erp rolls royce

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Int. J. Production Economics 87 (2004) 251–266

*Correspondin

1482466216.

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doi:10.1016/j.ijpe

Enterprise information systems project implementation:A case study of ERP in Rolls-Royce

Yahaya Yusufa,*, A. Gunasekaranb, Mark S. Abthorpec

a Business School, University of Hull, Hull HU6 7RX, UKb Department of Management, University of Massachusetts, 285 Old Westport Road, North Dartmouth, MA 02747-2300, USA

c Department of Mechanical and Manufacturing Engineering, Nottingham Trent University, Burton Street, Nottingham NG1 4BU, UK

Abstract

Economic globalisation and internationalisation of operations are essential factors in integration of suppliers,

partners and customers within and across national borders, the objective being to achieve integrated supply chains. In

this effort, implementation of information technologies and systems such as enterprise resource planning (ERP)

facilitate the desired level of integration. There are cases of successful and unsuccessful implementations. The principal

reason for failure is often associated with poor management of the implementation process. This paper examines key

dimensions of implementation of ERP system within a large manufacturing organisation and identifies core issues to

confront in successful implementation of enterprise information system. A brief overview of the application of ERP

system is also presented and in particular, ERP software package known as SAP R/3, which was the ERP software

package selected by Rolls-Royce plc. The paper takes an in-depth look at the issues behind the process of ERP

implementation via a case study methodology. It focuses on business and technical as well as cultural issues at the heart

of the Rolls-Royce implementation. The case study also looks at the implementation time scales and assesses the

benefits from the project both tangible and intangible.

r 2003 Elsevier B.V. All rights reserved.

Keywords: ERP; Information systems; Implementation; Success factors; Rolls-Royce

1. Introduction

The global nature of modern marketplacerequires active players to internationalise theiroperations. In the past, companies were used tocompeting based on one or two competitiveperformance objectives such as price and quality.However, present markets demand both price and

g author. Tel.: +44-1486466933; fax: +44-

ss: [email protected] (Y. Yusuf).

front matter r 2003 Elsevier B.V. All rights reserve

.2003.10.004

quality in addition to greater flexibility andresponsiveness and thus today’s organisationsmust compete based on all competitive objectives.In order to achieve such simultaneity in perfor-mance objectives, some organisations have decen-tralised their operations by global outsourcing ofactivities. This places enormous challenge oncompanies to achieve a co-ordinated and inte-grated supply chain. The emergence of variousinformation technologies such as the Internet,electronic data interchange (EDI) and WWWfacilitate the attainment of an integrated supply

d.

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Y. Yusuf et al. / Int. J. Production Economics 87 (2004) 251–266252

chain and in turn flexibility and responsiveness inmeeting changing market requirements. Informa-tion systems such as manufacturing resourceplanning (MRPII) and enterprise resource plan-ning (ERP) in particular have gained ground inproviding support for achieving an integratedsupply chain.

Firms around the world have been implement-ing ERP systems since the 1990s to have a uniforminformation system in their respective organisa-tions and to re-engineer their business processes(Rajagopal, 2002). ERP system as a packagedsoftware has the advantages of reduced cost, rapidimplementation, and high system quality (Lucaset al., 1988). Although application packages havethese benefits over custom design software, pack-aged software have problems of uncertainty inacquisition and hidden costs in implementation.Successful ERP implementation must be managedas a program of wide-ranging organisationalchange initiatives rather than as a softwareinstallation effort. Such IT-driven initiatives re-quire change of the organisation’s socio-economicsystem, which is intertwined with technology, task,people, structure, and culture. Thus organisationalresistance to change is identified as a criticalsuccess factor for ERP implementation (Hongand Kim, 2002).

Organisational fit and adaptation are importantto implementation of modern large-scale enter-prise systems that are built with pre-determinedbusiness process methodology. As a result, custo-misation is a crucial, lengthy, and costly aspect inthe successful implementation of ERP system, andhas, accordingly, become a major speciality ofmany vendors and consulting companies. Gefen(2002) examines how such companies can increasetheir clients’ perception of engagement successthrough increased client trust, that is broughtabout through respective and dependable custo-misation.

Considering the importance of ERP in SCM, anattempt has been made in this paper to analyze theimplementation issues of ERP in a major UKcompany. The lessons learned from this companywould be useful for other companies in theirefforts to successfully implement modern ERPsystem.

2. Enterprise resource planning

In the 1990s innovations in information tech-nology led to the development of a range ofsoftware applications aimed at integrating the flowof information throughout a company, and thesecommercial software packages were known asEnterprise Systems. During this period one parti-cular enterprise system called ERP caught theattention of some of the worlds largest companies.It has been estimated that businesses around theworld have been spending almost $10 billion peryear on ERP systems. ERP aims to integratebusiness processes through the support of anintegrated computer information system (O’Brien,1999).

ERP allows the corporate management of abusiness, and aims to integrate individual func-tional systems such as manufacturing, finance,procurement and distribution. The systems allowcompanies to replace their existing informationsystems and also help to standardise the flow ofmanagement information and have been regardedas the next step in the evolution of MRPII. TheMRPII model actually forms the basic core ofERP and uses similar modules, however someERP systems do contain certain modules that werenot originally used within MRPII such as compu-ter aided design (CAD), distribution resourceplanning (DRP), tool management systems(TMS), and product data management (PDM)(Yusuf, 1998; Prasad et al., 1999).

