The Implementation of Enterprise Resource Planning ERP at Nestle - Coursework Example

TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION About the Company: Goal on Information & Knowledge Management: Sign Posting DATA, INFORMATION & KNOWLEDGE MANAGEMENT What Nestle has to do in Current Information Age? Data Details of Nestle: Database Database Administrator EG in Nestle Knowledge Management Tacit Knowledge NEEDS OF THE COMPANY FEASIBILTY OF IMPLEMENTING ERP SYSTEM Technical Feasibility Economic Feasibility Legal Feasibility Operating Feasibility Scheduling Feasibility IMPLEMENTATION METHODOLOGIES CHANGE MANAGEMENT ISSUES RECOMMENDATION & CONCLUSIONS EXECUTIVE SUMMARY “I expect global corporations to be around but to be constantly changing. The balance that you can strike between doing things efficiently and responsibly is being changed by technology. It is allowing corporations to do things in ways they couldn’t have dreamed of before. Adapting to these technologies is of fundamental importance for our society.” (Donald John Roberts, Stanford University Graduate School of Business) Nestle is the world leader in consumer products. Its goal on information and knowledge management include Build and adjust Nestlé’s common business practices globally. Connect and support Nestle on the inside in order to be more globally competitive on the outside and use e-business to its maximum advantage. The information needs of Nestle in the present and future are very vital to its business operations and processes. As the systems are not integrated and different divisions operate their own information systems, it becomes vital to standardize these processes in order to receive timely and accurate data to remain competitive in the market. The benefits of an ERP system in Nestlé’s case are very large. It could standardize the business processes and work around the globe with employees and managers accessing one database and getting the same information no matter in what part of the world they operate. Decision making at all levels of management will be enhanced with range of capabilities that could help in managing performance by delivering consistent and accurate business information and knowledge. The major risk is that it could become unsuccessful if any small mistake occurs in the implementation process. The risk could also be associated with employee resistance and overall management non-cooperativeness. The overall success of ERP implementation depends on the attitudes and willingness of the people in the organization as to how far can they go to make their jobs easier and ultimately their company competitive globally. INTRODUCTION About the Company: Nestle is the world’s largest food company with its largest industrial home base in Switzerland. It has a workforce of almost 230,000 people working in almost 500 factories situated in 84 countries. The Nestle group includes: Nestle Nutrition Nespresso Nestle Waters Nestle Purina Pet Care Nestle Professional Goal on Information & Knowledge Management: Due to the fact that the company has many groups, it has a decentralized management system. By decentralizing the system and delegating decision making, the local Nestle companies can response to local environments readily. Sign Posting The implementation of DB2 Database Partitioning Function of IBM will pave the way for Nestlé’s future business systems architecture implementation globally. This will provide a high end proof point giving directions for implementation of systems in future. Nestle is being pushed to work on its information and knowledge management initiatives. For this, the company needs to integrate its information systems of its operations all around the globe. Therefore, the company will focus on centralizing its technical infrastructure and maintain its corporate consistency The company has being planning for years for the successful implementation of Globe. It is the Global Business Excellence program which is a worldwide initiative to implement a single set of procurement, distribution and sales management systems DATA, INFORMATION & KNOWLEDGE MANAGEMENT What Nestle has to do in Current Information Age? As mentioned above, Nestle has had a competitive advantage in the industry for years due to its decentralized management. But as the business expands, it would have to integrate its management and resources database around to globe to make it centralized so that readily information and knowledge can be available to all its group and employees in every part of the world. Data Details of Nestle: It becomes very difficult for all the operating Nestle locations to keep the data updated at once in all its groups. Nestle has a storehouse of production data of daily business operations as well as data on sales and financial reports. These warehouses quickly become large due to the size of the organization Database The company has had many database servers and systems from many different vendors as per the requirement in different countries of operations. These include UNIX systems from IBM, Digital and HP, Oracles Version 7 relational DBMS; the German firm SAPs integrated material, distribution, and accounting applications. (Greenbaum) Database Administrator The database administrator of Nestle is IBM and SAP who are working together in collaboration for the implementation of globalized integrated or centralized system. EG in Nestle Reliable information is based on reliable data. Nestle needs to access, assimilate, and examine data from various different sources. The data sources are managed through the company’s database server where any employee can get the information it wants but that information will only be limited to the divisions. There is a difficulty in cross-information exchange among the employees. Knowledge Management An effective content management system combines the internal knowledge within the organization with the external perspective that can be found through a strong collection of global news and business information. In the past, there was very little external information on Nestlés intranet (Creating the right mix: Content and Technology). Tacit Knowledge The tacit knowledge at Nestle is taken very seriously as agents are encouraged to report activities. In addition to this they are encouraged to issue trends daily and hourly. The reason that Nestle is so successful is due to its ability to listen to customers and respond quickly on tacit knowledge. On the other hand, if explicit information was being used, it would take time for any issue to be discovered and then reported and analyzed. For example, Hitachi consultants quoted “customers were calling in with concerns about the amount of caramel in their Caramel Crunch Bar. Taking this customer intelligence very seriously, the agents relayed the