SAP ERP Implementation - Nestle USA - Research Paper Example

? Contents Contents 2 Nestle Case 2 Lessons Learnt 4 Involve all the Stakeholders 4 Do not Force Deadlines 5 Training 5 Focus on Business Process Re-engineering 5 Limit Customizations 6 Unwavering Top Management Support 6 Universal Buy In 6 Conclusions 6 Bibliography 7 Nestle Case To most people, Enterprise Resource planning looks like one sure shot solution to solving all the issues a firm faces. This perception proves to be true a lot of times, though not always. Adopting an ERP system for a company helps the firm transform itself by business process reengineering. ERP implementation also helps the company synchronize the systems and working even when the systems are separated by distance. Providing real time data for distributed systems gives power to the users and thereby the company to work efficiently. Company employees, even though they are working from different locations, would have access to the data and moreover, would be getting the same view of data. But, quite obviously, all this cannot be achieved free of cost. There are different kinds of costs involved including monetary crunch, issues with putting all this into practice, and also people management issues. But, all said and done, each and every ERP implementation has important lessons to be learned from. This leads to say that for a company, what so ever be the result of ERP implementation, the lessons are always significant. The case I would be taking into consideration is the Nestle case. In the year 2000, Nestle SA management team became conscious of the fact that if they want to maintain their position in the hugely competitive market, they need to streamline their processes and upgrade their systems. To serve this purpose, Nestle SA signed a bond with SAP. Nestle SA wanted to implement an ERP system across all its systems, they wanted all the employees and hence, the company to benefit with the ERP system. Back then, Nestle SA had its presence in 80 countries with a total of 230,000 employees overall. A huge sum of $80 million was assigned for the consultation, maintenance and up gradation of the existing systems. A time frame of three years was decided upon in order to complete the ERP implementation for the most competitive sites of Nestle. After the ERP implementation of these sites is completed, the other sites would be dealt with. The implementation included most aspects of a company’s product and operation management processes. They ranged from finance and monetary aspect handling, to supply chain, forecasting, capacity planning and BI segments. Another Nestle ERP implementation was that of Nestle USA. Nestle USA had quite a few different ledgers and customer access points. The objective of implementing ERP implemented in Nestle USA was to consolidate these different data points to just one. Nestle USA faced a lot of challenges in implementing ERP. This was because of the fact that every location for Nestle USA was inclined to make their own decisions. There was a communication gap between decisions made by different locations and this lead to adverse effects on ERP implementation. A classic example of this was the story of Vanilla wherein each and every Nestle USA location had a different deal for vanilla price with the retailer, and the different locations were not even aware of this fact. (Ben, 2002) In spite of which subsidiary of Nestle is observed, the reasons and objectives for implanting ERP were the same. The goal involved grouping, synchronizing and merging all the operations of the firm despite of the distributed locations and nature of working. The ultimate objective was to increase revenue and to maintain the name of Nestle brand in the highly competitive market. In addition to the mentioned goals, there was an essential necessity to unify and integrate all the company information so that the forecasting activities as well as different forms of data analyses could be done more easily. This would also lead to greater accuracy in deriving trends while doing market research and demand forecasting. Nestle USA did not use any software vendor for their project implementation. They formed a team of 50 top executives and 10 senior IT professionals. (Steve, 2000) When the implementation was started in 1999 it was expected that the project will be finished by 2000 in order to escape the Y2k problem; however this deadline was not met .Finally the project was completed by 2003.The cost of the project also spiraled from the estimated 80 million $ to 210 million$. Most of this escalation in the cost of the project was attributed to the halt in their implementation and their decision of starting the planning again in 2001.They had to halt their implementation due to massive resistance from the employees to the implementation of the project as their buy in had not been taken during the planning phase. (Steve, 2000) Lessons Learnt Nestle USA had to go through a very difficult time in order to implement SAP.As we have seen earlier the implementation was halted in between and new roadmap had to be developed again. On the basis of the analysis of Nestle USA’s implementation of ERP we will now document the lessons that have been learnt through this implementation. Involve all the Stakeholders A simple and a very important lesson that has to be learnt by all the organizations is that change ERP implementation is not about bringing a new software in the company. It is not the simple process of replacing windows 2000 with windows7.It involves changing the way business is being done by the organization. (Adshead, 2002) This change cannot be forced from above. You need to involve the people who are going to actually work on the changes from the planning stage. Important feedback can always be obtained from these