ERP uses Internet technologies to integrate theflow of information from internal business func-tions as well as information from customers andsuppliers. The system uses a relational databasemanagement system, within client/server networkarchitecture, to capture valuable managementdata. The key principle behind the system involvesentering the data from a series of modularapplications only once. Once stored, the dataautomatically triggers the update of all relatedinformation within the system. The systems cansupport virtually all areas of an organisation,across business units, departmental functionsand plants. The development of an ERP systemwithin a large manufacturing organisation requiresthe integration of working practices and the

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Y. Yusuf et al. / Int. J. Production Economics 87 (2004) 251–266 253

information systems (Davenport, 1998; Mandaland Gunasekaran, 2002).

Companies that use ERP can gain a competitiveadvantage from the way they implement thesystem and then exploit the resulting data. Manycompanies that have installed ERP have claimedto be more nimble within the marketplace thantheir competitors with hard-to-change custommade systems (Latamore, 1999).

ERP systems offer companies the followingthree major benefits:

* Business process automation.* Timely access to management information.* Improvement in the supply chain via the use of

E-communication and E-commerce.

A vital task when implementing an ERP Systemis to understand the difference between functionsand modules. Functions are defined as actualphysical tasks that are performed within acompany. Whilst modules can be considered aspieces of software that help to provide thefunctions, different ERP vendors have differentmodules that perform the functions. The enor-mous growth of the Internet and MicrosoftWindows packages, complementary as they areas collaborative tools has made the argument forERP more compelling (Loizos, 1998). It is now ageneral industry view that ERP will take them tonew heights of efficiency by enabling them to movefinancial and other data speedily from onedepartment to another (Holt, 1999).

Companies have spent billions of dollars andused numerous amounts of man-hours installingelaborate ERP software systems. The ERP soft-ware vendor market has experienced rapid growthin the late 1990s. In 1998 there were five majorsoftware vendors offering ERP solutions tobusinesses worldwide. The largest of these wasSAP AG (http://www.SAP.com) who earned over$5 billion in revenue. The Oracle Corp. was thesecond largest with $2.4 billion in sales. Followedin third place by PeopleSoft (http://www.People-soft.com) who earned $1.3 billion. In fourth placewas J.D. Edwards with $979 million. And finally infifth place was the Baan Co. (http://www.Baan.com) with $743 million in sales (Holland andLight, 1999).

Van Stijn and Wensley (2001) focus on problemsthat may arise after ERP systems have beenimplemented—the in-use phase. Various problemshave been identified regarding the ERP systems in-use. Because of the organisational unwillingness orinability to make technology upgrades (Markusand Tanis, 2000), the enterprise system may takeon the appearance of a legacy system in disguise.

3. Implementation of ERP

ERP when successfully implemented, links allareas of a company including order management,manufacturing, human resources, financial sys-tems, and distribution with external suppliers andcustomers into a tightly integrated system withshared data and visibility (Chen, 2001). Potentialbenefits include drastic declines in inventory,breakthrough reductions in working capital,abundant information about customer wants andneeds, along with the ability to view and managethe extended enterprise of suppliers, alliances andcustomers as an integrated whole (Escalle et al.,1999).

The term ERP stands for enterprise resourceplanning, however it is not good enough to justplan resources required to run the enterprise, theyneed to be managed as well. An organisation mustassess itself, to see if it is ready for ERP. It mustdetermine if it is ready for the competitive businessenvironment of today and then strengthen itsposition for tomorrow’s changes. Some of thecompanies that implement ERP systems do notrealise the full benefits that the system offersbecause most organisations are not organised inthe correct fashion to achieve the benefits. Manycompanies that attempt to implement ERP sys-tems run into difficulty because the organisation isnot ready for integration and the various depart-ments within it have their own agendas andobjectives that conflict with each other (Langen-walter, 2000).

While companies such as Cisco Systems, East-man Kodak, and Textronix have reaped theexpected benefits of ERP systems, many businessesare discovering that their ERP implementationis a nightmare. FoxMeyer Drug, a $5 billion

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pharmaceutical company, recently filed for bank-ruptcy (Al-Mashari and Zairi, 2000; Chen, 2001).Dell Computers spent tens of millions of dollarson an ERP system only to scrap it because thesystem was too rigid for their expanding globaloperations (Trunick, 1999). ERP implementationsinvolve, in truth, broad organisational transfor-mation processes, with significant implications tothe organisation’s management model, organisa-tion structure, management style and culture, andparticularly, to people (Wood and Caldas, 2001).

ERP software is very adaptable but not verymalleable and companies that wish to use themcorrectly have to change their working practices tofit the software. The key factor of an ERPimplementation is the way in which the softwareis configured. The most important issue to identifybefore an implementation is the ‘core’ of thebusiness, which can be identified by the use of thebusiness model (Chung and Snyder, 2000).

One original motive for buying an ERP systemwas to automate business processes, but themodern view has shifted to the quick access ofup-to-date and timely management information.The majority of difficulties experienced by ERPimplementations have been the costly developmentof additional software to help ‘bridge’ or retrieveinformation from legacy systems. Before ERPmanagement reports can be generated and dis-tributed to managers, the data has to be createdfirst which can be a costly and inefficient process.In an attempt to improve the timeliness andaccuracy of management data, many softwarevendors are making end-users responsible forupdating their own information rather thanrelying on IT resources.

