2012

SAP at Rolls Royce

A project delivering its promise
The aim of this report is to present the process of implementation of SAP R/3 ERP solutions in Rolls-Royce plc in the early 2000s and to look at the vital events involved in the project that led to its success. The project management tactics, strategies involved, risks assessed will be highlighted as well which will be beneficial for any future project manager to structure, manage and organize his/her project successfully.

Damayanti Sen 1/9/2012

Table of Contents:
Company Background..3 Need for SAP..3 Project Team ......3 Key Factors of Success...4 Project Planning.5 Project Outline...7 Technology Management8 Communication and Teamwork....9 Assessment of Risks..10 Conclusion...10
References.12

Company Background
The private sector saw the return of Rolls-Royce in 1987. The acquisition of Northern Engineering Industries in 1989 demonstrated the industrial power of the company. A further acquisition of Allison Engine Company in the United States strengthened its presence in the field of aero propulsion and industrial gas turbines. (Yusufa, Gunasekaranb, Abthorpec, 2004) Today, Rolls-Royce PLC falls under the category of the worlds top power systems provider that constructs and supports a diverse range of products and services for air, sea and land applications. (SAP)

Need for SAP

There were a number of business challenges faced by Rolls-Royce plc which led to the decision of adopting ERP solutions of SAP R/3 by the company. The market competition is high and for a business giant like Rolls-Royce, factors like customer delivery, obtaining new business, flexibility in adaptation to changing environments have to be top class and brisk in nature. Before the implementation of ERP, the company used 1500 different systems, including few that were developed internally. These legacy systems did not support data integrity resulting in inaccurate and inconsistent data which could not support decision-making and performance assessment. On top of that, they were expensive in nature and came with difficulties in development and maintenance. Various departments worked in isolation and there was a chaotic situation as a direct channel of communication was absent between customers, partners and suppliers. Moreover, a change in the organizational structure in 1998, provoked the need for a change of the existing system and a shift to ERP solutions in order to pace up with the constantly changing business environment. (Yusufa, Gunasekaranb, Abthorpec, 2004)

Project Team
Introduction of EDS
The IT department of Rolls-Royce was outsourced to Electronic Data Services (EDS), who had a significant experience within the aerospace industry, so that the former could focus on its main expertise which was manufacturing and trading of aero engines. EDS was given the responsibility of development of new IT systems, maintenance and support of the existing

structure by providing ample IT resources. The partnership was completed in 1996. (Yusufa, Gunasekaran, Abthorpec, 2004) So, EDS had a huge role to play in the implementation of ERP systems in Rolls-Royce as it involved thorough revision of the existing disparate IT systems and introduction of packaged business software to automate and integrate business processes, share common data throughout the enterprise and provide access to accurate information in a real-time environment. The Team A pool of specialists from Electronic Data Services (EDS) formed the management team from the outsourced partner. EDS also formed a squad of SAP consultants who were masters of the ERP solution to be implemented. The team also consisted of internal managers and staff who had expert knowledge of cross-functional business relationships and had work experience in the old internal legacy systems. All of them comprised of the core ERP implementation team. In addition to this, every Operational Business Unit (OBU) of Rolls-Royce formed its own ERP Planning team. They were accountable for implementation of the changes brought about by the system within each OBU and training of employees. (Yusufa, Gunasekaranb, Abthorpec, 2004) In short, the organizations involved in this project were EDS Outsourced IT partner SAP providing the SAP R/3 solutions in ERP (6000 licenses were required) Sun Microsystems Provided the servers, hardware and IT infrastructure (SAP)

Key factors of Success

The final outcome of a project (whether success or failure) depends on a number of factors, be it large or small, simple or complex. But there are a basic few which drives the project forward and accounts for a generous share for its success. (Symonds, 2011)

Similarly, there were a number of factors that contributed to the success of the ERP project in Rolls-Royce. They are listed below and the major ones discussed in detail in the later sections. 1. Strategic Planning 2. Efficient, strong and reputed IT partner and SAP consultants

3. 4. 5. 6.

