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SAP INFO 134 · In Practice

With the ongoing war effort, the U.S. Navy is watching every dollar, literally. Its new enterprise resource planning (ERP) system, Sigma, gives the Naval Air Systems Command (NAVAIR) unprecedented insight into its business. Just to prove how much more efficient the Navy could be, they instituted four ERP pilot programs using SAP at the core of its solution. NAVAIR, which carried out the largest of these pilot projects, has achieved impressive results in improving and standardizing its business processes and reducing the costs associated with legacy applications.

Naval Air Systems Command runs SAP as the largest public sector ERP system

Off to a Flying Start

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At the end of the nineteenth century, aviation was still in its infancy. When the U.S. Navy recognized its importance for maritime activities, it was the domain of a few daring pioneers. In 1898, the future U.S. president Theodore Roosevelt ­ at that time still Assistant Secretary of the Navy ­ ordered two officers of scientific attainments and practical ability to examine the suitability of Professor Samuel P. Langley's flying machine for use in war. Although their investigation showed that the value of this "airplane" for military purposes was rather theoretical, this was the start of naval aviation in the United States. Another milestone in U.S. marine aviation was reached in 1910: On September 26, Captain Washington I. Chambers was appointed First Officer in Charge of Aviation. Shortly after, on November 14, the first airplane ­ flown by civilian pilot Eugene Ely ­ successfully took off from a ship. December 23 saw Lieutenant Theodore G. Ellyson begin his training as Naval Aviator No.1. A year later, Ellyson and his copilot John Towers, Naval Aviator No. 3, completed the maiden flight of the Navy's first airplane, A-1, although they had to make an emergency landing on the west coast of Chesapeake Bay, near the Cedar Point lighthouse in Maryland.

This made it clear to the Navy that airplanes' ability to fly depended greatly on their maintenance. As a result, Lieutenant Holden C. Richardson became the Navy's first engineering and maintenance officer for aviation at the end of 1911. In 1943, Cedar Point ­ the site of Aircraft-1's emergency landing ­ became home to the Patuxent River Air Station and thus the headquarters of Naval Air Systems Command. Today, this establishment is responsible for developing, acquiring, and supporting aircraft and related systems. All naval aircraft testing and evaluation takes place here and at seven other bases in the United States. Naval Air Systems Command (NAVAIR), although just one department of the entire U.S. Navy, has 32,000 civilian and military employees and maintains more than 4,000 aircraft.

Enterprise resource planning for the Navy Managing a multi-billion dollar organization requires an enormous amount of decision making. This task is made more difficult by the shrinking budgets available to governmental organizations, forcing them to constantly lower their operating and business costs. In 1999, then Secretary of the Navy Richard Danzig requested that priority be given

to "investments that will cut our operating or business costs, such as enterprise resource planning and the Navy Marine Corps Intranet." To this end, a working group for revolution in business affairs (RBA) was established. The group carried out a study and recommended implementing enterprise resource planning (ERP) and associated best business practices and processes to cut both operational and business costs. In order to find the best product to fit its business, NAVAIR conducted an extensive source selection process to acquire both an integrator to help them implement the solution, and the solution itself. The Command conducted extensive software demonstrations and found three acceptable applications: Oracle, Peoplesoft and SAP. The integrators expecting to bid on the proposal were instructed to partner with one of these acceptable software vendors. BearingPoint (formerly KPMG) partnered with SAP and eventually won the job of implementing Sigma at NAVAIR. "The SAP solution offered the best solution for our needs," explains Captain Michael S. Paul, program manager at Naval Air Systems Command. NAVAIR implemented SAP R/3 4.6C with functions for financial

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SAP INFO 134 · In Practice

NAVAL AIR SYSTEMS COMMAND

The Naval Air Systems Command, as the provider component of the Naval Aviation Enterprise (NAE), provides cost-wise readiness and dominant maritime combat power in support of the mission of the men and women of the naval service and the Department of Defense. The Naval Aviation Enterprise is delivering for the American warfighter the right force with the right readiness and the right cost at the right time. Delivering effective, state-of-theart tools to train, fight, and win, the NAE plays a critical role in advancing future military strategy by developing, acquiring, and supporting airborne weapons systems that are technologically superior, readily available, and affordably priced. For more information about the Naval Air Systems Command, go to www.navair.navy.mil

dardization can only succeed if all users are using the same application and have access to data from a single source," explains Paul. In implementing these requirements, NAVAIR also benefited from business process reengineering, some of which took place before the project began and the balance as part of the Sigma development process. Like all ERP implementations, NAVAIR encountered some problems during its initial deployment. Commonly referred to as the "perfect storm," NAVAIR was implementing a new, standardized IT infrastructure known as the Navy Marine Corps Intranet (NMCI) at the same time it deployed its ERP solution. This combination of deployments caused confusion for end users. The users were not clear about which project was causing the difficulties and which help desk to contact. "That was quite a challenge for our project team," admits Paul.

solution has enabled their work to evolve from mere data entry to analytical tasks.

accounting (FI), funds management (FM), controlling (CO), project system (PS), workflow (WF), sales and distribution (SD), materials management (MM), human resources (HR), Business Information Warehouse (BW) and employee self-services (ESS), plus the SAP for Public Sector solution portfolio.

