Information Technology now a day is growing in rapid pace. Almost every sector and the activities in this world are being attached with the Information Technology. Business organisations cannot endure in this competitive world without needing some type of technology however, they need to have to work with technology strategically to keep their existence for an extended term. In this essay I am going to present the case of one of a big, power engine processing organisation ie, Rolls Royce. This essay will discuss about the circumstance of Rolls Royce with its system prior to the implementation of Enterprise Tool Planning (ERP) system, why the organisation felt dependence on execution of ERP and what exactly are the business enterprise advantages they could get with the tactical implementation of ERP and how.
Introduction:
Today's business organisations find themselves in a more vivid and competitive environment. Business market leaders have taken care of immediately these by laying more emphasis on technology so as to continue with easy and efficient running of businesses and attaining competitive advantages.
Computer founded information systems have been extremely popular lately, organisations like Rolls Royce have stake most of the business operations on Enterprise Tool Planning (ERP).
ERP is an information system that integrates financial, materials and human resources of an company, it also aid information circulation between different business functions and connection to exterior stake holders.
This newspaper will seek to desert the execution of ERP by Rolls Royce, understand the business enterprise needs of ERP, and last but not minimal the aftermath implementation of ERP.
Background of Rolls Royce:
Rolls-Royce is a multinational company which manufactures power alternatives for the customers in aerospace, marine and energy marketplaces. The founders of the company are Henry Royce and Charles Rolls. The brand Rolls Royce came up after their surnames. The company had become about 100 years before. It really is first founded with the intension of processing the best car on the globe. Later on Rolls Royce organisation gradually expands its business in various markets, its name and brand was extended and now it offers its manufacturing business situated in 20 different countries and has its customers in more than 120 countries.
Now it includes became one of the world's largest power engine processing companies. One of the main reasons behind their success is the tactical use of technology to remain competitive in this business community. Though its main headquarter is within UK 45 % of their employees are based outside the UK. They are simply running a civil aerospace business from UK with growing capacities in Germany and the united states. They can be growing up day by day. All the trades, interdepartmental coordination, coordination with their dealer, consumers and customers are managed well and effectively and it is possible for them only by using modern systems to communicate, gather and process the info. [Rolls-Royce Group plc, Annual statement 2009].
They anticipate their customers need for the next 30 to 40 years and do research in the technology to remain competitive. They are experiencing good market power with many products and many customers. It produces goods as well as provides services to its customers in truth, services are the main part of the business it accounts for nearly above 1 / 2 of their revenue every year. So there is certainly the great need for real time data management which allows these to be predictive and they can immediately respond to the problems related to the engine that comes for the service.
Information System:
Information Technology (IT) and Information System (IS) are part of every other. Information system is the computerized program which collects data, processes it and provides the useful information. This information can be used for various purposes to include up the value in the business. It can be used for record technology, planning, decision making, business operation and which further will lead the organisation to acquire competitive benefits.
Figure: Strategic Platform
Information technology is becoming one of the most significant components where organisations are investing their capital. Most of the business company are wisely committing large amount of their money in information systems. The sensible choice of investment can outperform rivals and when it was the indegent choice then it will be nothing more than wasting their valuable capital. [Laudon (2006)].
Today the planet is getting smaller and smaller this is due to information technology and therefore competition in the businesses is rising daily. So to get the competitive advantages, proper use of information system is the must no matter it is smaller business organisation or the larger. Matching to Brooks (2003), adding value to the business enterprise means to extend products, decrease the cost, enhance the quality of services and so on. The explanation for adding value to the business is to get more customers, and keep organisation in an improved place on the market. The use of It and information system has become the efficient and more common method for adding value to the organisations of today's business community. Only the utilization of computer system is not sufficient to add value and take competitive advantage of it, the proper use of IT System is the most. Regarding to WU J (n. d. ), "ERP system is such a proper tool, which integrates information and information-based functions within and across useful areas within an organization".
Rolls Royce was using information system since long. It was using 1500 systems before using ERP (SAP R/3), many of those systems were built internally by Rolls-Royce in last 2 decades. Those systems were costly to use rather than easy to keep. They didn't give exact and steady final result because these systems were not centralised and using the principles from different systems gives inconsistent result. Considering all these problems Rolls-Royce produced a partnership with electronic data services (EDS) in 1996 and EDS was responsible for the introduction of ERP for Rolls Royce [Yusuf Y, Gunasekaran A and Abthorpe MS (2004)]. Though there are many implementation problems such as social issues (Training of new system to the employees), business difficulties (adjustment of attempting to fit in the ERP) and complex problem (transferring of past records in to the new system and reach the consistent stage), Rolls Royce needs to implement the ERP because they knew the necessity of the centralised, robust, accessible and exact system to gain the competitive advantage and to enhance their supply string.
