ERP Exploitation by the US Department of Defence

The US Department of Defence (DoD) enterprise is a unique business model. Its annual budget is equal to the 17^th largest economy in the world[i]. The DoD is not only one of the largest, but also by far, the most complex organisation on the planet. In the fiscal year 2009, DoD reported that its operations consisted of $1.8 trillion in assets, $2.2 trillion in liabilities, approximately 3.2 million military and civilian personnel – including active and reserved components – and disbursements of over $947 billion[ii]. The Departments operations are supported by a variety of business functions, which include financial management, procurement, logistics management and health care management. These business functions in turn rely upon 2,258 business systems, which include 335 financial management systems, 709 human resource systems, 645 logistics systems, 243 real property and installation systems and 281 weapon acquisition systems[iii]. In fiscal year 2012, the Department required approximately $17.3 billion to operate, maintain and modernise these systems.

In February 2011, the Government Accountability Office (GAO) of the US detailed 30 high risk areas[iv] in the federal government, which were vulnerable to waste, fraud, abuse, and mismanagement, and where losses could amount to billions of dollar. The purpose of identifying these high risk areas was to bring focus and oversight to problems impeding effective government and save tax payers’ dollars. Significantly, one-fifth of the high risk areas of the federal government pertain to the DoD and are appended below:

• Approach to business transformation.
• Business system modernisation.
• Support infrastructure management.
• Financial management.
• Supply chain management.
• Weapon system acquisition.

Interestingly, Enterprise Resource Planning (ERP) implementation forms a big part of the DoD’s strategy towards resolving problems related to the high risk areas. An ERP solution is an automated system using commercial off-the-shelf (COTS) software consisting of multiple, integrated functional modules that perform a variety of business-related tasks such as general ledger accounting, payroll, and supply chain management. As per GAO reports, the senior DoD management is of the view, that successful implementation of ERPs is the key to resolving long standing weaknesses in the department’s business operations, particularly in the high risk areas of business transformation, financial management, and supply chain management.

Presently, twelve major ERP programs of the DoD are classified as Major Automated Information Systems (MAIS), which are Tier 1 systems in a 5 tiered classification system, and include all large and expensive system programmes. The MAIS are subject to the most extensive statutory and regulatory reporting requirements. Most of these programs were initiated in the last decade, and today are at varied stages of their life cycle. Consequently, the DoD, as of Dec 2011 has 167,252 ERP users, and the number is expected to grow to 2.2 million (68 per cent of the DoD manpower) on successful completion of all twelve MAIS. The span and complexity of these systems can only be imagined by the fact that average implementation time of these programmes is ten years, with a maximum of thirteen and minimum of seven years. The DoD has invested approximately $6.55 billion in ERP implementations as of Dec 2011, and the net expenditure on completion of all MAIS is anticipated to be about $24 billion[v].

The MAIS primarily address the areas of Supply Chain Management, Financial Management, and Human Resource Management. Brief details of the MAIS in these three areas are appended in the succeeding paragraphs with a view to present functional capabilities of ERPs that are being exploited by the defence sector.

Supply Chain Management. The DoD has committed sizeable investments in the six MAIS appended below to address matters logistics/Supply Chain Management. Four of them use the SAP systems and the balance two use Oracle.

• Enterprise Business System is one of the first ERP solution introduced in the Defence Logistics Agency. The system comprises of major projects like e-Procurement, inventory management and stock positioning, Enterprise Operational Accounting system, amongst others. The project was fully operational in 2007 with 22,000 users operating in 28 countries.
• Logistic Modernisation Programme initiated in December 1999 leverages SAP to integrate Army Supply Chain activities to include sourcing and acquisition, production scheduling, order processing, inventory management, transportation, and warehousing and customer service.  The project will deliver real time situation awareness and vastly improve decision making.
• Global Combat Support System – Army (GCSS – Army) was initiated in December 2003, and is expected to be fully operational by September 2017 with 168,000 users. The system is intended to manage $216 billion in assets, and shall provide asset visibility for accountable items. GCSS – Army will provide capability to track supplies, spare parts, unit maintenance, and even total cost of ownership.
• Navy Enterprise Resource Planning System (Navy ERP) is envisioned to provide US Navy with info-technology services to manage its worldwide resources of people, supplies, and financials. The integration of financial and supply solutions on a single platform will provide real time data access and decision support to the Navy. The system shall eventually replace 96 legacy systems, will have 71,000 users and shall cost approximately $2.7 billion. The Navy ERP will control and account for $82.5 billion of total appropriations, $33.8 billion of total inventory and $1.1 billion of plant property and equipment.
• Global Combat Support System – Marine Corps (GCSS – MC) will provide the deployed warfighter with enhanced capabilities in the areas of warehousing, distribution, logistical planning, depot maintenance and improved asset visibility.
• Expeditionary Combat Support System (ECSS) was initiated in Jan 2004 to provide capabilities in the areas of product support and engineering; supply chain management; expeditionary logistics command and control; acquisition and procurement; and maintenance, repair, and overhaul. The system is expected to replace 700 legacy systems, and provide a single easy-to-use interface to as many as 250,000 users.

Financial Management. The three services and the Defence Logistics Agency (DLA) have a program each for financial management. The details of Navy ERP have already been detailed in the preceding paragraph. The details in respect of the rest are appended below:

• General Fund Enterprise System (GFEBS) was conceived to provide a transaction driven general ledger for the Army’s general fund. When fully implemented, the application is anticipated to control and account for $140 billion in annual spending. The life cycle cost of implementing the application is $1.3 billion, and a sum of $684 million has already been expended on the project since October 2004.
• Defence Enterprise Accounting and Management System (DEAMS) was initiated in August 2005 and is intended to provide the entire spectrum of financial management capabilities to the Air Force. The project is anticipated to be fully operational in September 2016 with 30,000 users at an estimated cost of $1.6 billion.
• Defence Agencies Initiative (DAI) is intended to modernise the defence agencies’ financial management processes by streamlining financial management capabilities and transforming the budget, finance, and accounting operations. The programme was initiated in Jan 2007 and is anticipated to be completed by Sep 2016 at a cost of $203 million.

The DEAMS and DAI use Oracle, while the Navy ERP and GFEBS use the SAP.

Human Resource Management. The US Army in September 2009 initiated ‘Integrated Personnel and Pay System – Army (IPPS – A)’ to provide a 24-hour web based, integrated human resource to professionals, combat commanders, personnel and pay managers. The system will provide combat commanders with a single source for personnel asset visibility and accountability. Concurrently, Integrated Personnel and Pay System – Navy (IPPS – N) and Air Force - Integrated Personnel and Pay System (AF - IPPS N) have also been initiated. The three systems would cost more than $3.3 billion and will be fully operational in Sep 2017.  

It is evident from the DoDs investment, both in terms of time and finances, that the ERPs are an unavoidable and essential part of its strategy for business transformation. Further, it is also clear that acquisition and implementation of ERP systems are a challenge with no easy solution. The DoD has evolved a framework for acquisition of such systems. It is also intensely involved in resolving implementation challenges and is continuously refining its approach to ERP implementation. It is also inevitable that our three Services will tap ERPs for financial, supply chain and human resource management in the immediate future. Towards that end, an in-depth study of the US experience in last decade can prove very useful in saving time as well as life-cycle costs. It would also be prudent that the Services institutionalise ERP training.

The author is a Senior Fellow at CLAWS

Views expressed are personal