Analysis of the Information Systems Strategy of Nestle - Case Study Example

Information Management Part Analysis of the Information Systems Strategy of Nestle The Company Profile The company was founded and it is headquartered in Switzerland; it is the world’s biggest beverage and food company. The company employs over 250,000 people and it has close to 500 factories in the world that are situated in 90 countries. Its products are sold everywhere across the world. The company produces over 127,000 different sizes and types of products. This has increased its business as it is capable of penetrating more markets with its many products at an increasing pace (Barnes 2008, p256). Contracts with co-manufacturers are many and majority of them work solely for Nestle. Its primary focus in the past years has been becoming a wellness, health and a nutrition company through the new acquisitions and existing brands (Dickersbach et al. 2009, p181). The brand portfolio of Nestle covers almost all the beverage and food categories. These categories include nutrition (healthcare, infant, weight and performance management), dairy and milk products, breakfast cereals, ice cream, beverages, coffee, chocolate, culinary products (cooking aids, prepared dishes, sauces), pet care, bottled water, and confectionery. Many of these brands have category leadership in the local and global market. Among the international best-known brands include Nestea, Purina, Nescafe, Maggi, Nestle and Buitoni. Revenues for Nestle exceeded 100 billion United States dollars for the year 2007 (Dickersbach et al. 2009, p181). The company is run through a decentralized group of companies that promote and rely on the organizational learning of the Group. The headquarter offers guidance, consultancy, and leadership to the local and regional organizations. Identification of the opportunities within the Businesses and Markets are done by the central competence units and they help the local management in the improvement of business performance (Dickersbach et al. 2009, p181). Information Management in Nestlé The company has numerous supply chains, a number of methods for predicting demand and infinite variety of ways of collecting payments and invoicing customers. The complexity of these processes has become very difficult to manage and they have been a bottleneck for the company. The Nestlé’s Chief Executive, Peter Brabeck standardized the operations around the world in 2003 in order to overcome some of the difficulties faced by the company. GLOBE (Global Business Excellence programme) was then initiated and its aim was to bring all the Nestlé’s operations to utilize a single computer system for all of its financial, manufacturing and sales operations (Barnes 2008, p256). The company had 14 different types of enterprise resource planning (ERP) systems from the Germany SAP AG in place in different nations. The ERP programs seek to monitor, control and plan all the activities within the organization by utilizing a totally integrated computer system. The main component within the ERP systems is the integrated database that has the ability to store data for a variety of system modules such as the operations, finance, HRM and others. Thus, the ERP systems incorporate all the information systems that operate various functions within the organization (Barnes 2008, p254). Figure 1: Enterprise Resource Planning (ERP). Source (Imran 2011, p1). The Nestlé’s senior management had realized that market by market approach to control and planning could not work anymore and the continuation with the existing systems was not possible. The old system was replaced by a new system; the system was based on the new internet based software referred to as the mySAP.com (Barnes 2008, p256). The new system was meant to take care of all the back office operations such as running factories, dealing with suppliers, taking orders, paying invoices and calculating demand. Administration and factory common sets of processes would be the business backed by the single collection of information systems. The main aim of the new system was to redesign the Nestlé’s many and huge supply chains, every product within the company, alleviate any wasteful purchasing practice, obtain the best administrative practices, and distribute them within the company’s operations. A practical example is the reduction in the number of suppliers from 600,000 to 167,000 and save 750 million US dollars in a year (Barnes 2008, p257). With the Mysap.com architecture, rapid implementation of the workplace is possible. The duty based workplace templates are designed for specific sections within the Nestle Company. The pre-customized templates are subsequently adapted and configured in an environment that is particularly hosted for Nestle by Sap. The templates will assist the individual business units within the Nestle Company to smoothly implement standard workplace configurations, the best business practices, and adjust them to the particular needs of the individual markets. The workforce will be defined individually and roles specified and this is important in the creation of an effective working environment (Shajahan 2007, p232). By 2008, Nestle had deployed GLOBE in nearly all of its operations globally and they included distribution centres, sales offices and factories. Nestle has the opportunity for delivering great internal efficiencies through the leveraging of GLOBE. The SCM (Supply Chain Management ) covers the following areas within GLOBE: (a) Procurement, from the purchase of materials to the payment of suppliers. Emphasis is put on the establishment of common procurement process and strategic procurement of goods and services for all the companies. Purchase is organized regionally or globally and locally in case there are clear benefits. The employees are empowered to conduct operational level procurement and enhanced information is made available to sustain the buyers through contract negotiations. (b) Customer Service entails the order management process (direct delivery is included) and processes such as returns, refusals and claims. (c) Material Handling – this includes network optimization, providence of real time data, transport cost minimization, and physical logistics optimization. (d) Demand and Supply Planning – it covers tactical, operational, and strategic planning (Dickersbach et al. 2009, p183). Nestlé’s Response to Information Management Strategies GLOBE is the biggest reengineering programme that Nestle has ever undertaken. Its implementation was faced with a number of challenges that made the programme look like a failure. The objective of the programme was to enhance the efficiency of the businesses performance on an international scale through the analysis of all the business practices and the creation of new processes that were to be undertaken by Nestle. The GLOBE programme