Reasons for Implementing ERP Systems

ERP or the Enterprise Resource Planning generally refers to the system which acts as a silver bullet for each and every problem that are faced by various organizations. the implementation of the ERP system is generally associated with providing the organizations with offers related to the chances of re-engineering the business process along with helping in coordination of the systems that are located in different geographical locations, consolidation of the data, and lastly providing the users with the power of giving access to the data of the organization on a real-time basis (Herath 2018). However, this type of opportunities are generally comes associated with high price which are mainly related to the financial costs, implementation of the nightmares and the issues arising due to humans. It is often seen that this type of implementation fails miserably due to running behind the schedule or due to over budget however many times they are also successful (Barry 2016). Despite of the outcomes, the implementation of the ERP is associated with valuable lessons which are to be learned by the companies and this is to be done by considering the own ERP implementation that they have done.

The business case related to the implementation of the ERP system is done upon the organization Nestle. Nestle SA is the parent company of one of the candy-making giants which has it’s headquarter situated in Switzerland. The organization has decided to leverage its size and to begin acting as one the giant organization. For doing this they would be needing an SAP ERP solution which would be costing around $220 million and this ERP solution would be rolled out to around 230000 employees of the organization in almost 80 countries all around the globe (Gronwald 2017). Along with this sum the Organization Nestle is also committed to make an additional amount of $80 million upon the consulting, maintenance and upgrading of the new solution. Besides this the representatives of the organization Nestle SA have also realized the fact that the company would be needing the standardization of all its business processes in case if they want to be competitive (Akeel and Wynn 2015). This rolling out of the new solution t the employees is to be scheduled and completed within 3 year for the largest site of the organization that is to be followed by the others. Some of the important things that are to be included in the process of implementation includes the following:

• com financials
• the payable accounts
• the receivable accounts
• planning,
• Management of the Production
• Procurement management
• direct procurement management,
• supply-chain management
• Demand planning
• Fulfilment as per the planning
• Modules for business-intelligence

Nestle’s ERP Project

The Organization Nestle before the implementation of the SAP ERP decision had already been associated with the implementation of an ERP solution. The British subsidiary of this organization Nestle SA had been associated with the implementation of the SAP R/3 for almost more than five years in the manufacturing site located in Australia. Wrapping up of this implementation was done in the year of 1999 and was also considered to be one of the largest ERP solutions which has been implemented in UK with almost more than 6000 users (Bindi 2016). As per the deployment by Nestle SA, the major goal which was included in the Nestle UK development was mainly centered upon leveraging of the organization size along with the aim of tightening the supply chain as well as the re-engineering work practices and the processes.

Another ERP decision taken by the Nestle SA involved the Nestle USA which is $8.1 billion U.S subsidiary of the Nestle SA. In the year of 1997 the organization Nestle USA started with the implementation of its own ERP solution which is also known as BEST or the Business Excellence through the Systems Technology (Gronwald 2017). This ERP was scheduled to run for more than six years which was estimated to be ending in the first quarter of 2003. The project had the budget of more than $200 million and would be responsible for the implementation of five major SAP modules which includes the following:

• Purchasing
• Financials
• Sales and distribution
• The payable Accounts
• Lastly the receivable accounts

The goal is almost similar to the other Nestle ERP implementations which is unification. In addition to this the project is also aimed at solving the Y2K woes of Nestle in USA. For Nestle USA the ERP was considered to be a part of the vision which the Chairman and CEO of Nestle USA, Joe Weller had and is often referred to as the “One Nestle” which would be solely responsible for the transformation of the numerous brands into a single integrated company (Shahzadi and Naveed 2016). Before the implementation of the ERP, Nestle USA consisted of nine different general leaders along with 28 different entry for the customers. The major goal of this ERP project was to bring these numbers down into a single one. One of the views which is interesting on the problems faced by Nestle USA is the vanilla story. Before the implementation of this ERM solution Nestle USA was not associated with working as a single company and instead of this each location was acting on its own behalf. Besides this they were also free of taking any kind of decisions related to the business (Gronwald 2017). In the year of 1997 the team which was associated with the examining of the various systems situated all across the company identified the fact that amongst the other trouble redundancies the brands of the organization Nestle USA were associated with paying 29 different prices for eth vanilla flavor to the same vendor. The major reason lying behind this was that each of the factories located at different locations has been associated with negotiating their own deals with the vendor and besides this the vendor was associated with adjusting their prices as per the factory by depending upon what they thought the factories would be paying for the product. This situation was more worsened due to the reason that each of the factory was associated with referring to the vanilla in a different way (Malinowska and Rzeczycki 2017). That is in case if one of the factories referred to vanilla as 1234 then another factory referred the same product as 7890. This was initially responsible for making it almost impossible for the individuals who are present in the corporate headquarters to do any kind of comparisons across plants to note down the cost related to manufacturing.