Strong Involvement of the stakeholders Effective Risk Assessment and Management Motivation of employees Proper communication and teamwork between Rolls-Royce, EDS, SAP and Sun Microsystems 7. Extensive support given to end users

Project Planning
Identification of Areas of Concern paralleled by strategic planning to ease up the process:
A thorough understanding of the market condition, competitions and more importantly the current scenario within the company is necessary in order to devise strategies of a new project. This will result in an unambiguous objective of the project. The project team of Rolls-Royce identified the potential problem areas and devised strategies and plans to fix them wisely. (Olson, Chae, Sheu, 2005) The problem areas are discussed in detail in the following section.

Business Problems A robust business structure is required for effective functioning of SAP R/3. The internal managers and staff of cross-functional business workshops soon realized that the current practices do not adhere to the SAP functions and norms and a shift from the conventional business process is required. Plan A Business Process Reengineering (BPR) programme was decided to be used in 4 steps. 1. Drawing and mapping of current process 2. Identifying issues from the mapped process 3. Applying some of the issues in the demonstration of SAP 4. Modification of processes in line with SAP (Yusufa, Gunasekaranb, Abthorpec, 2004) Outcome Rolls-Royce business processes were modified instead of SAP R/3 software which would have incurred very high expenses. Thus, the strategic planning of BPR saved Rolls-Royce quite a sum of money. Technical Problems The main technical issue was data inaccuracy. It was well understood that data migration procedure would be rigorous as redundant, duplicate data would have to be extracted from the legacy systems and stored in a non-redundant, normalized form in the central data repository of SAP.

Plan As data duplication was a major concern, it was decided by the implementation team in conjunction with Rolls-Royce steering committee that data entering the project has to be validated, cleaned and maintained in the Data Warehouse. Also, few internal systems were to be deliberately kept functional until they could be phased out to new systems. EDS took the responsibility of developing interfaces to achieve the purpose. Outcome Data was cleaned and no threat of poor data integrity was discovered. Introduction of any new software products within the processes involved thorough investigation and accreditation by SAP (Yusufa, Gunasekaran, Abthorpec, 2004). Cultural problems ERP systems are a balance of both computer systems and people systems. There is a potential user resistance when ERP is implemented. Being pro-active with the situation instead of being reactive is tactful. Top management need to exert their political power in a positive, motivating way for staff buy-in of ERP. The complexity that ERP provides is often difficult for staff buy-in as they prefer a user friendly application that covers most of the business, whereas in ERP, one simple transaction passes through a number of validations and processes. (Al-Mashari, 2001) Plan Rolls-Royce decided to break the traditional segregation of the OBUs and departments. It was planned that a lot of stress should be given to training and support of users. Seminars were supposed to be organized where the trainees would be divided into two groups specialists and mass users. Training of the specialists was to be done by SAP and was mainly technical in nature. The training for the mass users was to be conducted by EDS consultants. The trainees were supposed to be given practical demonstrations of SAP within workplace, presentations reflecting the change in work practices etc. Outcome Following the plan devised above, more than 10,000 Rolls-Royce employees were trained in SAP ERP.

Project Outline
The project was divided into three phases with distinctive tasks set for each of them. A key model portraying the distinctions is as follows: Key Phase 1 Phase 2 1 2 3 4 Phase 3 5 6 Strategy & Direction Planning, Analysis & Convergence Early Deployment Wave 1 Focus on Operations Wave 1 Pilot Wave 2 focus on Assembly & Spares

Phase 1 Strategy & Direction: This phase involved a short thorough research of the requirements and current conditions to finalize the scope of the project; provide an outline and calculate the budgeting. The financial aspects were to be dealt by a steering committee which was formed in this stage and the actual implementation was to be overseen by the ERP core team. Phase 2 Phase two saw the development of a prototype of Rolls-Royce Allison model and the merge of all the existing projects in the company. Activities like high level design review which involved analyzing the enterprise structure and development of Vanilla prototype, critical design and review involving design and customization, integration testing, user acceptance testing, system deployment and extensive end-user training were carried out. Phase 2 was completed within two weeks of the plan and at a price of 5.2 million which also included supplementary activities like support of finance and staff work booking. Shift from initial time plan It was during phase two that a crucial shift was made from the original timing of phase one and wave one (first part of phase 3) was postponed by 6 months resulting in delay of wave two (second part of phase 3) by a considerable amount. The main reasons of change were pragmatic with basic reasons like a) providing time to the line organizations to arrange, train, organize and clean up data b) further 5 months period for pilot running and early development c) additional time for completion of other pre-requisite projects like PDM (Product Data Manager) and SFDM (Shop Floor Data Manager) on which SAP was dependent.

