SAP Process Innovation in Aerospace

TLDR The aerospace supplier faced operational bottlenecks in their SAP ERP system, struggling with inefficiencies in procurement and inventory management as they scaled to meet global demand. By optimizing their SAP processes, they reduced procurement cycle time by 25% and increased inventory turnover by 15%, highlighting the importance of Strategic Planning and continuous improvement in achieving operational efficiency.

Consider this scenario: The organization is a leading aerospace supplier facing operational bottlenecks in their SAP ERP system.

As they scale up to meet increasing global demand, the complexity of their supply chain has magnified inefficiencies, particularly in procurement and inventory management. The organization seeks to optimize its SAP processes to enhance real-time data accuracy, improve supply chain visibility, and reduce cycle times, ultimately leading to better decision-making and increased competitiveness.

The organization's situation suggests a couple of hypotheses for the root causes of the challenges it faces. Firstly, the existing SAP configuration may not be aligned with the evolved business processes, leading to data inconsistencies and process inefficiencies. Secondly, there may be inadequate user training and engagement, resulting in low system utilization and poor data quality.

Strategic Analysis and Execution

A proven methodology for SAP process innovation involves a 5-phase approach that ensures thorough analysis, strategic planning, and effective execution. This structured process is pivotal for the organization to gain maximum value from its SAP investment, leading to enhanced efficiency and decision-making capabilities.

1. Assessment and Planning: The initial phase involves a comprehensive assessment of the current SAP landscape, identifying pain points and misalignments with business goals. Key activities include stakeholder interviews, process documentation review, and system usage analysis. Insights from this phase help in formulating a strategic roadmap for the SAP enhancement.
2. Design and Blueprint: In this phase, we create a detailed blueprint for the optimized processes, focusing on areas identified during the assessment. Activities include process redesign workshops, SAP best practices review, and prototype development. The deliverable is a design document outlining the proposed SAP enhancements.
3. Realization and Development: Here, the SAP system is configured and customized according to the design blueprint. Key activities include system configuration, development of custom functionalities, and integration with other systems. Testing is performed to ensure that the changes meet the business requirements.
4. Deployment and Training: The focus of this phase is to prepare the organization for the transition. This includes end-user training, data migration, and system cutover. Common challenges include resistance to change and ensuring business continuity during the transition.
5. Post-Go-Live Support: After the SAP system goes live, ongoing support is provided to address any issues and optimize system performance. Activities include monitoring system performance, user support, and continuous improvement initiatives. This phase ensures the sustainability of the SAP enhancements.

Implementation Challenges & Considerations

With the methodology laid out, the organization's leadership might be concerned about the alignment of SAP enhancements with strategic objectives. It is crucial that each phase of the methodology includes checkpoints for strategic alignment to ensure that the SAP system supports the organization's long-term goals.

Leadership may also question the potential disruption to business operations during the SAP enhancement project. To mitigate this, we emphasize a phased deployment approach and comprehensive training to ensure a smooth transition with minimal operational impact.

Another consideration is measuring the success of the project. We advocate for clear KPIs and metrics, established during the planning phase, to track performance improvements and ensure that the project delivers the expected business outcomes.

Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.

“

What gets measured gets done, what gets measured and fed back gets done well, what gets rewarded gets repeated.

     – John E. Jones

• Inventory Turnover Rate: to measure the efficiency of inventory management after SAP enhancements.
• Procurement Cycle Time: to track improvements in the speed of procurement processes.
• Master Data Accuracy: a crucial metric for assessing the quality of data within the SAP system.
• System Adoption Rate: to evaluate the success of user training and system usability.

For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.

Key Takeaways

Adopting a structured methodology for SAP process innovation is not just about technology - it's about aligning the SAP system with the organization's strategic vision. By adhering to this methodology, firms can expect to see a reduction in operational costs, increased productivity, and improved decision-making capabilities.

Another critical insight is the importance of change management throughout the SAP enhancement process. Effective communication and stakeholder engagement are key to ensuring that the changes are embraced and adopted by the organization.

Deliverables

• Strategic Roadmap for SAP Enhancement (PowerPoint)
• Process Design Blueprint (PDF)
• Custom Functionality Specifications (Word)
• End-User Training Materials (PowerPoint)
• Performance Improvement Report (Excel)

Key Findings and Results

Here is a summary of the key results of this case study:

• Reduced procurement cycle time by 25% through strategic SAP enhancements focused on supply chain optimization.
• Increased inventory turnover rate by 15%, demonstrating improved efficiency in inventory management post-implementation.
• Enhanced master data accuracy, significantly reducing data inconsistencies and contributing to better decision-making.
• Achieved a high system adoption rate, indicating successful user training and engagement with the new SAP functionalities.
• Decreased audit preparation time by 30% for a defense contractor, showcasing the versatility of SAP enhancements in addressing compliance needs.

The initiative to optimize SAP processes within the aerospace supplier organization has been notably successful. The significant reduction in procurement cycle time and increase in inventory turnover rate directly contribute to the organization's strategic goal of enhancing operational efficiency and competitiveness in the global market. The improvement in master data accuracy and the high system adoption rate further validate the effectiveness of the comprehensive training programs and the alignment of SAP enhancements with business processes. However, the success could have been potentially amplified by incorporating more advanced predictive analytics and AI-driven insights into the SAP system, providing even greater foresight and efficiency in decision-making. Additionally, a more aggressive change management strategy might have accelerated the adoption curve, minimizing resistance and optimizing operational impact sooner.

For the next steps, it is recommended to focus on leveraging advanced analytics and AI capabilities within the SAP system to further enhance decision-making and predictive insights. Additionally, continuing to foster a culture of continuous improvement and innovation will be crucial. This includes regular training updates, system reviews, and stakeholder feedback sessions to ensure the SAP system evolves in alignment with the organization's strategic objectives and the dynamic global market conditions. Further exploration into automation of routine tasks within the SAP system could also yield significant efficiency gains and cost savings.