Enterprise Resource Planning at Nestle - Assignment Example

Nestle Case Study of the Table of Contents Table of Contents 2 Introduction 3 Answer to Question 3 Answer to question 2 6 Conclusion 8 References 9 Introduction Globalisation is promoting worldwide set up for different businesses. They are required for intense resource planning and proper relationship with different stakeholders. Enterprise Resource Planning are highly used by the global firms to utilise and report resources (Beheshti & Beheshti, 2010). These two polices are increasing the compatibility of the firms in the global segments. The enterprise resource software is highly used in the supply chain using companies like the global food or grocery retailers. Enterprise systems implementation increases advantage by developing interactive relation with the different stakeholders. In the current study, Nestle is selected to outline the importance of the Enterprise Resource Planning (ERP), Enterprise Systems (ES) and SAP in the FMCG firms like Nestle (Li & Hou, 2013). Answer to Question 1 SAP (Systems, Application and Products) is one emerging and rapidly used Enterprise Resource Planning or Enterprise Systems. This software is aiding multidepartment firms in maintaining proper resource utilisation and increasing the efficiency of the supply chain or value chain. As per revenue generation Nestle is leader level international food and beverage company. The organisation is having international supply chain of various products like coffee, baby food, breakfast cereals, dairy products and confectionery are produced and supplied by the firm. They are dealing with more than 8000 brands (Hasibuan & Dantes, 2012). They are specialised in the food processing industry with brands like Nescafe, Buitoni, Milkmaid, Dreyers, Carnation, Maggi, and Kit Kat. In the international segment, these brands of Nestle are facing challenge from global brands like Unilever NV, Kraft Foods, Cadbury, Hershey Foods, Schweppes, GROUPE DANONE, Mars and Mondelez. Therefore, they must be using proper resource management in order to gain compatibility, increase food quality, delivery of fresh food products and increase innovation (Hasibuan & Dantes, 2012). The case study is outlining that proper resource management software will be developing micro magnitude of the international supply chain domain of Nestle. Implementation of SAP and ERP also considers various macro strategic factors of the firm to develop their compatibility in food processing industry. Globalised firms are using ERP and ES systems highly in order to manage their supply chain and resource planning. ERP system implementation has faced huge challenge in different large scale organisations (Mitra & Neale, 2012). Rolls Royce faced the challenges in implementing ERP and ES systems in terms of complex legacy systems. On the other hand, Nestlé was facing certain complexity in their online access with the customers, associates and suppliers before implementation (Mitra & Neale, 2012). ERP and ES software are helping the firms in optimising their financial, operational, human resources and compensation management. Firms can develop payroll, marketing and selling process. ERP and ES systems are reporting the expectations and experiences of the employees. This research concentrated on Nestle Corporation as it has multinational value chain. The firms have the IT based operational set up for the supply chain of more than 70 geographic places they are operating in (Pamungkas, 2009). Major advantages of ERP, SAP and ES can be stated as: ERP and SAP are helping the international firms in making the integration of resources very easily. Management will be able to reduce the obstructions that are faced due to the variation of the currency exchange rates, various linguistic aspects and cross cultural traits among the employees and customers. Updating the systems is quite easy and it can be put into practice on the overall operational practises of company (Pamungkas, 2009). Concurrent information are recorded and accessed by the users. Moreover, such systems are mitigating the challenges of potential redundancy errors in supply chain. SAP increases feasibility of data records, which offers well-organized work environment. Managers can disseminate various operational strategies and guidelines among the employees. Supply chains gradually increases its efficiency. Traders are able to use the acquaintance and proficiency in delivering food products and other raw materials to firms (Nah, 2002). It is observed that Nestle adopted the strategic decision of using SAP during the year 1990. They requested their ERP provider to develop SAP system in terms of the managing their resources very well in order to maintain international competency. Nestle have implanted the SAP business system in the France, UK, Italy, Germany, Spain and USA set ups during the decade. Different modules of SAP are implemented in the Nestle supply chain and by the year 2000 the firm ensured that high quality SAP experience (Sharma, 2012). SAP system is providing Nestle management with unique database for their international operational activities. Cloud base concepts are used by the firm in recording financial and operational data and access it in making the decisions. SAP system is specially made systems which outlines international consumptions of various resources. Management can track the performance of the employees and operational activity. Thus, Nestle management can implement effective decisions (Sumner, 2005). SAP will be impacting different dimensions of supply chain of Nestle in the international segment. Sales order meting out: Supply chain processes of Nestle are concerned for meeting the order of food products like Nescafe, Buitoni, Milkmaid, Dreyers, Carnation, Maggi, and Kit Kat. Organisational management is appointing effective sales people who have the knowledge of SAP and ERP to evaluate stock of products and prices before taking any orders. Nestle uses their SAP protocol for increasing the efficiency of executing sales order process. In the international set up, Nestle is maintaining different types of targets for the employees, sales persons are expected to meet at least 97.5% of their capacity (Wu, Xu & He, 2009). SAP system is increasing feasibility of reports of transit positions and customer approved Proof of Delivery. Global FMCG industry is facing intense competition from the presence of Unilever, P&G, KJS and Nestle. Therefore, SAP technology is helping Nestle in terms of meeting challenges from the other firms (Vathanophas & Stuart, 2009). Purchasing: Nestle is having huge channel for purchasing the raw material products. Purchase can be segmented during the year 2000, they have spent $35 billion. Purchase activity of Nestle is segmented into direct and indirect materials (Vathanophas & Stuart, 2009). SAP is increasing the feasibility of the ordering quantity and quality of the materials. Purchase channel of the firms are