Kenya Airways’ ERP systems get an upgrade to a modern Oracle solution.
by Alan Joch, November 2011
Kenya Airways was at a crossroads in 2006. A hunger for new markets prompted air carriers from the Middle East and Asia to expand aggressively into Africa. So Kenya Airways executives responded—putting in place an expansion plan of their own, designed to make the company the leader in intra-Africa air traffic by 2009.
But the managers included an important stipulation—find a way to fuel growth without significantly expanding back-office operations, particularly in the finance, human resources, and supply chain management departments. “We needed to be much more efficient, reduce costs, and liberate our internal resources to achieve higher levels of business activity,” says Kevin Kinyanjui, information systems director and CIO at Kenya Airways.
So leadership gathered key talent from across the organization and created a steering committee to scope out technology solutions, find the right integrated enterprise resource planning (ERP) solution, and ensure that staff in all areas of the airline had the support they needed to succeed during this growth phase.
Since then, passenger volumes for Kenya Airways have climbed 21 percent as revenues have grown 34 percent, backed by an integrated ERP solution that introduced efficiency-boosting automation and tore down the old separations between core finance, HR, and supply chain activities. The result: millions of dollars in annual cost savings and an IT infrastructure able to support continued business growth.
Profit discussed the project with Kinyanjui, who revealed how Kenya Airways’ IT and business leaders worked together to make the implementation a success and to quickly derive value from the investment.
Profit: How did management decide on this IT overhaul?
Kinyanjui: As we looked at our internal efficiencies, we saw standalone systems for HR, supply chain management, and financials that were from different vendors that each had very different philosophies on how they designed their architectures. And, of course, the systems didn’t interface with each other, so we decided that it was the right time to put in place an integrated business management system.
One example is suppliers’ invoices. Our supply chain department had to feed information into our financial system for payments to be made. But they couldn’t do that in real time—it was a batch process that ran each week or each month. Today we constantly process invoices and pay much earlier in the cycle. From a competitive standpoint, this promotes supplier loyalty. We are rapidly growing our fleet, so it is important to make our suppliers feel more loyal to us than to our competitors.
Another example is in the HR department. In the previous system, we handled service requests in person or with paper forms, which was very inefficient as we began expanding our staff. We were looking at having to increase the number of HR people by the same magnitude as those in the core business, and that’s not an ideal situation. You want to grow your support functions at a much slower rate. The only way to do that is through efficiencies that allow each HR professional to serve a much bigger proportion of the staff.
Our new automated processes allowed many services to be done online, and we don’t risk losing paper forms. The beauty is that we can also measure how long it takes to process each request and identify any bottlenecks. It all means a happier business staff, and a happy staff does its job more effectively and delivers better customer service.
Profit: You’ve said it was important that this wasn’t seen as an IT project. Why do you feel that way?
Kinyanjui: If we had tried to do this just as an IT project, it would never have seen the light of day. It’s not an IT project. In fact, there is very little now that you can call just IT. It’s really about enhancing the business.
So we formed an internal team with experts from finance, supply chain management, and HR. These leaders then decided who else would be part of the team. We knew we needed a business team involved in the product evaluation process and also in the actual implementation. You need to get everybody involved.
In the beginning, some of the businesspeople were asking, “What’s my purpose in all this?” But as the information was presented to them and as people communicated more and more, everyone started to see what their role was and what contributions they could make. They also learned much more about their own part of the business just by going through a process like this.
In fact, we went live in 2008, and now three years later we still have teams that are constantly looking for opportunities for further improvement.
Profit: How did they select the ERP solution?
Kinyanjui: The team put together a formal list of requirements, almost 500 pages’ worth. And being an airline, we were able to make site visits to any part of the world. We traveled to North America, Europe, the Middle East, Asia, and even Australia. We also asked vendors throughout the world to present ideas for how their ERP systems could meet our aspirations and requirements. It was a very formal process that was well documented.
We also looked at possible implementation partners and their ability to work in Africa. For many people, Africa is an unknown continent. So we needed people who could say, “A best practice is best practice everywhere in the world. And we are ready to work in Africa.”
