Nestle SA, the world largest food and beverage company decided to implement SAP systems to all of their branches and subsidiaries company. This project call Nestle Globe project (Global Business Excellence) roll over 500 facilities in 70 countries around the world and using enormous amount of budget at $2.4 billion.
Nestle Globe have three objective
To Create standard best practices business process for Nestle organization
To create standard set of Nestle data and use to whole Nestle organization.
To implement standard information systems infrastructures and SAP was chosen.
In 2006 Nestle globe project expected to pay back its implement cost at $ 2.4 billion and increase Globe operating company from 30% in 2005 to 80% by end of 2006. Moreover, Nestle decide to cap their spending of information technology at 1.9% of sales each year.
Background of Organization:
Nestle SA Corporation is the world’s largest nutrition and food company operates in 86 countries around the world, employ around 280,000 people and have factories or operations site in almost all countries around the world. Nestle primary sells wide variety of food and beverage categories in many well known brands such as magi, nescafA©, nestea, coffeemate , Nestle sales were almost $ 2.4 billion in 2010 (David Barne,2010).
SAP Brief Information:
SAP (Systems, Applications, and Products in Data Processing) ERP systems is enterprise resource planning (ERP) software produced by SAP AG. Enterprise Resource Planning (ERP) is systems designed to integrate core activity with in organization together in order to increase company performances (Markus et al., 2000).
SAP use concept of modules by providing separated functional modules for specific core activities within companies such as SAP-Financial and Accounting for accounting related transactions, SAP-Sales and Distribution focus on sales operations, each modules can be purchased, installed and operated separately but use same database (Monk, Ellen F. and Wagner, Brej J. ,2009).
The main problems before ERP implementation was data integration among various of systems within Nestle organization structures. For example, Nestle USA had problems with 29 brands of vanilla that every plant order vanilla to the same vendor seperately and result in paying 29 different prices (Worthen,Ben 2002).
From 1997 to 2000 ,Nestle company was going to re-engineer their over all business processes amd implement SAP systems as one standatize systems to Nestle and its subsidiaries comapny.The first Nestle ERP implementation began at Nestle USA, when Nestle USA decided to implement ERP systems and they selected SAP as their system solutions, this project also known as Best (Business Excellence thorough Systems Technology) (Worthen,Ben 2002). Best schedule for six years of implementation from first quater of 1997 to first quater of 2003, this project was budgeted over $200 million and would implement five SAP modules ( purchasing , financials, sales and distribution, account payable, acount receivable) (Worthen,Ben 2002 pg.1 – 3). This ERP project goal was to create centralize solution between Nestle comapny and their subordinate brand.
The second Nestle ERP implementation happen in 1999 at Nestle UK, which decided to use SAP R/3 as Nestle USA to 18 UK manufacturing sites with 6,000 SAP users (Bryan Glick, 2001). The main objectives of this movement was to improve efficiency across the company from Nestle UK inventory management, supply chain and change business processes to be more competitive for tough competitions (Glick, Bryan, 2001).
In 2000,the third and the largest ERP implementation projects up until now happen when Nestle SA(Nestle Headquater) determined to launch their Globe (Global Business Excellence) project in order to move whole company to one integrated company instead of set of individual operating units (Bendoly.E. and F.R. Jacobs ,2005). Before implementation, Nestle had around 140 different financial systems(Malcolm Whetley ,2001), but after Globe project Nestle would have only SAP for all its manufacturing, sales and distribution and financial operations( Barnes, D., 2008). Globe would cost $2.4 billion, the highest implementation cost in history (Barnes, D., 2008). Globe scopes were developing business processes’ best practices, creating data management and data standards and standardize Nestle’s information systems by using Mysap.com (Ray, R., 2010). Ray, R., 2010 claimed that in 2006, Globe covered half of NestlA©’s food and beverage business with overall coverage of 90,000 users, 300 factories and 350 distribution centers
SAP Key technologies:
SAP R/3 ERP applications operate though separate functional modules that control specific operation such as accounting, inventory management and integrated with SAP database together. All functional modules could perform separately according to client system environment and also can effectively integrate with non-SAP application. For example, Nestle USA did not implement SAP Advanced Planner and Optimizer (SAP APO) for their supply chain management systems but using Manugistics supply chain management systems instead ,Manugistics and SAP could perform smoothly together results in saving $325 million for Nestle USA’s supply chain improvement (Worthen, Ben 2002). In addition, SAP contains industry solutions package that enhance SAP performance in specific industry such as leasing, industrials, banking, which have industry-specific functionality. Moreover, due to centralize database, all module could use data from database without redundancy problems. For example, account receivable modules use same existing customer master data as sales and distribution use when doing account receivable related functions. Last but not least, even SAP is software package systems but SAP could customize the application modules for specific client requirement by using ABAP language, specify SAP programming language.
