EPM Sets Sail
General Dynamics Launches Global Financial Planning Initiatives with Oracle.
by David Baum, February 2011
The champagne bottle bursts across the hull of the Arleigh Burke destroyer with great fanfare. It’s the culmination of a billion-dollar project for General Dynamics and a proud moment for thousands of people employed at Bath Iron Works, part of General Dynamics’ Marine Systems division. As a full-service shipyard specializing in the design, construction, and support of complex surface combatants for the U.S. Navy, Bath Iron Works has a 120-plus-year history that reflects a continuous pattern of innovation, new technology, and process improvements.
Today, Oracle business intelligence (BI) and enterprise performance management (EPM) technologies are facilitating management and reporting activities for the company. In conjunction with Bath Iron Works’ implementation of Lean manufacturing processes, Oracle’s Hyperion EPM solutions and Oracle BI technology are beginning to serve as key tools in shipyardwide efforts to provide better visibility into costs and are helping project managers at Bath Iron Works to reduce the labor hours needed to build these complex Navy warships.
Bath Iron Works is just one of the major business units of General Dynamics, the fifth-largest defense contractor in the world, with 91,000 employees and about US$30 billion in annual revenue. The company has changed markedly in the post–Cold War era of defense consolidation and now has four main business segments: Marine Systems, Combat Systems, Information Systems and Technology, and Aerospace.
Anchored by Precise Planning
Hailed as the most successful Navy new ship construction program in decades, the Arleigh Burke destroyers are the most technologically advanced surface combatants afloat. In addition to these ships, the first of the Navy’s next generation of surface combatants—the Zumwalt Class guided missile destroyer—is under construction at the shipyard. Building these ships is a massive job that requires precise planning, budgeting, and financial management.
Allocating labor budgets is one of the primary responsibilities for Andrew Bond at Bath Iron Works. As the director of labor and business planning for the shipyard, he is concerned with figuring out precisely how to staff the shipyard and use staffing projections to determine how labor volumes translate into sales. “Being able to look ahead in terms of planning our shipyard resources is extremely important,” he explains. “Shipbuilding is a resource-intensive operation, and effectively planning and scheduling the work of more than 5,600 people every day can be challenging. We want to run as lean as possible, yet we need to allocate a huge and diverse labor pool.”
Bath Iron Works also needs to analyze labor metrics, such as comparing the number of feet of pipe that have been installed with the number of pipe fitters that are working at any moment. To answer these questions, Bond and his team use Oracle Hyperion Planning, a centralized budgeting, forecasting, and planning solution that integrates financial and operational planning processes, along with Oracle Essbase, a multidimensional database. Using simple Web forms and a direct interface to Microsoft Excel, Oracle’s EPM software lets them examine business operations and their impact on financials through tightly integrated financial and operational planning models.
“Building a ship is a lengthy and complex process,” says Bond. “We adopted the Oracle Hyperion software to automate our weekly operational reporting and to add new capabilities for better forecasting. The Oracle Hyperion EPM solution enables us to take an extraordinary amount of complex data and aggregate it in a logical fashion to produce quick and simple answers much faster than we’ve ever been able to before.”
For example, Bath Iron Works might need to know the impact of adding another ship to the labor profile or the impact of a significant upgrade. Previously, Bond and his colleagues used Microsoft Access to devise these labor-planning scenarios, but it was a highly manual process that was time consuming for the team. Oracle Hyperion Smart View for Office—a component of Hyperion Foundation Services—will offer a simple and intuitive way to view, import, manipulate, distribute, and share the planning data through Microsoft Excel, Word, and PowerPoint interfaces.
“Our analysts can make sure that our forecasts are the best they can be; they’re not just working feverishly to get it done in the time we have available,” explains Bond. “These highly skilled workers will be able to do their jobs more efficiently and not spend their time chasing data around or manipulating databases; they’re able to run reports and analyze scenarios more quickly. And because we have centralized data, Bath Iron Works produces more-accurate reports from a single source.”
The analysts can submit ad hoc queries using Oracle Hyperion Smart View for Office, or they can use Oracle Hyperion Financial Reporting to generate reports that comply with industry financial regulations. These reports can be accessed on demand or scheduled for later distribution to automate financial planning, management, and forecasting activities.