ERP software consists of a number of modulesthat link together to form a complete businesssolution, however the main difficulties experiencedby ERP users have been in manipulating the datastored within the system. Software developers havebegun to address the need for additional informa-tion tools. Some of these tools include the need fordetailed and advanced planning and advancedscheduling and customer relationship manage-ment. Abdinnour-Helm et al. (2003) discussedthe pre-implementation attitudes and organisa-tional readiness for implementing an ERP system.

Huang and Palvia (2001) analyze the ERPimplementation issues in advanced and developingcountries. Umble et al. (2003) presents theempirical findings on implementation proceduresand critical success factors for ERP. Van Stijn andWensley (2001) address some concerns, methodsand directions for future research on organisa-tional memory and the completeness of processmodelling in ERP systems.

Most ERP software vendors supply theircustomers with an implementation programme aspart of an overall solution package. For exampleSAP provides some of its customers with acceler-ated SAP (ASAP). ASAP suggests the adoption ofa ‘big bang’ implementation. This programme optsfor a quick implementation that is specificallydesigned for small and medium sized companies.‘Big bang’ implementations offer lower costs andgenerally use only a few of the software’s inter-faces, however the risks are greatly increased, asless time is spent on development and assessingbusiness needs. There are several more papers onERP implementation and some of the most recentones include Mabert et al. (2003), Olhager andSeldin (2003), Umble et al. (2003) and Wood andCaldas (2001).

4. Systems, applications and products in data

processing

Five former IBM employees originally foundedsystems, applications and products in data proces-sing (SAP) in Mannheim, Germany in 1972. Theiraim was to produce standard software applicationprogrammes that could integrate with each otherto form a business solution. SAP has beendedicated to produce products that improve thereturn on information gathered by an organisa-tion. The company began its life with the name‘Systemanalyse Und Programmentwicklung’ andeventually became known as SAP.

SAP’s first product known as R/2 was built andprototyped for a subsidiary of ICI. The systemthey produced was simply known as system ‘R’,which stands for ‘Real-time’ processing. Thissystem was fully integrated and could be used onthe IBM mainframe. The R/2 solution was

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launched in 1979 and was developed for acomputer mainframe environment, at the time itwas perceived as the most comprehensive systemavailable to businesses in the world, and it receivedgreat interest from industries in the 1980s.

SAP saw the future potential for the delivery ofinformation to the end-user via the PC, so SAPreinvented and developed their product further bydeveloping a business solution for the client/serverarchitecture environment, this became known asR/3 and was released in 1992. In the 1990s SAPand its R/3 solution would go on to become thedominant ERP solution, and also become one ofthe worlds biggest software houses.

SAP R/3 applications are a range of softwaremodules. They can be used either alone orcombined to form business solutions. SAP statethat their R/3 applications offer comprehensivefunctionality for all standard business needs withinan enterprise. SAP R/3 uses a programminglanguage called advanced business applicationprogramming (ABAP).

The following are SAP R3’s 12 applicationmodules: financial accounting, treasury, controlling,enterprise controlling, investment management, pro-duction planning, materials management, qualitymanagement, project system, human resource man-agement, sales and distribution, and plant main-tenance and service management.

5. Rolls-Royce—case study

In this section, a case study conducted at Rolls-Royce investigating the implementation of ERP(SAP) is discussed. The case study starts withintroducing the company and its background,presenting the status of IT before and after theimplementation of SAP, and giving the detailchronological phase of the implementation of SAPin Rolls-Royce. Also, the research methodology isdiscussed. The implementation of SAP in thecompany and project risks is presented.

5.1. Company background

Rolls-Royce returned to the private sector in1987 and acquired Northern Engineering Indus-

tries in 1989. This acquisition allowed Rolls-Royceto consolidate its capabilities in the area ofindustrial power. A further acquisition was madein 1995 when Rolls-Royce bought the AllisonEngine Company in the United States, thusenlarging the company’s presence in aero propul-sion and industrial gas turbines. The acquisitionallowed Rolls-Royce a major foothold within USmarkets. The most modern family of engines is theTrent series, which are also powerful three-shaftturbofan engines similar to the RB211, and areused to power the Airbus A330, A340-500/600.The Trent series of engines offer greater thrust,long range flight capabilities and economicaloperating and maintenance costs. The Rolls-RoycePower Generation Market includes both electricaland nuclear power, which also includes marineapplications, such as providing power plants fornuclear and naval vessels. Rolls-Royce is a trulyglobal business offering a range of first class worldleading products. It has facilities over 14 differentcountries and also offers first rate after salesservices, covering mechanical overhauls and sparepart distribution. In March 1998 a new organisa-tional structure was adopted that recognised thestrategy and the need for change to reflectcustomer requirements.

5.2. The situations before ERP

Rolls-Royce used over 1500 systems before theERP project was started, many of which weredeveloped internally by Rolls-Royce over the lasttwo decades. These legacy systems were expensiveto operate and difficult to maintain and develop.They did not provide accurate, consistent andaccessible data that was required for good andtimely decision-making and performance assess-ment (e.g. delivery performance, quality metrics).These ageing systems often did not lend themselvesfully to a modern manufacturing environment.Some of the legacy systems were so old that theyhad year 2000 compliance problems. Work withinRolls-Royce was functionally orientated andvarious departments worked in isolation.

