Nestlé USA's SAP project
Ahmad Zelzle
Marinela Vasile
Rick Elston
Samir Causevic
June 19,2004
Agenda
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Nestlé “A global food powerhouse”
Business need
Business Process re-engineering
Management Team
Project Team
SAP
Nestlé's critical situation
Resolution of the Project
ERP Implementation generates savings for Nestlé
Conclusion
Lessons Learned
Managing Change
The Global Food Market- Introduction
 Food is a (3.5 trillion)
USD 3,500,000,000,000
global industry
2%
 Nestlé Sales (2001)
USD 51.1 billion
Nestlé
98%
Source: Nestlé SA
Nestlé is the World’s leading food company
2000 food & beverage sales
(alcoholic beverages excluded)
($ in millions)
50,000
45,000
40,000
Phillip
Morris
35,000
30,000
10,000
5,000
General Mills
Pillsbury
15,000
Unilever
20,000
Quaker Oats
25,000
0
Source: Nestlé SA
NESTLÉ Trading
RESULTS 2001
• Worldwide Sales:
USD 51,112 million
• Trading Profit:
USD 5,766 million
• Net Profit:
USD 3,617 million
• Factories:
468 in 85 Countries
• Operating companies
200
• Employees:
224,541
• Real Internal Growth:
4.4 %
GEOGRAPHIC SPREAD OF GLOBAL SALES
Zone Europe 40.3%
Zone Americas 39.0%
Zone AOA 20.7%
History of Nestlé
1867
1929
1938
1947
1960s
1970s
1980s
1990s
2000s
In 1867, Henri Nestlé invented the world’s first infant food,
saving a neighbor’s child who was unable to breastfeed.
Background Nestlé USA
“ Nestlé USA is named America's Most Admired Food
Company for the sixth consecutive year “
-Fortune Magazine, March 2003
“Nestlé is indisputably a global powerhouse, with such
well-known brands as Nestlé Crunch in candy, Nescafe
in coffee, and Friskies in pet food”
-Business Week, September 2002
In 1867, Henri Nestlé invented the world’s first infant
food, saving a neighbor’s child who was unable to
breastfeed.
Nestlé USA
• Part of the World’s Largest Food Company
• Nestlé USA, which includes Nestlé Brands Company, Nestlé Prepared Foods
Company, and Nestlé Purina PetCare Company, is a part of Nestlé S.A. in Vevey,
Switzerland – the world’s largest food company.
• $12 billion in sales in 2003
• 21,000 employees nationwide
• 42 manufacturing facilities, 6distribution centers, and 58 sales offices
Source: Nestlé SA
Nestlé USA
• What can go wrong with corporate systems
implementation?
"If you try to do it with a system first, you will have an
installation, not an implementation"
"And there is a big difference between installing
software and implementing a solution"
Jeri Dunn, vice president and CIO of Nestlé USA
Source: CIO Magazine 2002
Business Need
Vanilla is the root of all problems
• In 1997, a team examining the various systems across
the company found, among many other troubling
redundancies, that Nestlé USA's brands were paying
29 different prices for vanilla—to the same vendor.
Source: CIO Magazine 2002
Business Process Re-engineering
• Spring 1997 Nestlé USA Chairman and CEO Joe Weller coined
the term One Nestlé to reflect his goal of transforming the
separate brands into one highly integrated company
• In June, Dunn joined with executives in charge of finance,
supply chain, distribution and purchasing to form a key
stakeholder’s team
“study what was right and wrong with the company”
• 9 different general ledgers and 28 points of customer entry
• Multiple purchasing systems
• No clue how much volume Nestlé doing with a particular
vendor because every factory set up their own vendor masters
and purchased on their own
Source: CIO Magazine 2002
Management Team
• An implementation team of 50 top business
executives
• 10 senior IT people
Did not include anyone from the management groups that
would be directly affected by the new business processes !!!
The team's goal was:
To come up with a set of best practices that would become common
work procedures for every Nestlé division. All the divisional
functions—manufacturing, purchasing, accounting and sales—
would have to give up their old approaches and accept the new panNestlé way
Source: CIO Magazine 2002
Management Team
Technical approaches :
• Vanilla would be code 1234 in every division.
– The SAP system would be customized around the uniform
business processes.
– In the case of the supply chain, the team decided not to use
SAP because the ERP company's supply chain module
• Advanced Planner and Optimizer or APO, was brandnew and therefore risky.
• Instead, Nestlé turned to Manugistics—at that time an
SAP partner.
• Manugistics' supply chain module followed all the SAP
standards and could easily be integrated.
