ERP

Can ERP lead to

FAILURE???

Silver bullet for company’s problems

Reengineers the business processes

Coordinate systems geographically

Empowers users by giving access to data in real time

ERP IMPLEMENTATION AT NESTLE

Major products

Nestle

Revenue - CHF 109.9 billion Market capitalization - 87 billion Swiss

francs Seven Business Divisions – Beverages,

Confections & snacks, Food services, Foreign trade, Nutrition, Prepared food and Sales

US Subsidary’s Annual Revenue - $8.1 billion

No of Employees – 16000 I.T. Professionals – 250 (including the

consultants)

Source: www.nestle.com/

Nestle USA

9 different general ledgers and 28 customer entry points

Goal - reduce these numbers down to 1 Nestle USA – multiple companies under

one roof, each factories acting as an autonomous unit

Nestle faced severe competitive disadvantage

Solution - one system used by all – more efficient & to survive in global market.

Best example - mismanagement of Vanilla

29 different prices for vanilla – to the same vendor

Discrete deal by each factory Distinguished ways of reference

Vanilla is No.1234 for one factory and No.7778 for other.

ERP Implementation

Business Excellence through Systems Technology - BEST

Scheduled to run over 6 years from 1997 to 2003

Budgeted at $200 million

Goal of ERP - Unification

BESTPurchasing

Financials

Sales and Distribution

sAccounts Payable

Accounts Receivable

Expectations

“transforming the separate brands into one highly integrated company” - Nestle USA Chairman and CEO Joe Weller

Consolidate the operations of different locations – to leverage their size and buying power

Centralize and control data – to predict financial, reporting, and forecasting numbers more accurately.

RESULT OF ERP

BIG FAILURE‘Coz there is a big difference between installing

software and implementing a solution

Failure Factors

Failed to implement broad business process before the roll-out

Underestimated budget planning – 5% increase of actual $200 million budget

Unrealistic time constraints – implementation deadline set to Y2K instead of planned 2003

Failure Factors

Inadequate training of core staff before roll-out, with implementation team involving 50 top business executives 10 senior IT executives 0 key stakeholders who use the system

directly Attempt of plunge approach instead of

parallel, pilot or phased approach Employee turnover rocketed to 77%

Failure Factors

Poor communication to the key stakeholders

Less involvement of the key stakeholders

Failed to evaluate the legacy IT infrastructure

Failed to assess effect of new system on the legacy system

Curative Measures

June 2000, roll-out force halted

Jeri Dunn, CIO, discussed the future of the project with 19 key stakeholders & executives

Business requirements redefined

Curative Measures

Project timeline reshaped around requirements rather than predefined end-date

Detailed blueprint was prepared

Tom James, Directors of Process Change – liaison between project team & divisions

Success Ingredients

Support from Executive leadership & Stong management

Adjustment of the business process to reflect new realities of new system

Learning from mistakes – involve everyone related to particular system

Willingness to spend money

Success Ingredients

Support & guidance from experienced SAP

Belief that ROI will be higher than cost overruns – Nestle claims $325 million made of $210 million

Approach of key stakeholders to analyze the division’s atmosphere before roll-out

Changing to phased roll-out approach

Success Ingredients

Readiness of the lead, Jeri Dunn, to admit mistake & revise plans accordingly

Leniency in deadline – worthy waits for feedback from end users of roll-out

Being inline with global implementation

Illuminations

ERP is not a solution. Just a tool to use in changing business

process Must be installed as part of overall

business process redesign effort and not an independent activity

If used properly ERP is a powerful tool to aid in BPR.

Illuminations

Involve right individuals from the beginning

No forcing on timelines Large focus on training Conjugate business process re-

engineering with the roll-out Limit number of customizations done on

the system Obtain universal buy-ins with everyone’s

support

And the Credits goes to…

Gene Leshinsky, "Nestle and Nike: How they almost failed...", http://www.boston-technical-recruiter.com/2008/02/18/nestle-and-nike-how-they-almost-failed/

Derek S. Dieringer, "ERP Implementation at Nestle", Enterprise Resource Planning Systems, June 24, 2004, http://www.uwosh.edu/faculty_staff/wresch/ERPNestle.htm

Paul Harmon, "Nestle USA Installs SAP", Trends Newsletter, November 2002, http://www.bptrends.com/publicationfiles/BPT%20Case%20Study%2DNestle%20USA%20SAP%2011%2D02%2Epdf

Ben Worthen, “Nestlé’s ERP Odyssey”, CIO Magazine, May 15, 2002, http://www.cio.com/article/31066/Nestl_eacute_s_Enterprise_Resource_Planning_ERP_Odyssey?page=2&taxonomyId=3000

William Echikson, "Nestlé: An Elephant Dances," Business Week Online, December 11, 2000, http://www.businessweek.com/2000/00_50/b3711064.htm