Question

Question 3: Case Study: Implementing a Successful ERP System

Nestle was found in 1866 by Swiss pharmacist Henri Nestle. Nestle operated factories in North America. Nestle USA was not incorporated until 1991. More than 17 thousand people work for Nestle USA in 6 distribution centers and 17 sales office. Together with well-known brands, Nestle produces tens of products, including coffee, snack, waster, chocolate, juice, pet food, prepared food and infant food.

After its centralization in 1991, Nestle USA continued to function more like a holding company than a single entity. Divisions still had geographically dispersed offices and made their decisions.

For example, each factory arranged their orders of Vanila, one of raw material common used, from a same vendor for different prices. They didn’t contact each other before purchase. The whole company lost a strong purchasing power. 9 different general ledgers and 28 points of customer entry. It is not efficient.

In 1997, Nestle USA embarked on SAP project code-name Best (Business Excellence through systems technology). SAP modules reached the areas of purchase, financials, sales and distribution, accounts payable and accounts receivables. Each would be deployed across every Nestle division. For instance, the purchasing group for confections would follow the same best practices and data as the purchasing group for beverages. Budget was for US$210 million and is expected to finish around Year 2000. 50 top business executive and 10 senior IT professionals were involved in this project.

The Project Objectives were to transform the separate brands into one highly integrated company. Internal aligned and united, establishing a common business process architecture and Standardizing of the master data.

During the project implementation the workers did not understand how to use the new system, they didn’t even understand the new process. And the divisional executives, who were just as confused as their employees and even angrier. In addition, the Best project team had overlooked the integration points between the modules. All the purchasing departments now used common process, but their system was not integrated with the financial, planning or sales groups. A salesperson-----discount to a valuable customer--------but the account receivable have no idea. -----Customers paid--- only partial paid in account receivable.

They also concluded they had to do a better job of making sure that they had support from key divisional heads and that all the employees knew exactly what changes were taking place, when, why, and how. They started with business requirements reaching an end date, rather than trying to fit the project into a mold shaped by a predetermined end date also they realized that the hardest part is changing the business process of the people who will use the system.

Nestle group contracted with SAP in June 2000 for $200 million, the largest software sale in the ERP vendor in that moment. Nestle has been in the process of deploy my sap.com ERP application to each of its employees worldwide. To consolidate its information technology operations now based in more 100 sites, in five GLOBE data centers around the world. GLOBE is the most important project under way to prepare Nestle for the e-world.

Answer the following questions:

1. What were some of the challenges which Nestle continued to face after its centralization in 1991?
2. What were the Objectives of Nestle BEST project?
3. List the challenges faced during the project implementation of BEST.(1)
4. List some of the lessons learnt.
5. “Nestle will now proceed with SAP to implement GLOBE and implement a complete ERP” give suggestions which would help the project implementation to be successful.

Answer 1

Nestle faced challenges like inefficiency in integration of customer data points and vendor management as different prices were paid for same vendor for different products and subsequently over dependence and inability to understand and collate reports caused great problems.

Nestle BeST projects were aimed at technology integration and system efficiency planning to bring easier collaboration of data and elimination of redundancy in data.

Implementation challenge during Best projects were that managers failed to educate employees on how systems work and thus they were unaware of howbto dealnwith customer and how to followup data points with financial and sales planning teams. Some lessons learnt were that implementation needs phase based planning and teaching and continuing support from vendor and effectiveness in training procedures.

SAP ERP allows common purpose platforms integrated all together to make sure account payable, account receivables, purchase requisition and orders are all visible together.

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