Pratt & Whitney tinkers with its ERP engine

ORLANDO, FLA. — After spending millions of dollars on enterprise resource planning, Pratt & Whitney Canada has turned its attention to squeezing more value out of its investment.

Unlike some technology projects, the benefits of

massive ERP implementations aren’t immediately realized when the system goes live, according to John MacFarlane, ERP manager with Pratt & Whitney.

“”Once you’ve implemented R/3 and you’ve had that massive cost and massive strain on the organization, you don’t get all the benefits from day 1. The benefits come from small, incremental optimizations,”” MacFarlane told Computing Canada at Sapphire, SAP’s annual user conference held in Orlando, Fla., from June 5-7.

Pratt & Whitney designs and builds aircraft engines for more than 800 airlines throughout the world. Early in 1999, the Montreal-based company simultaneously went live with a number of SAP 3.1 modules, including Financials, Logistics, Sales and Distribution and Materials Management.

Before its foray into ERP, Pratt & Whitney was a classic case of a silo-based company, with more than 9,000 employees scattered mostly throughout Canada, but with some in the U.S. and abroad. Each business unit had its own technology for managing information and none of them integrated well. To ensure its survival and gear up for increased competition, Pratt & Whitney knew it had to consolidate its systems, get a better handle on inventory and improve its response times – with customers and suppliers.

“”We needed advanced planning in our supply chain and that meant reducing lead times, increasing inventory turns, reducing inventory levels and managing all those assets very carefully,”” said MacFarlane. “”We also needed to have a better flow of information from our customer base to the supplier base.””

Twenty-seven months and one budget overrun (of an undisclosed amount) later, MacFarlane said the company is in good shape.

“”Performance is an important issue in our company and we’ve been successful in managing the performance in our SAP environment,”” said MacFarlane. “”We have 2,500 concurrent users in the SAP environment and we manage over two million transactions a day. Our average response time is less than 0.5 seconds.””

Just months after rolling out 3.1, Pratt & Whitney took the adventurous step of being the first global SAP customer to upgrade to SAP 4.6, a move MacFarlane said was more about positioning than necessity. This time, things went a little smoother.

“”It only took up six months to upgrade and we did it under budget,”” MacFarlane said, adding that Pratt & Whitney has now eliminated all of its non-integrated systems across the organization.

But there was still one problem its broad-based implementation of SAP software could not solve: how to quickly integrate the systems of a newly acquired subsidiary. Pratt & Whitney recently bought a US$100 million company, and in an effort to quickly amalgamate it into their enterprise, they considered an SAP competitor’s product.

“”We were sold on SAP, but it was too heavy to implement in this circumstance,”” said MacFarlane.

During the conference here, MacFarlane said he was happy to learn that SAP AG had purchased an Israel-based company called TopManage Financial Solutions Ltd. in March, which had developed a scaled-down version of ERP for small to mid-sized companies. SAP Business One is specifically designed for either stand-alone mid-sized businesses or divisions of enterprise customers that don’t justify a full-blown implementation, according to Richard Elliot, SAP Canada’s vice-president of strategic initiatives.

“”The perception, rightly or wrongly, is that SAP is a large, more expensive product for bigger companies. It’s interesting because in Europe, we’ve gone very far down-market with the existing solution,”” Elliot said.

MacFarlane said that learning more about Business One was one of the reasons he attended Sapphire 2002, since installing a slimmed-down SAP application in the new subsidiary would reap benefits on many levels.

“”If you put them on an SAP environment, you’re not throwing away that investment a few years later,”” he said. “”If the company reaches a certain size, you can either adopt them in your central instance or you can continue to link it back together. It’s not a throw-away.””

MacFarlane expressed some skepticism, however, about whether Business One will truly be a scaled-down version of

At this point, it’s all theory, according to Joshua Greenbaum, principal analyst at Enterprise Applications Consulting, a Daly City, Calif.-based IT consultancy.

“”Is it truly a scaled-down version of R/3?”” said Greenbaum. “”That’s the assurance SAP is giving us, but at this point we really don’t know. The trick for SAP is going to be in presenting a portal-based interface that has a similar look and feel to R3. If I were Pratt & Whitney, I’d be pretty excited as are lots and lots of customers, but I’d also be waiting for them to prove themselves.””

Greenbaum said if SAP’s promises on Business One are fulfilled when the product is rolled out in Canada around September, companies similar to Pratt & Whitney will have another option to consider besides Great Plains, the current market leader in this space in Canada.

But the product will have to be competitively priced, said Greenbaum, who noted that similar packages typically come in at less than US$100,000.

Elliot said SAP had not yet determined pricing for Business One, but promised it will be competitive.

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