The whole evaluation process was very thorough and took a year to complete. But it was important for us to be comprehensive rather than rush through the process only to say two years down the road, “You know what? We didn’t take everything into consideration, and the product can’t do everything we want.”
Profit: New ERP systems often require managers to customize the solution to fit existing business processes. But you chose to change your processes. Why did you make that decision?
Kinyanjui: We knew we would undergo many fundamental changes to provide the best internal efficiencies and services we could to our company. It became obvious that if we tried to keep our processes as they were, it would be very difficult to support the growth we expected for the airline. So yes, we made the fundamental decision that it would be better to use the best practices that are built into Oracle E-Business Suite. It doesn’t mean that we didn’t do any customizations, but we take advantage of what the product offers as much as we can.
Profit: You were able to implement the solution in only six months. How were you able to do this so quickly?
Kinyanjui: One crucial factor was our steering committee. Once we got to the actual implementation phase, we dedicated these people to the project on a full-time basis. So for six months, they were taught how to configure and manage the system and they blueprinted the processes and determined how we were going to configure them. Then once we got close to going live, they were the ones who did the end-user training. They coordinated teams that were doing all the data cleansing and migration. And after we switched on the system and went live, they spent another six months optimizing the way we were using the system. They continued training people, supporting them, answering their questions, running workshops, looking at the unanticipated challenges, and coming up with improvements to address those challenges.
That full-time dedication is essential. I don’t see how you can do this kind of a project if people also have to do their normal jobs. Otherwise, when are they supposed to do the implementation? It just doesn’t work. The chief finance officer, the chief HR officer, and the head of supply chain need to commit totally, and if we were not going to get total commitment, I think we would have then said politely that it is better we don’t even try.
Profit: How did you convince them to agree to that level of commitment?
Kinyanjui: This was part of what we learned from other people’s experiences. The implementation partners shared their experiences, and when we made site visits, we got independent advice from airlines in other parts of the world. Oracle also did walk-throughs for us and explained what’s required for a successful project. So the managers heard it three times over and then came to the same conclusion—that there is really no other way to do this and succeed. People may not believe you the first time. Their support is not automatic. So you need to take the time to talk about the challenges and persevere and keep talking about it again and again. Then eventually you succeed and people get on the same page.
Profit: What benefits have you found in core areas like HR, finance, and supply chain management?
Kinyanjui: In HR, our recruitment process used to be predominantly manual. Now, with automation, the benefits we are looking at in this area are savings of US$100,000 on an annual basis. These come from internal efficiencies around people, around eliminating paper forms and lost documents, and not having to redo transactions.
And recruitment is only one process. There are many other HR processes, so we are looking at more than US$1 million per year in savings in our internal processes.
After evaluating everything in the finance area, we are talking about collectively saving more than US$600,000 per year through efficiencies in areas like invoice reconciliations, payment processing, and how quickly we are closing our books. And even as we grow and open new destinations, we are not adding additional finance staff to process all the additional payroll transactions.
Similarly, in the supply chain area we’re saving about US$400,000 on an annual basis. With our manual requisition process, whenever you needed any goods or services you had to fill in prepublished forms and then go around to get lots of signatures. Now, when it comes to the procurement process we are looking at a minimum of $250,000 a year in savings by automating just that one process.
In addition, we are improving planning around materials inventory—reducing the inventory that we are holding, instead of carrying huge volumes of safety stocks to make up for internal inefficiencies. And we are doing a better job of consolidating purchases with suppliers. The system gives us good reports to show where we have opportunities for more consolidation, and that means we can negotiate better price reductions.
Profit: Is the IT infrastructure easier to manage?
Kinyanjui: IT has benefited because an integrated platform means that our administrators are looking after just one system. We’ve been able to reduce the number of administrators. We might have had six people looking after those three legacy applications; we now only have two for systems administration. We’ve also benefited because we were able to put the system on a database in one physical environment in the data center. This has meant better utilization of our infrastructure. And because we’ve got the whole system on one instance that is centralized at headquarters, we don’t require all kinds of data center infrastructure to run in different parts of the world. Irrespective of where our people are sitting—in Europe, in Asia, or anywhere in Africa—they are actually connected to the same instance in Nairobi.