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Department of the Navy Converged Enterprise Resource Planning Program: the United States Navy gets down to the business of doing business using a bold and radical initiative called the Navy ERP.

Over the past three decades, a steady stream of legislation has directed federal agencies to improve their financial management operations, systems, performance, and internal controls. Consistent with one of these laws--the Chief Financial Officers Act of 1990--the Secretary of Defense is actively pursuing a clean audit opinion on Department of Defense (DoD)--wide financial statements. The Assistant Secretary of the Navy (Financial Management and Comptroller) is working closely with the Under Secretary of Defense (Comptroller) to support this goal and recently has developed a strategy that emphasizes business process transformation as the key to audit readiness. Within this strategy, the Navy Enterprise Resource Planning (ERP) Program is a critical element.

Transforming our business processes will require process consolidation and standardization. Fewer and better integrated systems and better controlled processes will produce higher-quality financial information supporting better operational and resource allocation decisions by Navy-Marine Corps senior leaders. A related and welcome outcome of this transformation ultimately will be a "clean" opinion on Department of the Navy (DON) financial statements. The Navy C converged Enterprise Resource Planning Program is the cornerstone for future DON enterprise management--and is also one of the components of the "Sea Enterprise" section of the Secretary of the Navy's Naval Power 21 vision statement.

The Navy ERP is a bold and radical initiative to improve Navy business processes. It transfers ERP methodology proven in the commercial sector to government processes, in the largest government enterprise resource effort yet attempted. The Navy ERP will provide a single, consolidated end-to-end business management system, standardizing the present patchwork of Navy business processes--acquisition, financial, maintenance, and supply-chain operations. Targeted benefits from this integration include (but are not limited to) streamlining organizational infrastructure, maximizing synergy in business functions, harvesting efficiencies available through technology insertion, and reducing the cost of support operations, freeing up resources for warfighting.

Successful implementation of an ERP can happen only if all parties are willing to change the way they do business. This is an axiom developed from successful private sector ERP conversions. Revamping processes and systems represents a significant cultural change for all organizations throughout the DON and the DoD.

Another immutable lesson from previous ERP implementations is that enduring, vocal support from top management is absolutely essential for success of the conversion effort. This support has been clearly expressed by senior managers throughout the Office of the Secretary of Defense (OSD), the Navy Secretariat, and DON major commands.

What Is ERP?

An ERP system supports the integration of business processes across an enterprise. As Figure 1 depicts, functions that are currently supported by stovepiped, government-unique legacy systems can be better supported by an integrated ERP solution that crosses the entire enterprise.

[FIGURE 1 OMITTED]

With ERP, business process reengineering becomes an enterprise-wide effort rather than a functional, stovepiped undertaking. The Navy ERP business management system integrates the key operational components of an organization: supply chain, manufacturing/maintenance, finance, procurement, and human resources. All essential data and information are entered into the system one time and remain accessible to everyone involved in the business process, thus providing consistent, complete, relevant, timely, and reliable information for decision making.

Successful implementation of ERP systems enables organizations to eliminate costly existing internal business systems and interfaces (especially financial feeder systems); to support a more auditable, compliant processing environment (that is, since systems deployed are certified as compliant with the requirements of the Financial Systems Integration Office and employ the U.S. Government Standard General Ledger (USSGL) at the transaction level); and to provide Navy's leadership a quantum improvement in business information along with a dramatic reduction in infrastructure costs. The bottom line: ERP demands changes in business process through integration. Thus, business process reengineering is a key to a successful implementation.

Successes to Date

In 1998, the Navy's Revolution in Business Affairs Commercial Business Practices Working Group authorized a limited-production ERP pilot in each of the four major systems commands. The pilots would test the feasibility of applying a commercial off-the--shelf (COTS) ERP solution to the Navy's business operations. Each pilot focused on different business areas of the Navy Enterprise:

* Sigma Naval Air Systems Command (NAVAIR)--integrated financials, program management and budgeting, procurement, and human resources

* Supply Maintenance Aviation Reengineering Team (SMART--Naval Supply Systems Command (NAVSUP) and NAVAIR)--maintenance planning and supply support processes

* Navy Enterprise Maintenance Automated Information System (NEMAIS)--Naval Sea Systems Command (NAVSEA) optimized intermediate-level maintenance

* Cabrillo--Space and Naval Warfare Command (SPAWAR)--Navy Working Capital Fund management

All four of these limited-scope pilots have successfully proven the Navy's ability to do business in a COTS environment. Three of the four have been retained as operational programs, continuing to demonstrate substantial benefits. SMART's timing versus the Navy ERP planning schedule resulted in its being terminated, although its functionality has been included in the future converged program. Some of the positive results achieved during the pilots include the following:

* Financial statements now are available within 48 hours of a period's end, not weeks afterwards, as formerly was the case.