“Bath Iron Works’ workload planning and shipyard reporting applications enable planners to suggest various contract scenarios to see how they impact the overall performance and profitability of the shipyard,” explains John Monczewski, director of business intelligence and enterprise performance management at General Dynamics Information Technology (GDIT), a standalone business unit that provides IT services to defense and civil agencies worldwide. “For example, they can estimate results based on where they are in their production cycle for a specific ship and where they might be if they win additional contracts from the government.”
At the Helm of Progress
Monczewski heads up GDIT’s Business Intelligence Collaborative (BIC). His 12-member team in Fairfax, Virginia, oversees 10 different planning applications, 38 multidimensional online analytical processing Oracle Essbase applications, and a dozen Oracle data warehouses for many of the 13 General Dynamics business units, including Bath Iron Works. “Our goal is to assist General Dynamics business units with the implementation, application support, and application hosting for business intelligence and enterprise performance management applications. This ‘collaborative’ approach allows us to focus on improving the quality of every application and reducing the cost for each business unit.”
The BIC maintains expertise with Oracle Hyperion Planning, Oracle Hyperion Financial Management, Oracle Hyperion Profitability and Cost Management, Oracle Essbase, Oracle Business Intelligence Enterprise Edition, Oracle Data Integrator, and Oracle Database. They apply this expertise to create manufacturing-oriented metrics and statistics, labor and materials forecasts, and financial statements.
Under the direction of the BIC, General Dynamics retained Peloton Group, an Oracle Platinum Partner that specializes in executing EPM and BI initiatives. Peloton worked with Bath Iron Works to develop a strategic workload planning application to work in concert with Bath Iron Works’ earned value system, a project management technique for measuring project scope, schedules, and costs. This technique integrates information about costs, schedules, and forecasts to provide early indications of project performance and to highlight the need for corrective action in the event of budget overruns. The new planning application integrates shipyardwide resource requirements and communicates progress to stakeholders, keeping management focused on measurable objectives on a weekly basis. All pertinent data is automatically loaded into an Oracle data warehouse, permitting both summary and detail-level planning and reporting.
Next Peloton created a shipyard reporting application to provide a more granular view of labor resources, enabling Bond and his team to “monitor the pulse of what’s happening in the shipyard.” This application allows project managers to run planning scenarios to see the impact of scheduling changes as they manage finite pools of labor resources.
“Using Oracle’s BI and EPM tools, we were able to take data feeds from multiple sources and put them into one BI environment. Once fully implemented, the system will dramatically reduce the time it takes to run the reports and distribute the information to people throughout the shipyard,” explains Bond. “These technologies not only let us move data faster and more efficiently; they also provide some configuration management tools to ensure that data flows appropriately across the various departments that are involved. We can run what-if scenarios faster than we’ve been able to in the past. With these tools, we expect to do things in minutes rather than hours or days.”
Bath Iron Works plans to roll out a cash management solution using Oracle Hyperion Planning along with a detailed overhead and rate model and material planning system, all using the Oracle Hyperion EPM solution. According to Balaji Yelamanchili, a senior vice president in Oracle’s BI and EPM product area, by tightly integrating financial and operational planning models, Oracle Hyperion Planning provides an in-depth look at business operations and their related impact on financials. “In General Dynamics’ case, a lot of the funding is ultimately taxpayer dollars, so there’s a heavy emphasis on enterprise performance management throughout the organization,” he notes.
Keeping Government Contracts Afloat
Much of General Dynamics’ work springs from government contracts that are very carefully audited. The primary emphasis of these government audits is on earned value measurements.
“General Dynamics’ manufacturing-oriented business units are very dependent on the Oracle Hyperion Planning system to provide EAC [estimate at completion] and other earned-value-type measures in a timely fashion,” says Kathryn Josephson, senior architect for the BIC team at GDIT. “We are contractually obligated to provide this information. The government always wants to know things like, ‘Based upon the work you’ve accomplished to date and the work you project to accomplish, what am I getting for my money?’”