segmented in three different parts like: Global Channel: Nestle collects coffee and sugar from the international market. . SAP is helping the firm in maintaining sound relationship with the clients. International customers will be enjoying increased potentials of timely payment, increasing orders and quality bench marks (Tsai, Lee, Shen & Lin, 2012). Regional Channel: Nestle is using regional channels to purchase direct and indirect materials. SAP technology helped them to reduce zone based channels. Now they are operating in the Americas North and South (AMS), Europe (EUR), and Asia, Oceania and Africa (AOA) channels (Vathanophas & Stuart, 2009). Country based Channel: SAP system also increases the efficiency of the firms in developing the purchasing channel nationally. It reduces transportation cost and wastage of perishable raw materials (Wu, Xu & He, 2009). Distribution: SAP have developed distribution channel of Nestle through materials handling policies. It is observed that Nestle is offering different brands of food products like Nescafe, Buitoni, Milkmaid, Dreyers, Carnation, Maggi, and Kit Kat. Thus, finished products need to be handled properly. They are observed with shrink-wrapped pallet in the factory overhead. SAP system increased the efficiency among the operational policy (Wu, Xu & He, 2009). Customer service system developed rapidly in the Nestle SAP policy as the process is using API and SAP convergence model. SAP module of the firm is dealing with high MH functionality. In different environmental circumstances, SAP aids the leading food processing firm with Strategic Development Programme so that they can increase the compatibility in the global market. Nestle is using 5 different strategic development programs for developing compatibility against Mars, Danone and Mondelez International (Mitra & Neale, 2012). Moreover, SAP policy helped Nestle in maintaining proper policy for increasing the efficiency of demand and supply scheduling and manufacturing process. Answer to question 2 Although, SAP is providing advantageous for the international business, it has certain limitations or risks also. Firms are facing certain disadvantages that are limiting the success of supply chain and profitability of the company. SAP requires bilateral relationship which are enforced by different contractual agreement which creates complexity in vendor management. Contractual relationship will bound the company to transact with the vendor till the expiring date of the contract. In some condition, SAP can create contract with vendors reporting unprofitable business situation. However, switching those vendors is not possible due to the contract and legal obligation (Sharma, 2012). SAP can create rigidity in the operational and supply chain process of the big firms like the Nestle. Food vendor options might not fit in the business model of the global food processing organisation. Thus, it can be proved as much more expensive for Nestle. Return on Investment might be taking higher time to get converted into profitable segment. SAP and ERP system implementation in the big organisations like Nestle will be facing the higher risk of project failure. Nestle is a huge organisation having multinational set up and huge brand groups. Thus, SAP can increase the cost of operations, complexity in operational decision making and ensuring effective workforce (Tsai, Lee, Shen & Lin, 2012). Nestle faced major complexity in the post 2000 years. From that period, they are facing intense challenge in developing SAP modules. Decision making powers of the organisation is aligned to the main board naming EBM which is situated in the headquarters in Vevey, Switzerland. However, SAP is increasing the complexity in centralised decision making and project execution. They are judging the project scenarios on the virtual or assumption basis. The concept of “GLOBE” is getting crucial for designating the SAP template of Nestle. This template will be based on standard functionality of the operational factors of the firm, whereas, international operational templates will differ for different external and internal factors (Vathanophas & Stuart, 2009). SAP business model execution in the large organisational structure like Nestle is quite expensive. Firms will be facing complexity to build SAP module and maintaining it in the operational process. In addition, they are facing the challenge in integration of the existing employees with the SAP models of data entry and resources management. Employees have to be trained and developed so that they can acquire relevant knowledge on the SAP techniques (Wu, Xu & He, 2009). Conclusion The current study highlighted the terms Enterprise Resource Planning, Enterprise Systems and SAP (Systems, Application and Products) in the large supply chain systems. Two different themes are argued in the report. First concept is reporting the importance of SAP in Nestle perspective. It can be said that SAP increased competitive advantage of the firm. Another one is stating the limitations of SAP system in the large systems. SAP can increase the embedded risks in the organisational operational process of Nestle. From the study, it is obtained that the SAP or ERP systems of the Nestle business are involving the options like supply chain, investment, industrial unit, HR and compensation management, salary and payroll, sales and promotion. Firstly, Nestle involved almost 700 employees to taste the feasibility of the policy. Employees are selected on the basis of the actual business scenario. Initially, Nestle used budget of $2 billion for introducing the SAP module in their system. In the international businesses groups, they implemented the system to win the competition against the groups like Unilever, P&G and KJS. SAP model and time schedules helped the management of Nestle for implementing Strategic Development Programme in more than 70 countries during the time period of 2005. More than 250,000 employees are involved in the SAP based system which initially created confusion, but later on it resulted as one of the success factors for Nestle. References Beheshti, H., & Beheshti, C. (2010). Improving productivity and firm performance with enterprise resource planning. Enterprise Information Systems, 4(4), 445-472. Hasibuan, Z., & Dantes, G. (2012). Priority of Key Success Factors (KSFS) on Enterprise Resource Planning (ERP) System Implementation Life Cycle. Journal of Enterprise Resource Planning Studies, 1-15. Li, C., & Hou, C. (2013). Applied Research on Jiaozuo Wanfang SAP-ERP System Logistics Module. AMR, 803, 471-474. Mitra, A., & Neale, P. (2012). One size fits all: case study of enterprise systems implementation in nestlã‰. European Conference on Information Systems (ECIS), 1-14. Nah, F. (2002). Enterprise resource planning solutions and management. Hershey, PA: IRM Press. Pamungkas, B. (2009). ADempiere 3.4 ERP solutions. Birmingham, UK: Packt Pub. 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