individuals. Not involving the people who will actually work may led to dissatisfaction and in the worse case it may lead to a total rebellion where employees simply try to block every initiative. Nestle learned it the hard way as they had to halt implementation midway due to these problems. Do not Force Deadlines This is a very important lesson which can be learnt from Nestle’s experience. They tried to bring the ERP project before 2000 to meet the deadline of y2k.Deadlines should be kept but when there is resistance from employees or when the task proves to be more arduous then it was throughout before, top management needs to be flexible with these deadlines. Being inflexible and harsh may lead to a breakdown and it might do more harm than simply a failed ERP implementation. Training Training is a very important part of ERP implementations. Training on software projects is usually an afterthought and is generally ignored if there is difficulty in meeting the deadlines or there is budget constraint. Managers normally believe that employees will learn working on the new system with time. This attitude will prove to be very dangerous in the case of a ERP implementation.SAP doesn’t only changes the way data is entered in the system; it changes a lot of business practices which were followed earlier. This is the reason why so many firms try to implement ERP-these changes incorporate best practices and thus save millions. Changing way of doing business is very tough especially when employees consider the software as alien and difficult. This problem can be solved by consistent and repeated trainings. Training schedule should always be part of the initial planning and not an afterthought. Even the end-users should not be left to their own means and should be trained on SAP. (Olson, 2004) Focus on Business Process Re-engineering SAP software is simply incidental. The basic thing that the organization is trying to achieve through ERP implementation is business process re-engineering. You are trying to streamline your business by removing old and cost consuming practices with new best practices that will make your organization leaner and fitter. Caution needs to be exercised during choosing these best practices. These changes should not be dictated by what technology people say will be ideal for your company but they should be simply what your business demands. Best practices may vary from location to location or even from company to company. Some times it is best to leave processes as they are as it will produce the best results. The important thing to consider is that SAP should be molded according to what your company’s policies are and not the other way round. Limit Customizations Nestle in the first failed attempt at implementation tried to include a lot of customizations into the SAP software. Even today consultants who are familiar with their GLOBE project or have worked on it claim that Nestle’s SAP system is one of the most customized soft wares. However they have maintained many legacy systems and have decided on integrating these systems with SAP rather than customizing SAP. Nestle’s three tier architectural framework is usually found to be very complex by many consultants. (Glick, Apr 12, 2001) The problem with the high degree of customization is that you hve to constantly hire expensive consultants to make your employees understand the system as well as to maintain them. Simpler systems are more cost effective in the long run than complex systems. Unwavering Top Management Support This point is simply very essential in the case of ERP implementations. As we can see from the initial introduction to Nestle case that top management support was always available to the project even though there was resistance from the employees. These implementation projects usually run into millions of dollars. BEST project total cost was around 200 million$. Such huge spending on a project simply cannot be sustained if top management is not 100% behind the project or if they have other priorities than ensuring the success of the implementation. Universal Buy In Although top management support is the life line of the ERP implementation project but the fact remains that no project can be forced from the top. A carrot and stick policy is very dangerous and may lead to the collapse of the whole organization. All employees should have a stake in the implementation. Their compensation should be made contingent on the implementation. They should also be made aware of the benefits to their department that will be received as a result of the successful implementation. Once they are behind the implementation; they will see it as their project and not the top management’s project. Conclusions Despite the bad press that SAP implementation has been receiving due to many failed projects; the fact remains that SAP implementation remains just like any other major change that the organization tries to achieve.ERP implementation is not the only thing which makes a company successful; it is simply one of the many things. The difference between success and failure of an organization will be an organization’s ability to rally and work through difficult times. A number of lessons have been learnt through the experiences of many organizations which can be taken into account during an implementation. Bibliography Adshead, A. (2002). SAP:The climb gets easier. Computer weekly , 26-27. Ben, W. (2002, May 1). NEstle's ERP Odyssey. Retrieved September 08, 2011, from NEstle: http://www.cio.com/archive/051502/nestle.html Glick, B. (Apr 12, 2001). 7 Days: SAP Software Gives Nestle Sweet Returns. Computing , 4. Olson, D. L. (2004). Managerial Issues of Enterprise Resource Planning Systems. USA: McGraw Hill/Irwin. Steve, K. (2000). Nestle Taps SAP for E Business. Information Week , 185. Read More