The last major manufacturing system to bedeveloped and implemented by Rolls-Roycewas MERLIN, which stands for mechanised

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evaluation of resources, logistics and inventory,the system was basically a scheduling system whichran on MRPII system principles. The system wasdeveloped in the 1980s and, although it wascapable, it was prone to manual manipulation.One particular down fall of the system was the lackof communication between individual sites. MER-LIN often had difficulty communicating withanother manufacturing system named IBIS, whichstands for inventory based instructing system.IBIS was an older manufacturing system thatwas used at the Bristol and Ansty facilities. Workin progress was often transferred between sites andcould not be tracked accurately, often causinginventory and stock take problems.

An additional system named corporate costaccounting (CCA) was used to financially monitortransactions, which covered pipeline inventory andinter-site transport. Rolls-Royce also had a rangeof individual systems for controlling and monitor-ing commercial, financial and procurement func-tions, these systems had problems interfacing witheach other, as they had different databases and fileformats. The legacy systems did not allow Rolls-Royce to establish direct, on-line communicationwith customers, partners and suppliers. In fact,these systems did not support significant growth ofthe business and were not sufficiently agile to keeppace with the changing business environment.

5.3. IT at Rolls-Royce

In 1996 Rolls-Royce formed a partnership withelectronic data services (EDS). The Rolls-RoyceIT department was outsourced to EDS, whichmeant that EDS were responsible for the develop-ment of the company’s IT systems as well as takingover the existing structure and providing adequateIT resources. This move was made in order toallow Rolls-Royce to concentrate its efforts on itsmain area of expertise—the making and selling ofaero engines. Rolls-Royce decided that a partner-ship with a world leading IT outsourcer wouldbenefit the company far more than designing andmaintaining their own IT systems. EDS werechosen because of their substantial experiencewithin the aerospace industry. EDS also had theresponsibility for employing specialist consultants.

In 1998 changes were made to flatten thestructural hierarchy. The customer focused busi-ness units (CFBU) were made responsible formaking sales deals within the various marketsegments. Whilst the operational business units(OBU) formed the manufacturing support forproducing the product, the Executive Groupcontrols the whole business and makes decisionson the overall direction of the company.

5.4. The implementation project

The ERP project consists of a management teamof specialists from the external outsourcing com-pany EDS. EDS also have the specialised talents ofSAP consultants. Within the project team arespecialist internal managers and staff that havevital knowledge of cross-functional business rela-tionships and experience of the old internalsystems. In conjunction with this team each OBUhas its own ERP planning team, which isresponsible for implementing working changesand training. The project implementation pro-blems can be grouped into three areas of cultural,business and technical difficulty.

5.4.1. Cultural problems

The implementation project team expected ahigh acceptance of the system in areas that providejust as good or better functionality than the oldsystem. However some functions and processesmight not get the full appreciation the legacysystems once had. The project team decided toresolve this by illustrating the improvements madeto the company as a whole, thus breaking thetraditional segregation of OBUs and departments.The original implementation plan was increased inan attempt to address training and culturalchanges. Training took the form of organisedseminars, which were split into two distinct groupsof specialists and mass users. The specialisttraining was carried out and conducted by SAPand was technically based. These specialist expertsthen in turn trained expert users. The remainingtraining for end-users was conducted internally incollaboration with EDS consultants. The trainingcarried out within the seminars was supported bydemonstrations within the workplace, along with

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information meetings and presentations to relayinformation to all employees about the changes ofworking practices. In all, more than 10,000 peoplewould have been trained.

5.4.2. Business problems

SAP R/3 requires a fairly rigid business struc-ture for it in order to work successfully. Theparticipants of cross-functional workshops soonunderstood that their working practices must beadjusted in order to fit SAP, ultimately changingthe way Rolls-Royce does business. They achievedthis by using an internal business process re-engineering (BPR) programme. The programmeconsisted of four steps, the first involved drawingand mapping the current processes. The secondstep involved identifying any problems or issuesraised from the mapped process. The third stepinvolved applying some of these issues to ademonstration of SAP, to identify potentialproblems within the new system. The fourth stepinvolved the re-mapping or modification of theprocesses in line with SAP. The modifications tothe Rolls-Royce business process meant that theSAP R/3 software need not be modified. Mod-ifications to the software would have beenextremely expensive both in terms of implementa-tion resources and the fact that newer softwareversions would be difficult to install in a modified

Create Customer Solutions

Build Customer

Relationship

Plan the Business

Resource the Business

Satisfy the Shareholder

Manage Cash

Fig. 1. Business pr

system. SAP named this unmodified softwareimplementation ‘Vanilla SAP’.

5.4.3. Technical problems

The main technical problems that Rolls-Roycehas encountered have been with the accuracy ofdata. The new system requires the retrieval of olddata from the legacy systems that has to benormalised, screened and stored in a sensible dataformat within the new systems data repository.The duplication of data was a major concern thatRolls-Royce had to address. In some special areasthe old systems was kept running until such time asthey could be phased out by the new systems, andto do this EDS built interfaces between thesystems. The CAD system used by Rolls-Royceremained the same, as the process to alter the fileformats would be too expensive and require use ofvaluable resources that are needed for the coreimplementation.

Rolls-Royce has nine principal business pro-cesses, which when taken together describe every-thing the company does. Fig. 1 is a schematicrepresentation of the business processes and theinterfaces.

