ISY2005 Enterprise Resources Planning Systems

Enterprise resources planning systems happens to be very important when it comes to solving the problems of a company (Abthorpe, 2004 p. 45). Implementing ERP systems assists companies to be able to coordinate systems, Consolidate data, re-engineer business processes and empower users effectively. However this does not happen to a company easily. The company must incur human issues, implementation nightmares and high financial cost (Grabot, et al., 2008 p. 55). Many are the times that the implementation of these systems has become a challenge thus failing miserably. Despite the obstacles incurred when trying to implement an ERP system every ERP implementation is a lesson for other companies to learn (Davison, 2002 p. 108)

I choose to study Nestle USA case study from the book enterprise system of management because it is one example of a successful ERP system as it also contains both the success and failure of the system (Markus& Tanis, 2000 p. 66). There were a lot of challenges when planning for the project, but the whole project was successful because it has helped the company save a lot of money.

Nestle organisation and the problem or opportunity it faced.

The executives of this company noted that the company needed to standardize the different business standards for it to compete effectively. This rollout had to take a period of three years (Davenport, 2000 p. 22). The implementation was to cover the supply chain, demand planning, procurement, production management, direct procurement, business-intelligence module, accounts receivables, account payable and mySAP.com financials (Grabot, et al., 2008 p. 78). However, before the Nestle SA could decide coming up with an ERP system Nestle UK had already implemented one.

Nestle UK had already implemented an SAP which had taken about five years in the 18 UK manufacturing locations (Grabot, et al., 2008 p. 95). The implementation of this ERP system by Nestle UK had ended in 1999. This ERP system happened to be the largest in the UK with around 6000 users (Abthorpe, 2004 p. 177). The reason behind implementing ERP systems for  Nestle UK was to have  the size of the organization leveraged as well as re-engineering work practices and tightening the supply chain.

The other Nestle ERP implementation story is based on Nestle USA. In 1997 Nestle had started implementing its own ERP project which was referred to as Business excellence through systems technology (Berente, et al., 2010 p. 205). It was meant to take around six years thus expected to end in 2003(Boersma & Kingma, 2005 p. 45). This project was worth around $200 Million. Its implementation included accounts payable, sales and distribution, accounts receivable, Purchasing and financials. Just like the other Nestle divisions, the basic reason why ERP system had to be implemented was to unify the business (Boersma & Kingma, 2005 p.300).

For example, the Nestle USA implemented the ERP system based on the CEO Joe Weller vision where he wanted to see a ‘'one Nestle'' thus making the company highly integrated (Clemmons &Simon, 2001 p.66). Before the implementation of the ERP system, Nestle USA had 28 points where customers could enter through and had nine different ledgers. The main reason why ERP system was being adopted was to lessen this number to one (Berente, 2010 p. 89). The vanilla story happened to be the most interesting in Nestle USA problem. Before the implementation of ERP, USA Nestle Company was not one company instead every business location acted as on its own and made its decisions. In 1997 a team that was carrying out an analysis discovered that Nestle USA companies used to pay 29 different prices for vanilla to the same vendor.

This situation came about because each business used to negotiate with the dealer on their own. Thus the vendor would adjust the price according to how the factory would pay (Berente, ,2010 p. 53). The funniest thing was that every factory had a different name for vanilla. While if the business were one vanilla would have been referred by one name to all companies. It was even difficult to carry out the cost of production for vanilla in the different companies

            Regardless of these three Nestle cases, the goals behind the implementation of ERP system were similar. That is in every case the primary goal was to bring together the operations of the different manufacturing plants together to be able to leverage the buying power and size (Batenburg, et al., 2002 p .254). Moreover, it was necessary to control data and centralize it, to make sure that reporting, forecasting, and financial data was accurate and consistent (Siregert,2011 p. 34). The fact that each company used to act on its own Nestle could not effectively compete thus it was necessary to develop one system which could be used by all manufacturing units for the company to be able to compete effectively.

The implementation strategy that Nestle Company adopted and the process by which it was selected and implemented.

            The term ERP implementation has become a common term in current years (Davenport, 2000 p. 67). However these implementations are known for failures, and many businesses are significantly affected not only because of the high price but also because of the adverse effects they are likely to bring to the company (Markus& Tanis, 2000 p. 93). Vendors Such as SAP are making many efforts to try and correct this reputation and have made a lot of improvement in reaching this goal (Besson, & Rowe, 2001 p. 345).  Years back the companies used to pay a lot of consultation charges. However, this day the consulting cost has dramatically dropped. For those companies that are thinking of implementing ERP systems, they can look at those businesses that implemented theirs years ago (Besson, & Rowe, 2001 p.80).

