Proposal for rolls royce to adapt an erp system

Proposal for Rolls –Royce to adapt ERP System

TABLE OF CONTENT

Abstract .................................................................................................................................................. 2
Company Background.............................................................................................................................. 3
Enterprise Resource Planning System ...................................................................................................... 4
The need for ERP Adaptation in an organization ...................................................................................... 4
SWOT Analysis on the basis of IT and Business ........................................................................................ 6
Drawbacks of the Current Systems Used by Rolls Royce........................................................................... 8
ERP Systems Considered for Rolls-Royce.............................................................................................. 8
SAP vs. Oracle’s E-Business Suite ......................................................................................................... 9
SAP Technologies Recommended for Rolls Royce .................................................................................. 10
Service Provider recommended for the SAP implementation ................................................................. 11
Business Process.................................................................................................................................... 11
Standard MAP’s (Models, Artifacts and Processes) ................................................................................ 12
Implementation (Big Bang vs. Phased Approach) ................................................................................... 13
Organizational Change........................................................................................................................... 14
Issues after Go-Live ............................................................................................................................... 15
Risks Involved .................................................................................................................................... 15
Steps to be taken to overcome the risk .................................................................................................. 16
Summary and Conclusion ...................................................................................................................... 17
References ............................................................................................................................................ 18

By Kunal Chadha


Abstract

Since 1990s organizations around the world have been implementing ERP systems to have a
consistent or standardized information system in their organization and re-engineering their
business processes (Rajagopal, 2002). ERP system packages have the merit of reduced cost,
rapid implementation, and high system quality (Lucas et al., 1988). Even though these
applications have its own advantages over custom design software, they may face problems of
uncertainty in acquisition and lots of hidden cost during the implementation process.

Successful implementation of ERP must be managed as a program of wide-ranging
organizational change initiatives and not as a software installation effort. These types of IT
initiatives require change of the organizations social and economic systems, which then are got
together with technology, people, task culture and structure. So, organizational fight to change is
recognized as a significant success factor for ERP Implementation (Hong and Kim, 2002).

Organizations have to match and adapt to implement these modern large scale ES Systems which
are built with pre-determined business process methods. As a result, customization is important,
lengthy, and expensive aspect in the successful implementation of enterprise resource planning
system. It is examined how such companies develop and enlarge cliental trust which is a
consequence of relevant and trustworthy customization. Considering the significance of ERP, an
attempt has been made in this paper to select and implement the right ERP system for a
prestigious company in UK.

By Kunal Chadha


Company Background

Rolls-Royce made a comeback in the private sector in the year 1987 and took over Northern
Engineering Industries in the year 1989 which enabled Rolls-Royce to show its capabilities in
industrial power. It further acquainted Allison Engine Company a US based company in the year
1995, enabling it-self to grow the company’s presence in aero propulsion and industrial gas
turbines. This acquisition further enabled Rolls-Royce to get a major foothold in the US markets.
Rolls-Royce then came up with the most modern family of engines the ‘Trent Series’ which were
used to power Airbus A330, A340-500. This series of engine offered good maintenance costs,
long range flight capabilities, economical operating and greater thrust. Rolls-Royce is into Power
Generation Market which includes both electrical and nuclear power, which also includes marine
applications. Rolls-Royce is truly global business offering a range of first class world leading
products.

By Kunal Chadha


Enterprise Resource Planning System

Innovations in the 1990s in IT led to the development of variety of software applications
targeting at the integration of the information flow throughout the company and these packages
were known as Enterprise Systems. During this period when lots of new software packages were
introduced in the market one particular enterprise system known as the ERP system caught the
eye of some of the world’s leading companies. ERP systems targets to integrate the business
process through the support of an integrated computer information system.

ERP helps in integrating individual functions systems such as Finance, Manufacturing,
Procurement and Distribution. This system allows companies to swap their current information
system as well as to standardize the stream of management information.

