Enterprise Resource Planning at Rolls Royce Engine Company - Case Study Example

Rolls Royce Engine Company Introduction Globalization and the increased competition in the global market in the 1990s led tothe innovation in information technology in most companies, which were in terms of software applications which were aimed at making the flow of information throughout a company smooth. Large companies were more interested in the Enterprise systems, most importantly the one known as the Enterprise Resource Planning (ERP). ERP facilitates the corporation management of a business through integrated computer systems such as procurement, distribution, finance and manufacturing. A successfully installed ERP system links all the departments of a company to the external suppliers and customers (McGraw-Hill 2006). Rolls-Royce was founded by Henry Royce and Charles Rolls and it has since grown to be one of the largest manufacturing companies and one of the pioneers of global companies that is why it decided to reanalyze its organisational strategies so as to make its operations more flexible to suit its customers’ demands. The primary reason behind its success is the use of strategic technology systems. The change in structure began with the division of the company in two main units, namely the Customer Focus Business Unit (CFBU) and the Operation Business Unit (OBU), which were all managed by the Executives and their decisions were then communicated to the whole organisation. These units over time could not support the resource planning all over the world and this made them to partner with the Electronic Data Services Company (EDS) to innovate modern systems that will be efficient in the modern business world and this is when they come up with the Enterprise Resource Planning systems (ERP). They invested heavily in this system an estimate of $ 10 billion since it has a complicated nature and may cause a risk to any big company (Lloyd ,1978). To implement this project they formed a team that consisted of internal managers and outsourced external teams. The ERP project is proving to be successful in Rolls Royce Company since they had the willingness to change its organisational structure and culture. Benefits of the implementation of ERP system (Rolls Royce Engine Company) Enterprise Resource Planning system has an endless list of benefits. In this case study I will focus on Rolls Royce Engine Company is this system offers a range of solutions to any manufacturing company when implemented well, some of the benefits include: 1. Open communication ERP has allowed an open communication among the internal departments within Rolls Royce and its suppliers, distributors and the customers since it offers a focused system to the customer giving an effective result. Being a worldwide established company it needs to have an effective way of communicating from the headquarters in the United Kingdom down to the other stations for instance in the United States of America and Germany.ERP uses a single computer to combine all the departments into a single system by using internet technology making it easy to access any department or personnel anywhere at any time.This has made it decentralise its communication points making them accurate and accessible making them improve their supply and distribution chains and gain an advantage in the competitive business market (Addo-Tenkorang 2011). 2. Delivery of better services and products Brand image is in most cases important for any profit oriented organisation since this makes it hard for other competitors to compete with the especially if it is highly established. ERP gives a focused and detailed system on how to meet the diverse and unique demands of the high numbers of customers in Rolls Royce. They have a high initial investment cost which make it hard for other companies to compete with them. They collect and analyse data of their engines and act upon it to improve their performance to suit the services and products needed by their customers. Rolls Royce has also enabled their suppliers and customers to have a bargaining power helping them to maintain good working relationships and reducing the threat of them being substituted by other competitors who offer almost the same products and services (Moon, 2007). This is one of the reasons they invest heavily in research and innovative technology to distinguish themselves from other competitors. 3. Competitive Advantage If a business exists in a highly competitive market, it needs to formulate systems that will give it an exceedingly high advantage over its competitors to attract more customers and gain high returns. Rolls Royce set out to do exactly that by implementing the highly costly ERP system which distinguishes it from its competitors by enabling it to improve the quality of their engines, provision of a good after sale services, enabling them to differentiate their products from those of their competitors. Being in a market that gives a lot of emphasis on increased value of cost, quality and delivery performance ERP implementation provides the needed information to help them in boosting their advantages. This system has enabled them to operate effectively at a global state, for instance, the data collected allows them to predict engines are going to come along and in their aircraft maintenance. They are making more innovative products distinct from their competitors’ by inventing engines that cause less pollution to the environment through the information provided by ERP system (Morris 2011). 4. Standardisation of Business Practices Companies that are successful have standard operating procedures that enable them to deliver quality services and products. They only archive this if they have proper working systems within and outside the organisation. This allows all the departments to operate in the same way regardless of the location be it in Africa, Asia, Europe or America. Rolls Royce being an internationally established company must have this standard operating procedure and this working effectively since they implemented ERP system that supplies the information across all their stations anywhere in the world. The procedures are integrated with the ERP system that enables managers and personnel access accurate information regarding how they need to conduct their daily operations so as deliver quality results in less time. Each department recruits using the same method and run their operations in unison to suit the business need of their customers and suppliers (Doom and Poelmans 2010). This requires a long-term evaluation of the managerial processes since a change of culture will be involved, and this is not easily acceptable by many in the management of human resources. 