Boeing Australia Limited (BAL) is relatively new company and a global extension of the US firm, the Boeing Company. The BAL developed capabilities in the areas of space and communication, site management and the upgrade and maintenance of military aircraft and equipment. As BAL grew, it had developed various systems to support the procurement operations at four key divisions and 12 sites that made up the organization. However there is no interface of these systems and they operated autonomously, resulting in a lot of administrative redundancies, low productivity, and high processing time for the procurement processes.
The dilemma exists in whether to continue to sit on the fence and seek a long-term improvement tools for integration with the current systems, or to invest in a new system that would simplify the procurement processes across the different divisions and support complex interfaces with suppliers? As Russell Menere, National Procurement Manager, I recommend to pursue a cost effective e-Procurement system, which would integrate with the various legacy information technology systems currently in place. The e-Procurement tool should simplify the processes across the different divisions and support the multiple suppliers.
The immediate issue BAL facing is the necessity to find an e-Procurement system that would link the BAL, the Australian Defense Force (ADF) and the major suppliers. Following are the requirements to the e-Procurement system: High process efficiency (to help reduce the manual processes, which create errors); Decreased lead times;
Compliance with ADF standards for procurement, which support the provision of services for the ADF.
1. Central administration with decentralized procurement processes
BAL had made a strategic move to establish in the organization’s head office the following departments:
Management Information Systems
These departments supported 4 key divisions:
1. The Military Aerospace
2. The Commercial Aviation
3. The Knowledge System
4. The Space and Communications
By relocating 4 divisions under one roof BAL achieved synergies through more centralized and standardized operations. Although, the 4 divisions were still autonomous – they executed their own work, reported the same measuring criteria in financial dollars, project performance and product quality terms, as well as range of other measures for the BAL balanced scorecard.
2. Systems Architecture Issues
The information systems architecture encompassed 12 different BAL sites, which were strategically located close to major BAL customers. And at multiple sites the numerous programs and application were used by employees to meet their operational objectives. The following applications were used:
1. ProPricer – bidding for projects;
2. OPP – project scheduling, planning and labour hours;
3. COBRA – cost performance;
4. eMatrix – data management
The work packages form the above systems were fed into the ERP system, and then became KPI’s for the balanced scorecard.
The main problem associated with the above systems architecture was that these were buy-in off-the –shelf applications, and were not developed in –house to meet the specific needs of the BAL various sites, and did not always interfaced with the other applications.
Environmental and Root Cause Analysis
1. BAL is relatively new company with multiple divisions and sites that do not use one integrated procurement system; 2. Redundancy in processes for staff through using multiple system applications; 3. Slow manual processes for data management (manually entering data); 4. Deficient operations due to strict requirements to suppliers; 5. High cost of systems available on the market, which would provide systems integration solution; 6. Unknowns: not enough analysis done to guarantee that the new purchased system would meet all the functional requirements for the integration of system application already in place; 7. Staff resistance to change in case new procurement system will be implemented.
Budget available for the setup, implementation, and training and interface and service of e-Procurement system and BAL legacy system. BAL suppliers are flexible with changing their existing procurement processes. E-Procurement system of choice is compliant with the ADF standards.
Alternatives and Options:
A1. BAL implements a sophisticated e-Procurement system, which integrates all parts of the current BAL legacy system already in place. Pros: There are average expenses associated with purchasing e-Procurement solution. Future lower costs, and cost savings long-term. Integrates with current legacy system. Based on the integration of current systems, which staff is already using – no steep learning curve and less resistance to change. Cons: Adding another system to the legacy system provides temporary problem fix until more budget available to purchase an ERP system.
Major suppliers may not all meet the requirements of the new e-Procurement system. A2. Upgrading and redeveloping the existing ERP platform, and building new ERP system, which would include e-Procurement system to serve the needs of suppliers and end-users. Pros: Provides visibility and transparency of all the steps of the full cycle procurement process. Cons: High cost, long implementation time.
A3. Continue with the existing system, and wait until affordable e-Procurement system is available to be purchased off-shelf (should be compatible with the BAL legacy system). Pros: This will save money short term.
Cons: the risk of waiting for the low- cost solution will involve losing current suppliers and not having correct data available for current state analysis and reporting. The low-cost e-procurement tool may not be sophisticated enough to provide the necessary technical advantage and solve the current issues.
1. Gap analysis on what will be needed to implement the e-Procurement system organization wide. 2. Identify mandatory, technical and functional requirements for the e-Procurement system. 3. Research of e-Procurement systems on the market. 4. E-Procurement system purchase and implementation. 5. Develop Processes internally (staff/end-users) and externally (suppliers) to sustain e-Procurement system. Implementation:
Who – Primary
BAL Admin, Finance, Purchasing, Engineering, IS, Logistics, ADF, major suppliers Who – Support and Input
BAL Admin, Finance, Purchasing, Engineering IS, Logistics, ADF, major suppliers When
Short run (S)
Long run (L)
Monitor and Control
There are two aspects to the monitor and control functions of the above recommended BAL procurement process improvements. The first aspect is the successful implementation of recommendations listed above. This process can be completed by continuous monitoring of what had been completed, developing project plan with all the dependencies and timelines indicated, assigning resources to tasks, and verifying the project deliverables. The second aspect is the controlling process, which measures and monitors progress after all the recommendations are implemented. This process identifies variances from plan and highlights when corrective action is required. Following is the list of inclusions that may be used to measure the performance e-Procurement system:
1. Operational staff efficiency manual entry /error decrease
2. Cost Savings
3. Decreased lead time
4. Increase in suppliers cooperation
The alternative solution for BAL is to purchase the cost efficient new e-Procurement system, with would be ADF compliant and will have the technical capacity to interface with the existing legacy system. The anticipated results of implementing new e-Procurement system will be cost savings, decreased lead times, operational efficiency and enhanced relationship with major suppliers and main customer (ADF).
1. Boeing Australia Limited: Assessing the Merits of Implementing a Sophisticated e-Procurement System Case. #HKU271. Centre for Asian Business Cases.