EAC equals the sum of actual costs to date plus the estimated costs to completion. Josephson says the Oracle Hyperion EPM solution helps senior managers track this important metric. “We use the software to develop strategic plans, define a methodology-based strategy, measure performance against goals, and monitor progress on a regular basis,” she says. “We also use Oracle BI technology to communicate this information across the enterprise.”
The federal government allows defense contractors such as General Dynamics to recoup the cost of doing business through the application of what are called indirect rates. Based on strict regulations and accounting standards, General Dynamics’ financial planners determine these rates by allocating costs against specific activities throughout the corporation. For example, human resources budgets are allocated on the basis of employee headcount or payroll dollars.
“We need to be able to take these indirect dollars and flow them down to the specific cost objectives and activities in order to compute the rates that we bill to the government and include in our bidding proposals,” says Lorraine Conlon, director of financial planning and analysis for GDIT.
To achieve this objective, the BIC developed models that compare allocated costs against the cost basis to produce forecasted rates. In addition, the team can study the impact of potential events such as winning a large government project. This insight helps them improve the accuracy of projections and produce more-competitive bids.
“If we win new business, we have a larger base over which to spread indirect costs, which can significantly impact our rates,” Conlon explains. “The Hyperion tools enable us to respond very quickly so we can provide the best possible information to the government and other constituents.”
Conlon’s department reports GDIT forecasted and actual results to General Dynamics’ corporate office so that senior managers can examine monthly revenue and expenses across all business units on a consistent basis. The BIC created an executive dashboard with Oracle Business Intelligence Enterprise Edition that lets GDIT executives drill down into the cost centers that report directly to them. Department managers in finance, HR operations, IT, and other business areas have similar dashboards to peruse costs, budgets, headcounts, orders, and other items within their domains.
“They can drill down from major programs to specific projects to track performance using a combination of standard Hyperion financial reports, custom BI dashboards, or ad hoc analysis using Oracle Hyperion Smart View for Office,” notes GDIT’s Monczewski. “Our previous tools required us to do multiple downloads or multiple extracts and manually consolidate the data. With Hyperion, we can provide business information faster and more reliably.”
Buoyed by Confidence in the Data
As Conlon and other members of the team review the corporate balance sheets and income statements, they have to occasionally investigate anomalies in accounts payable, accrued salary, fixed assets, and other business modules. Oracle Hyperion Smart View for Office enables them to drill into line items on the financial statements—all the way down to specific accounts—to make month-to-month comparisons using Oracle Business Intelligence Enterprise Edition. Previously they maintained all those mappings in Microsoft Excel spreadsheets, but it took them a long time to make updates. Now Oracle BI applications seamlessly integrate detailed general ledger data and Oracle Hyperion Financial Management mappings to provide month-over-month key account analysis in a fully automated manner.
“Senior managers have greater confidence in what we’re reporting,” Conlon says. “If they come back to us with a question, we can dig into our Hyperion system to provide answers as our Department of Defense programs change and evolve. Oracle Hyperion Smart View for Office lets us create custom reports and then refresh them each month or each quarter so we always have consistent information. If it is in the Hyperion system, we can easily extract it using the Oracle Hyperion Smart View for Office tool to compare quarter to quarter, month to month, vision to vision, actual to plan, and so forth.”
GDIT’s Josephson estimates that the Oracle Hyperion user base currently includes about 300 people throughout the company. She anticipates that General Dynamics will have as many as 1,000 Oracle Hyperion users by the end of 2012.
“We’ve seen people transform their planning cycles from a three-month odyssey involving multiple people manually manipulating spreadsheets to two or three people doing all of their reporting in less than two weeks,” she says.
That’s no surprise to Guy F. Daniello, founder and CEO at Peloton Group. “Oracle’s BI and EPM product suite utilizes the [Oracle] Essbase engine, the most robust and functional solution of its type on the market today,” he notes. “Oracle has the strongest vision for integrating all the pieces together, using Oracle Fusion Middleware. Their vision and direction embody where clients want to be.”
For More Information
Intelligence Design: Q&A with Oracle’s Tobin Gilman
Oracle Enterprise Performance Management and Business Intelligence Solutions
Oracle Solutions for Aerospace and Defense
is a freelance writer who specializes in business and technology.