ERP Implementation at Rolls-Royce
The first decade of the 21st century saw an increase in the number of organisations adopting ERP systems for automating and streamlining their operations. This was because the use of ERP results in the standardisation of information as all the business units of an organisation are integrated. Not only this, business processes also get automated.
For an ERP system to be effective, it must be implemented with the view of making changes throughout an organisation rather than viewing it simply as a software installation. The ERP system must also be linked to the existing software.
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Those in charge of a successful implementation of ERP should also take organisational resistance into account. In 1994, Rolls-Royce acquired Allison Engine Company, an American manufacturer of gas turbines and aviation, industrial and marine engine components.
With this, it could establish facilities in 14 countries by the year 1995. At that time, it was using about 1500 internally developed systems; however, the data and information provided by these systems were neither consistent nor accurate.
In 1996, it gave the responsibility of implementing ERP to an organisation, named EDS. EDS formed a project team consisting of specialists who were SAP consultants. The team was further divided into sub-teams. Each functional unit of the organisation had its own planning team. The team was responsible for implementing the changes associated with the ERP implementation as well as training the employees in the new ERP environment.
The implementation team faced three major problems, viz. cultural, business and technical. The organisation now had the challenge of training its employees and ensuring that the changes were accepted throughout the organisation.
The expected end users of the ERP system were trained by the SAP specialists, and other employees were trained by the EDS consultants. The organisation was also faced with the task of redesigning its business processes.
For this, it performed the following steps:
- Mapping the current process
- Identifying catches in mapping
- Comparing mapping with the ERP process to identify problems with the new systems
- Remapping for process realignment as per the ERP system
A major technical problem faced by Rolls-Royce was the accuracy of data. Transition to the ERP system required data from 1500 odd systems to be uploaded in the new system. The implementers also had to ensure that there was no data redundancy, so they created user-friendly customer interfaces.
The major business tasks that had to be integrated into the ERP system were as follows:
- Building customer relationship
- Creating customer solutions
- Resolving customer problems
- Generating orders
- Fulfilling orders
- Satisfying shareholders
- Managing cash
The implementers devised a systematic release strategy for the ERP implementation process. To ensure the effectiveness of this release strategy, they considered four major points. First, if the organisation required third-party software, it must be accredited by SAP.
Second, all business reports that formed a part of ERP must be justified. Third, the implementers must identify the data and validate, clean, load and archive it. Fourth, the implementation required additional hardware, which included 1000 new PCs, 6000 licenses and new servers.
The release strategy of the organisation was divided into three phases and six stages. These phases and stages are shown in the following figure:
Note that Q in the above figure denotes ‘quarter’.
Three Phases Strategy
The details of the three phases are as follows:
Stage 1: Strategy & Direction
During this phase, i.e. during the first quarter of 1998, a detailed study of implementing ERP and determining the scope of the project was carried out. During this time, the implementation plan outline was prepared, and the cost of the project was determined.
Also, a core team was formed to oversee the entire implementation process of the ERP system.
Stages 2 and 3: Planning Analysis &Convergence and Early Development
During this phase, a number of workshops were conducted to understand various business processes. Apart from these, a number of ‘business simulation’ workshops were also conducted in which a detailed implementation plan was chalked out. Other points that were discussed with respect to the implementation of ERP at Rolls-Royce were as follows:
- Preliminary design review
- High-level review
- Critical design review
- Implementation realisation
- Technical/operation review
- Post-implementation review
Stages 4, 5 and 6: Focus on Operations, Pilot Testing and Focus on Assembly & Spares
This phase was divided into three stages as it was large and complex. Under stages 4 and 5, the 1500 odd old systems were replaced with new ones, and at the end of these stages, the pilot project was initiated at one of the facilities of Rolls-Royce.
A year later, the pilot project was completed successfully, and the system could be adopted on an organisation-wide basis. Stage 6 started from the second quarter of 2000 and ended in the first quarter of 2001. This stage was concerned with engine assembly, spares, logistics and human resources. The old systems were phased out gradually.
The changes were implemented in a number of suites. Under suite 1, the master schedule key program and the supply chain plan were implemented. Under suite 2, planning and scheduling of the factory and the shop floor were implemented. Under suite 3, other operations were implemented