SAP R/3 can divide into 4 function parts; logistics, accounting, human resources and cross applications (figure1.0 R/3 systems).
sap R3 systems.png
Figure 1.0: R/3 systems
SAP R/3 Logistic parts consists of 3 main modules responsible for logistics with in companies
Sales and distribution modules this module related to sales transaction such as making sales order, customer debate payback
Material Management modules focus on material management within organization from posting material to company stock, posting payable data, stock information
Production Planning modules focus on production planning within organization such as create bill of material and production setting.
SAP R/3 accounting parts control and integration of financial information within It consists of 3 core modules to create flexible solution control over company accounting information
Financial and accounting consists of modules related to manage accounting transaction within company such as account payable, account receivable, treasury.
Controlling modules focus on costing method within organization.
Asset Management is modules designed to manage and monitor asset information within organization.
Human Resource division parts responsible for SAP resource management within organization including 3 main modules.
Quality management manage control process over material quality of vendors and manufacturers
Plant maintenance for maintenance task
Human resource specialize module for manage human resource such as pay roll
SAP cross functional application : modules that affect to many modules when it was implement
Project management modules include tools for project management
Work flow modules focus on process control within SAP systems
Industries solution is specific modules to enhance performance in some industries such as leasing , manufacturing , media.
SAP building methodology
In order to implement SAP ERP systems, organization need to be revised their own business process first in order to create highest performance after SAP implementation. SAP called this method ASAP (Accelerate SAP implement solution) which contains 4 main components
ASAP methodology consists of five consecutive phases
Phase 1- Project preparation: initial planning and preparation. This phase emphasized on project planning before going to collect information for business blueprint.
Phase 2 – Business Blueprint: documentation of the business process requirements of the company. This phase is first phase that SAP consults have met with their client to collect business process information for creating new SAP business environment in phase 3.
Phase 3 – Realization: implement all business and process requirements based upon the business blueprint.
After collect information and create new business blueprint, SAP consult need to implement all of business process requirement to SAP systems. To illustrate, SAP – FI consults would set configuration of company code, general ledger requirement and preparing for key user training.
Phase 4 – Final Preparation: complete testing, user training, system management and cut-over activities.
This is last phase before SAP is going to real operating client server. This phase emphasized on customer new process training to let key user know how to use SAP systems. Moreover, all customization need to be finish at this phase including customization modules or forms.
Phase 5 – Go-Live & Support: transition from implementation
Last phase when all master were transferred to main production servers, SAP consults need to support real environment within organizations.
PC base tools is computer base application contains various tools and templates for supporting the ASAP approach such as Q&A Database , ASAP roadmap, knowledge sharing.
Services: SAP company will provide support information for implementation for organization that would like to use ASAP such as OSS user to ask question to SAP development team directly when client has problems related to SAP that consults cannot fixed such as patch bug, etc.
R/3 resident tools provide R/3 configuration guide for all business transactions in SAP systems. SAP consult can look at implement step within configuration pages
Basis of Information Systems components on SAP R/3
Data and hardware
SAP R/3 manage data environment though client and server basis, SAP users can process their transactions though GUI (graphic user interfaces) then data will transmit though application servers (can be use one or many application server depends on usage) to main database (Three-tier Client/Server Architecture) which application servers located the SAP software and the database servers handle documents and master data databases. (figure 2.1) or can be operate though Two-tier Client/Server Architecture by transfer data from GUI to main database directly (mostly use for training configuration) in 2 tier architecture database manage both transactions data and software together (figure 2.2).
