8/13/2019 Nestle Struggles EnterpriseSystems

1/3

Nestl Struggles with Enterprise SystemsNestl SA is a giant food and pharmaceuticals company that operates virtually all over the world.Headquartered in Vevey, Switzerland, the company had !!" revenues of #$% &illion and morethan '(,!!! employees at '!! facilities in )! countries. *est +nown for its chocolate, coffee itinvented instant coffee-, and mil+ products, Nestl sells thousands of other items, most of whichare adapted to fit local mar+ets and cultures.

raditionally this huge firm has allowed each local organization to conduct &usiness as it saw fit,ta+ing into account the local conditions and &usiness cultures. o support this decentralizedstrategy, it has had )! different information technology units that run nearly /!! 0*1 AS2"!!midrange computers, 3' mainframes, and !! 4N05 systems, ena&ling o&servers to descri&e itsinfrastructure as a verita&le ower of *a&el. 0nterestingly, despite its size, the company has had nocorporate computer center.However, Nestl6s management has found that allowing these local differences createdinefficiencies and e7tra costs that could prevent the company from competing effectively inelectronic commerce. he lac+ of standard &usiness processes prevented Nestl from, for e7ample,leveraging its worldwide &uying power to o&tain lower prices for its raw materials. 8ven thougheach factory uses the same glo&al suppliers, each negotiated its own deals and prices.Several years ago, Nestl em&ar+ed on a program to standardize and coordinate its informationsystems and &usiness processes. he company initially installed SA96s :2( enterprise resourceplanning 8:9- software to integrate material, distri&ution, and accounting applications in the4nited States, 8urope, and ;anada.Nestl is wor+ing on e7tending its enterprise systems to all of its facilities to ma+e its '!! facilitiesact as a single

8/13/2019 Nestle Struggles EnterpriseSystems

2/3

Be had nine different general ledgers and ) points of customer entry. Be had multiple purchasingsystems. Be had no clue how much volume we were doing with a particular vendor &ecause everyfactory set up their own vendor masters and purchased on their own.CSoon after this meeting, the mem&ers of the team offered a three< to fiveect.C *y =cto&er, Nestl had esta&lished a pro>ect team of '! top &usinesse7ecutives and 3! senior information systems professionals. hey developed a set of &est practicesto &ecome common wor+ procedures for manufacturing, purchasing, accounting and sales. Asmaller technical team was set up that too+ 3) months to e7amine all data for every item in alldivisions and set up a common data structure for the whole company.At first the pro>ect decided not to use SA96s supply chain software &ecause that module was &randnew and appeared to &e ris+y. 0t turned instead to 1anugistics for its supply chain module. heteam did decide to use SA96s purchasing, financials, sales, and distri&ution modules. All of thesemodules would &e installed throughout every Nestl 4SA division. he plan was completed &y1arch 3//) and development wor+ &egan in @uly 3//). he pro>ect was called *est for C&usinesse7cellence through systems technology.C0n @une !!!, Nestl SA followed the lead of Nestl 4SA and contracted with SA9 to deploypurchase and deploy the new version of their software called mySA9.com. he new system will notonly standardize and coordinate the whole company6s information systems and &usiness processes,&ut it also will e7tend SA96s enterprise software to the Be&. he new system will allow each Nestlemployee to start wor+ from a personalized Be& page lin+ed to his or her >o& function. heemployee6s >o& is structured to conform to the C&est practicesC defined &y SA9 for (!! wor+ roles.According to @ean ;laud ispau7, senior Nestl vice president for group information systems, C0t isan e7ceptionally simple way to ma+e sure that everyone does the same >o& in the same way.CNestl will also create up to five computer centers around the world to run mySA9.com enterprisefinancial, accounts paya&le, accounts receiva&le, planning, production management, supply chainmanagement, and &usiness intelligence software. Nestl pu&licity announced that the SA9 contractwould cost #!! million, plus Nestl would add an additional #)! million for installing all the

system for the glo&al company. However, a year after the announcement of the pro>ect, AnneAle7andre, an HS*; Securities analyst in Fondon who covers Nestl, downgraded her Nestlrecommendation. Her reason was her dou&ts a&out the success of the pro>ect. C0t touches thecorporate culture, which is decentralized, she said, Cand tries to centralize it.C She added, Chat6sris+y. 0t6s always a ris+ when you touch the corporate culture.C @eri unn agreed after here7perience with *est.he ma>or pro&lem that *est faced in the 4nited States was that &oth Beller and most of the +eysta+eholders failed to realize how much the pro>ect would changed their &usiness processes. itsoon was clear that they had created as many pro&lems as they had solved. 0n fact a re&ellion hadalready ta+en place when the team moved to install the 1anugistics module.he pro&lem &egan during the early planning stage of the pro>ect when the staffs that would &edirectly affected &y changes were not included in the +ey sta+eholders6 team. unn summed up theresults, saying CBe were always surprising Dthe heads of sales and the divisionsE &ecause we would

