Peter Conway/LONDON
A couple of years ago, there was quite some expectation building over the extent to which enterprise-wide computing systems had the power to revolutionise airline maintenance. Supporters pointed to the increased tendency for airlines to see maintenance operations as profit centres, and suggested that these new ERP systems were the ideal tool to manage the transition. After all, that is exactly what they had already achieved in similar industries, aerospace included.
In those environments, ERP had been introduced to forge a seamless link between finance, production and human resources systems, so creating a single platform from which management information could be extracted across the business. Exactly what the maintenance community needed, it would seem. But doubters worried that the manufacturing environment, for which ERP was originally developed, was unsuitable for their special requirements, with its requirements for disassembly, regulatory due diligence and massive spares inventories. For them, ERP was an awkward tool imposed by finance departments on a reluctant maintenance repair and overhaul (MRO) community.
Two years down the line, it is evident that both views are, to some extent, correct. Standard ERP systems do lack significant functionality, vital to maintenance operations, and putting them into practice in maintenance departments has proved a lengthy and complex process. But those who have made the effort say there are long-term benefits, and that ERP companies have learned crucial lessons which they are applying to specialist products for maintenance.
SAP leads the field
The ERP solution that has attracted most attention in maintenance is the R/3 system of German software giant SAP. Despite the efforts of close rivals Baan and Oracle, many see SAP as becoming the standard bearer in aerospace and defence. The company already lists a roll call of the sector's most familiar manufacturers and suppliers among its clients: BAE Systems, DaimlerChrysler, Embraer, Lockheed Martin, Rolls-Royce and Telair. "A lot of manufacturers are going for it, and MRO operations need to swap a lot of data with manufacturers. It is the quasi-standard for the whole aviation business," points out Gianni Romualdi, head of aircraft maintenance solutions at Atraxis, the IT arm of the SAirGroup and therefore a sister business to the growing SR Technics maintenance unit.
SAP is also fairly well embedded in the airline industry already. Both Lufthansa Technik, which began to implement R/3 four years ago, and SR Technics, which started in 1998, were already using R/2 for finance and accounting purposes, though maintenance functions were handled by other legacy systems. For both groups, a desire to bring all systems onto one platform was the key reason among several for choosing R/3.
Matthias Malina, head of ERP systems management at Lufthansa Technik, says his group moved to ERP to reduce IT costs. "We saw that our own custom-made systems on the production and logistics side of the operation would become more and more expensive to update," he says.
Lufthansa Technik was also unable to develop systems fast enough to keep pace with change. "We were finding that systems projects had a five-year cycle and, by the end of the five years, the world, the market and the structure of the company had changed. We hoped by using SAP that we would be more flexible in responding to change."
Atraxis and British Airways Engineering (which chose SAP to replace its 139 MRO legacy systems in June) both cite IT development costs as a crucial factor, and add that only a realtime, Internet-compatible system such as R/3 will enable them to take part in the online purchasing initiatives currently sweeping the industry.
Both insist that R/3 was chosen purely by their maintenance departments and was not forced on them by "bean-counters" in the parent airline. Interestingly, both also seemed to give a relatively low weighting to potential reductions in inventory or other costs - something ERP companies use as a key selling point. "We already had a pretty sophisticated system for inventory and cost control," says Malina. "It has produced efficiencies, but that was not the primary aim."
In terms of implementing ERP, there is a clear message from both Lufthansa and SAir that the process can take longer and cost more than expected. Malina admits that the IT cost savings Lufthansa Technik hoped for have been elusive and there has not been a clean break with the past. The old legacy systems that ERP was designed to sweep away have frustratingly lingered on. "It has proved a lot more expensive to run than we expected, and five years later we still have huge legacy systems which we are still trying to phase out," he says. "When we started, I would not have expected to still have such systems at this stage."
Teething problems
For SR Technics, there was a false start when the company initially tried to implement R/3 module by module. Romualdi says it soon found that this approach was unworkable. "There were huge numbers of interfaces to be built with existing systems and it became too complex. R/3 needs a good base, and you must have the finance and materials management functions in place before you can do such things as rotable control or configuration."
The result was that a year and a half ago, the original project was largely abandoned, and a new "big-bang" solution dubbed SRMaRIO was decided upon. This will ultimately result in a complete switchover to R/3 at SR Technics in April 2001.
Another lesson passed on by Lufthansa Technik is that a good deal of internal reorganisation is needed before R/3 can be integrated. "The implementation of such a powerful tool changes all your processes, and companies need to be aware of this," says Malina. There was also inconsistency in the way data were prepared and entered into systems. "When we tried to migrate the data into one system we saw how inconsistent our data really was: it took two to three months focusing solely on this to sort the problem out."
British Airways Engineering, indeed, believes this kind of process re-engineering is a necessary pre-requisite of implementing ERP. Helen Lynam, its EWS architect, says it spent some time identifying and recording processes before it ever looked at SAP. "That gave us a solid base so we were not starting from scratch when we started to implement SAP," she says. In fact, Lynam believes one process flows naturally from the other. "We had got as far as we could go with process re-engineering, so ERP was the next logical step."
System customisation
One thing all three MRO departments agree on is that implementing SAP involves a lot of customisation. Malina has a long list of changes that LH Technik has made to the original R/3 package, notably including the creation of a system to keep track of technical documentation for regulatory purposes, and a system to control rotable parts. The latter was achieved by customising the plant maintenance module of R/3 designed for planning the servicing of factory machinery. "It was quite complicated because the module was only designed for occasional overhauls, whereas we live from this business," says Malina. He adds, however, that the solution did work and the customised module has been successfully operational for a year and a half now.
