Nestlé's Enterprise Resource Planning (ERP) Odyssey

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Jose Iglesias, director of information systems, says the retreat started off as a gripe session. The time constraints necessitated by Y2K had put too much pressure on the people in charge of executing the changes. The project team had lost the big picture of how the various components would work together. And there was still work to be done. The existing modules had to be integrated and the team still needed to roll out two more SAP modules?sales and distribution on the domestic side, and accounts receivable?as well as a new module for the supply chain. Since Dunn had rejected the SAP supply chain module two years before, it had improved and been named a Nestlé global standard by Dunn’s old standards group in Switzerland. So she decided to replace all but a couple of parts of the Manugistics system with APO. Dunn estimates that last-minute switcheroo accounted for 5 percent of Best’s $210 million cost.

The offsite group members eventually decided that to finish the project they would need to begin at the beginning, starting with the business requirements then reaching an end date, rather than trying to fit the project into a mold shaped by a predetermined end date. They also concluded they had to do a better job of making sure that they had support from key divisional heads and that all the employees knew exactly what changes were taking place, when, why and how.

The End Game: Sadder But Wiser

By April 2001, the end-state design was complete, giving the project team a highly detailed road map to follow. A month later, Tom James came on board as director of process change for the Best project, having the sole responsibility of acting as a liaison between the divisions and the project team. James says that he was shocked by the still poor relationship between the divisions and the project team. He and Dunn began meeting with more of the division heads. They also started conducting regular surveys of how the employees affected by the new systems were dealing with the changes.

They were not afraid to react to what they found. Dunn says that Nestlé recently delayed the rollout of a new comanufacturing package for six months based on feedback indicating that the would-be users were not prepared to make the process changes that were involved.

ERP projects are notorious for taking a long time and a lot of money. Jennifer Chew, an analyst at Cambridge, Mass.-based Forrester Research, found that 54 percent of respondents to a recent survey said that their project lasted more than two years (the other 46 percent brought theirs to fruition in less than two years). Nestlé USA’s project "sounds on the high side" for both time and money, says Chew. Still, success is ultimately measured by what the project accomplishes. Chew points out that Kmart had to write off $130 million for an ERP project that was never completed.

Dunn herself is not ashamed of the length of the project or the numerous dead ends. She insists that slow and steady wins the race. Nestlé USA has already achieved significant ROI, she says, with the largest chunk of savings from better demand forecasting. "The old process involved a sales guy giving a number to the demand planner, who says, ’Those guys don’t know what the hell they are talking about; I’m going to give them this number,’’’ Dunn says. "The demand planner turns [that number] over to factory, and the factory says the demand planner doesn’t know what the hell he’s talking about." Then the factory changes the number again.

With SAP in place, common databases and business processes lead to more trustworthy demand forecasts for the various Nestlé products. Furthermore, because all of Nestlé USA is using the same data, Ramage says, Nestlé can forecast down to the distribution center level. That allows the company to reduce inventory and the redistribution expenses that occur when too much of a product is sent to one place and not enough to another. Ramage says that supply chain improvements accounted for a major chunk of the $325 million Nestlé says it has saved from SAP.

If Dunn were to do it over again, she’d focus first on changing business processes and achieving universal buy-in, and then and only then on installing the software. "If you try to do it with a system first, you will have an installation, not an implementation," she says. "And there is a big difference between installing software and implementing a solution."

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Copyright © 2002 IDG Communications, Inc.

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