The essay portrays the various difficulties associated with improper implementation of systems, inadequacy of data, lack of standardization of work procedures and methods. It throws light on the fact organizations gets affected because the top management fails to understand the nuance of systems integration and merely treats the whole job as purchase of software. It also highlights the additional costs involved in debugging wrong procedures or approaches.
The essay is primarily based on the case of the food and confectionary giant Nestle, SA. Nestle, best known for its milk and chocolate products operates from more than 500 locations across the world and has its operations in more than 16 countries. The case draws our attention because it projects the need for systems integration approach, measures to be taken in selection of ERP modules and vendors, the number of difficulties a business organization can encounter in integrating some of its key activity areas such as centralized purchasing, linking the supply chain, distribution, manufacturing and sales functions. The essay critically exposes the limitations systems integrations approach can pose business units to if they fail to use the definition given by Elliot.G regarding ERP. Elliot defined ERP as "A key feature of ERP system is the ability to link areas of businesses that are globally distributed" (2004, pg.202) and customize its applications to suit its business needs.
Nestle, operating in more than 500 locations and with a business volume of around $46.6 billion is a huge enterprise, controlling and planning operations of that magnitude is a colossal task. Nestle, had its own Electronic Data processing and Systems departments to cater to its needs. They had around 80 systems units using a range of IBM mainframe computers and UNIX machines to process and ensure information is exchanged properly between all the business units. A large organization such as Nestle believes in decentralizing its purchasing, marketing and even production activities. They decentralize the above mentioned activities so as to suit the cultural needs, values, preferences of customers regionally. They focus at offering products depending on the preferences of the customers. This customization of products helps them in leveraging their market positions globally.
Rationale for ERP in large multinational organizations such as Nestle:
Areas of concern for Nestle in this case are the amount of expenditure it is incurring in purchase of raw material, damage of material in the ware house and supply chain problems. As they do not have a centralized electronic data processing unit it is unable to compare and analyzes prices paid in purchase of raw material from a single vendor. For any organization it can be a serious limitation in terms of information, time and money. In order to overcome this limitation Nestle decided to go for an ERP.
Organizations before they decide to go for ERP packages do need to evaluate their organizational needs. Information technology for managers a book from ICMR in a chapter named as Enterprise resource planning suggests that "before initiating the process of ERP implementation, the management should identify the