8 However, this change did not affect the costing plan much, as the issues resulting from this change were realized early enough and addressed well. ( Yusufa, Gunasekaranb, Abthorpec, 2004) Thus, thousands were saved by following a strategic approach. Phase Three This phase was large enough to be completed in one go and was divided into two waves which mainly involved physical implementation of the system and alteration of the current working practices within the company. Wave One Mainly concerned with the replacement of legacy systems, wave one also saw the introduction of Integrated Programme Management (IPM) for new production projects and deployment of the new manufacturing execution system, SFDM. A SAP pilot project was also conducted at one of RRs facility in transmissions and structures operations unit for 3 months which formed a solid footing for the go-live. Wave two Wave two lasted for an entire 1 year and had a dependency on wave one to complete first. It was concerned with implementing engine assembly, spares, logistics and human resource elements within the project. (Yusufa, Gunasekaranb, Abthorpec, 2004) The legacy systems were toggled to a view-only mode and were eventually phased out once SAP became fully operational and the executive system. IPM was also networked over the whole business by the end of phase two.

Go-live The go-live process took 2 weeks to complete after this when the existing legacy systems were kept off the fore-front by switching them to a view-only mode as specified above. Both the old and new systems were then compared to gauge performance and verify improvement. The legacy systems came to an end of being the primary system of the organization.

Technology Management
Behind every IT project, there is a specific business requirement. Now, it is the duty of the project manager to map that requirement into the technology arena and formulate an end product that meets the business need. (Cochran, 2009) New technology systems like the SAP system of Rolls-Royce are just tools to optimize day to day functions of an organization. The trick lies in successful management of technology, a superlative form of which can be a key to profitability and success. As mentioned before, the main technical challenge faced by Rolls-Royce for this project was data migration from legacy systems. (Olson, Chae, Sheu, 2005) The voluminous data was greater than any transaction load that the system will bear once it becomes fully operational. But proper technology management made this complicated and error-prone task quite feasible. Before migration, data was kept in a stable state for 10 weeks. (Yusufa, Gunasekaran, Abthorpec, 2004) Data included both master data and transaction data. It was decided that if

there occurs some changes in the data on the old system after the transfer activity, it will be logged and passed through to the new system. Purchase orders and purchase requisitions were not transferred as there will be greater probability of errors. The erroneous documents cannot be deleted from the system and will unnecessarily occupy database space. This challenge was managed by the MRP (Materials Requirement Planning) during go-live, which created the purchase documents afresh in the new system. The decision of delaying wave one for completion of PDM and SFDM, without any drawbacks, which were pre-requisites of SAP falls under the category of expert management. Thus it can be inferred that for an IT project to deliver its goal, a thorough scrutiny of each little small process within a business cycle is essential to avoid system failures at the last moment.

Communication & Teamwork

Project success requires a sound communication with customers, end-users and within the project team as well. No decision should be taken based on assumptions and contacts should be made with the stakeholders regularly. (Haughey, 2010) Rolls-Royce understood the necessity of a direct communication with the vendors and end-users which would ultimately result in successful delivery of the commitment. On understanding, the business, cultural and technical challenges, a strong core implementation team was developed that catered to the needs of both the managers and the end-users. Specialist knowledge from SAP was also kept under constant consultations. EDS acted as the trusted partner who provided the architectural framework for the project. The communication between EDS and Rolls-Royce was effective to the core as it allowed the latter to give its full effort in its area of expertise, which was manufacturing turbine engines. (Yusufa,

Gunasekaran, Abthorpec, 2004)This would have only been possible if the stakeholder had immense
trust on the partner. And trust comes from a stable customer-vendor relationship whose base lies in the ways and types of communication between them. Teamwork was again a vital factor for a project as huge as this to be completed successfully. As the ERP team had people involved from EDS, Rolls-Royce and SAP, it is expected to have been a challenging journey to maintain harmony between three different organizational cultures. Apart from them, line personnels from Rolls-Royce had to maintain a strong relationship with the core team to address issues like initiative fatigue and lack of cooperation from staff during phase 2 of implementation. Work in the project involved non-computer based environments as well. So, there was excellent interaction between people of technical and non-technical backgrounds epitomizing effective relationships and robust teamwork. (Yusufa, Gunasekaran, Abthorpec, 2004) This showed that teamwork was healthy in

this project.