Internet Technologies are used by ERP to integrate the stream flow of information from the
inside of business and information from customers & suppliers. The relational database system is
used by the ERP system with the help of the client/server networks architecture to take-over the
important management data. The most important motive behind the system is to input the data
from a variety of modular applications just once. After the data has been stored, it should
automatically update all concerned information in the system. This ERP system can virtually
hold all the areas of the organization which includes all the internal and external business units.

The need for ERP Adaptation in an organization

The most important use in adaptation of an ERP system in an organization is to provide a
common platform which would include all the internal and external business functions
information recorded in a single database system. Another most important reason was to replace
the legacy system that used obsolete technologies that lead to higher spending and maintenance
cost. Most of the organizations preferred ERP systems which would in turn enable improvise the
process of cycle time from order to delivery. In view of the fact that ERP systems are highly
integrated, they have the potential to provide managers with better information to support
decision making and data visibility. Data visibility is used to illustrate a one expression to
different customers and to be acquainted with global customer as a single entity. Other advantage
of adapting an ERP system would be overhead cost reduction and customer satisfaction.

 Below are a few bulleted points that pin out the importance of ERP system to be used in
an Organization
 The necessity or for a common platform
 Improvement in Business and IT processes
 Data Visibility
 Reductions in Operating Systems
 Augmented customer receptiveness towards the organization.

By Kunal Chadha


 Enhanced strategic decision

The table below pins out a few more detailed use of ERP systems in small scale and large scale
organization with regards to Business and Technical reasons:

By Kunal Chadha


SWOT Analysis on the basis of IT and Business

Strength (Business)

 Rolls-Royce holds number one position in the super-luxury car segment.

 Major market share with leading aircraft manufacturing companies like Airbus and
Boeing

Strength (IT)

 The company used a system known as CPA for monitoring financial transactions which
included pipeline inventory, inter-site transport.

 Rolls Royce used a CAD system that supported in the process of altering the file formats.

Weakness (Business)

 Perception of high prices

 Constant delay in delivery of engines to clients. For example, Boeing blamed engine
make Rolls Royce for yet another delay in delivery for its first 787 Dreamliner.
(Robertson, 2010)

Weakness (IT)

 Data redundancy was a major area of concern in Rolls Royce.
 The company had issues with data accuracy
 In the current system the data was not normalized, screened and was not stored in a
sensible format in the data repository which led to problems in copying data to other
systems.
 The company lacks a legacy system. The company has implemented more than 1500
systems over a period of time.
 Due to numerous systems used within the company, they had problems establishing
direct online communication with customers and partners.
 Systems were conventional with absolutely no room for growth to sustain changing
business environment.
 The company used a system called MERLIN (Mechanized Evaluation of Resources
Logistics and Inventory); which was a scheduling system based on MRPII systems. The
software was capable enough to handle the scheduling but involved a lot manual
manipulation.

By Kunal Chadha


 The company worked with systems for controlling procurement, finance and commercial
functions which had problems in communicating with former systems.

Opportunities (Business)

 Internationalize there operations as an active player in the modern market

 Modification of business process to adjust and fit in the new ERP systems available

 Workshops and training to employees should be provided to work with the current
systems and the systems that are to be implemented to make the maximum benefit out of
the systems implemented.

 Demand for comfortable and relatively cheaper cars.

Opportunities (IT)

 Implementation of an ERP system that would reduce manual manipulation which would
reduce time consumption.

Threats (Business)

 As per Porters ‘ Five Forces’ model of industry competition it has discovered:
o Potential entrants and the threat of entrants
o Power of buyers
o Power of Suppliers and threat of substitute as well as one within the industry –
Competitive rivalry

 The rising price of raw materials such as steel threatens to offset the company’s earning
 Threat from rival companies such as Engine Alliance who manufactures and supplies air
craft engines.

Threats (IT)

 Use of SAP by other major manufacturers in the market.

 Engine Alliance has already implemented SAP A&D (Aerospace & Defense)

 Transmission of data across communication links due to globalization poses IT Security
risk to the data.