Thus there are many great lessons to learn from past failures and successes of different companies. For a company to have a successful ERP implementation strategy  they should not make the product according to the way they wish it to be rather they should consider other people who would like to change the process to meet the different package (Clemmons &Simon, 2001 p.32). The First implementation usually takes a more extended period while the second implementation faces a lot of resistance (Wu, 2006 p.209). However, most companies need to have another approach since there are problems in the organization that the software may not solve and also other processes may not fit in the given software. Moreover, savvy project leaders known to have a lot of experience in the ERP implementation tell that there is a lot of pitfall one should avoid during ERP implementation.

            One should not pick a package based on how it is being demonstrated instead one should ask questions and do a lot of research (Wu, 2006 p. 89). An ERP system happens to be a very costly investment thus it is necessary for project managers to make sure that what they are choosing best suits their companies (Gopalakrishna, 2005).

The other thing is to make sure that the management is committed. Not involving the top management is likely to lead to the project failure (Davison, 2002 p. 32). Management commitments are usually high at the start of a project, but as the project continues, the commitment usually goes down. Thus it is vital always to keep the management committed (Clemmons &Simon, 2001 p. 300).

One should also avoid high customization; sometimes it seems easy to customize an ERP system to fit the needs of business (Siegert, 2011 p. 110). However, customization always affects a project by making the project timeline long thus making costs to be high.

The final thing to avoid during the ERP implementation is not to taking the training seriously. Many people receive the training for the new system, but they do not continue to use it again (Wu, 2006 p.118). Therefore users need comprehensive training, and they also need to be involved when testing the system.

Difficulties Nestle organisation may have faced in adopting the system, and the preparatory steps that were taken to facilitate implementation.

            However Nestle USA they did not look at the successes and failures of other companies. Throughout implementation, they made a lot of mistakes that almost brought failures to the project (Alvarez & Urla, 2002 p. 65).At the beginning of the project 50 executives and some other 10, IT experts came together to come up with the best practices for the Nestle USA manufacturing units. Their main aim was to come up with best practices for all organizations (Alvarez & Urla, 2002 p.33). Moreover, a technical team was tasked coming up with shared data structures for the whole organization (Davison, 2002 p. 24). Even before the implementation started the system began to face resistance from the employees.

The main opposition emerged from the fact that the key stakeholders of the implementation team never included the people who were to be directly affected by the system (Tonn& Stiefel, 2012 p. 55). These happened to be the beginning of Nestle USA issues. Come 2000 the implementation of these systems started becoming a disaster (Venk, 2001 p. 160). Employees were not in the position of using the new system (Klein, 2008 p. 329).The executives tasked to carry out the implementation was also confused because they were not involved in the implemention of the system. They also did not want to take part in the implementation process (Batenburg, et al. 2002 p. 330). These significantly affected the company because employee’s morale went down thus making the turn over to go down to. A lot of issues persisted in this company.

Come the period during the rollout a lot of technical difficulties emerged (Batenburg, et al., 2002 p. 168). The rush to meet the Y2K deadline made the project team to assume some integration points. There was no communication between the different modules. For example, if a salesperson offered a discount to the person the account receivable is likely to not know of it. Customers used to pay their money, but the invoice would appear like they only partly paid.

On June 2000 Nestle USA had to stop the project rollout where the project manager was demoted, and the project was reassigned to Switzerland (Tonn& Stiefel, 2012 p. 98). Some critical executives from Nestle USA had to go for a three-day conference to come up with the future of the project. Out of these meeting, they decided to redefine the business requirements and tailor them to the project timeline (Stoel& Muhanna, 2009 p.53).  These process took a longer time but came up with a good plan which the project team needed to follow. Another director to act together with the project team and other teams. When all these issues were solved, it became possible to continue with the project.

An assessment of how successful was the adoption of the enterprise system and any success metrics that were used.

