CASE 1.2 Real-World Case
Rolls Royce’s ERP Implementation
Source: Based on Greg Sumner, Case Study Report, U Mass Lowell, 2006.
Rolls Royce (RR) is a global company with several divisions in more than 14 countries. Itoperates in four global markets: civil aerospace, defense aerospace, marine, and energy.9 In 1996, Rolls Royce outsourced 90 percent of its IT functions to a contractor called Electronic Data Services (EDS), which meant that EDS was responsible for overseeing the existing IT structure as well as providing adequate IT solutions for the future prosperity of the company.10 RR used more than 1,500 legacy (mainframe) systems that were inaccurate, expensive to operate, and difficult to maintain.
9 Rolls-Royce Web site. www.rolls-royce.com/index_flash.jsp (accessed October 2010).
10 Kelly, L. (December 2003). Outsourcing Case Study: Rolls-Royce. Computing.
A need for an enterprise resource planning (ERP) system was noted during the late 1990s at RR to handle the volume of data being produced and processed from the new acquisitions and overall growth experienced by the company. In 2001, RR decided that SAP/R3, an ERP platform consisting of 12 functional modules, would be implemented at its aerospace division. There were multitudes of challenges that RR had to overcome in order for a successful implementation to occur.
To conquer the challenges presented, RR had to have an excellent IT team in place with a viable implementation strategy. The ERP project consisted of a management team of specialists from EDS who in turn hired SAP consultants to provide specialized technical help with the implementation. Within the project team there were subject matter experts (SMEs) and staff that had vital knowledge of cross-functional business relationships and experience of the old legacy systems. In conjunction with this team there were operational business units (OBUs), each with its own ERP change management team, which was responsible for implementing working changes and training.11 The ERP team at RR could be classified into three categories: cultural, business, and technical.
11 Yusuf, Y., Gunasekaran, A., and. Abthorpe, M. S. (February 13, 2004). Enterprise in Formation Systems Project Implementation: A Case Study of ERP. International Journal of Production Economics, 87.
The cultural team’s challenge was to overcome the problems that stemmed from whether or not SAP (1) would be accepted by users throughout the company and (2) would provide similar functionality as the prior legacy systems. The cultural team decided to illustrate the benefits to the company as a whole in order to quell concerns. They did so by training individuals throughout RR. Specialist users were trained, and they, in turn, trained expert users. Along with meetings and presentations, they allowed users fully to understand and utilize functionality.
The business team had to overcome the problems that stemmed from the fact that SAP required a rigid business process structure that necessitated a vanilla implementation. This meant that working practices at RR would have to change in order to meet the functional demands of SAP. The business team used process mappings of current procedures and remapped them to show how they would have to be changed organizationally in order to meet the demands of SAP. Overall, expensive modifications to the SAP software were avoided.
The technical team had to overcome problems mainly to avoid the possibility of inaccurate data. Their main challenge was cleaning data during the migration. Mr. Uwe Koch, the technical lead at RR, says: “We didn’t achieve all our targets and still haven’t finished cleaning the data. We are in a stabilization period. Making enough people available for these tasks has been difficult.”12 Data had to be screened and stored while avoiding duplication—a major concern for RR. RR built interfaces with the old legacy systems for some special circumstances, so some legacy systems weren’t taken offline immediately. Interfacing required that data be retrieved from the prior legacy systems, which of course meant that it had to be accurate after being run into SAP. This was so because the reports generated from SAP had to be precise. This was accomplished by validating the data before putting it into the SAP data warehouse. The system required multiple weekly “runs” via a UNIX server, which bridged the data from the legacy systems.
12 Adshead, A. (May 13, 2003). Cheaper Field Staff Tracking Services. Computer Weekly.
The system rollout was another technical challenge. The ERP was designed in three phases, of which the third stage was actually the “implementation.” The implementation was done in two waves. The first wave was focused around the replacement of the legacy systems. The second wave was done in order to implement such leftover elements as logistics and human resources that were not converted until wave one was completely successful.