* A significant reduction was made in the number of legacy systems required, resulting in lower infrastructure support costs. For example, Cabrillo realized a 50 percent reduction in the annual cost of business systems support.

* Sigma is now the financial system of record for NAVAIR. Sigma meets or beats accelerated timelines for month-end, quarterly, and annual close processing and reporting. Additionally, it is fully integrated with the Standard Procurement System for buys and also is integrated with the NAVAIR Travel System.

* NEMAIS reduced from twenty days to less than one day the assessment time needed to determine whether a Navy repair activity could perform requested work. This "eyeblink" response provides greater lead-time for contracting when alternative repair sources are needed, thereby lowering contracting costs.

* The time to complete a catalog-based simplified acquisition requisition-to-order was reduced from 44 days to 44 minutes, providing significant time and resource savings.

The next step--bringing these pilot environments together into a standard end-to-end solution for Navy business management--will produce even greater mission support capabilities and efficiency.

Plans for the Future

No single pilot was sufficiently comprehensive to satisfy the Navy's cross-enterprise requirements and to provide improved financial, supply, maintenance, workforce management, and acquisition processes and data. Thus, DON chartered the Navy ERP Program Office and tasked it with merging the four pilots into a single Naval Enterprise-wide solution. Figure 2 reflects this transition.

[FIGURE 2 OMITTED]

Converging proven pilot solutions across the Navy will integrate existing pilot projects, expanding the software suite into a single Navy platform. Navy ERP will encompass financial management, intermediate-level maintenance, plant supply, wholesale support, and program management and will provide the mechanism for future technology insertion.

It also will enable the Navy to standardize business processes, which will result in accurate, complete, timely, and efficient services to the Fleet; to retire stovepiped data systems that are no longer sustainable; to accelerate financial transactions; and to improve accountability within the financial management discipline. Figure 3 reflects the number of legacy systems that were retired with implementation of the pilots (prior to fiscal year (FY) 2005), as well as those that will be retired with implementation of the Converged Navy ERP Program.

[FIGURE 3 OMITTED]

To mitigate risk, the Navy must achieve buy-in and support from the owners of the various stovepiped processes and legacy systems replaced by the ERE To this end, Navy ERP has welcomed participation by the Defense Finance and Accounting Service (DFAS), as well as other key stakeholders and process owners throughout the Navy and OSD. The DON Office of Financial Operations also will plan and critically review testing of the system prior to a "go-live" decision. This testing will use current benchmarks to validate correct transaction-level processing and to ensure that the configuration is consistent with federal financial management requirements.

Business transformation is not merely a matter of changing the systems an organization uses. It impacts people, processes, and systems. Many processes become automated, and new processes are introduced. In today's organizations, it no longer is sufficient simply to design the new processes and expect people to execute them. Rather, large-scale change management efforts are required that take into account the users' organizations and the impact of the new system and processes on those organizations.

Change management engages and aligns leaders to support these changes and to smooth the transition. Quality training that is focused on understanding the new process and execution of each component of that process increases the users' ability to execute successfully in the new environment. The Navy ERP Organizational Change Management team is working with all levels of program and site stakeholders to develop integrated implementation strategies, to increase understanding of this large-scale change effort, and to help define the changing roles of users throughout the transition.

Relationship to the DoD Business Management Modernization Program (BMMP)

The Navy ERP is working closely with the DoD BMMP Office to ensure that the Converged ERP is aligned with the DoD "blueprint"--the Business Enterprise Architecture (BEA). The BMMP is an initiative that encompasses the policies, business rules, and systems that guide or support all aspects of business management across DoD. The BEA will provide a framework for the development of DON's transition plan.

A specific example of a BMMP enterprisewide financial capability is the Standard Financial Information Structure (SFIS). The Navy Converged ERP is the first system targeted for SFIS full implementation. SFIS is a comprehensive data structure that supports requirements for budget, financial accounting, cost/performance management, and external reporting across the DoD enterprise. [A separate article on SFIS begins on page 22.] It provides a common foundation to track, process, and report business transactions and achieve integration and interoperability, and it will help sustain an unqualified audit opinion. SFIS will standardize the environment in which every financial transaction occurs.

Phase 1 of SFIS has defined 59 data elements that have been configured in the Navy ERP software. As additional data elements are defined, these also will be included in the ERP data structure. As the Navy ERP is deployed--and as other end-state DoD systems are deployed with the SFIS--the need to construct costly interfaces and crosswalks to transport financial information will be significantly diminished.