One unanticipated result of the program affected the company's inventory. Malina admits that stock levels actually rose as a result of R/3 implementation. "SAP enabled us to define our service standards much better and inventory rose to meet those new expectations," he explains.
In other areas, Lufthansa Technik has had to use outside modules. For tracking the amount of time a mechanic spends on a job - a key element of calculating the true cost of any MRO service - it finally chose a third-party product by SAP. Similarly, for job scheduling, the company was offered New Dimension, a SAP product designed for this area but not part of R/3. Malina is not sure whether the latter will be suitable for Lufthansa Technik's purpose. His team has also yet to create a solution that allows mechanics to put their parts demands directly into R/3; a legacy system is still used for that.
Both Atraxis and BAhave had to undertake similar customisation work. BA has opted for XelusPlan, a maintenance inventory management product designed for downtime-critical industries such as computing and telecoms, which it will use for rotable forecasting and inventory until SAP develops that functionality. "We are working with SAP on it, and so Xelus is a temporary fill, but if SAP is unable to produce what we want, we will keep Xelus," says Lynam. The Xelus module will be operational in BA Engineering from January, ahead of SAP implementation later in the year.
Meanwhile, at Atraxis, what Romualdi admits were "battles" between technical and systems staff have led to the implementation of R/3 being delayed until April 2001. While he is quick to say that "SR Technics is a quality company and the legacy systems were very highly integrated and automated", Romualdi experienced some difficulties with the integration process. "SAP fits well with MRO but it is not as adapted in some aspects as the legacy systems were. There has been some discussion about what customisation needs to be done before implementation and what can be left until afterwards."
Such problems have led doubters to suggest that classic ERPis entirely unsuited to MRO. Ron Schaeuffele, manager of application development at Crossair, is vehement on the subject. Despite the fact that Crossair uses SAP R/3 in its finance and management functions - and the airline's place within the SAirGroup - he says that Crossair definitely will not use it for maintenance.
"It does not give MRO the functionality it needs: it is a manufacturing system which even when customised can only fulfil 80% of the functions MRO needs," he says. He adds that "I know of no airline that is using SAP for MRO", though he makes a possible exception for Air New Zealand. "There is a big market of airlines turning away from SAP to dedicated MRO products," he claims.
Schaeuffele does have to declare an interest, in that Crossair's AMOS product for MRO is now in use by 15 other carriers, including Condor, Ryanair, Deutsche BA and Meridiana. It is also currently in talks with Airtours of the UK and with "a large US airline with 250 aircraft". Schaeuffele takes particular delight in the fact that Condor provides maintenance for Lufthansa Cargo's fleet of MD-11 cargo planes. "We supply everyone in the Lufthansa Group except Lufthansa Technik," he claims.
Fighting off the competition
AMOS is not alone in the market - there are around 10 other proprietary solutions for MRO, which makes one wonder why Lufthansa Technik, BA and SR Technic are still so keen to use SAP. In answer, all three point to the many improvements it has incorporated in recent years. Malina says that almost all the problems raised during its four- year implementation have been, or are being, addressed by SAP. He also says a version of SAP's industry solution for aerospace and defence to be launched in April will fulfil most maintenance needs.
"I think a lot of airline MROs will then go over to SAP," he says. "We would still recommend SAP and I would not like anyone to get the impression that I think it is not a good solution. It is just important to reduce your expectation in terms of cost reduction: implementation is an enormously large process and takes time and involves a degree of risk."
Furthermore, although he says process efficiencies were not the primary aim, Malina points to a range of advantages SAP offers, from much easier data entry and retrieval, to greater data consistency, lower error rates and a greater awareness among employees of the needs of others in the process. SAP has also enabled Lufthansa Technik to do things it could never do before, such as predict turnaround times for overhauled parts, or compare performance levels from job to job by part type or aircraft. "Nowadays we can talk about service or performance levels between shops or with the customer, because we have that data. This is a big advantage," he says.
Atraxis is also backing SAP, and has developed axsMaintenance, a consultancy package which shows airlines how to implement SAP in their maintenance departments. "It allows airlines not to start at zero with the standard package, but to incorporate all we have learned right from the start," says Romualdi. The only customisation needed is to individual airline account practices and company structure, he says, predicting that, with axsMaintenance, SAP implementation times can be cut to a year.
Romualdi points out that a persuasive reason for going with R/3 rather than a specialist system is the sheer size and durability of the company. "SAP has experts all over the world available 24 hours a day, and, even if they are not MRO specialists, the commonality between R/3 projects means it is not hard for them to learn," he says. "Such large projects as this can only be done every 10 or 20 years, and it is important to be working with a company that will still exist in 20 years' time. SAP has proved it can survive in a hard market."
Room for improvement
One worry that slightly tempers such enthusiasm is the question of how committed SAP is to continuing to refine its maintenance project. Malina worries that with the company focusing on e-commerce and Internet solutions, it will not put enough resources into developing MRO refinements to R/3. He says Lufthansa Technik offered to sell to SAP the documentation and configuration control module it had developed, but without success.
"We have developed a solution worth several million deutchmarks and we would have liked SAP to use it, but they would not," Malina says. "All we can hope is that they don't lose interest, because we still don't find everything in SAP we would like and we would like the process of improvements to go on."
Source: Airline Business