ERP combines all departments mutually into an individual system within a computer. It uses internet technology and it could be seen by authorised department and authorised employees anytime from anywhere so interdepartmental communication can be done easily and proficiently and therefore optimizes the time and the cost.
Impacts of ERP Execution in Rolls Royce:
According to the total annual statement (2009) of Rolls Royce "Our process excellence and improvement journeys continuing throughout 2009. Our jv engine unit overhaul facilities, Hong Kong Aero Engine Services Small (HAESL) and Singapore Aero Engine motor Services Limited (SAESL), were the latest to take advantage of the rollout of the business reference planning (ERP) and SAP process systems". Rolls Royce has implemented and is utilizing information systems very proficiently and effectively that's the reason they are in the apex of success today. Rolls Royce is utilizing ERP for communication, decision making, to control their business functions, improve value chain, to lessen competitive makes and as a whole to gain competitive benefit.
We will now discuss one at a time how Management Information System (MIS) like ERP will help the business organisation to gain the advantages maintained above and we will start to see the impact of using ERP in the Rolls Royce.
Communication
One of the critical factors which lead the organisation towards its success is the effective communication (intra-organisation and inter-organisation). Employer and professionals of today's business company must have to be familiar with the effective communication approaches for the success of the company. And effective communication is becoming an important tool for the organisation's success. ERP raise the communication between the functional boundaries within the organisation. Rolls Royce is successfully and effectively using this advantage provided by ERP. Rolls Royce is also a service agency to its customers. When customers demand services to be delivered in more well-timed and perfect way, organisations must triumph over functional boundaries to meet this challenge.
Rolls Royce is greatly spread in several countries and all of its organisational functions aren't carried out within a place. ERP helps the effective communication within different departments and between their suppliers, customers as well much like their partner organisations. And this obviously adds value to the organisation by reducing the study time, providing the exact and the optimized reviews and minimizing the communication cost. Let's take an example, Rolls Royce uses Suppliermanager website to move together everything their supplier needs. They are employing SABRe which shows the external part of the Rolls-Royce Quality Management System, and is applicable to all its suppliers or partners who are providing products that effect after Rolls-Royce and its own customer requirements. By using these strategy of using information system and providing the information, Rolls Royce is lessening the price and time for the communication.
Decision Making
Decision Making is one of the critical indicators in every business organisation. Again your choice is made by making use of report generated by the info System. One of the major benefits of using good information system like ERP is the fact it does increase the velocity of decision making within an organisation and the circumstances to make faultless decisions in tactical, managerial as well as functional level.
Let's take the circumstance of Rolls Royce, the legacy systems used in Rolls Royce did not provide accurate, steady and accessible data that was required for good and timely decision-making and performance evaluation. Those old systems generally didn't fit to the present day manufacturing environment. However in the ERP system a data warehouse (included collection of data) is established. Data is stored centrally and it is extracted from different databases. The data is supervised, edited and then finally standardised for future use. The data is placed in a reasonable and user friendly format. It also allows nontechnical users to questions the databases which allow and provide the management information for business brains and helps Rolls Royce for operational, managerial and strategic decision making [Yusuf Y, Gunasekaran A and Abthorpe MS (2004)].
Business Process Management
Business Process is the set of activities completed with a business organisation that is set up by a meeting, transforms information, materials, or business commitments, and produces an end result [Harmon (2003)]. Business Process Management is the procedure of managing the activities of business process. Among the major great things about using ERP is the business process automation. So, ERP can be very helpful for the management of business process, in fact, ERP itself identifies the business process because the organisation's business process is integrated in the ERP system. Rolls Royce acquired also faced difficulties to improve their business process to be able to match the SAP. However they need to implement the ERP to automate their business process, to gain access to accurate management information in less time and add value in their resource chain.
Value Chain
Figure: Value String in an Company [modified from: Porter Me personally (1985); Competitive Advantage: Creating and Sustaining Superior Performance, Free Press]
The value chain model includes the exact activities running a business company where we can apply the competitive strategies [Porter ME (1985)] and where we can apply the info system effectively to gain competitive advantages. These activities of the company described by value chain model are recognized in two different categories
Primary activities and
Supportive activities
Primary activities are those activities which are involved in the procedure of development and distribution of the organisation's product and the services. Those activities shown by the value chain model are inbound logistics, operations, outbound logistics, sales and marketing and services. Inbound logistics explain the receiving and storing of the materials for the creation of the goods. Operations define the process to convert the inputs to the end products. Outbound logistics define the storing and circulation of end product. Sales and marketing describes the campaign and offering of the outbound logistics and last but not minimal is the services which includes after deal repair and maintenance of the finish products. Supportive activities support for the successful final result of the principal activities which include; infrastructure of company (administration and management), recruiting (recruitment, hiring and training of employees), technology (technology used for the improvement of product and creation process) and procurement (gathering inputs for the organisation) [Laudon (2006)].