The implementation team at RR, including EDS personnel and SAP consultants, identified problems that would be pertinent to the implementation of SAP as the ERP for the company before they could develop into issues that would impede and possibly cause the implementation to fail. Hence, a sound implementation strategy made the endeavor possible. This case is surely proof positive that having a solid and knowledgeable ERP implementation team that can anticipate problems during an implementation, while putting forth a solid strategy, is the key to success. RR continues to look into the future to adopt new technologies, methodologies, and processes to take them to the next level.
What do you think of RR’s ERP implementation project? Did they select the right implementation strategy?
Discuss the critical success factors of RR’s implementation strategy and the role of SMEs in the project.
What advice can you give to RR’s technical team on their approach of migrating legacy system with the SAP software?
There are focused discussions throughout this course. Since these discussions are an integral part of your learning in this course, you are encouraged and expected to participate in the online discussions. They are also a great opportunity to use active learning strategies and make your classroom an interactive environment. Regular and meaningful discussion postings are part of your final grade. The Checklist for Meaningful Discussions below will assist you in creating effective posts. Your Instructor will use a course specific rubric to evaluate your work.
Answer the discussion question below.
Where are ERP systems heading in the future? Do you agree or disagree with the trends discussed in the chapter? Explain.
When answering the discussion questions for each week, use terminology from the chapter. Each answer should be a paragraph in length, grammatically sound, and free of spelling errors. During the week, read all your peers’ responses and respond to two of them. Your comments should add value to the discussion by posing additional questions and providing further insight.
Checklist for Meaningful Discussions (PDF)
Part 1: Answer the module review questions listed below. These questions were chosen to demonstrate your understanding and help you assess your progress.
How is the role of an ERP system different from traditional TPS, MIS, DSS, and others? Can an ERP system support all levels of management?
Discuss the evolution of information systems in an organization. How can the use of ERP systems remove information or functional silos in organizations?
Among all the ERP components listed in the chapter, which component is most critical in the implementation process and why?
Discuss the role of ERP in organizations. Are ERP tools used for business process reengineering (BPR) or does BPR occur due to ERP implementation?
Part 2: Provide examples of ERP components in an organization that you know of or where you’re working. Provide examples of the hardware, software, people, processes, and databases.
Part 1: Answer the module review questions listed below. These questions were chosen to demonstrate your understanding and help you assess your progress.
What are functional silos and how did they evolve in organizations?
Compare and contrast centralized, decentralized, and distributed IT architectures. Which do you think is most appropriate for ERP and why?
List the horizontal and vertical levels of systems that exist in organizations.
Describe at least five steps involved in systems integration.
What is the role of ERP systems in systems integration?
Part 2: Pick an organization that you know of or where you are/were working and provide examples of logical and physical integration issues that were faced by the organization when they broke the functional silos and moved to integrated systems.
CASE 2-2 Real-World Case
Systems Integration at UPS Corp
Source: Adapted from Aimee Desrosiers. (2006). Case Study Report, U Mass Lowell; Emigh, J. (August 3, 2005). UPS Bolsters Online Shipment Tracking, Ziff Davis Internet; and UPS’ Sutliff: Communication Key to Alignment, CIO Insight (January 28, 2003).
In the mid-1980s, United Parcel Service, Inc. (UPS) was struggling for market share with a relative newcomer to the shipping industry, Federal Express (Fed Ex). After only 10 years in business, Fed Ex was emerging as a formidable player largely due to the company’s culture of embracing technology as a strategic competitive advantage in improving efficiency and customer service. In contrast, UPS studied their processes and employed less-technical changes (e.g., reducing physical motions in handling boxes) to shave time off their deliveries. Fed Ex started as an airfreight company and UPS as a truck delivery company, but the two increasingly desired market shares in the other’s core business.
