Derek S. Dieringer
Enterprise Resource Planning Systems
June 24, 2004
At first glance, Enterprise Resource Planning (ERP) systems seem to be the silver bullet for every company’s problems. In one fell swoop, implementation of an ERP system offers a company the chance to re-engineer business processes, coordinate the systems of geographically dispersed locations, consolidate data, and empower users by giving them access to all the company’s data in real time. Of course, these opportunities come at a high price in terms of financial cost, implementation nightmares, and human issues. Often these implementations fail miserably as they run behind schedule and over budget; other times they are successful. Regardless of the outcome, each ERP implementation holds valuable lessons to be learned for companies considering their own ERP implementation.
The Business Case for an ERP
The business case for implementing an ERP system can be seen by examining any one of three Nestle stories. Nestle SA is the parent company of the candy-making giant and is headquartered in Switzerland (Konicki, pg 185). In 2000 Nestle SA decided that it wanted to leverage its size and begin acting like the giant it is. To do so, it signed a $200 million contract with SAP to roll out an ERP system to its 230,000 employees in 80 countries around the world (Olson, pg. 53). In addition to this sum, Nestle SA also committed to an additional $80 million to be spent on consulting, maintenance, and upgrades (Konicki, pg. 185). Executives at Nestle SA realized that the company needed to standardize its business processes if it wanted to be competitive. The rollout was scheduled to take three years for Nestle SA’s largest sites with the others to follow. Included in the implementation were the mySAP.com financials, accounts payable, accounts receivable, planning, production management, procurement, direct procurement, supply-chain, demand planning, fulfillment, and business-intelligence modules (Konicki, pg. 185).
Prior to the Nestle SA ERP decision, Nestle UK had already implemented an ERP system. The British subsidiary of Nestle SA implemented SAP R/3 over a period of five years in 18 UK manufacturing sites (Glick, 7 Days, pg. 4). This implementation wrapped up in 1999 and was the one of the UK’s largest ERP systems with over 6,000 users (Glick, Enterprise, pg. 24). As with the Nestle SA deployment, the goals of the Nestle UK implementation were centered on leveraging the size of the organization as well as tightening up the supply chain and re-engineering work practices and processes (Glick, 7 Days, pg. 4).
The third Nestle ERP implementation story involves Nestle USA. Nestle USA is the $8.1 billion U.S. subsidiary of Nestle SA. In 1997, Nestle USA began its own ERP project known as Best (Business Excellence through Systems Technology) (Worthen, pg. 1). Scheduled to run over the course of six years ending in the first quarter of 2003, this project was budgeted at well over $200 million and would implement five SAP modules: purchasing, financials, sales and distribution, accounts payable, and accounts receivable (Worthen, pg. 1-3). Similar to the other two Nestle divisions, the goal behind this ERP implementation was unification. Additionally, the project would solve Nestle USA’s Y2K woes (Worthen, pg. 3). In the case of Nestle USA, the ERP was part of the vision Nestle USA Chairman and CEO Joe Weller referred to as “One Nestle” that would be responsible for “transforming the separate brands into one highly integrated company” (Worthen, pg. 2). Prior to the implementation, Nestle USA had nine different general ledgers and 28 points of customer entry (Worthen, pg. 2). The goal of the ERP project was to bring these numbers down to one. One of the most interesting views on the Nestle USA problem is the story of vanilla. Prior to the ERP implementation, Nestle...