By Kunal Chadha


Drawbacks of the Current Systems Used by Rolls Royce

Rolls Royce has been a global power system and services company, yet the company had several
problems in there management systems. Rolls Royce currently uses a number of systems,
approximately more than 1500 systems. Many of these systems were developed within the
company itself. The company had no particular legacy system, and maintaining and operating a
legacy system would fall expensive and difficult. The current systems did not provide an
accurate, consistent and accessible data which was important for timely decision making and
performance assessing. These systems are quite out dated and often had problems in
compatibility to the new manufacturing environment. Work within Rolls Royce was purpose
oriented and different departments worked in isolation. One of the last systems which were
implemented was MERLIN (Mechanized Evaluation of Resources, Logistics and Inventory), this
system was mainly designed to manage scheduling but was prone to manual manipulation also
the system did not support communication with other manufacturing system like IBIS which was
meant for inventory based instructing system, problems in communication with the two systems
led to problems such as data transferring and hence could not be tracked properly which further
led to errors in inventory and stock take problems.

An additional system was also used which would manage and handle the finances called CCA
(Corporate Cost Accounting), which included inventory handling as well as inter-site transport.
Apart from this there are other individual systems at Rolls Royce that are meant for controlling
and monitoring commercial, financial and procurement functions, these systems had trouble
interfacing each other because each of them had different file formats. Use of such systems did
not support the growth of the business and were not capable to meet up to the changes that took
place in the business environment.

ERP Systems Considered for Rolls-Royce

There are two ERP systems that are taken into consideration for Rolls-Royce, SAP -
Systemanalyse und Programmentwicklung (System analysis & programme development in data
processing), which is a German enterprise software application; and Oracle E-Business Suite
which is a collection of applications. Both ERP systems are rated on top two in the list of ERP
systems. Let us furthur see the pros and cons of using this system in a business organization like
Rolls-Royce, the information provided below will help the decession makers to choose the right
type of ERP system for their business.

By Kunal Chadha


SAP vs. Oracle’s E-Business Suite

It is very difficult to determine the best ERP system fit for the company as it depends on the
function and requirements of the company. However a common difference between SAP and
Oracle is given below:

SAP Oracle (E-Business Suite)

SAP is focused on people do their jobs better. Oracle is focused on helping computers to do
their jobs better.

Implementation takes longer time with ‘more’ Takes less time for implementation with a few
efficient results. inaccuracies.

SAP customers are more satisfied with higher Oracle did not meet the required satisfactory
level executive satisfaction, employee level of customer requirements.
satisfaction and customer satisfaction.

Maintenance rates for SAP customers are Maintenance rates for Oracle customers are
lower. higher as compared to SAP.

SAP is regarded as ‘Vanilla Software’ (that is Oracle has higher level of flexibility and can be
not customized from its delivered form and can customized to suit the company needs.
be used without any customization applied to
it.)

SAP continues to enhance and build on core Oracle is moving towards fusion.
product offering

SAP has been created on its own from the base Oracle has been developed mainly from
like sales and operation planning, financial gaining best-of-breed point solution. E.g.
reporting, CRM, functionalities into its core Acquisition of Demantra for advance sales and
ECC and developed all in one ERP solutions operations planning, Siebel for CRM etc.

SAP has the ability to keep its business risks at Oracle keeps its business at a higher risk
its lowest operational disruptions during the during the ‘go-live’ process.
‘go-live’ process.

By Kunal Chadha


As seen in the above table it is apparent that SAP wins the race when in comparison with
Oracle’s E-Business Suite. Below is a detailed view as in how and what types of SAP
technologies that should be implemented in Rolls-Royce.

