible, sketch the value chain for Corning from raw material to finished consumer goods.

2. Is Corning a producer, a consumer, or an intermediary? Explain.

3. Discuss Corning's distribution channel management. How does it compare to Apple and Samsung?

4. Identify all the reasons why Corning's partnerships are essential to it success.

5. Apple has outsourced almost ALL of its manufacturing to contract manufacturers. Do you support Corning to adopt the same approach?

6. Comment on Corning's supply chain strategy. What are some threats to Corning's future?

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