Tuesday, October 17, 2006

$6 Billion Business Mistake at Airbus caused by Poor Process Mgmt

I like to tell executives that business rule engines help prevent business mistakes. As a matter of fact, I am extremely confident that preventing business mistakes provides enough ROI on its own to justify the investment in business rules management and technology.

So one of my favorite sections in the Business Rules Knowledge Base is where I tell you about real life examples of business mistakes caused by poor rules management, poor process management, and poor knowledge management.

I've just added an entry on a business process mistake that led to a $6 billion profit hit at Airbus. Very interesting reading, at least to me...

Wayward Airbus - Cross-border clashes have led to costly production errors. Job One for a new CEO will be to unify the jetmaker. "Airbus' A380 double-decker jet is two years behind schedule, sending billions of dollars in potential profits down the drain. But the reason sounds too simple to be true: Airbus factories in Germany and France were using incompatible design software, so the wiring produced in Hamburg didn't fit properly into the plane on the assembly line in Toulouse. It's one of the costliest blunders in the history of commercial aviation, and it has plunged Airbus into crisis. Chief Executive Christian Streiff quit on Oct. 9 after only three months on the job...

The delays in the A380 mean EADS will take a $6 billion profit hit over the next four years...

When bundles of the cabin wiring started arriving in Toulouse early this year, assembly slowed to a crawl. Workers tried to make them fit into the fuselage by pulling them apart and rethreading the wires, but that proved to be impractical, and the effort was abandoned. Airbus says it has introduced new software to correct the wiring design, but it will take months for engineers to get up to speed on the new system. That's why Airbus now predicts it won't deliver the first A380 orders until late 2007... BusinessWeek, Oct. 23, 2006

Source: http://www.businessweek.com/magazine/content/06_43/b4006075.htm
b4006075.htm

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Revenue Recognition rules are good candidates for Business Rule Engines

The Business Rules Knowledgebase aims to keep you informed on the business rules market. Here's an item that just crossed my desk a few minutes ago.

Revenue recognition rules are hard to understand, they change often, they may be subject to interpretation, and they are difficult to program using conventional (i.e. procedural) programming languages. According the news item below, Pegasystems (a BizRules partner) is currently working on revenue recognition rules and timing rules.

I happen to know a little bit (very little!) about revenue recognition rules. One of our BIZRULES customers is successfully using the PegaRULES rules engine to manage and automate these types of accounting / financial rules. So I wouldn't be surprised if Pega begins to use its own proven rules engine to drive their improved internal revenue recognition process forward.


October 17, 2006 07:08 PM ET Pegasystems Delays Filing 3Q Report

CAMBRIDGE, Mass. (AP) - Business-process software company Pegasystems Inc. said Tuesday it will delay filing its third-quarter financial results while it continues an internal accounting review of the timing of revenue recognition for certain arrangements, including fixed-price services.

The company said it may restate previously issued financial statements when the review is complete. In the event of a restatement, Pegasystems said it expects that not more than $2 million of revenue previously reported through would be deferred into the 2006 third quarter or future periods.

source:
http://news.moneycentral.msn.com/provider/providerarticle.asp?Feed=AP&Date=20061017&ID=6112462

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