SAP Technologies Recommended for Rolls Royce

As the study suggests, the company needs to implement an Enterprise Resource Planning system.
SAP would be the best recommended ERP system for Rolls Royce as SAP has been devoted to
provide products that would improve the return and management of information collected by the
organization. Software packages that would be best suited for to meet the current requirements at
Rolls Royce would be:

 SAP R/3 is an integrated computer system that can manage and sustain the entire business
management tasks of an organization. In Rolls Royce, SAP r/3 would be able to handle
business process such as invoice payment, production resource management and financial
account control. These tasks can be accomplished by employing various modules such as
MM (Materials Management) and SD (Sales Distribution). Since, all these modules come
under the SAP itself the communication between departments would not be a problem
anymore at Rolls Royce.

SAP R/3 is one of the world’s most used standard business software for client server
computing. SAP R/3 is highly customizable and is compatible with other systems which
would avoid the problem of data transferring that has been occurring at Rolls Royce
while using the current system. Also, the system handles document updates and master
file databases which would avoid data redundancies. The system can support an
unlimited number of servers and a variety of hardware configurations

An additional advantage of implementing the SAP R/3 would be that it can aggregate
itself with the existing computer system which would make sure there will be no data lost
after implementing the new system.

 SAP Aerospace and Defense (A&D) industry solution has been a market leader in the
industry. It is known for its configurable flexibility. The system allows intelligent and
quick response to demand and supply of dynamics across global supply network to serve
the purpose of outstanding performance based services. SAP for A&D supports processes
in manufacturing operations, proposal management, and program management, as well as
project and contract manufacturing and order management.

With the use of SAP for A&D can help Rolls Royce to manage complexity, cut costs and
boost productivity. The system responds to the area of MRO (Maintenance, Repair, and
Overhaul). SAP A&D will support important business processes in Rolls Royce and
provide tools that would help managing these processes with greater efficient and
effectiveness.

By Kunal Chadha


Service Provider recommended for the SAP implementation

There are many service providers available in the market for implementing SAP systems.
Amongst which the market leader is IBM. IBM has been supplying SAP services to many major
firms as they are known for their efficient business processes. IBM can help modifying the SAP
systems, which would help it to function more efficiently and cost effectively to meet the
demands of Rolls Royce and achieve a competitive advantage in the market place.

Apart from this, IBM can also help Rolls Royce in cost cutting with their Full Economy Model.
Together SAP and IBM offer reliable business processes.

Another service provider which plays major role in the market is INFOSYS, their SAP
implementation approach is highly focused and in lockstep with industries best practices. The
company assures compliance during every phase of implementation and upgrade, providing
organizations with sufficient opportunities to re-align their internal business practices.

Business Process

Implementation of ERP system in Rolls Royce would probably lead to the change of
current business process; this can be achieved by internal business process reengineering.
This would involve a few steps such as:

1) Drawing and mapping the current processes
2) Identifying problems or issues from the current processes mapped
3) Applying some of these problems to SAP, to compare the problems to the new
system that would be implemented.
4) Remapping and modifying the process inline to SAP.

By Kunal Chadha


Standardized MAP’s (Models, Artifacts and Processes)

One of the most important and critical area of concern during any of the ERP systems follow ups
are the choice of common standard MAP’s, i.e. Models (e.g. organization models), Artifacts (e.g.
vendor numbering schemes and lists), Processes (e.g. order management). ERP will design one
standard MAP format, to which the organization will stick, rather than following different
standard of MAP’s designed earlier by its legacy systems for every business unit.

The quality of the MAP’s will have a huge impact on the organization. If, the MAP for an
organization is not designed in an efficient manner, the organization could push down on in its
overall performance. Similarly, MAP’s that are efficiently designed as per the requirements of
the business will push up the performance giving it a competitive edge in the market. As a result,
it makes it very important for choosing the right type of MAP for the organization before getting
on to the implementation process. It makes the implementation process of ERP a lot more
efficient after standard MAP’s have been taken care of.