information to the manufacturing plant. Within hours the problem was solved. It turns out only one third of the bars were receiving the proper amount of caramel. Instantly taking that tacit knowledge and implementing in restructuring the caramel delivery mechanism, the candy bar quality was quickly brought up to par. In addition, the call volume decreased and customer satisfaction increased “(Knowledge Management: The ROI of Employee Braintrusts) NEEDS OF THE COMPANY Nestle has its strategy based on the information system. Therefore the reliability, scalability and manageability of its system become very important. Data management is the heart of all the systems at Nestle as it is used to forecast the strategic data consolidation. The company has different information technology units installed globally with no standardization. Therefore the need of the company is to: Make its worldwide business act as a single-minded e-business Standardize and coordinate its information systems and business processes (Nestlé Struggles with Enterprise Systems) “leveraging the size of the organization as well as tightening up the supply chain and re-engineering work practices and processes” (Dieringer 2004) To develop and implement an end to end business solution for the business systems and processes globally. FEASIBILTY OF IMPLEMENTING ERP SYSTEM Technical Feasibility The integration between departments (accounts receivable department, brand department, sales department, distribution department, vendors) would make the process of information flow and management more easy and convenient for the employees and managers. If one department has some change or addition in any information of the customer it can be accessed by the other departments readily as the database would be updated regularly at every point of entry. The architecture of the ERP would be sufficient enough to support the mix of workload such as reporting queries. The architecture would enable the organization to manage the database well within the maintenance window. It can support the needs of the company (technologically and scalable) for 2 to 3 years. Economic Feasibility Although the ERP investment costs are very high reaching about $20o million for a large scale implementation, it can be economic for the company in terms of the expenses that the company has for different small processes. The cost benefit analysis in terms of dollar amount is that the company can save millions of dollars on the forecasting various demands and sales by using the same data that is available through one system. Instead of gathering information from different systems and departments, the ERP can help in saving both time and cost. There would be almost accurate demand forecasts due to common databases and processes. The ROI might be negative for some few years but it will be beneficial for the company in the long run. Legal Feasibility The legal feasibility of the implementation of an ERP system would be related to the copyrights and licensing agreements of the company. The legal documentation for implementing ERP system could be lengthy and expensive as all the aspects like authorization etc would be looked at from the point of view of software providing company and Nestle. Operating Feasibility The employees and managers that would be directly affected by the business re-engineering would have to be trained on ERP systems as it would be completely different than the systems that they are used to now. Also the vendors and suppliers would have to be trained in order to communicate with the organization using the new system. The standardization of business process can help the employees make the use of the continuously updated data which could in turn help increase productivity and efficiency. Scheduling Feasibility The time of the implementation of the ERP system should be well thought of. If the ERP system implementation is not given proper attention at each and every level of implementation, the implementation process could fail. IMPLEMENTATION METHODOLOGIES As the ERP implementation will be large scale (globally) it should be implemented in different modules with sufficient implementation time for each period and should not be rushed in as it might cause the process to fail. The modules would be based on the Nestlé’s different division such as purchasing, financial, sales distribution and so on. Each division would have its on implementation which would be integrated in the final stages of the implementation. The implementation of ERP software might take 2 to 3 years to be completely implemented calculating all the risk factors associated with such a scale implementation. CHANGE MANAGEMENT ISSUES The employees might resist the implementation of ERP as it will challenge their principles, their beliefs and the way they have being doing things for years and have grown accustomed to the culture and environment of the organization. Strategies would have to be made for managing change. These could include: Involve directly affected stakeholders (employees) during the planning process Communicate with all levels of employees before and during the change. Take advice and feedback from the employees and managers Train the people for using the system Slowly change the business processes rather than doing it on radical basis. RECOMMENDATION & CONCLUSIONS The recommendations would be: Important to understand the span of complexity of an organization Important to understand that standardization should not be imposed if processes cannot maintain value. Implementation of ERP systems is very complex and can have an unsuccessful rollout. Nestle can have a setback and difficulties during the phase of implementation. The plan should be made in such a way that they are flexible enough to be adjusted to overcome any obstacles. The implementation of ERP system can be very long but the success will depend how well the people together in all situations to reach the goal that can help make jobs easier and Nestle more competitive in the market. REFERENCES & BIBLIOGRAPHY Busco, Frigo, Noni, Riccaboni, Scapens, Beyond Compliance, Strategic Finance. Available from > [28 November, 2008] Dieringer, Derek, 2004, ERP Implementation at Nestle. Available from [28 November, 2008] Greenbaum, Joshua, Switzerland: Nestlé’s information technology strategy, Information Systems: A managerial Perspective. Available from [28 November, 2008] Konicki, Steve, Nestle Taps SAP for E-Business, Information Week Online. Available from > [28 November, 2008] Skydel, Seth, 2002, The very best; Nestle USA: 2002 T3 Information Technology Enterprise of the Year award winner, All Business. Available from [28 November, 2008] Worthen, Ben, 2002, Nestles Enterprise Resource Planning (ERP) Odyssey, CIO. 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