Making sense of defense through ERP

Making sense of defense through ERP

The scale and complexity of a modern defense force may appear overwhelming – but a ‘commercial’ approach to ERP, along with sound project and change management, can bring rewards.

Lead Partner, Defence and National Security

KPMG Australia

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ERPs have become the backbone of all large organizations. But there is a widely held belief that due to its size, complexity and national importance, defense organizations are somehow a special case. Huge sums are ploughed into customizing defense ERP systems that often come in late, over budget, and can already be obsolete when realized.

In reality, many of the needs of defense departments are remarkably similar to those of other private and public institutions. They are, admittedly, larger and more complicated than most, so those tasked with design and implementation, should find ways to adapt to these requirements without trying to reinvent the wheel.

The same but different

The needs of defense forces are, of course, not to be taken lightly. Compared to most institutions, defense tends to have a particularly large and diverse inventory. One of the biggest challenges is to keep track of billions of stock items, ensuring that they are all up to date, in perfect working order and easily accessible.

Today’s forces are dependent upon extremely technical equipment, from weapon systems to personal kit. Each item has its own specifications, with a vast array of parts, as well as exacting maintenance and servicing requirements. There is no room for error. The last thing you need when stepping into a combat zone is something that might fail on you.

Even the more ‘commercial’ functions within defense, such as HR, Finance and Procurement, are far from straightforward.

Training, for example, is not simply a ‘nice to have.’ If personnel are not confident and capable of working with new equipment and procedures, they can put their own and others’ lives at risk. Each individual’s development program must, therefore, be rigorously evaluated and adhered to, which means that records have to be accurate and current.

Defense payrolls are considered among the most complex of any organization, due to a wide range of awards, bonuses and other special payments, based upon rank, level of training received, and location. This creates thousands of permutations of pay across the force – something that ERP has to manage effectively.

Given the huge sums of taxpayers’ money at stake, Finance, especially procurement, is subject to intense scrutiny. Governance and approval processes are strict, often stretching up to the highest levels of government. When the prime minister signs off a few billion dollars on a new submarine or warship, they need to be pretty sure that the numbers are right.

Defense accounts and processes are subject to robust audit, which is harder than you would imagine. During their lifetime, tanks, armored vehicles, helicopters, airplanes and warships will undergo a number of modifications to enhance their capabilities and adapt to new weapon systems. Valuing these assets thus becomes very tricky, as their form is constantly evolving.

Then there’s the supply chain. A major piece of equipment such as a fighter jet is the sum of the efforts of several different manufacturers around the world. Each member of these consortia has its own supply chains and associated systems, inevitably with different software and data reporting. Gaining visibility over this vast web of transactions, by cutting across disparate systems, is no easy feat.

A major deployment is, arguably, the ultimate test for defense ERP. Getting people and assets in place, often at short notice, to deal with conflicts, national security situations or natural disasters, possibly in inaccessible regions, relies on tight coordination supported by reliable information. Government leaders will also want to know the cost of any defense venture, and expect the entire operation to be auditable.

Pulling it all together

Battlefield command-and-control systems may be the dominant technology in the combat zone, but ERP ensures that the force is in a position to fight, by kitting it out, transporting people and assets, and keeping everyone refreshed and replenished.

ERPs have proved to be an excellent way to help manage the size and complexity of modern defense forces, to bring together a number of key functions, and, potentially, offer a single view of the supply chain.

The rules of successful ERP implementation are, in essence, the same as for any large program: strong project management teams that balance technical skills with cultural sensitivities, and remain unchanged for the duration; disciplined processes; and high user engagement. Change management cannot be underestimated, as this is where most projects fall down. As a ballpark figure, 30% of resources should be spent on the technology, and 70% on change management, to maximize the chances of buy-in.

Many defense forces are in the process of reviewing current ERPs and transitioning to second-generation versions, consolidating multiple systems for HR, Finance, Procurement and Logistics. In doing so, they should acknowledge that they are not unique, and recognize their similarities to – rather than differences from – other large organizations.

By sticking to the tried-and-trusted principles; a commercial approach, supported by sound project and change management, it should be possible to build defense ERPs that live up to their promise as a true backbone, meeting the complex and testing demands of modern defense forces, without creating over-costly, out-of-control programs.

Read more about ERPs for defense, which features a series of insights on the use of technology in ERPs for modern defense forces including profiles of the "Five Eyes" (US, UK, Australia, New Zealand and Canada).

Operation ready defense ERP: The backbone of today’s defense capabilities

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