Figure 2.1 three tier client/server architecture
Figure 2.2 second tier client/server architecture
Software and telecommunication
SAP R/3 can operate with wide range of hardware, operating systems, database(figure 3.0 SAP R/3 technology environment and their GUI can be manage though both window OS and mac OS. Moreover, for SAP telecommunication SAP systems can effectively interact to its server by using LAN, WLAN or internet access to SAP serer to maintain client and server communications.
r3 technology environment.png
Figure 3.0 SAP R/3 Technology environment
SAP has 3 types of users
Key users; person who use SAP according to their training and receive limited authorization within user responsible areas such as key user for accounting , account payable , sales.
Functional consultants; consultants who specialized in separate modules such as Financial and Accounting, Sales and Distribution, Material Management.
Technical consultants; technical specialist who can divide separately in 2 position for SAP systems and SAP infrastructure
ABAP programmer is programmer who specializes on ABAP programming language which used for SAP modification or customization.
Basis is technical specialist who emphasized on hardware and software related to SAP infrastructure such as
SAP has experience in large scale implementation to many multi-national companies some is Nestle competitors such as Kraft food.
SAP company also have effective implementation methodology called Accelerate SAP method for implementation (ASAP) that Nestle used this method until Nestle Globe project in order to create standardize best practices business processes (Ray, R.,2010)
SAP systems could answer all Nestle objectives within one system in term of data integration, business processes and also data management. For example, problems of redundant vendor master data can be fixed by SAP master data principles that manage vendor master from both accounting and purchasing sides (figure 4.0). This solution provide account payable modules to collect vendor information separate by company code but use same purchasing module with organization segment result of one standardize general ledger can be used for all Nestle and their subsidiaries company (sap financial,N.D.) .
Figure 4.0 the complete vendor master data
SAP is suit for Nestle Global project because SAP has multi-language packages that can use with many countries in the world to create standardize understanding over SAP usage. By using standard local language SAP can reduce training and let local understanding function more easily.
Objective and benefits of systems by matching with organization in global context
Completive context: Barnes, D. (2008). Stated that after Nestle globe project going as plan it will create competitive advantages over main competitors such as Uniliver and Kraft food by operating more efficient in both supply and demand side. For example, Nestle can cutting number of supplier from 600,000 to 167,000 accounts, Nestle can save about $750 million a year for this process.
Customer context: Nestle globe implementation would create efficient use of information among Nestle brand categories and nestle major customers such as wall-mart and Tesco which could receiving stocking shelves from nestle information systems back to their branches and use this information for more space utilization for Nestle wide range of products. (Barnes, D. 2008). Moreover, nestle
Company context: Brabeck, Nestle CEO, claimed that Globe project will transform Nestle into new age of success by using information technology and standardize new process designed. For example, Nestle management could press on single button and monitor nestle performance in real-time data including geography sales, sales channel and product categories and brand. By using new technology Nestle can create more innovative strategies by combining online data and tactical approach. To illustrate, Nestle could monitor their wall-mart account manager’s performance by investigating profit and loss within wall-mart branches in real time (Barnes, D. 2008).
Results after SAP Implementation:
First, Nestle USA by integrating difference database together Nestle USA could save net worth $325 million by using same standardize database for general ledger, vendor and customer master data for all Nestle branches and their subsidiaries company. (Worthen, Ben,A 2002)
Second, Nestle UK ERP implementation met its success by reducing 50% of inventory stocks after implement SAP due to improvement business processes and efficient control over inventories (Glick, Bryan, 2001).
Last, Nestle Globe project create new strategic movement to Nestle by shifting from individual business thinking (normal ERP systems) into joint business thinking (coordinate ERP systems) that relied on integrated information between Nestle core unit such as purchasing , sales and use information to create value to key vendors and key customers( Bendoly, E. and F. R. Jacobs, 2005). Bendoly, E. and F. R. Jacobs, 2005 claimed that in 2006 this globe project create estimated total profit for overall program CHF 3 billion per annual.
