Page 82 -

58 Chapter 3 • Enterprise Systems Architecture

CASE 3-1
Opening Case
Nestlé’S ERP Implementation

Source: Adapted from Worthen, B. (2002). Nestlé’s ERP Odyssey. CIO Magazine. May 15; Aberdeen Group.
(November 2005). Center-Led Procurement Organizing Resources and Technology for Sustained Supply Value;
Weiss, T. (2002). Nestlé Shifts from HP to IBM in Data Center Pact. Computerworld, March 11.

Since market leader SAP introduced R3, the first ERP system with client–server architecture
in 1992, thousands of companies worldwide have implemented this software. Many have been
successful, but none has been without problems. Nestlé USA was one of them. Nestlé USA
has seven business divisions: beverage, confections and snacks, food services, foreign trade,
nutrition, prepared foods, and sales. Some of the popular brands sold in the United States by
Nestlé are Alpo, Baby Ruth, Carnation Instant Breakfast, Coffee-Mate, Nescafé, Nestlé
Carnation Baby Formulas, Nestlé Toll House, PowerBar, Stouffer’s Lean Cuisine, SweeTarts,
and Taster’s Choice. Its annual revenue is around $8.1 billion with 16,000 employees.
The ERP implementation at Nestlé, code-named BEST (Business Excellence through
Systems Technology), had an estimated cost of $210 million with an IT staff (including
outside consultants) of 250, began in 1997, and was due to be completed in 2003. The
project’s main goal was to use common business processes, systems, and organizational
structures across the autonomous divisions within the United States. These common
systems across Nestlé USA would create savings through group buying power and facilitate
data sharing between the subsidiaries.
Jeri Dunn, CIO of Nestlé USA, joined with executives in charge of finance, supply
chain, distribution, and purchasing to form a key stakeholder’s team for implementing the
SAP. The stakeholder team made it clear to the top management that the SAP implementation
would require business process reorganization and couldn’t be done without changing the
way Nestlé USA did business.
The stakeholder team, however, did not include any members from the groups that
would be directly affected by the new business process. This caused a rebellion in the ranks
and the employees resisted. Nobody wanted to learn the new way of doing things. Divisional
executives were confused and angry. Morale sank and employee turnover reached 77 percent.
Help desk calls reached 300 per day. The project team had overlooked the integration points
between modules to account for the Y2K deadline. By the beginning of 2000, the rollout had
collapsed into chaos and the project was halted. In its haste to unify the company’s separate
brands, the project team had essentially replaced divisional silos with process silos.
The company reconvened the stakeholder team and started the SAP implementation
process from scratch. The group members eventually decided that to finish the project, they
would need to start with the business requirements and then reach an end date, rather than
trying to fit the project into a mold shaped by the predetermined end dates. They also made
sure that they had support from the key divisional heads and that all the employees knew
exactly what changes were taking place.
With SAP in place, Nestlé USA has already achieved a significant return on investment
(ROI). The common databases and business processes led to more trustworthy demand fore-
casts for the various Nestlé products. This also allowed the company to reduce inventory and