Case Study: Nestle ERP implementation
Nestle is a multinational company based on Switzerland, was establish long ago in 1866 by Henri nestle which supplies different kinds of food products. Over the period nestle has grown as one of the big company. Nestle USA is a part of nestle company, having seven business divisions: beverage, confection and snacks, food service, foreign trade, nutrition, prepared food and sales. Some of Its popular products in USA were: Alpo, Nescafe, Tasters choice. Its annual revenue was 8.1 billion and 16000 employees were working. In 1992 enterprise resource planning (ERP) system provider SAP introduced the R3 system of client server architecture and Nestle USA has decided to implement R3 ERP system in 1997 and given a project name BEST ( business excellence through system technology). It had estimated cost of $210 million with total IT staff of 250 including outside consultant and estimated time to complete was 2003.To implement the ERP there are two choices; either you change your business process or customize the ERP system according to your business process. The CIO of nestle USA Jeri Dunn has consulted with the other key stakeholders from finance, supply chain, distribution and purchasing and came up with the idea of changing the Nestles business process to fit in with the ERP system. They assume that the new system would create saving through group buying and facilitate data sharing between subsidiaries. Implementation approach and its impacts
Nestle was implementing a new system but they didn’t include the real user in stakeholder team who will have to face the change in business process. Those were the one working with the system but BEST project has ignored them. In other words, they failed to address the change management. They didn’t communicate with them to set expectation and prepare plan for the implementation. As a result Nestle faced a lot of peoples issue. Employee started to resist new system and no one wanted to learn the new system of doing things, which created a pressure to divisional executives and they became affronted with the employee. This has direct effect on the self-esteem of workers. Employee started to feel unsecure and pressurized in the new system and they started to leave the job. Scenario continued and reached 77 precent of employee turnover. Employees are the company’s assets, so Nestle lost their important asset which has impact on their day to day business. That new system created a lot of problems and the help desk was overloaded they are getting 300 calls per day. Nestle USA’s implementation problems did not stop with employee issues. The project team didn’t make a clear integration point between the modules to address the Y2K deadlines. This created the miss communication between modules. When the year 2000 started, the old system where only 2 digits were there to represent the year, created a lot of problems. Nestles BEST project was also infected by this confusion of Y2K deadline and the project was stopped due to lack of improper integration planning. Project team combined its separate brand in hurry to meet the time goal of the project they didn’t count the possible outcome of combining them without proper preparation. The project team, without doing the business process reengineering, necessarily replaced the divisional silos in to process silos. This created the conflict between the division and process silos were not in proper way of reengineering the whole business process of each division. After this big mess up of implementation of new system Nestle USA learned a big lesson about the process of ERP system implementation. The company restarted the SAP implementation from a claw mark. Stakeholder’s team reassembled to start the project. Now they have realized the importance of divisional heads and the end users, so they boost the support from divisional heads and communicate to the employee about the new system and its impact on...
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