&ring something up to the e7ecutive steering committee that they weren6t privy to.C *y the&eginning of !!! it was clear that no&ody wanted to learn the new processes, that no&ody wantedto ma+e the changes. he lower level wor+ers did not understand how to use the new system andalso did not understand the changes. No&ody had &een prepared for the new ways of doing things,and their only hope was to call the pro>ect help des+. unn said the help des+ reached aphenomenal (!! calls a day. hey did not want to learn the changes. 8ven the divisionale7ecutives were confused and angry. No one seemed willing to ta+e the e7tra step to learn what todo. urnover among the employees who were to use the 1anugistics software to forecast productdemand reached $$ percent. hose who remained found it easier to use their familiarspreadsheets.0n the rush to &e done on time, the team had failed to integrate the various modules. herefore,for e7ample, while the purchasing departments used the appropriate systems and data names,their systems were not integrated with the financial, planning, and sales software. As a result,

when a salesperson gives a valued customer a special discount rate, it was entered in the newsystem, &ut the accounts receiva&le department would not +now a&out it and would thin+ thecustomer did not fully pay its &ill.

8/13/2019 Nestle Struggles EnterpriseSystems

3/3

he team finally called a halt to the pro>ect in @une !!!. Nestl removed the pro>ect coect leader. 0n =cto&er, unn held a threeect, and as a result the mem&ers of the pro>ect teamhad lost sight of the &igger picture. hey >ust focused on the technology. hey now needed tointegrate the e7isting components and to complete the wor+ on the sales and distri&ution modules.

unn also decided she now wanted to switch the supply chain module to the new SA9 system&ecause it had &een improved enough since her re>ection of it in 3//). *y the time the retreat wasended, the team decided to start the whole pro>ect over again. 0t would first determine the&usiness requirements and then decide on a new completion date, a&andoning the earlier date.hey also agreed to educate those affected so that all employees would +now not only whatchanges were ta+ing place &ut also why, how, and when those changes would happen.he pro>ect team created a detailed design and pro>ect road map &y April !!3. Nestl alsoassigned one person, om @ames, to &e *est6s director of process change, giving him completeresponsi&ility for liaison &etween the divisions and the *est pro>ect. he team also &egan ta+ingrepeated surveys of the effect of the pro>ect on employees and how they were dealing with it.@ames and unn also &egan holding more meetings with the division heads. As a result of theinformation gathered in this way, @ames and unn determined the manufacturing users were notready for the many changes, and so the rollout of that pac+age was delayed for si7 months.he new pro>ect appears to &e paying off. All of Nestl 4SA are using the same software and data.he company not only has &een a&le to produce &etter sales forecasts, &ut unn said the factoriesare following these &etter num&ers. he company said it has already saved #(' million &y spring!!. And Nestl SA has learned from that pro>ect and e7pects to have an easier success with itspro>ect. And that, she says, is despite the fact that unn only had to deal with eight or nineautonomous divisions while the glo&al headquarters was dealing with )! autonomous countries toaccomplish the same thing.Nestle6s glo&al organization is &enefiting from standardizing its data and &usiness processes aswell. *y the end of !!", a&out ten percent of Nestle6s glo&al food and &everage &usiness wasoperating with standard processes, data and systems. Bithin the ne7t few years most of thecompany6s food and &everage &usiness will undergo system implementations to &ring them up tothese standards.Sources: ere+ S. ieringer.C8:9 0mplementation at Nestle,C @une ", !!"G CNestle !!"1anagement :eport,C www.nestle.com, accessed April 3, 3!!'G *en Borthen, CNestl6s 8:9

=dyssey,C ;0= 1agazine, 1ay 3', !!GBilliam 8chi+son, CNestl An 8lephant ances,C *usinessBee+ =nline, ecem&er 33, !!!, www.&usinesswee+.comG Steve Ionic+i, CNestl aps SA9 for 8