Go-live in October 2002 NAVAIR decided against a big-bang implementation where all activities were to go live at the same time. Instead, Project Sigma was implemented in two deployments. The first deployment was for the General Fund organizations, including the headquarters at Patuxent River; Naval Air Technical Data and Engineering Service Command in San Diego, California; NAVAIR Training

Systems Division in Orlando, Florida; Naval Aviation Mediterranean Repair Activity in Italy; and Naval Aviation Pacific Repair Activity in Japan. The second deployment was for the Navy Working Capital Fund organizations, including the Naval Air Warfare Center Aircraft Division at Patuxent River and Lakehurst, New Jersey, and the Naval Air Warfare Center Weapons Division at Point Mugu and China Lake, California. Sigma officially went live for the General Fund activities in October 2002, closely followed in January 2003 by the Navy Working Capital Fund activities. "The focus of our pilot was program management," emphasizes Paul, who is responsible for Project Sigma. The aim was to bring the decision closer to the

decision makers in real time ­ using information readily available in an ERP system. Naval Air Systems Command also wanted to replace as many legacy systems as it could with one integrated solution. "Many systems were redundant, and we were spending large sums on licenses, maintenance, and upgrades," Paul says. Replacing 59 legacy systems is saving NAVAIR U.S.$15 million per year ­ on this basis alone, the project is a success.

Uniform, standardized business processes The aim of consolidating various systems in one ERP system was to fulfill NAVAIR's need for uniform, standardized business processes. "This stan-

Extensive training for 22,000 users Training and change management proved to be another critical aspect of the project. "We had to train our users at the right time," Paul explains. "If you train them too early, they forget what they learned by the time you go live. If you're too late, they don't have enough time to practice and absorb what they learned." NAVAIR had more than 22,000 users to be trained, which required a large team of trainers. Despite this considerable effort, there were still problems at the start. "We tried to make it clear to people why we had changed the processes and what the advantages were," emphasizes Paul. "We were unable to attain all the desired functionality initially but we have worked to incorporate it after the system went live." The many benefits of the SAP solution eventually won over users. Three years have passed since NAVAIR went live, and there are few complaints about the system. In fact, many users are now vehement advocates of the solution. NAVAIR's ERP

A for achievement Like the users, Paul is more than satisfied with SAP's solution: "The system has met our expectations. So far, we have achieved 86 percent of the intended original functionality. By next year, we will probably be above 90 percent. In my book, that's an A." Having installed the various functions, NAVAIR is now benefiting from using them. Paul sees one advantage in the automation of processes: "Before deploying Sigma, we carried out many of these processes manually. Now, we're saving a great deal of time, which users can spend on other, more important things than data entry." To give an idea of the dimensions: "We execute some 3.4 million dialog steps each week and process over 4,000 funding documents per month." In addition, NAVAIR manages 470,000 vendor master records and almost three million material master records in the SAP system. A further benefit, besides the time savings, is the reduced number of errors caused by duplicate entry of data. Shorter cycle times "Thanks to Sigma, we have shortened our cycle times and standardized our business roles," adds Paul. Another major advantage is that the solution offers a tremendous insight into the enterprise and faster and better decision making. NAVAIR can now provide many financial statements within 48 hours and easily close the financial books by the deadlines ­ something that was not always a simple undertaking in the past. The opportunities opened up by ESS were particularly well received by NAVAIR. "Employees and managers can now fill out their time sheets themselves without help from a timekeeper," says Paul.

"As a manager, I have immediate access to the system and can view and process employee and financial data if required. That enables me to make better decisions, faster," he adds. Paul recounted a story of a user who was particularly pleased that he could use ESS to fill out his time sheets while in Australia.

Winner of the ASUG Implementation Award Improved business processes, greater savings, and satisfied employees and managers are not the only rewards for NAVAIR's Project Sigma. The success of the implementation of SAP's ERP solution was recognized by the Americas' SAP Users' Group (ASUG). Naval Air Systems Command won the ASUG Impact Award 2005 in recognition of special strategic and business results from an SAP implementation. It is no wonder that other ASUG members were very interested. "Due to the high demand, we are holding demonstration events every quarter to explain our work to prospects in the public sector, including numerous government agencies," reports Paul. As successful as NAVAIR's project is, its days are already numbered. Sigma and the other three pilot projects are being integrated into the Navy-wide ERP program. This program is currently in the realization phase and is slated to go live in late 2007. According to Paul, the Navy ERP program office will take advantage of the lessons learned and experiences gained during NAVAIR's project to "ensure the best possible SAP implementation for the Navy."

(gi)

A single army logistic execution: www.sap.info/int/go/25583/ More about ERP in the armed forces: www.sap.info/int/go/29709/

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