UPS faced the typical challenges of any shipping company. They knew that shipping errors due to the wrong address or loading the box on the wrong truck were expensive and time consuming. Errors happened frequently on systems that required manual data entry, and multiple systems required redundant processes to utilize the data. Much of the products UPS handles look similar, which allows for picking errors. UPS’s phone-in customer service received an overwhelming number of phone inquiries each day that required time- and cost-consuming processes to locate approximate package status. They had also identified the Internet and integrated technology as global business drivers of the future. It was at this time that UPS decided to invest heavily in technology to drive growth.
UPS first identified their internal competencies and assets and looked for areas that could be improved through a strengths, weaknesses, opportunities, and threats (SWOT) analysis. They found that they had an extensive infrastructure and expertise in transportation. UPS next examined such external factors as their customers, the emerging business marketplace, and the competition. Traditional brick-and-mortar business and emerging e-Business all had similar requirements: integrated information and real-time connectivity. Their customers desired the power to buy, sell, and research on their own terms—not where and when business dictated. It was clear that UPS needed to bridge the gap between physical product or services and access to electronic information.
UPS developed an action plan that would be focused on the customer and enabled by technology. They offered a new variety of services integrated with core transportation functions to make UPS an invaluable part of the customer’s business. They chose to centralize data in one of two large data centers (i.e., the hubs of their IT platform). Integration is the cornerstone of UPS’s success. Since going public in 1999, UPS has acquired more than 30 other companies. They have more than 3,600 IT staff with two data centers in Mahwah, NJ, and Atlanta, GA. UPS has more than 14 mainframes, 2,755 mid-range computers, 260,000 personal computers, and 6,200 servers. According to the CIO of UPS, “We haven’t made [these acquisitions] to gain market share. Instead, we’ve made them for very strategic (technology) reasons.”13 Each time, UPS integrates old and new services to add value to the delivery chain.
13 Emigh, J. (August 3, 2005). UPS Bolsters Online Shipment Tracking. Ziff Davis Internet.
The IT department at UPS was a critical enabler and tried to integrate the systems from a business perspective.14 They installed a couple of different ERP modules from Oracle: one for the HR functions and another for financials. By implementing the ERP UPS saved a tremendous amount of money for the goods and services purchased from hundreds of locations around the globe. In addition, the UPS logistics network, which is very extensive, is rigorous because it was built on well-defined technological standards. When UPS adds new applications, therefore, they fit into the rest of their interconnected IT infrastructure, which doesn’t tolerate excessive waste. UPS makes sure all new technology fits in nicely over their architecture. In general, two factors have contributed to the successful integration of technology at UPS: a corporate culture of open communication and a commitment to training.
14 UPS’ Sutliff. (January 28, 2003). Communication key to Alignment. CIO Insight.
UPS now integrates information from more than 60,000 Web sites with more than 7.2million customers making online tracking requests daily. The sophisticated UPS IT platform offers such new software as Package Flow12, which identifies the packages that should be loaded on the delivery truck first, second, and so on, so that the first deliveries are in the rear of the truck. Another software service is Trade Direct12, which now allows retailers, dot-com sites, and other enterprises to track the status of both small packages and large freight around the globe through a single Web-based system. Management is also committed to training whenever new technology is introduced and to providing an environment where all employees can contribute ideas for improvement.
From the customers’ standpoint, systems integration translates to better services related to package shipping and tracking that can be easily accessed from the UPS Web site, or by using software provided by UPS. If an incorrect zip code is entered, an error message prohibits the user from continuing the process. The system provides “smart” data (e.g., identifying rural addresses that may require extra delivery time and allowing the user to change options). It is possible to save a database of shipping addresses to auto-fill fields for frequent receivers.
The UPS integrated system platform provides real-time communication links between packages shipped because the tracking number, date, and status are immediately recorded. Aclient’s customer service could respond to an inquiry instantaneously instead of having to acquire a tracking number manually from shipping, trace the package, and call the customer back. This puts the power directly in the customer’s hands. UPS is the model for successful integration for all industries.
What are some of the system integration challenges faced by UPS?
Discuss the systems integration solutions at UPS. How does it help UPS integrate new technologies?
Discuss the advantages of systems integration for UPS customers.