Source: CIO Magazine 2002
Project Team
Project Manager: Jeri Dunn, CIO Nestlé USA
IT Staff: 250
• IT Staff comprised of employees and consultants
Special Advisors
• Advisors to the project team from Nestlé
– Tome James, Director Process Change
– Jose Iglesias, Director of Information Services
– Dick Ramage, VP Supply Chain Management
SAP package
A blueprint for major changes they thought could be
made in 3 to 5 years
The recommendation was an SAP solution
Nestlé would implement five SAP modules
• Purchasing
• Financials
• Sales
• Distribution
• Accounts payable and accounts receivable
and the Manugistics' supply chain module
Each would be organized across every Nestlé division
Source: CIO Magazine 2002
SAP package con’t
SAP project code-named BEST
Business excellence through systems technology
• Best will have gobbled up six years and more than
$200 million
• Development work began in July 1998
• The deadline for four of the modules was Y2K
Speed created almost as many problems as it solved
• The new systems would have to double as code fixes
and be in place for the millennial change
Source: CIO Magazine 2002
Nestlé's critical situation
Beginning in 2000, the rollout had collapsed into chaos
The implementation had been full of dead ends and
costly mistakes
• None of the groups that were going to be directly
affected by the new processes and systems were
represented on the key stakeholder team
• Nobody knows how to use the new system, they did
not even understand the new processes
Source: CIO Magazine 2002
Nestlé's critical situation con’t
• Nobody wanted to learn the new way of doing things
• Morale tumbled
• Turnover among the employees who forecast demand for
Nestlé products reached 77 percent; the planners simply were
not keen or unable to abandon their familiar spreadsheets for
the complex models of Manugistics
A technical problem:
• In the rush to beat the Y2K deadline, the “Best project team”
had overlooked the integration points between the modules.
• All the purchasing departments now used common names and
systems, and followed a common process, but their system was
not integrated with the financial, planning or sales groups.
Source: CIO Magazine 2002
Resolution of the Project
Marc Richenderfer as project co-leader was removed
Dunn gathered 19 Nestlé USA key stakeholders and business
executives
Looking through all constraints
• 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
• 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
Source: CIO Magazine 2002
Resolution of the Project
• Dunn had rejected the SAP supply chain module before
• Now improved and been named a Nestlé global standard
• So she decided to replace all but a couple of parts of the
Manugistics system with APO. Dunn estimates that last-minute
change accounted for 5 percent of Best's $210 million total cost
Major decision
• Management Team decided to finish the SAP project
• They would need to begin at the beginning, starting with the
business requirements then reaching an end state
• 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.
Source: CIO Magazine 2002
SAP Generates Savings for Nestlé
The new SAP system has allowed Nestlé to
reduce inventory and save on supply chain
costs
• By April 2001, the end-state design was complete,
giving the project team a highly detailed road map to
follow
• Poor relationships between the divisions and the
project team were solved by getting all stakeholders
together for regular meetings
• Started conducting regular surveys of how the
employees affected by the new systems were dealing
with the changes
Source: CIO Magazine 2002
Conclusion
With SAP
• In place, common databases and business processes
lead to more trustworthy demand forecasts for the
various Nestlé products
• Nestlé can forecast down to the distribution center
level. That allows the company to reduce inventory
and the redistribution of expenses
• Supply chain improvements accounted for a major
chunk of the $325 million Nestlé says it has saved from
SAP
Source: CIO Magazine 2002
Lessons Learned from Nestlé's ERP
1. Don't start a project with a deadline in mind. Figure out the project
requirements, then determine how long it will take you to accomplish them
2. Update your budget projection at regular intervals. So many things happen
during a long project that you will be lucky to stay on target during a
particular year, let alone the life of the project. Frequently revisiting your
numbers will help minimize troublesome surprises
3. ERP isn't about the software. It's easy to put a new system in place. The hard
part is changing the business processes of the people who will use the system
4. Nobody likes process change, particularly when they don't know it's coming.
Include in the planning the people whose processes you are changing. Keep
the communication lines open while the project is in the works, and measure
the level of acceptance before, during and after the rollout
5. Remember the integration points. It isn't enough to simply install new
systems; you need to make sure that they can talk to each other
Managing Change at Nestlé
Benefits of the the ERP Implementation at Nestlé USA:
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Allows Nestle USA to forecast demand with great precision
giving the company a competitive advantage
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Generated first year savings of $ 325 million
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ERP paid for itself in less than a year after being rolled out
across the organization
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Stopped the high staff turnover (77% yearly) of the demand
forecasting department
Managing Change at Nestlé
Nestlé SA to implement ERP tools across all its operating divisions
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Nestlé has operations in 80 countries
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Company sees ERP as a global advantage
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ERP to standardize business processes across all operations
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Challenge is to get stakeholders to buy in to benefits of ERP
Thank you