IT Transformation Targets Readiness as Top Priority

The protection and defense of the United States and its allies presents quite a challenge in the 21st Century. As the world moves at a faster and faster pace, the complexity increases in relations between members of the global community.
In peacetime and at times of war, the U.S. Department of the Navy plays a critical role in the infrastructure of the nation. With 375,548 active duty personnel, 147,672 reservists, 295 ships, 38 submarines and 4,000 aircraft, the Navy is responsible for some of the most sophisticated supply chains in the world. Everything from ammunition and individual gear, to aviation equipment and heavy artillery must be in the hands of those that need it, before they need it.
According to Ronald Rosenthal, program manager, Navy Enterprise Resource Planning Program, the Navy has been upgrading its information technology (IT) systems to meet that demand. Between 1999 and 2003 the Navy launched four successful SAP for Defense & Security pilots to handle financial management, regional maintenance, program management and aviation supply tasks.
Today, the Navy is building on the success of the four pilots, which are now operational in a variety of locations around the world. It is in the midst of merging them into one complete, end-to-end production system. “In the end the Navy’s finance, program management, workforce management, intermediate maintenance, plant supply and wholesale supply systems will be linked using SAP for Defense & Security. It provides the Navy with a solid Net-centric solution that enables them to be more adaptive and responsive to ever-changing situations.” said John Barry, (Major General, USAF [Ret]), vice president, Defense and Security for SAP.
The idea, said Rosenthal, is to use ERP to modernize the Navy’s IT, much the same way private enterprises have done, with an eye toward greater effectiveness, efficiency and cost-savings. “We’re looking for transformational changes in the way we do business. So far, the projects have been a big success story,” Rosenthal told a large group of attendees at the SAP SAPPHIRE conference in New Orleans.
Although it will take years to complete the entire scope of the planned integration, the Navy’s four limited scope ERP pilots already are generating noteworthy returns. “The benefits have been beyond our expectations,” Rosenthal said. Business processes are more efficient, outdated legacy IT systems have been retired, costly inventory and manpower have been reduced, and funds are being driven back into systems to spur further improvements.

Four ERP pilot projects, four successes

Benefits beyond expectations
Benefits beyond expectations

The Navy’s four ERP pilots had project goals that were well-defined: demonstrate accurate, consistent and timely financial information; manage and track cost drivers, standardize business processes; and provide an integrated end-to-end capability, eliminating technology stove-pipes. Each project team did an independent selection process and each chose SAP. With the assistance of several integrators, the Navy’s IT experts rolled out the new solutions over a four-year period.
First, the financial management system of the Space and Naval Warfare Systems Command is the financial system of record for $1.4 billion in annual budget. It has been operational for three years and has 3,700 users at seven global locations
Second is regional maintenance for the Naval Sea Systems Command, in production at three U.S. locations. It’s been operational for two years and has more than 6,800 users and contains data for 215 non-nuclear ships. It will go live in Japan next spring.
The third pilot is the program management system of Naval Air Systems Command. This huge project encompasses the financial system of record for a $23 billion annual budget. It’s been operational for one and a half years and has 20,000 users at 10 primary sites and 126 global locations.
Finally, the aviation supply and intermediate maintenance pilot for the Naval Supply Systems Command and Naval Air Systems Command manages 2,400 items in a wholesale supply system. It successfully processes more than 7,800 requisitions per week.
Rosenthal said that the new systems have great potential to increase readiness and to fund overall improvements to Navy operations. For instance, the time savings generated could let the Navy fleet devote 55,000 more days per year to steaming. They also could let it spend 70,000 more hours in flight. Or the Navy could potentially buy 1,500 more Tomahawk missiles, 18 more fighter jets or one more ship with the money it saves.
And from a financial process in which reconciliation was difficult and time-consuming, the Navy has morphed its financial systems to a process in which decision makers devote their time to key analysis. They no longer have to search for necessary data because it’s readily available. They can instead direct time and energy to strategic decision making.

IT initiatives spur Navy’s transformation

Despite the dramatic improvements, Rosenthal pointed out to the crowd that the Navy’s IT was never broken. It has always operated well, as evidenced by its ongoing skill in equipping forces and keeping them in a state of top-notch readiness. But as part of the Navy’s continual dedication to excellence and to reducing the cost of IT operations, improvement of IT systems and business processes were put on the front burner starting in about 1990.
The Chief Financial Officers Act of 1990 was one impetus. The federal decision to require more transparency and accuracy in the financial systems of the military and other government agencies spurred the Navy to embrace ERP. It’s similar to what many corporations have done recently in response the Sarbanes-Oxley Act of 2002.
As for the Navy, it’s using its SAP for Defense & Security system to achieve required central coordination of internal controls and financial accounting. It’s also using it to “eliminate data latency, gather information in real time, reduce costs and labor and modernize the fleet,” Rosenthal said. “ERP has been a solid answer for us.”
In 1997 three additional federal IT initiatives further validated the Navy’s ERP decision. The “Quadrennial Defense Review,” a six-month analysis of the threats, risks and opportunities for US national security, required a review of IT systems and the adaptation of private sector practices.
The Secretary of Defense’s “Defense Reform Initiative” likewise required more modern IT, including standardized processes, the selection of common technology for government agencies, and the reduction of IT infrastructure. Finally, the “Revolution in Business Affairs” mandated streamlining of the Department of Defense’s (DoD) business operations, with generated savings going toward modernizing the military.
In 1998, the Navy set up the “Navy Commercial Business Practices Working Group” led by a three-star admiral. In 2004 the Navy designated an ERP Process Council with five lead focus areas. The goal was to get everybody engaged in the new processes and on board with a program of change management. It was important, Rosenthal said, to incorporate stakeholders from the fleets to ensure that the new IT processes would be accepted.

Navy navigates the future with mySAP ERP

In the future, the Navy will continue to streamline its IT systems. Its deadline to complete the convergence of the ERP system is 2014, but Rosenthal said it’s likely to be finished much earlier, by 2011. To satisfy the broad demands of the larger merged project, the individual integrators and the Navy IT experts have formed a single, comprehensive ERP integration team.
Of course there will be challenges as the Navy moves down its path of transformation. Its budget is tight and federal regulation will continue to be strict. The DoD requires all services and agencies to operate under a standard architecture that still is evolving.
The four services of the U.S. military, Army, Navy, Air Force and Marines, are working together with the Defense Logistics Agency to ensure all ERP systems integrate and communicate. That’s a huge requirement – much like requiring four or more disparate Fortune 500 companies to share data and a common IT architecture.
The goal is to minimize interfaces and have a single database with shared common data. When all the work is complete, the Navy’s system will have some 90,000 users, up from 35,000 today. Said Rosenthal: “It will be a complete transformation.”

Sarah Z. Sleeper
Sarah Z. Sleeper