Question 3: Case Study: Implementing a SuccessfulERP System
Nestle was found in 1866 by Swiss pharmacist Henri Nestle.Nestle operated factories in North America. Nestle USA was notincorporated until 1991. More than 17 thousand people work forNestle USA in 6 distribution centers and 17 sales office. Togetherwith well-known brands, Nestle produces tens of products, includingcoffee, snack, waster, chocolate, juice, pet food, prepared foodand infant food.
After its centralization in 1991, Nestle USA continued tofunction more like a holding company than a single entity.Divisions still had geographically dispersed offices and made theirdecisions.
For example, each factory arranged their orders of Vanila,one of raw material common used, from a same vendor fordifferent prices. They didn’t contact each other before purchase.The whole company lost a strong purchasing power. 9 differentgeneral ledgers and 28 points of customer entry. It is notefficient.
In 1997, Nestle USA embarked on SAP project code-name Best(Business Excellence through systems technology). SAP modulesreached the areas of purchase, financials, sales and distribution,accounts payable and accounts receivables. Each would be deployedacross every Nestle division. For instance, the purchasing groupfor confections would follow the same best practices and data asthe purchasing group for beverages. Budget was for US$210 millionand is expected to finish around Year 2000. 50 top businessexecutive and 10 senior IT professionals were involved in thisproject.
The Project Objectives were to transform the separate brandsinto one highly integrated company. Internal aligned and united,establishing a common business process architecture andStandardizing of the master data.
During the project implementation the workers did not understandhow to use the new system, they didn’t even understand the newprocess. And the divisional executives, who were just as confusedas their employees and even angrier. In addition, the Best projectteam had overlooked the integration points between the modules. Allthe purchasing departments now used common process, but theirsystem was not integrated with the financial, planning or salesgroups. A salesperson-----discount to a valuablecustomer--------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 surethat they had support from key divisional heads and that all theemployees knew exactly what changes were taking place, when, why,and how. They started with business requirements reaching an enddate, rather than trying to fit the project into a mold shaped by apredetermined end date also they realized that the hardest part ischanging the business process of the people who will use thesystem.
Nestle group contracted with SAP in June 2000 for $200 million,the largest software sale in the ERP vendor in that moment. Nestlehas been in the process of deploy my sap.com ERP application toeach of its employees worldwide. To consolidate its informationtechnology operations now based in more 100 sites, in five GLOBEdata centers around the world. GLOBE is the most important projectunder way to prepare Nestle for the e-world.
Answer the following questions:
- What were some of the challenges which Nestle continued to faceafter its centralization in 1991?
- What were the Objectives of Nestle BESTproject?
- List the challenges faced during the project implementation ofBEST.(1)
- List some of the lessons learnt.
- “Nestle will now proceed with SAP to implement GLOBE andimplement a complete ERP” give suggestions which would help theproject implementation to be successful.