By Kunal Chadha


Implementation (Big Bang vs. Phased Approach)

Enterprise System Implementation strategy ranges from a Phased approach and Big Bang
approach. A Big Bang approach is an incremental implementation where the recommended
system goes from being a test version to being the actual system used to capture transactions in a
matter of days. Such an approach requires simultaneous implementation of multiple modules
along with large amount of testing before the actual implementation of the new system over from
the legacy systems. However, such a system determines the complexity and the timeline for the
project over an extensive period of time to the complete implementation of a system within a
short period of time (Brown & Vessey 2003). This strategy mainly focuses on an intense and
short period and the disadvantage of such strategy is that the details are often overlooked and
there are high amount of risks connected with it. On the contrary, a Phased approach is a module
which is implemented one at a time or in a group of modules, often at a single location which
requires orderly implementation of designing, developing, testing and installing different
modules. The problem with a phased approach is that each module relies on the information
received from other module which may result in incorrect facts and figures. Moreover,
substantial attention and maintenance to be given to former systems at each phase so as to
facilitate the new ERP system.

The task of deciding the best implementation approach is a challenging task because of attached
uncertainties that need to be taken into consideration. In this case, as Rolls Royce is a large
company with numerous organizational domains, a phased rollout strategy would be
recommended. Such approach would enable the designated team members to utilize enough time
and resources in planning, training, testing while continuing to work with older systems and
recommend any suggestion during the course of the changing phase.

The implementation strategy would be executed in three phases.

Key
1 Strategy & Direction
Phase One
2 Planning Analysis & Convergence
Phase Two 3 Early Deployment

4 Wave one – Focus on Operations
Phase Three
5 Wave two – Focus on implementation
Fig: ERP Implementation Model

 The first phase would be to conduct a short study to determine the scope of the project
which would provide a base to outline the blue print and costing. A specific body would
be formed who will monitor the finance of the project along with controlling the genuine
implementation process.

By Kunal Chadha


 In the second phase, a detailed plan would be created and a prototype system would be
installed. This phase would be very crucial where the model would be developed based
on previous implemented models and all existing projects would be drawn together and
merged. In this stage a review regarding the whole module would be conducted based on
the results derived from the prototype and any suggestions would be considered.

 Finally, in the third stage the actual module would be implemented. But, since this phase
would be too large, the implementation would be made in two ‘waves’. Both the physical
and the architecture would be taken into consideration during the execution process. The
first wave would deal with replacing the older system with the new ERP system where
prototype would act as a foundation for the ultimate implementation process. In the
second wave, the necessary infrastructure would be set in place; the employees would be
thoroughly trained to use the new desired ERP system. During this wave, the older
systems would be set to ‘view only’ mode as SAP would become the primary system.
Once the new system provides some positive responsive, the older system would be
completely eradicated.

Organizational Change

There are many factors to be understood by the management before implementing Enterprise
system. Such issues are important for the success of the ERP achievement. In order to
successfully implement the ERP system, the management of Rolls Royce should plan and
manage the execution process with the objective to proficiently fit within the company. There are
few ways the management should consider for the success of the project implementation:

 At an individual level, the reaction of the employees to the new proposed system needs to
be identified. There is a need to understand if the employees are exposed to ERP in their
past? Whether they are computer literate? If not, the management must provide adequate
training and education so that it can encourage the employees to use the new system.

 Both individual and organizational issues must be considered for the introduction of
Enterprise system.

 The problem of resistance to change from the employees must be taken into consideration
which is very vital for Rolls Royce.

 At the organizational level, the business objectives of Rolls Royce must be identified.
Based on this, several questions need to be answered, such as, how critical it is to
integrate the business process? How important is the cost of implementation of Enterprise
system and the return on investment (ROI).

By Kunal Chadha


 It is very essential for the top management to support and give total obligation to the
implementation of Enterprise System.

 The management responsible for the change must not only involve in planning the
change but also for introduction of new system and process. A good communication
within the company will guarantee the effectiveness of the implementation.

 Change management involves in managing the change in addition to the result of the
implementation.