Rolls-Royce decided to adopt and utilise theSAP solution offered for the aerospace anddefence industry. The SAP aerospace and defenceindustry solution is the market leader in its

Resolve Customer Problems

Generate Orders

Fulfil Orders

ocess model.

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industry and is highly configurable for flexible‘vanilla’ implementation. Predetermined imple-mentation points from the Rolls-Royce SteeringCommittee and Implementation Team defined therelease strategy for the project. Any future thirdparty software products must first be accredited bySAP to safeguard the upgrade process and wouldrequire a justified business case. Business reportsthat are generated by SAP have to be fully justifiedin a business case, which follows a standard formatfor internal use. Data entering the project has to beidentified, validated, cleaned, loaded, archived andthen maintained within a Data Warehouse.

Rolls-Royce have estimated that over 1000additional PCs will be required and the total costfor the network infrastructure was about twomillion pounds. The company required over 6000SAP licences for users across all the business. Theserver was provided by Sun Microsystems and in

1 Strategy & Direction

2 Planning Analysis & Conv

3 Early Deployment

4

5

6

Wave 1 – Focus on Operat

Wave 1 – Pilot

Wave 2 – Focus on Assem

Key

Phase 1

Phase 2

Phase 3

1

2

3

4

1998 1999

Q1 Q2 Q3 Q4 Q1 Q2

Phase 1

Phase 2

Phase 3

Fig. 2. ERP implementation mo

excess of 2 Terabytes of disk space. The systemrequired almost 35 weekly MRP runs cascaded byplant. A UNIX server bridges the data from legacysystems and testing and training required an NTserver. The detail implementation model plan withproject time-scale is shown in Fig. 2.

5.4.4. Phase 1 (strategy and direction)

The first phase of the project was a shortintensive study to set the scope of the projectand provide an outline plan and costing. Asteering committee was formed to administer thefinancial guidance of the project and a ‘ERP CoreTeam’ was formed to control and oversee theactual implementation process.

5.4.5. Phase 2

During the second phase a detailed plan wascreated and a prototype system was installed. An

ergence

ions

bly & Spares

5

6

2000

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2001

SAP ‘Go Live’

del with project time-scale.

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enterprise model was developed based on theRolls-Royce Allison model, and all the existingprojects within Rolls-Royce were drawn togetherand merged. Many issues were addressed includingthe integration of Better Performance Faster(BPF) initiatives. A series of workshops knownas ‘High Level Process Confirmation Workshops’took place, which involved over 200 line personneland the ERP core team, and took into considera-tion the various business processes within thescope of the project. These workshops were closelyfollowed by ‘Business Simulation Workshops’,which involved approximately 300 line personneland were used to forge a strong relationshipbetween the ERP core team and line personneland avoid possible pitfalls, such as initiativefatigue or lack of co-operation. Activities carriedout during the second phase of the projectincluded:

* Preliminary design review—developing a designand implementation strategy, defining the scopeof the project, and developing the businessprocess model.

* High level design review—analyse the enterprisemodel, and develop ‘Vanilla’ prototype.

* Critical design review—detailed design andcustomisation of the prototype.

* Implementation realisation—integration test-ing.

* Technical/operation review—user acceptancetesting.

* Post implementation review—system deploy-ment, systems conversion, user training beforethe ‘Go Live’.

During phase two the projects core structureswere identified. Integrated programme manage-ment (IPM) was also adopted for research anddevelopment and would eventually cover thewhole business. Additional activities included thesupport of finance and staff work booking. Phasetwo was completed at a cost of d5.2 million, withintwo weeks of the plan.

5.4.6. Project changes

During phase two a significant change was madefrom the original timing of phase one, the

completion of wave one was deferred for about 6months. This has resulted in a knock-on delay towave two by a corresponding amount. The changein schedule was possible without a significantincrease in cost because the problems wereaddressed early enough in the programme. Therewere four main reasons for the change:

* To give the line organisations more time toprepare, train and clean up data.

* To provide an additional 5 months period forpilot running and early development of thesystem.

* To provide additional time for the completionof other pre-requisite projects being managedby BPF. Specifically the deployment of productdata manager (PDM) and shop floor datamanager (SFDM) on which SAP is criticallydependent.

* To provide additional time for resolving diffi-culties with successful use of SAP at RRAllison.

5.4.7. Phase three (implementation)

This phase was too large to implement in onego, and thus was divided into two ‘waves’. Bothwaves were concerned with the physical imple-mentation of the system and its architecture. Thewaves were also concerned with changing workingpractices within the company.

5.4.8. Wave one

This wave was concerned with the replacementof legacy systems. IPM was also introduced fornew production projects during wave one. Thenew manufacturing execution system, known asshop floor data management (SFDM) was alsointroduced during wave one. The ultimate end towave one was a SAP pilot project at one of Rolls-Royce facility. The pilot laid the foundation forthe full ‘go live’ throughout the company about ayear afterwards. The first wave had the ultimateaim of providing new capabilities for gas turbineoperations.

5.4.9. Wave two

The second wave was approximately 1 year induration, and was not operational until after the

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first wave finishes. The second wave was concernedwith implementing engine assembly, spares, logis-tics and human resource elements within theproject. By this time the legacy systems wasswitched to ‘view only’ as SAP becomes theexecutive system. Once the new system shows apositive response the older systems was phasedout. IPM completely covered the whole businessby the end of the second wave.

5.5. Changes to the existing system

During phase two, modifications were made tothe legacy systems. These modifications wereadopted in a series of suites.