Lessons Learned from Nestle ERP Implementation

Despite of examining the Nestle cases the goals which lied behind the implementation of the ERP were almost similar for each and every division. Which means in each instance there existed a driving goal which was responsible for the consolidation of the operations in different locations so as to make sure that Nestle could truly become capable of leveraging the size along with the buying power. In addition to this there existed the need of centralization and control of the data so as to make sure that the financial, reporting and forecasting of the numbers becomes more consistent as well as accurate (Welch and Sadok 2016). Due to the acting of the factories as an autonomous unit, the organization Nestle had to face a severe competitive disadvantage and this in turn was responsible for realizing the fact that there is a need of one system which can be used by the organization for the purpose of becoming more efficient and to survive the global economy.

In recent years it has been seen that the term ERP implementation strategy has almost become synonymous with the term “Nightmare”. Various high-profile failures have been dotting down the headlines as well as the companies which are often intimidated not only due to higher prices but also due to the negative effects that the implementation is going to bring upon the business processes. Numerous Vendors like the SAP has been associated with working in a diligent way for eth purpose of shaking the reputation and has also been associated making great strides for the purpose of meeting the goals (Eugene et al. 2017). Previously it was seen that the organizations were associated with paying six to ten time more upon the consulting charges than the cost of the license. However, in recent days the external consulting costs have dropped to almost around one or two and a half of the cost of the software and this is generally dependent on how much the process related to re-engineering is done by the user. Luckily the companies which are now associated with thinking about ERP implementation have done enough in their past which are responsible for increasing their opportunities related to learning from the success or eth failures that the other companies have already experienced. One of the major factors for successful implementation of the ERP solution is by not trying to fit the product exactly according to the way which is ideally needed so as to work or contrarily it is better to assume that the peoples would be associated with making complete changes in their processes so as to meet the new ERP package (Krishnadan 2017). Amongst this two factors the first factor is associated with taking a lot of time as well as would be facing lot of cost loads whereas the second factor would be meeting a lot of resistances. A middle-of-the-road approach is needed by most of the business where the individuals would be associated with realizing the fact the software would not be associated with solving each and every problems that are faced by the organization and not all the process of the company can be re-engineered so as to fit the software. Despite of the existence of the savvy project leaders in the previous ERP project implementations, there exists several pitfalls which needs to be avoided at the time of ERP implementation projects. The first pitfall that is included is not selecting the ERP package by just looking into the demo (Ishrar 2017). The package needs to be chosen wisely along with these questions should be asked, references should be gathered and lastly a lot of homework needs to be done. The implementation of the ERP package is a costly investment and there is a need of being sure about the fact that the organization is associated with choosing the package that is best fitted for eth organization.

ERP Implementation Pitfalls to Avoid

The second pitfall includes the receiving of commitment from the management. The non-secured top management buy-ins is associated with automatic failure of the project. The commitment of the management is often seen to be high at the projects beginning however this begins to wane as the project moves forward. So, it is very essential to keep the management interested along with making them involved and positioned squarely behind the project.

The third pitfall that needs to be considered and is to be avoided is the heavy customization which is considered to be easy as well as tempting for the customization of the ERP packages in order to get fitted in accordance to the needs of the organization (Sadeed 2017). However, the excessive amount of customization would be associated with haunting the organization by means of lengthening the timeline of the project and by driving the maintenance cost that are likely to be needed in the future.

The last pitfall that is to be considered and avoided is the underestimating the importance that the training programs are having. This is not very uncommon that the users are associated with receiving of several days of training for using the new system which is followed by not seeing the system for months (Thankdenchai and Pasawat 2015). There is a need of in-depth along with on-going training by the users and besides this the users should even be involved in testing the system if it is at all possible.

However, Nestle USA was not associated with heeding the failures experienced by others. Nestle USA was associated with making a lot of mistakes throughout the implementation process which were almost responsible for dooming of the project. At the beginning of the project a team was created which consisted of 5o top executives along with 10 senior IT professions who were assembled for the purpose of developing the set of best practices for all the divisions of the organization (Mitra, O’Regan and Sarpong 2018). The goal mainly included the development of the best practices for the different operations of the business. Each of the functions would be eventually forced to have retirement of the old approaches which is to be followed by adaptation of the new best practices which are to be developed. Besides this another major reason for turning of the previous solutions into a complete disaster was not understanding the system by the employees along with not understanding the new work processes as well for which they were being forced in order to be adopted (Bhattacharya 2016). Besides the divisional executives were totally confused and the major reason behind this was that they had been left out of the planning and development of the ne system and this in turn was responsible for making them loose their will to assist the new system in straightening out the numerous messes which has developed. This initially resulted in the palmation of the morals and the skyrocketing of the turnovers.

The Nestles USA’s did not just stop at the problems that arose due to the employees but also exceeded towards the technical difficulties that began to emerge at the time of rollout. Due to the rush in beating the Y2K deadline the team associated with the project entirely overlooked the points of integration that existed in between the different modules. Which meant that the different modules were not capable of talking to each other, in case if a discount is provided by the salesperson and is entered in the system then the accounts receivable portion of the system was not knowing the amount of discount, this initially resulted in the paying of the bills by the customers however it appeared as though they are paid partially.

