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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. Oracles E-Business Suite ......................................................................................................... 9 SAP Technologies Recommended for Rolls Royce .................................................................................. 10 Service Provider recommended for the SAP implementation ................................................................. 11 Business Process.................................................................................................................................... 11 Standard MAPs (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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

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 companys 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

Proposal for Rolls Royce to adapt ERP System

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 worlds 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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

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 companys 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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

SAP vs. Oracles 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
SAP is focused on people do their jobs better.

Oracle (E-Business Suite)


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

Implementation takes longer time with more efficient results.

Takes less time for implementation with a few inaccuracies.

SAP customers are more satisfied with higher level executive satisfaction, employee satisfaction and customer satisfaction.

Oracle did not meet the required satisfactory level of customer requirements.

Maintenance rates for SAP customers are lower. SAP is regarded as Vanilla Software (that is not customized from its delivered form and can be used without any customization applied to it.)

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

Oracle has higher level of flexibility and can be customized to suit the company needs.

SAP continues to enhance and build on core product offering

Oracle is moving towards fusion.

SAP has been created on its own from the base like sales and operation planning, financial reporting, CRM, functionalities into its core ECC and developed all in one ERP solutions

Oracle has been developed mainly from gaining best-of-breed point solution. E.g. Acquisition of Demantra for advance sales and operations planning, Siebel for CRM etc.

SAP has the ability to keep its business risks at its lowest operational disruptions during the go-live process.

Oracle keeps its business at a higher risk during the go-live process.

By Kunal Chadha

Proposal for Rolls Royce to adapt ERP System

As seen in the above table it is apparent that SAP wins the race when in comparison with Oracles 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 worlds 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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

Standardized MAPs (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 MAPs, 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 MAPs designed earlier by its legacy systems for every business unit. The quality of the MAPs 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, MAPs 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 MAPs have been taken care of.

By Kunal Chadha

Proposal for Rolls Royce to adapt ERP System

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 Strategy & Direction Planning Analysis & Convergence Early Deployment Wave one Focus on Operations Wave two Focus on implementation
Fig: ERP Implementation Model

Phase One Phase Two

1 2 3 4

Phase Three 5

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

Proposal for Rolls Royce to adapt ERP System

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

Proposal for Rolls Royce to adapt ERP System

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 hardwares 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

Proposal for Rolls Royce to adapt ERP System

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 companys 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 freshers 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

Proposal for Rolls Royce to adapt ERP System

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 softwares 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

Proposal for Rolls Royce to adapt ERP System

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By Kunal Chadha

Proposal for Rolls Royce to adapt ERP System

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By Kunal Chadha