ERP system links every office of the company with one another so every activity can be watched at any time. The info about those activities provided by ERP system is used to get the point in the worthiness chain where the cost can be lowered and value can be added. In addition, it could be used to tie up up the organisation's promoting body such as suppliers, customers, spouse organisations and distributers and the worthiness chain of the organisation will be linked with the value string of its accommodating bodies. The usage of the information system for the linkage between value chains will allow the organisation to lessen the price for inventory and also to response the customer's demand immediately.
Competitive Forces
Figure: Competitive Pushes [adapted from: Porter Me personally, Harvard Business review, January 2008]
According to Porter's competitive push model there are five major forces that are operating after any business company which tries to diminish the organisation's performance and these forces must be produced ineffective by the organisation to be able to survive on the market. These five makes are:
Possibility of new entry of competitor
Bargaining vitality of customer
Bargaining power of supplier
Substitute products or services
Position of the prevailing competitors
Different strategies can be applied to lessen these causes. And use of information system can make easiness for the company to look for the strategy that should be applied to be able to get the competitive gain.
Rolls Royce has suprisingly low risk of new entrants. Because of their brand and their well establishment make hard for the possible competitor to contend with Rolls Royce. The high primary investment cost will also discourage the threat of new entrants into this market. Rolls-Royce gathers real-time data of these engines that are operating all over the world. By analysing, posting and acting upon these details, they can optimise the performance of the engines in service [Rolls-Royce Group plc, Total annual report 2009]. They have such a good information system to care for the services needed by their customers, which reduces the bargaining electricity of customers and threat of substitute product and services. Information system in Rolls Royce and their direct communication with the suppliers are also aiding them to keep good relationship with their suppliers minimising their bargaining electric power. Rolls Royce is operating its business in a very competitive market in response to its rivals such as Pratt and Whitney, Standard Electric, CFM International. That is why they invest large amount of money for research and technology to differentiate themselves from their competitors.
Rolls Royce has developed a balanced business stock portfolio and continues to maintain a steady focus on improvement in operational performance by modernisation of its facilities and focusing on managing the costs of procedures and products. Continual investment in technology and strong security of intellectual property, together with the establishment of long-term customer interactions, permit the Rolls Royce to make its products and services different from its rivals [Rolls-Royce Group plc, Total annual Report 2009]. Among the examples for his or her investment in technology is the implementation of ERP removing their old systems making an investment huge amount of money in it.
Competitive Advantage
In a straightforward sentence, we can explain competitive advantage available term as the advantage gained with a company in the market competition with the competitors. Any company can gain competitive edge over their competition by the next means:
Reducing their development cost and then the price of their product,
Improving the quality of their product,
Providing good after deal services,
By differentiating their products from the merchandise of their challengers,
Growth of the company
"Companies that efficiently adjust their business around It could achieve a significant windowpane of competitive edge" [Tapscott D (2004)]. This won't mean that those companies who utilize it and it is in their business procedures can gain competitive benefits but, the organisation who smartly and strategically use IT and IS will certainly gain the competitive gain.
Rolls Royce is working on the market which desires them to deliver increased value in terms of cost, quality and delivery performance. So they always try to minimize the cost, boost the quality of the product and promptness in services. Management information system like ERP put in place in Rolls Royce supplies the relevant information which directly or indirectly aiding them to attain those advantages. ERP benefits Rolls Royce to regulate the business functions and helps costs reductions. It can be used for real time data management which also helps them to provide good and on time service with their customers. For example, real-time data management allows them to become more predictive they can know when engines are going to come along and they can provide the exact down-time for the aeroplanes and the maintenance. Based on the article by Ashford W (2007), the CIO of Rolls Royce, Mr Jonathan Mitchell claims that "We've traditionally run factories independently, however the standardisation of systems and functions means we is now able to operate more effectively at the global range". ERP is the integrated system for business procedures so, moving of the factories, widening the business and creation throughout the world is not difficult. They have got a different division for the study goal only, which always works how to add value to the products? They want to make their product not the same as other rivals by inventing the engines that produce less pollution and without the refined information provided to them it will not be possible for them to carry out these duties.
Conclusion:
The market behind the success of Rolls Royce in its market is the execution of the latest systems and the information system in its business procedures, which provide a message to people who believe that, investment in the IT and the IS is nothing but just waste products of the organisation's capital. Rolls Royce were using many systems since long however, taking a look at the feasibility and need for ERP in strategic decision making, business process and joining their departments as well as business functions, they invested large amount of money for growing and implementing ERP system upgrading the old systems.
The smart integration and implementation of Information System and Information Technology in an enterprise organisation and its own operations will lead it to the competitive edge in its industry. It is rather difficult to find any organisation which includes experienced up to the inability regardless of strategic execution of Is at its business processes.