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Assessment of Risks
The number of departments and OBUs involved in the ERP project was huge in number. Risk analysis should be done in 5 steps a) identifying risks b) logging risk c) reviewing risk d) managing risk e) closing risk. (Dey, Clegg, Bennett, 2010) During this project, at every step, the areas of potential errors were scrutinized and a detailed risk register was maintained which recorded all the risks in the concerned areas along with the mitigation plans. Risk assessment was fantastically conducted by regular reviews and updates of the register. Few risks that were identified are highlighted below: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Failure of on-time delivery of reliable IT hardware from Sun Microsystems. Insufficient support after implementation from Rolls-Royce and EDS. Inadequate training of the workforce in the new system. Failure to give ERP the required significance it deserves due to the ongoing business improvements. Inappropriate systems testing of volume, stress and data conversion. Issue of maintenance in the legacy systems that have been bridged by interfaces. Negative impact on company interim and end of year accounts. Changes in the demand during may stretch the new system on the learning curve beyond capacity. Failure in loading data from old systems. Managements outlook towards ERP as just another IT system without being able to realize the change in process methods. The resistance of change from employees.

Proper risk assessment and understanding the ongoing processes during ERP planning would help the company realize its various business benefits and ROIs from the ERP project. (Yusufa, Gunasekaran,

Abthorpec, 2004)

Conclusion
It can be concluded that Rolls-Royce executed a successful implementation of SAP R/3 solutions with the help of EDS and SAP. This was only possible because the project team showed tact in planning from ahead, registering risks and displaying profound teamwork and healthy communication. All this led to the following sets of outcome which ultimately led to the success of the project: Rigorous testing (3 huge pilots were conducted) Resolved defects Adequate training of staff Proper understanding of business processes

11 Proper communication Expert legacy data migration Development of interfaces by experts Change management in required business areas Maintenance of regular status reports by managers Proper backup plan and disaster recovery Clear responsibilities, accountabilities and ownership

According to Julie Scattergood, Director of Enterprise Resource Planning, Rolls-Royce plc, the implementation of SAP met their initial expectations and successfully provides accurate information to the decision-makers of the company. (SAP) So, this project can be set as an example for any future project manager. It is learnt that a detailed project plan at the very outset needs to be devised that is at par with the budget, schedule and scope of the plan. The manager needs to drive and motivate the team members, build connections and form a healthy environment throughout; motivate the users as well, by arranging workshops and trainings. A good understanding of the deliverables needs to be present along with the potential to identify, manage and control risks.

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References
Al-Mashari, M., 2001.Enabling process-orientation through enterprise resource planning systems, Business Process Management Journal, Vol. 7 Issue: 3 Cochran, J., 2009. Turn Your Customer's Needs into Successful IT Projects. http://www.projectsmart.co.uk/turn-your-customers-needs-into-successful-it-projects.html Dey, P., Clegg B., Bennett D., 2010. Managing Enterprise Resource Planning Project, Business Process Management Journal Vol. 16, No. 2 pp. 282-296,Emerald Group Publishing Limited Haughey ,D., 2010. 10 Golden Rules for New Project Managers. http://www.projectsmart.co.uk/10-golden-rules-for-new-project-managers.html Olson, D., Chae B., Sheu C., 2005. Issues in Multinational ERP Implementation, Int. J. Services and Operations Management Vol 1, No. 1 SAP, Customer Case Studies, Rolls Royce Plc http://www.sap.com/uk/about/success/casestudies/rollsroyce.epx Subramonium, S., Tounsi M., Krishnankutty K., 2009. The Role of BPR in the implementation of ERP systems. Business Process Management Journal, Vol. 15, No. 5, pp 653668, Emerald Group Publishing Limited Symonds,M., 2011. 5 Key Components of a Project You Need to Get Right. <http://www.projectsmart.co.uk/5-key-components-of-a-project-you-need-to-get-right.html> Yusuf, Y., Gunasekaran A., Abthorpe M., 2004. Enterprise Information Systems Project Implementation: A case study of ERP in Rolls Royce, Int. J. Production Economics 87 (2004) 251 266 Ziaee, M., Fathian, M., Sadjadi S., 2006. A Modular Approach to ERP system selection, A case study, Information Management and Computer Security Vol. 14, No. 5, pp 485495, Emerald Group Publishing Limited