5.5.1. Suite 1

Plan the supply chain: This takes place as part ofthe corporate business planning activity with a 2–5year horizon. A review was undertaken of allpotential future sales, including engines andspares, identifying the probable minimum andmaximum levels. The supply chain capacitywas compared to the range of possible salesscenarios.

Master schedule key programmes: Suite 1 sup-ports the sales and operating review board(SORB), which is a director level meeting, whichstrategically plans engine sale and factory capacityon a 2–5 year rolling forecast. The SORB makesdecisions affecting changes to achieve capacity interms of manpower, machines, technology, andultimately for factories to meet the potential salesforecast. The SORB process has often beenreferred to as the ‘Evaluation and CommitmentAcceptance Program’. The SORB meet every 3months to decide what has to be made and when.The SORB records baseline data from the previousmeeting and then identifies new changes. Forexample if 20 engines were required last, it doesnot necessarily mean that 20 were actually built, aparticular manufacturing unit may have hadmachine breakdowns, which could have effectedthe amount of work leaving the factory. A copy ofthe plan gets taken from the Project Systemmodule within SAP and then the new requirementsare input into an inactive version of the SAPmodule Demands Management. This copy can

then be used in ‘what if’ simulations before finallybeing transferred to the master copy as the latestSORB.

5.5.2. Suite 2

Plan and schedule the factory: This converts theagreed schedule from suite 1 into a productionplan and enables all the manufacturing units toplan capacity to produce the required components.The production plan may include schedulesmoothing. Schedule smoothing is a process,which converts erratic customer requirements intoa consistent production plan that allows thefacility to operate efficiently on a regular pattern.The operations businesses will have the responsi-bility of holding excess inventory that is created byschedule smoothing.

Schedule the shop: This converts the productionplan into a detailed shop plan. It generates when tolaunch material (either raw material or part-finished details) onto the shop floor, and whenthe material should meet identified stages of themanufacturing process.

5.5.3. Suite 3

Operate the factory: Suite 3 covers the control ofworkflow through the shop from the initialgeneration of launch paperwork, right through todelivery of finished products. It gathers informa-tion on the booking of work at identified stagepoints in the manufacturing process, and collectsoperating data for cell level management. Itcontrols inventory between the manufacturingunits and controls the flow of components throughthe make process. Once SAP has become executivethese suites will be replaced by SAP modules andSFDM, which will handle and perform thesetasks.

The complete systems architecture for theproject is extremely complicated, however for thepurpose of this discussion a brief overview can beseen in Fig. 3. The core business operations aresupported by SAP and integrate with otherstrategic software products (highlighted in brack-ets). Rolls-Royce are using 11 out of 12 SAPmodules. They decided not to use the plantmaintenance module as they already have anadequate system called MAXIMO (Fig. 4).

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Plan the supply chain

Master Schedule KeyProgrammes

Plan & Schedule the Factory

Schedule the Shop

Operate the factory

Suite 2

Suite 1

Suite 3

APS – Enterprise Level

APS – Factory Level and SAP

SFDM and SAP

Fig. 3. The five box diagram of suite implementation.


5.6. The ERP pilot

A small-scale pilot of the system was run for 3months and throughout this period, a facilityknown as number 4 shop, which was part of thetransmissions and structures operations unit be-came the central focus of attention for the wholecompany. This facility was chosen for the pilot runbecause the facility only produced 280 parts, andmaterial flowed into the facility at low volumesfrom external suppliers and internal operationalunits. The purpose of the pilot was to demonstrate:

* business principles;* processes;* procedures;* role definitions and behaviours;* software, hardware and data transfers.

‘‘We initially looked at over 1000 part numbers,identified which ones had a schedule againstthem, its the ones that have a schedule that wedid the data clean up on, which came down to280 part numbers. If we had to do it across the1000 part numbers we would never have got itfinished. For each part number there arearound about 30/40 operations, there had been7 of us working full time on it, that’s included

Saturdays and Sundays as well!’’—Core Im-plementation Team Member (a).

The implementation of ERP has created twonew roles at Rolls-Royce, these key roles were:

* MRP controllers;* Capacity owners.

‘‘We had to go through symmetric tests,aptitude tests, interviews, it was quite dauntingreally, I mean to think that here I am, quitesettled but I’ve got to make these moves. I’mtold that I’ve got to spend X amount of timearound a PC, it’s a bit strange as I must spendaround 80 percent of my time on the shop floorto day, and that’s going to change dramatically.I will own the men and machines, the capacityy’’—Core Implementation Team Member (b).

‘‘An MRP Controller is going to be in charge ofthe inventory, and getting the raw material in,and talking to the supplier and the customer.But they’ve also got to release the material tothe shop floor, and then release the materialwhen its finished as a component to thecustomer.’’—Core Implementation Team Mem-ber (c).