is based on three key principles; (a) Good practice, (b) Standardization of management and data, and (c) common technologies and information systems (Atos Origin SA 2007, p2). Nestle is aiming at expanding the enterprise system to all the 500 facilities and make them act as single minded business. Once the GLOBE project is completed, Nestle will be capable of using sales information from the retailers on an international basis to reduce spoilage and overstocking, and calculate the effectiveness of the company’s promotional activities (Pearson 2010, p1). Despite the challenges faced before and during the implementation, the process was successful and by 2001, the design was completed and it gave the project team a clear map to follow (Worthen 2002, p7). There were still poor relationships between the project team and the divisions. The director of the process change at that time, Tom James and Dunn began meetings with the division heads. They also began performing frequent surveys in regard to how the employees were affected by implementation of the new systems and changes that came with the implementation. Nestle had to some point delay for six months the release of a new co-manufacturing package based on the information that indicated that the targeted users were not well prepared to adjust to the process changes (Worthen 2002, p7). EPR projects are well known for consuming a lot of time and huge sums of money. However, Nestle seems to have fallen on the higher side for both the money and time. The new SAP system has made it possible for Nestle to save on the supply chain cost and reduce inventory. With the new system in place, business processes and common databases have lead to demand forecasts that are trustworthy for a variety of Nestle products (Worthen 2002, p7). The company is able to put more emphasis on the distribution center level and permit the company to redistribute expenses that emerge when too much of the same product is sent to a single place and not adequate to the other, and reduce inventory (Worthen 2002, p8). By 2002, Nestle USA ascertained that they had saved over 325 million US dollars. A big chunk of the savings came from the section of supply chain improvements and in particular the area of demand forecasting. The old system, the demand planner (the number) used to turn to the factory and the factory would assert that the demand planner did not know what he was talking about; then the factory would change the number again. With the new system (SAP) in place, business processes and common databases lead to a more trustworthy forecast demand for a variety of the Nestle products (Dieringer 2004, p1). Other than saving money, the new system enabled Nestle USA to come together as a unit (one organization). The 29 different Vanilla brands problem was already solved and with the possession of a common database, each of the factories gives the same reference to the vanilla products. They also allow the use of common processes that simplify the operating procedures and permit the centralization of specific functions such as the development of training procedures. There is now no need for the customization of the training procedures for each of the factories. Each of the location follows the same training procedures and the training materials can be developed once. Any employee of Nestle USA can relocate to a different factory and there is no need to adapt to the local processes (Dieringer 2004, p1). The same successes were experienced by their UK counterparts with the implementation of EPR. They were able to recover the money spent on the implementation of the system within two years and they were able to experience reduced inventory levels, a better attitude towards business processes, and the fostering of a culture of continuous improvement (Dieringer 2004, p1). Nestlé’s challenges and experiences in the implementation of the EPR systems indicate that the success and effective utilization of the information systems to innovate the processes entirely depends on the management of a number of interactions and it is not a constricted technical project (Hinton 2009, p203). Part 2 The Nortel case represents a company that is in the process of implementing an EPR system. The system is not complete and there are a number of items in the EPR system that needs to be implemented. Since the company deals with the transfer of goods and services, a Supply Chain Management (SCM) should be part of the EPR system to be implemented. From the study, it has been noted that the success and effective utilization of the information systems in the change of the processes within an organization need the effort of all the stakeholders of the organization. The Chief Information Officer should outline how all the members of the organization can become useful in the implementation of the information systems. It is imperative to note that one of the possible failures in the implementation of these systems is rejection to change the processes of the company. The stakeholders should be well informed of the changes to take place and their possible effects. In most cases, the implementation of information systems consumes a lot of time and money. The project team should take into consideration and solve the previous problems of the organization in the process of implementation of these systems. Ignoring the problems can lead to a lot of time and money spent on implementing the systems and possible failure as a result of un-conducive environment. The environment should allow the swift implementation of the systems. From the case above, there were a number of problems that were threatening the successful implementation of the information systems. References Atos Origin SA. (2007) Integration of the production control system with SAP [Online], Atos Origin. Available from < http://www.es.atosorigin.com/NR/rdonlyres/DB302820-7002-492D-AC3F-052071C54141/0/CS_Nestle_EN.pdf> [Accessed on 22 April 2011]. Barnes, D. (2008) Operations management: An international perspective. London, UK: Cengage Learning EMEA. Dickersbach, J. T., Knolmayer, G. F., Mertens, P. & Zeier, A. (2009) Supply chain management based on SAP systems: Architecture and planning processes. Berlin, Germany: Springer. Dieringer, D. S. (2004) ERP implementation at Nestle [Online]. Available from [Accessed on 22 April 2011]. Hinton, M. (2009) Information management in context. Open University. Imran. (2011) ERP/MRP implementation [Online], Revolutionary Technologies: Virtual Strategists. Available from [Accessed on 22 April 2011]. Pearson. (2010) Nestle’ struggles with enterprise systems [Online], Pearson. Available from [Accessed on 22 April 2011]. Shajahan, S. (2007) Management information systems. New Delhi, India: New Age International. Worthen, B. (2002) Nestlé’s ERP odyssey [Online], CIO. Available from [Accessed on 22 April 2011]. Read More