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Nestle's Enterprise Resource Planning (ERP) Odyssey

By Ben Worthen

May 15, 2002 — CIO — In June 2000, NestlŽ SA signed a much publicized $200 million contract with SAP?and threw in an additional$80 million for consulting and maintenance?to install an ERP system for its global enterprise. The Switzerland-based consumer goods giant intends to use the SAP system to help centralize a conglomerate that owns 200 operating companies and subsidiaries in 80 countries.

Not surprisingly, a move of this magnitude sparked skepticism. Anne Alexandre, an analyst who covers NestlŽ for HSBC Securities in London (the company is traded only in Europe), downgraded her recommendation on NestlŽ stock a year after the project was announced. While she says that the ERP system will likely have long-term benefits, she is wary of what the project will do to the company along the way. "It touches the corporate culture, which is decentralized, and tries to centralize it," she says. "That’s risky. It’s always a risk when you touch the corporate culture."

It is a risk that Jeri Dunn, vice president and CIO of NestlŽ USA, the $8.1 billion U.S. subsidiary, knows all too well. In 1997, the Glendale, Calif.-based company embarked on an SAP project code-named Best (business excellence through systems technology). By the time it reaches the finish line, Best will have gobbled up six years and more than $200 million (the same amount its global parent intends to spend). Dunn now says she sees the light at the end of the tunnel. The last rollouts will take place in the first quarter of 2003. But the implementation has been fraught with dead ends and costly mistakes. It is a cautionary tale, full of lessons not only for its Swiss parent but for any Fortune 1000 company intent on an enterprisewide software implementation.

"I took eight or nine autonomous divisions and said we are going to use common processes, systems and organization structures," says Dunn. "[NestlŽ SA is] looking at 80 autonomous countries and saying the same thing. They’re just taking it up a notch. If they go in with an attitude that there’s not going to be resistance and pain, they’re going to be disappointed."

NestlŽ’s global SAP project, which is tied in to a larger $500 million hardware and software data center rehaul, will be integrated with its American subsidiary’s soon-to-be completed ERP. And Dunn is even lending 70 of her own staffers for the global initiative, as well as some of her hard-won expertise. But while the verdict is still out on the global project, the pain?angry employees, costly reengineering and long periods when it seemed the project would never end?was worth it for NestlŽ USA, Dunn says. To date, she claims, the Best project has saved the company $325 million. (Because NestlŽ is headquartered outside the United States, it doesn’t have to disclose its financial information to the SEC.)

 

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