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FinanceCore Organisation & Finance

Structure Asset Management Accounts Payable

Accounts Receivable Product & Inventory Accounting

Profitability Analysis

Programme ManagementResearch & Development

Series Production Spares & Other

Profit & Cost Accounting Staff Work Booking

Human ResourcesResourcing

Compensation & Benefit Payroll

Health & Safety Organisation Development

Employee Development Pensions

Product & Process Development

Assembly Configuration Component Configuration

Assembly Process Planning Component Process Planning

ERP (SAP R/3)

Integrated Business Processes &Systems Applications

Supply Chain PlanningSales & Operations Planning

Demands Management Master Production Scheduling

Material Requirements PlanningForecasting & Provisioning Supply Chain Optimisation

Procurement & InventorySourcing

Procurement Inventory Management

(Manufacturing)Inventory Management

(Assembly) Warehouse Management

Manufacturing & Assembly Execution

Manufacturing Execution Assembly Operations

Tool Management Plant Management

Order ManagementSales Order Administration

Service Management

Manufacturing Execution (SFDM)

Work StatusRoutings WorkLaunch

Product DataManagement

(Metaphase)

Bill of Materials

Material Master Basic

Data

Assembly Instruction & Control (CAPP)Process Planning

Execution

Product Structure

As-built Data

Kits & Tools Requirements

Facilities & Services Management (MAXIMO)

Financial Consolidation

(Hyperion)

Fig. 4. Systems applications architecture overview.


MRP Controllers and Capacity Owners weresent on a residential behavioural course for 2weeks and for most of them this was their firstglimpse at how they would be working in thefuture.

‘‘We’ve got 20 users at Ansty, in the pilot and toconnect those users we’ve had to install a lot offibre network throughout the Ansty site. Itssuch a huge task of delivering the infrastruc-ture, that’s the reason why people have been sofrustrated, saying things like, I go live in 4weeks and I haven’t got a piece of kit yet!

Once they’ve been trained and know how touse that piece of kit they will have it thereand then. The second thing to bear in mindis to really understand what roles the user isgoing to play in the pilot. This is to ensurethat we have the right access permissioncorrectly set-up for the user so they can useSAP correctly.’’—Core Implementation TeamMember (d).

Systems testing and getting the user to acceptthe system were important roles undertaken in the

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pilot. The following quotes give some insight:

‘‘Before the system can go-live the team neededto check that it works properly in theiroperational environment. User acceptancetraining is all about buy off, we’re trying tomake sure that the ownership is with thebusiness not the core team. They have to saywe’re happy!’’—Core Implementation TeamMember (e).

‘‘I thought that when we first started theprogramme it would be pretty black and white,finishing the unit testing, starting the integra-tion testing, starting the user acceptance testing,its not that simple! What you have are differentbits of either configuration or bridges that youhave to phase in at different parts of the testingcycle. They cannot be missed but they cannot befinished in time to say, I’ve finished all unittesting, I’ve finished all integration testing itsactually quite blurred.’’—Core ImplementationTeam Member (e).

Loading clean data into the new system alsoproduced many difficulties. The following quotesgive some insight:

‘‘Its not until you actually try and load the data,get the data in the system and then hopefully letit feed into SAP that you really start tounderstand that things aren’t quite right. We’velost something like a week and a half so fartrying to get the bill of materials into metaphaseand then feed them into SAP.’’—Core Imple-mentation Team Member (e).

‘‘We are going to load into SAP about 2 percentof the part numbers that we would actually loadin wave one, and we are finding it incrediblydifficult!’’—Core Implementation Team Mem-ber (d).

The initial problems experienced on ‘going live’were:

* User authorisation problems, such as, passwordand user level clearance.

* Work was temporarily halted on the shop floor,as route cards were unavailable.

* Values between the systems were incorrect, socomparisons were made on the values from thelegacy system with those on the new system,such as inventory levels and WIP.

* Transaction problems occurred from the firstMRP run, so comparisons were made, betweenthe old and new systems, and corrections weremade.

A second pilot was also carried out for non-
production purchasing. The second pilot ranexecutively, covering Derby-based purchasing ofground support equipment. A third pilot alsowas run by the Airline Business. The third pilotwas non-executive, but designed to specificallyexplore the interplay between Metaphase PDMand SAP.
5.7. The ‘Go Live

As the main ‘Go Live’ of the new system wasplanned, the most difficult part of the cut overprocess was in transferring the data from legacysystems. The shear volume of data that has to betransferred is far greater than any normal transac-tion load that will be carried out by the systemthereafter. In order for this process to be successfulthe data must be kept in a ‘stable’ state for aperiod of roughly 10 weeks. The initial data to betransferred includes some transaction data andmaster data, for example, lists of suppliers. If anychanges occur to the data on the old systems afterthe transfer, they are logged and then passedthrough to the new system. The remaining datawas loaded in after the ‘Go Live’.

The next step during the ‘Go Live’ processinvolved running the MRP system to initialise thewhole system. Purchase orders and purchaserequisitions was not transferred from the oldsystem, instead the MRP run should create themfresh. The whole ‘Go Live’ process took roughly 2weeks to complete, and during this time the newsystem was ‘off the air’.

Immediately after the ‘Go Live’ the existinglegacy systems was switched to view only mode.The view only mode enabled comparisons to beperformed between the old and new systems.However, the legacy systems ceased to be executive.

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5.8. Project risks

The ERP Project at Rolls-Royce covers manydifferent departments and many different topicareas, all of which have associated risks. In orderto address and take positive action to avoid failureor potential errors the ERP implementation teammaintained and recorded in a great detail, a riskregister. Every issue within the company, whichinvolves risk has been catalogued and continu-ously reviewed. The risk register is very large,however the Rolls-Royce ERP Intranet page offersa brief summary of some of the major risks:

* The possible failure or inability to align goalsthrough conflicting directions within the orga-nisation.