Improved Financial Information Through Business Process Transformation Using the Navy ERP

If business process transformation is the strategy, then the Navy ERP is the cornerstone for the future DON financial management environment. With it, the DON will approach standardization of financial management information and business processes across its enterprise. This section describes some of the significant business process and system changes that will be implemented with the Navy ERR

Even though the scope of the Navy ERP rollout will include only about 35 percent of DON's budgetary resources, it will reduce significantly the number of financial and nonfinancial feeder systems. The sidebar on page 13 shows the near-term legacy systems scheduled to be replaced by the Navy ERR

The Navy ERP has also incorporated the USSGL and the DON chart of accounts using the Standard Transaction Library--a database of all possible proprietary and budgetary entries with the pro forma USSGL entries. Configuration of the system to these standard transactions will ensure that the chart of accounts in the Navy ERP is consistent with other DON accounting systems of record.

The Navy ERP will move the DON one step closer to commercial best business practices by replacing STARS One Bill Pay as the entitlement system. Under the "to-be" process, the Navy ERP will perform all required computations and calculations required for cash management and prompt payment by the Prompt Payment Act and other laws and implementing regulations. The Navy ERP will receive an invoice and pass a "pay-ready" file to DFAS, which will make payments and so notify the Navy and the Department of the Treasury. Upon notification, the Navy will close out the cash cycle and thereby eliminate unmatched disbursements. The current Daily Expenditure File will be used only for reconciliation, which mirrors a best commercial practice. The Defense Logistics Agency already has employed this methodology in its ERP system and is assisting the Navy ERP team to develop this functionality.

The Navy ERP is also working with the DFAS Columbus site to create a standard data element that will uniquely identify all transactions, from prevalidation through disbursement. This process will greatly reduce unmatched disbursements in scenarios where the Navy ERP is not the entitlement system (that is, where the Mechanization of Contract Administration Services system is employed). Currently, there is no unique identification number that is passed from any of the entitlement systems through the prevalidation and other intermediary systems and ultimately to the accounting systems. Because of this shortfall, it is extremely difficult to match Daily Expenditure File transactions to the accounting systems. This new standard data element number will greatly ease this problem and bring the Navy in line with the SFIS concept.

The integration process ensures that all processes work in harmony, with all functions using the same data, that is, the same item numbers, the same cost codes, the same sourcing data, and the same shipping data. This eliminates errors caused by typos, duplicate records, or incorrect or inaccurate data. Finally, all financial information is posted and reported with a system that is compliant with mandated accounting standards.

One example of this integrated process is the supply chain. When an ERP supply chain module's order-to-cash process takes an order, it accesses real-time information about funding, sourcing, and availability and transportation. It can tell the end user if the item is available and when and where it's coming from. Users can track the whole process from beginning to end. If, for example, the end user is not satisfied with a delivery, he or she immediately can process the return and reinitiate the process immediately to get the right item.

Conclusion

The DON is facing a paradigm shift. Technology has made it possible to shift from stovepiped functional systems to fully integrated enterprise systems. A fully integrated ERP system will allow the financial community to improve the quality of information--to provide managers the information they need to manage, to meet CFO requirements for both financial and nonfinancial information, and to meet rigorous funds control and reporting requirements. At the same time, an ERP solution will enable the DON to operate more efficiently, thereby significantly reducing the costs of the current infrastructure and allowing for reallocation of resources to recapitalize war fighting needs.

For more information on this and other financial management transformation initiatives within the Department of the Navy, please go to http://www.finance.hq.navy.mil/fmc/default.asp.

Near-Term Legacy Systems Scheduled to be Replaced by the Navy ERP

Standard Accounting and Reporting System--Headquarters Claimant Module (STARS-HCM)

This is the accounting system of record for the major acquisition commands. Once the Navy ERP is fully implemented at these commands, STARS-HCM will be terminated.

Defense Industrial Financial Management System (DIFMS)

This is the accounting system of record used by most of the Research and Development (R&D) laboratories and Navy depots. Two-thirds of the DIFMS community will be migrated to the Navy ERP under the current deployment plan. The activities left on DIFMS will be the Naval Aviation and Marine Corps depots. A case study to determine the best course of action is required. The three options are to leave those commands on DIFMS, to bring those commands into Navy ERP, or to migrate those commands onto another existing accounting system of record. The second and third options are preferable in that they would reduce the number of accounting systems used in DON.

Integrated Management/ Processing System (IMPS)

This is the accounting system of record for the Navy Research Laboratory. IMPS is another candidate for termination since most, if not all, of its functionality is included in the Navy ERR Retirement of IMPS would standardize the final R&D lab to an ERP solution.

Program, Budget, and Accounting System (PBAS)

This is the system that pushes the execution budget down to Echelon II activities. The Navy ERP will be deployed to Echelon I and II activities to replace PBAS functionality.

Beverly Veit is a financial manager in the Office of the Assistant Secretary of the Navy (Financial Management and Comptroller), Office of Financial Operations, Washington, D.C. She is the secretary of ASMC's Washington Chapter.
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Author:Veit, Beverly
Publication:Armed Forces Comptroller
Geographic Code:1USA
Date:Sep 22, 2005
Words:2709
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