Bombardier - ERP Implementation

Key Problem

In the Bombardier study, Bombardier Aerospace is the third largest designer and manufacturing aircraft company in the world. Bombardier Aerospace reported to make $8.2 billion in revenues which is 55% of Bombardier Limited’s total revenue in 2007.  Bombardier is using a legacy system since the early 1990s known as the Bombardier Manufacturing Systems (BMS).  BMS is based on a MACPAC platform, which is starting to show its age as an insufficient solution. Bombardier has made several acquisitions throughout the years and the MACPAC platform is making it difficult for the future development of the company.  The Vice President of Operations and Project Sponsor is aware of the aging MACPAC platform and has a vision to make an efficient upgrade so Bombardier can be a ‘One Company’ philosophy. The key problem is Bombardier Aerospace needs to significantly improve their low visibility of inventory and lack of integration within the company.

ERP I - Implementation

            Bombardier Aerospace tried to make a significant technological improvement with an Enterprise Resource Planning (ERP) system. An ERP application provides one platform for inventory, purchasing, procurement, customer service and finance. The first attempt for the implementation of ERP system project was not successful.  The ERP project was discontinued in 2000 and spent a substantial amount of $130 million in sunk costs. There were several reasons why the ERP implementation was a failure: Inappropriate businesses process, outdated company vision, a weak sponsorship and insufficient involvement of employees. In my opinion, Bombardier didn’t have best practices for the ERP implementation as there was no structure, loyalty, organization and leadership for the IT project. The Bombardier Aerospace ERP best practices should have been developing the inventory management, integration, formal employee training, price consistency and a master supplier listing.     

ERP II -Implementation

            As you may know, the second ERP implementation was started in 2001 by a group of senior managers from Bombardier Aerospace’s Irish facilities. The senior managers developed the Bombardier Manufacturing Information System (BMIS). BMIS was a motivated realistic proposed plan to achieve project goals. The BMIS project was to have a wider ERP strategy and focus on the processes that support manufacturing, inventory, procurement, finance and engineer data. The main reason the ERP implementation failed the first time was not having a detailed management planning solution. Also, one of the BMIS objectives was to reduce the headcount for clerical roles since the processes are automated and not input manually. The ERP system would eliminate paper as most of the material would be automated.  Employees could focus on more analytical tasks rather than administrative tasks. The SAP enterprise system was chosen as the ERP system for Bombardier Aerospace. There was value for deciding to use the Mirabel plant as it is manufacturing plane site. The CRJ700 model plane is manufactured at this location and the jet plane is Bombardier Aerospace’s potential growth in the future.  The one site implementation approach is a more conservative approach which is needed for a large scale ERP implementation.  I agree that big bang theory is not the best approach and would be more challenging for the company. I commend that way the implementation was structured using the Mirabel site as pilot with integrating testing, training and Go-Live. Once SAP implementation was fully completed, the cost savings was extremely favorable within the year. There was a significant reduction in $1.2 billion in inventories within the first year of Go-Live. Employees’ attitudes changed for the better as the ERP system started to make their job easier and more efficient. In my opinion, the second ERP was successful but there is room for improvement for the third ERP implementation.  

ERP III – Implementation

            After reviewing a memo from an executive, I will identify the ERP SAP best practices and bring the necessary world class standard for the implementation project. The second ERP implementation was a success but I want to ensure the third implementation will be flawless. There are several action steps during the second ERP implementation that I would continue to support for the third ERP implementation: BMIS, One-Company (Integration) and less Consultants. 

  In my opinion, the BMIS functional strategy is one of your strongest assets to the development of the ERP implementation. I would continue to utilize the BMIS philosophy as it provides the right focus on the Bombardier’s functional processes. BMIS focuses on the functional processes, such as: inventory management, manufacturing, procurement and finance. BMIS shows a detailed analysis and structure to implement thoroughly and effectively. I do support the VP of Operations and Project Sponsor’s One-Company approach. It is necessary to have all checks under the Bombardier name and have an integrated system. I am in favor of less third party consultants and I do like the ratio of employees to consultant (1:10). Employees can get frustrated with too many consultants explaining the processes and can be challenged with a new ERP implementation. There will be a better working environment with fewer consultants.

            I would recommend 4 areas to make improvements so your team can learn from the mistakes from the second implementation: training, eliminating legacy systems, processing purchase orders and Finance. There were several opportunities to improve your training program. The third-party consultants didn’t provide the proper training material and the staff expressed dissatisfaction with the training program. At this point, I wouldn’t recommend training from a third-party consultant as the Mirabel plant is your training material. The BMIS team and the Mirabel plant users can provide a formal cross training program during the new ERP implementation. The Mirabel employees can provide feedback to the new users that the ERP system has saved them a significant amount of time.  Your employees will learn from each other, and it would boost morale.         

There were users after the Go-Live from the Mirabel plant that were using the current legacy systems. I would recommend discontinuing the ERP user from using the current legacy systems. In my opinion, the employee isn’t adding any value and this is not an effective way of learning a new system. The VP of Operations and Project Sponsor’s should send out an email to the managers and not give permission for users to use the legacy systems. I would encourage managers to send out a problem list to the BMIS project team so they can problem solve for any new issues in SAP. 

There were challenges with processing purchase orders during the Mirabel implementation. I encourage revamping the purchase order process as vendors are either receiving too many faxes or not receiving purchases orders.  SAP was automatically sending fax purchase orders to vendors, causing problems within the MRP engine. Suppliers were receiving too many faxes every time the MRP engine was being updated. At this point, ERP SAP has the capabilities to email purchase orders rather than faxing a PO to your vendor. It was unacceptable that the BMIS team was printing, stapling and mailing purchase orders to vendors for three weeks. Also, the BMIS team should create an IT audit to ensure vendors are receiving POs in a timely manner.         

Key Performance Indicators (KPIs)

In my opinion, Key Performance Indicators (KPIs) are an excellent way to monitor your goals and improve your business. Once the third implementation of ERP SAP is installed, I would recommend utilizing KPIs on a monthly basis. ERP systems can provide a plethora of KPIs and you can choose what KPIs are most important to your department.  There is a significant amount of opportunity to improve your trade working capital (inventory + trade debtors – trade creditors). For example, Bombardier Aerospace has done an outstanding job with a one-time reduction of $219 million reduction in inventory costs. The reduction in inventory costs can lead to other financial opportunities for your company. Overall, KPIs give excellent visibility for achieving goals within your organization.  

Conclusion

            SAP is creating an effective and efficient solution for your inventory and integration problems. An ERP implementation can be successful with the proper vision and dedication to the system. Management needs to be confident in their product and encourages users there is a benefit to their daily workload. Bombardier Aerospace must emphasize that ERP systems give you an upgrade and an opportunity to grow the business. In my opinion, it’s time to eliminate the outdated legacy systems and look to the ERP system as a resource of future growth.  ERP systems provide the following services better than legacy systems in the following: organization, inventory visibility, purchasing, customer service, finance, employee morale and function control. The Mirabel ERP implementation contributed to a $1.2 billion cost saving reduction which is impeccable! This will give Bombardier additional cash flow, improve Bombardier’s balance sheet and make potential company acquisitions.  I would eliminate the legacy systems completely and replace them with the ERP SAP.

The ERP SAP system would be just as efficient as the design of your aircrafts. The CRJ700 jet plane needs an engine to fly with power and speed and the wings to bring control effectively to the aircraft. The ERP SAP system will bring a fast and powerful one platform solution and provide an effective solution with integration, inventory, purchasing, sales and finance.