However, Nestle ERP implementation also had many drawbacks most of it from business process re-engineering. First, Nestle USA got in trouble when they launch go-lived in big bang method but most of their key user still cannot operate new systems; do not understand new business process. Then, Best project SAP support met trouble with enormous problems. Next, Jeri Dun, Nestle USA CIO, stated that turnover rate among Nestle demand forecasting employee increase to 77 percent after SAP project go-lived. Next, technical problems due to non-integrated function during go-lived phase, due to project deadline before Y2K in year 2000 consulting and staffs of Best projects had very limit time before it will launch therefore, Nestle got in trouble with integrated function between key modules. For example, integrated function between sales and distribution (SD) modules and accounting receivable module were missing. When sales persons use SAP to post discount rate for customers, A/R module did not interact with discount from SD modules result in wrong billing information was send to customers (Worthen, Ben.A 2002).
Nestle business objective
Nestle has objective to create standardize for its business processes architecture and Nestle data. By using same standard processes to whole Nestle organization could easily to manage its international branches around the world. Moreover, Nestle decided to reduce their information systems into one systems SAP to be more effective control over all Nestle organization. Combine three objectives for standardize business processes , systems and data together, Nestle would receive benefits of standardization and coordination of their operations which could eliminate redundant processes and coordinate marketing activities for global customers (Bendoly, E. and F. R. Jacobs ,2005).
How systems help organization to achieve its business objective
SAP systems would helped Nestle to re-engineer its business process and forced NestlA©’s employees to change their previous business processes into new standardize best practices because NestlA©’s employee need to work according to processes setting with SAP systems though standard master data and business processes.
Identify IT in Strategic point of View:
Bendoly, E. and F. R. Jacobs, 2005 defined Nestle Globe as evolution process from individual business unit thinking (unique ERP systems) to joint business unit thinking (coordinated ERP systems) under Sap technology. From Nestle new systems share information with their suppliers and customers to create jointly working with Nestle suppliers and customers. To illustrate, Nestle could share information with its customers like wall-mart and create joint promotion program for new products. Therefore, IT has important role in organization strategic planning in order to create competitive advantages over competitors.
Identify IT in Operation Point of View
Information Technology is core component to operation processes within organization, because all company need tools to collect operation records for future usage such as audit, management report supported. By comparing integrated systems like SAP and non integrated systems, integrated systems like SAP could provide more benefit to company operation efficient. For example, case of Nestle USA that can SAP to eliminate redundant data for vanilla vendor master in al factories result in large amount of saving for purchasing goods.
Identify IT in Tactical Point of View
In tactical after Nestle Globe project, nestle can performed decentralize process to transform their organization into lean and fast moving company. Globe project will provide more accurate information related to specific area to let local boss to remain close to their customers or take an action related to change within their territories without wait for top management decision (Barnes, D. 2008). Nestle manage can adapt faster and more effective by using information such as product’s profit and loss within their area and use these information to create product tactical decision within that area.
How IT help the organization achieve the objectives and other benefits
First, by using combination of standardize systems, master data and business processes, Nestle can maximize benefits of SAP systems in global term not just Nestle in some countries. Standardization create same understanding toward information based from SAP systems and can create synergy cooperation within global groups such as innovation sharing between different countries or successful product launch from one countries can be monitor by Nestle company located in other countries. This phenomenon create Nestle united into “One global Nestle organization ” and cannot be made without using Information systems.
Second, standardize process also cannot be made without control process done in SAP client that lead Nestle employee to work on standardize process to create standard data that all Nestle employee understand and use in practice in same manner.
Third, Nestle Globe project is major improve Nestle competitive advantages by lean large organization business process and create consolidate solution from SAP systems such as lean supply chain management, consolidate purchasing. SAP is in role of integration all data together in its database systems and provide decision support systems base on integrated data. For example, SAP APO use data from SAP logistic part (sales, material management, production planning) and integrated data together to generate information report provide to responsible persons.