* The non-delivery or non-availability of reliableIT hardware and infrastructure both before andduring implementation.

* The possible failure of providing inadequateand ongoing support after implementation,from both Rolls-Royce and EDS.

* The resistance of change to new processmethods by management and supervision.

* Management and supervision may treat theproject as merely an IT implementation, ratherthan change in process methods.

* Inadequately educating the workforce to oper-ate the new system properly.

* Possible failure to cut over to the new systemthrough an inability to load data.

* Possible failure to cut over to the new systemthrough the inappropriate systems testing ofvolume, stress and data conversion.

* Possible failure to give ERP adequate prioritydue to the number of existing and ongoingbusiness improvements.

* Maintenance difficulties may occur on bridgedlegacy systems.

* The project may impact on company interimand end of year accounts.

* The PDM project may not be sufficientlypositioned in time with the ERP project.

* Possible changes to kitting demand during ‘golive’ may stretch the new system and thoseoperating it on a learning curve beyondcapacity.

* The decision to implement Wave 1 separatelyfrom Suite 3 may fail to integrate the newsystems.

* Airline Business After-sales may not be able toanalyse and manipulate inventory investment instock target groups (MERLIN functionalitywhich helps to control forecasting forAirline Spares stock targets will be removed inWave 1).

6. Summary and conclusions

Rolls-Royce has a large complex businessprocess and the project has had to assess theeffects throughout the whole business, which isequivalent to ten medium sized companies pullingtogether as one. This has caused administrativedifficulties, particularly in the first phase of theproject, whilst setting the strategy and overalldirection. Rolls-Royce decided to make theseradical changes to their business, in response toincreased orders from the market place, and alsofrom the fact that ERP has become a standardsolution world-wide within the Aerospace andDefence industry. The introduction of SAP R/3 atthe facility in the USA was a major factor ininfluencing the UK implementation. Rolls-Royceproduce a range of quality world class turbineengines, and have recognised that they mustchange in order to compete effectively with theircompetitors. Accurate information systems anddirect communication with suppliers are vitalwhen offering customers a committed promise todeliver.

Rolls-Royce has understood the business, cul-tural and technical difficulties of such a largeproject, and has developed a solid core implemen-tation team. The team has used the specialist skillsof consultancy specialists. The partnership withEDS has produced a sound architectural frame-work for the project, thus allowing Rolls-Royce toconcentrate its efforts on manufacturing turbineengines. A project of this size would never runsmoothly and difficulties have occurred through-out the implementation and will no doubt occur inthe future. The company have taken a differentapproach to IT systems but have not let the project

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become just another IT system. The core imple-mentation teams have taken into account theneeds of both the managerial and end-user. Thefollowing list contains just some of the problemsencountered:

* Matching the process to the software config-uration.

* Training people to accept change, and gettingthem to do business in a totally new way.

* Teaching employees to use modern IT equip-ment.

* Equipment not delivered on time, or delays intechnical equipment installation.

* Data clean up has been particularly timeconsuming as many legacy systems have beeninvolved.

* Training the behaviour of SAP users such asMRP Controllers and Capacity Owners.

Many activities have taken place, which havebeen vital to the overall success of the project, suchas:

* Bridging the legacy systems and cleaning upsuspect data has given the company more trustin its management of information.

* Training senior management, particularly theexecutive group, who are responsible for theoverall direction of the company and are nottechnically orientated.

* Managing effective relationships and leadingteams in both technical and non-computerbased environments.

* Manufacture simulation exercises.* Transactional training.* Shop floor communication with line workers

was an exercise that occurred during theimplementation of suite 3. This required lineworkers to attend workshops to learn new PCskills in order to book work.

SAP guarantee that newer versions of theirsoftware will upgrade SAP reports, whilst speciallycreated reports will require re-writing of thesoftware. The future of the project will eventuallylead to the need for a Data Warehouse. A DataWarehouse is an integrated collection of data. The

data is stored centrally and is extracted fromoperational, historical and external databases. Thedata is first screened then edited and finallystandardised for future retrieval. The data isstored in a logical user-friendly format. It allowsnon-technical users to create database queriesallowing the simple retrieval of managementinformation for business intelligence and manage-rial decision making. The database continuallyabsorbs new data and integrates it with theprevious data.

The full benefits of the project will not be fullyexperienced or achieved until the system becomesexecutive and has a period of stability, for at leasta whole year. Once the system has become stableand users have had time to adjust to new workingpractices the benefits of lower IT cost will becomevisible. An immediate benefit that will be achievedby the system will be the ability to promise andthen deliver to the customer on time. This wassomething that the older systems could neverachieve, as they often used due dates that were inthe past. SAP can only use current information.The ability to deliver on time will improvecustomer satisfaction and also improve customerconfidence, which should lead to an increase oforders in the future. The system will also improvethe relationship in the supply chain, as transac-tions will be made easier via the use of ElectronicCommunications.

The sustainability of enterprise informationsystems (EIS) during the post-implementationperiod needs to be looked into. There is a lack ofclear understanding about the strategic needs andrequirements for sustaining the effectiveness oflarge-scale information systems after a period ofrelative stability following initial implementation.Sustainability management of EIS is therefore avery important research dimension that needs tobe explored to maximise the benefits of anexpensive information system investment such asERP.

Acknowledgements

The authors are very grateful to two anony-mous referees for their constructive and helpful

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comments which helped to improve the presenta-tion of the paper considerably.

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