5. Improved business performance When organisations implement proper working planning and control systems, solid information systems need to be implemented and affected to increase the competitiveness of its business in line with its business processes.ERP offers Rolls Royce the benefit of automating their business processes since the processes are integrated with the ERP system. Earlier Rolls Royce had experienced difficulties in integrating these processes to fit in SAP but after implementing ERP they have been able to access accurate information on management and it has been able to add value to their chain of supply.ERP stipulates useful process that upgrades the business performance and management activities within Rolls Royce since all their business functions are integrated and unified into a single system (Dezdar and Ainin 2011). 6. Increased Value Chains The whole series of activities that a company engages in to improve the value at every step in production marketing and sales and after sale services is known as Value Chain. There two main subdivisions of a value chain which are the primary and supportive functions. Primary functions include inbound and outbound logistics and procurement and development of skills. Supportive functions are as a result of the primary functions which include infrastructure and human resources and technology that act in their support. As mentioned in the earlier paragraphs, ERP systems link every department of an organisation making the monitoring process of all the activities easier. It is useful to Rolls Royce while determining where to lower or add the cost or value in the value chain (Wei, 2008).ERP ties up the partners of Rolls Royce, Suppliers, distributors and the customers with the value chain since they are all linked to the supportive bodies. This enables them to monitor the external environment, the economic and technological changes. 7. Improved decision-making While conducting operations in the business field, critical decisions need to be made from time to time since factors affecting the business be it internally or externally keep on changing. Having efficient and effective information systems that are used to increase the rate of making decisions in an organisation creates a favourable platform in setting objectives. Rolls Royce initially used legacy systems which offer a reliable access to data required for rapid decision-making and performance evaluation this made them adapt and implement the use of ERP system that has a central data storage point that can be accessed at different database extraction points. This has helped Rolls Royce to access management information for use in making decisions that require a high level of business intelligence. 8. Centralization of business data Transparency and legitimacy in any organisation is vital, and this is archived by making information easily accessible to all the parties involved. ERP has made this possible for Rolls Royce by consolidating all the departments’ for instance human resource, finance, marketing and sales, and manufacturing applications. All these data is protected by a security system provided by ERP (Tadinen 2005). Conclusion Access to information generates ideas, and the implementation of these new ideas leads to the growth of a business enterprise. The innovations made in information technology have made the world a global village making it easier for firms to market and sell their products and services. This has also brought along massive competition in the business market making companies find better-working information systems to have a healthy competing power in the market. Rolls Royce being in the engine manufacturing industry had to formulate systems that would increase its quality in production so as to set it distinct from the rest (Pettigrew ‎et al., 2001). It invested in many systems before, but most of them did not produce the desired results but after a series of research and heavy investment in the information technology systems it was able to customise the ERP system to suit their unique and specific business needs. This system has proved to be worth it due to the returns it gives to Rolls Royce after a well-established implementation. Despite the numerous benefits this system also has its share of disadvantages which can be overcome by a long analysis is done to do away with these shortcomings. Rather than that ERP has been useful in integrating all the operations in Rolls Royce proving it to be a company to reckon with in the industry of engine production. Reference List Addo-Tenkorang, R. , 2011. Enterprise Resource Planning (ERP) - International. Academic journal, p. 266. Dezdar, S., & Ainin, S., 2011. The influence of organizational factors on successful ERP implementation. Management Decisions. Doom, C., Milis, K., Poelmans,S., 2010. Critical success factors for ERP implementations in Belgian SMEs. Journal of Enterprise. Lloyd, I., 1978. Rolls Royce: The Growth of a Firm. London:Macmillan Publishers Limited. McGraw-Hill, 2006. Aviation Week & Space Technology. Morris , J. 2011. The Impact of Enterprise Resource Planning (ERP) Systems .... information systems, p. 48. Moon , Y., 2007. Enterprise Resource Planning (ERP): a review of ... - SUrfa. p. 222. Pettigrew A. M., ‎Howard, T., ‎Whittington, R., 2001. Handbook of Strategy and Management. New York:SAGE. Copyright. Tadinen, H., 2005. Human resources management aspects of Enterprise Resource Planning (ERP) Systems Projects. Human Resources Management. Wei, C.C., 2008. Evaluating the performance of an ERP system based on the knowledge of ERP implementation objectives. The International Journal of Advanced Manufacturing. Read More