 The stakeholders have to be informed prior and post the implementation of the system.
This makes sure that the shareholders are aware of the present situation and how the
change would help the company.

Issues after Go-Live

There are a certain risk factors that are discussed below that may or may not occur depending on
the adaptability abilities of an organization. However, by taking certain steps of precautions
during and after the phase of implementation can overcome these barriers. Below are a few risk
involved with the implementation of a new enterprise planning system, again, which may or may
not happen:

Risks Involved

Risk management is one of the major challenges of the project, and is an important area of
concern amongst the stake holders as it requires several precautions and brainstorming amongst
themselves. The ERP project that will be implemented would cover various departments. There
are certain risks that might take place during the course of the project which need to be handled
effectively. In order to avoid such potential failures and errors, the ERP Implementation team
shall record and maintain a risk register, which will contain all the details. Some of the major
risks involved after the project going Live:

 Conflicting directions in the organization can lead to potential failures or inability to
align the new IT systems with the business process

 Lack of reliable IT infrastructures and hardware’s due to unavailability or limitation,
before and during the implementation of the ERP system

 Providing insufficient and ongoing support to the company after implementation of the
system might not be possible.

By Kunal Chadha


 The management and the supervision might resist adapting to the change in the process
methods.

 The project may be treated as a mere IT Implementation by the management and
supervisions rather than a complete transformation in the business process.

 Insufficient training or education provided to the workforce to operate the new system
appropriately.

 Possible failure to give ERP sufficient priority due to the number of existing and ongoing
business processes.

 The implementation of the ERP project may possibly have an effect on the company’s
interim and end of year accounts.

 Possible failure to cut over to the new system through the inappropriate systems testing of
volume, stress and data conversion

 Difficulties in maintenance might occur on bridged legacy systems

Steps to be taken to overcome the risk

Pre-Go-Live end user training should be performed to mitigate many risk factors involved after
the implementation process.

Additional re-enforcement after go-live like core project team members should be appointed to
provide general support, answer simple process and system focused queries.

It is observed that more than 80% of the issues are associated with lack of understanding and not
some problems related to the system, to avoid such kind of a scenario ‘superusers’ should be the
first level of support.

Providing employees with training documentation such as cheat sheets will make the employees
more comfortable with the system more swiftly.

Providing training to fresher’s as and when needed on an on-going basis

It is seen that defining your go-live and on0going processes as a part of your overall ERP
planning will help your ERP technology to realize real business benefits and Return on
investments from you ERP project.

By Kunal Chadha


Summary and Conclusion

Successful implementation of ERP requires a structured methodology which is strategy-people
and process focused which is the only way to manage risk effectively. A good methodology is
one which covers all expectations without severe negative consequences even when unexpected
situation pops up (Donovan). Rolls Royce is a large business with complex process and such
project would require the whole business to be assessed thoroughly for the effects. A company
with a magnitude of ten medium sized companies as one would cause administrative difficulties
while implementing a new system particularly in the first phase while creating the strategy and
planning. Rolls Royce need to understand business, cultural and technical difficulties of such a
large project and must develop a solid core implementation team. It is bound that a project of this
size would never run smoothly without a team using their specialized skills of consultancy
specialists. This team must take into account both the needs at the managerial and end user
levels. They need to understand and solve the problems such as matching the process to software
configuration, providing adequate training so as to reduce the resistance to change, enable new
way of work, and bridge the gap between the legacy systems and the new system and so on.

SAP gives a guarantee that their newer version of the software’s will upgrade SAP reports.
However, reports specially created would require re-writing of the software. ERP systems are
characterized by features such as functional coverage, single database, interdependent
relationships and standard management and processing rules; all of which are able to bring
various kinds of changes in the company and enhance productivity.

By Kunal Chadha


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By Kunal Chadha


Yusuf, Y, Gunasekaran, A & Abthorpe,M 2004, Enterprise information systems project
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By Kunal Chadha

Proposal for rolls royce to adapt an erp system

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