Although there were a lot of challenges when implementing the ERP system for Nestle USA, the system has helped the company to gain a lot of profits. In 2002 Nestle USA was thought to have saved around $325 (Klein, 2008 p. 298). Most of this savings were obtained from supply chain especially the area of demand forecasting (Stoel& Muhanna, 2009 p. 377). With SAP in place having a typical business process together with a database brought about a good demand forecast for the different Nestle products

             Apart from being in a position to save money, Nestle USA has integrated to be one organization. They no longer have 29 brands of vanilla instead of vanilla has been given a common name (Wills, 2001p. 433). These organization also use common processes that make operating procedures simple while other functions in the organization were centralized. For example, training no longer takes place at the different manufacturing units rather it takes place in one location. Moreover, an employee can quickly relocate to another Nestle factory.

            Nestle UK also greatly succeeded since they implemented the ERP systems (Sunderraj, 2003 p.278). They able are to gain back all the cash they spent on the system within a short period. Just like Nestle USA, Nestle UK has a seen a reduction in inventory because there is a lot of control over inventory (Markus& Tanis, 2000 p.65). The implementation of this system has assisted in bringing out a culture of continuous improvement.

Recommendation

By looking at this case study, many other companies can learn a lot of things. Some things are told directly by the Nestle executives while some happen to be observations that are made from the case studies (Gopalakrishna, 2005 p. 220). 

One of the main lessons that can be drawn from these case studies is that for the implementation to succeed users need to be part of the planning team in the implementation process (Sunderraj, 2003 p. 230). Nestle had to learn this out of their own experience. It is complicated to come up with a work process without involving the people who are said to do the work. It is usually straightforward to involve the company team in the implementation process than bring new people because one has to train them on the different working processes of the organization

            Another lesson that can be drawn from this case study is that the implementation process is not anything that companies should be given a specific time to be completed. It is not essential for the implementation to be done in a hurry without fixing the critical issues (Verreault, 2006 p. 17). Besides it always necessary to first come up with the goals of the business  and later come up with an excellent timeline to accomplish the given goals

            Also, companies considering to do ERP implementation should first train the employees (Sunderraj, 2003 p. 6). Training is import when it comes to implementing ERP systems because it prepares employees who will commonly be using the system to carry out the day to day activities of the business. For most software projects, training get to be forgotten. Employees need to receive training throughout the project. However, if a chance is there, the end user should be given a platform to air his view about the new system

Also an organization needs to know the business process re-engineering that should be integrated with the ERP implementation (Besson, & Rowe, 2001 p. 27). ERP implementation gives companies a chance to adopt best practices or redesign business processes in an organization. However, the re-engineering team should take a lot of caution during his process because re-engineering is not necessary (Venk, 2001 p. 25 ). However, best practices also vary based on location. Trying to come up with some new operations in every manufacturing unit is an excellent way to bring a lot of resistance and conflict in the organization. ERP system implementation usually gives an excellent reason to re-engineer processes, but a lot of care needs to be taken.

Another recommendation for the ERP systems is that we need to put a limit on the number of customization done to the system. When customization increase the timeline also increases and cost also increase (Verreault, 2006  p. 23). Because vendors mainly sell ERP systems, they also need to be generic enough such that they can resell too many organization. This means that the software should be customized to meet the needs of customers or the organization processes should be re-designed based on the software. As we indicated earlier, it is always necessary to know which methods should be redesigned. Thus making a decision which processes need re-engineering or which process of software should be customized is commonly a balancing act.

Lastly is that when ERP system is being implemented one should look at how acceptable they are. One should seek from top management whether the system should be implemented or not. Everyone in the organization should be in a position to support the process for it to be successful (Verreault, 2006 p. 77 ). If Nestle USA new this they would have started with changing the different methods and later achieving a buy-in .lastly they would end by installing the system (Siegert, 2011p. 34). If they would have started with installing software they were likely to end up with installation and not the implementation (Ramdani, 2009 p. 66). There is a difference between installation and implementation. The end users must be involved in the implementation process because they are the one to use the end processes and systems. If they are kept behind their morale is likely to be affected.

Conclusion

            In conclusion, ERP implementations are not like other system implementation that the company engages in (Ramdani, 2009 p. 236). Despite how the press portrays ERP systems as a bad thing it is very possible to have a successful rollout. Just like Nestle USA, many companies experience a lot of problems while trying to implement these systems but they usually sail through (Gopalakrishna, 2005 p. 57). One thing that organizations need to know is that their plans should be flexible enough such that they can change in case of any obstacle that may stand along the way. Many companies have done ERP implementation which should act as a lesson to other organization. ERP systems are mainly involved in combining data sources, re-engineer processes and also it involves a high number of users and locations.

List of references

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