Reducing Cycle Time
 
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Reducing Cycle Time

      9/27/2001

Reduce cycle time was the goal that sparked Newport News Shipbuilding's consideration of an ERP (Enterprise Relationship Planning) infrastructure back in 1995. Despite the ERP implementation failures of the past few years by its industrial peers, the shipyard took on a $100 million implementation of a shared-data infrastructure, changing its business and the way every employee performs his or her job.With 17,000 employees and nearly $2 billion in revenues, Newport News is a large player in the business of the construction and repair of nuclear-powered naval submarines and ships.

The shipyard builds aircraft carriers, made up of numerous systems, equipment and components. A cycle in the shipyard might be to create a system. This requires a process consisting of a design, specification of material, procurement of material, warehousing the material, and then sending the components to many different craft shops to build and complete. With an ERP system in place, the transactions involved in ordering and specifying material and contacting suppliers to get the material are done in one common window, accessible by the different constituents. This reduces time and effort because the intelligence is more accessible, employable and less costly.

At the outset of the project, the implementation team began to calculate the ROI, but that effort was short-lived. The ROI calculations would be a meaningless number to the implementation, as there were too many unknowns. The teams learned that even if they were to discover that the ROI wasn't working out, they would be reluctant to scrap the project. Marching forth without an ROI calculation seemed like a bold move at the time. As it turns out, it is typical of large enterprise implementations. Financial analysts like ROI calculations because they can use the numbers to make management decisions. It's typically used in buying equipment and capital assets. But while an enterprise product may be viewed as an asset purchase, there are too many intangibles, unknowns and unpredictable results. This explains why many firms don't bother with an ROI calculation. And with no ROI number, it was easier to discuss the project with labor unions. To get buy-in without the ROI figures, the team relied on the logic of its presentation and what an ERP implementation would mean to the company. When it works, it doesn't take long for an enterprise integration to reap big cost savings in labor and overhead.


Network Computing, by Jim Romeo, 17 September 2001  







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