There are numerous bumps at the process of implementing the new ERP by Nestle USA, despite of the bumps it is considered that it would eb paying for itself. They are likely to realize a lot a savings and the most of the savings would be received from the areas like the improvements in the supply chain, which were specially associated with demanding the forecast. The sales guy is associated with providing a number to the demand planner and the demand planner is then associated with providing the number to the factory. After receiving the number, the factory denies that they know nothing about the number and followed by this factory would eb associated with changing the number and provide a new on (Ofoegbu 2016). By having the SAP ERP solution in place there would exist a common database and this would be initially responsible for leading the business process towards a demand forecast which would be more trustworthy. Besides this the usage of the same data would be helping the organization is forecasting down to the distribution center level.

Along with providing assistance in saving money the organization would become capable of coming together and problems like the 29 different brands of vanilla can be solved very easily. Besides this the usage of common database would be helping each and every factory to refer to the vanilla in the same manner. The usage of the common processes would be associated with simplifying the procedures of conducting different operations along with allowing the centralization of different functions like the development of a common training plan (Fisher and Krumwiede 2015). This in turn would be helping in eliminating the need of different training programs for different factories. Due to the reason that each of the location is associate with following the same procedures, so the training materials only needs to be developed once. Additionally, if any of the employee is relocated to some other factory then the employee no needs to adjust to the local processes.

 The Organization Nestle UK is also likely to gain the similar advantages as that of Nestle USA after the implementation of the ERP. They would become capable of recouping the money that they have already spent upon the spent. They are also likely to experience a reduced level of inventory, tight control of the inventory along with a more disciplined attitude towards the processes included in the business (Gronwald 2016). Amongst all this the most important thing is that the ERP implementation would be helping in fostering the culture of continuous improvement. Besides this the ERP implementation is associated with providing a clear view of the improvement priorities and this firstly includes the internal opportunities, which is followed bu the business-to-business and lastly the business to customers. There is need of developing a process development manager as well who would be solely responsible for acting as the bridge between the business and the IT department so as to make sure that they remain focused upon continuous improvements instead of just trying to maintain the system that already exists.

The business case of Nestle USA is considered to be one of the best example of ERP implementation as it consists of both failure as well as success. obviously there exists numerous breakdowns at the planning phase of the project yet the overall result is entirely unpredictable because this is a consolidated system. The ERP experiences of the Nestle can be improved by the recommendations provided below:

There is an essential need so selecting the right individuals for the purpose of making sure that the implementation of ERP becomes successful. The selection of the right individual and including them in the process of implementation would be highly responsible for achieving success. However, it is very much impossible to redesign the entire working process and for this reason the organization Nestle had to initially halt their rollout. Involving skilled peoples would be acting as an important factor associated with the successful redesigning of the processes. For ERP implementation having number of people more than needed is considered to be a better option and this would also be helping in determining the future of the organization as well. Bringing new peoples to the project is much harder than trimming of the peoples from the project.

From the case study it is also clear that the implementation of the ERP is a project where the companies should not make attempts in forcing the project to be completed within the specific timeline. There exists no such better way of missing things and having the components completed shoddily than to forcing the project timeline in getting fitted to as specific end date.

Companies associate with considering the ERP implementation should be focusing upon the training. Training acts as one of the key elements associated with the successful implementation of the ERP and the major reason behind this is that without employees who are not properly trained would not be prepared for using the new ERP. In case of most of the software project the training is generally seen to be an afterthought and is typically the first item which is cut or reduced whenever the timeline of the project begins to slip. Organizations must be essentially associated with resisting or urge for training in case of implementing the ERP projects. It is very crucial that the employees are receiving the training at the early stage and often throughout the project.

It is also recommended that the number of customizations gets limited that are to be done to the system. Lastly the final recommendation included in the implementation of the ERP is the obtaining of a universal buy-in for the project.

Conclusion:

ERP implementation are unlikely any other system implementation which each and every company would experience. Despite of the existence of bad press that the ERP system along with its corresponding rollout that are received, it it still possible that the organization would be experiencing a successful rollout. Often in the case of Nestle USA the organizations would be associated with encountering some major setbacks along with difficulties at the time of implementation yet they would still be capable of salvaging the projects in a successful way. One of the most important factors in the take away is making the plan flexible enough so as to change the mind-stream and overcome the various obstacles which appears ae the time of project implementation and besides this there is also a need of doing a lot of homework by the organization before they begin the ERP project. There exist many companies which have gone through the implementation of ERP and besides this there exist plenty of lessons which needs to be learned in case if any organization is having the will of accepting the advice that are provided by others. The ERP implementation is associated with combining the various disparate data sources along with the re-engineering process and must be associated with involving large number of users as well as locations. It is almost impossible to plan every contingency in projects of different size. The basic difference that exist between success and failure is the ability that the organization is having in order to rally and work together at times of difficulty so as to reach the end goals that would eventually responsible for making everyone’s job much easier along with making the company become much more competitive.

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