2. Nestlé USA's SAP project
Ahmad Zelzle
Marinela Vasile
Rick Elston
Samir Causevic
June 19,2004

3. Agenda 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

4. The Global Food Market- Introduction
Food is a (3.5 trillion) USD 3,500,000,000,000 global industry
98%
Nestlé 2%
Nestlé Sales (2001) USD 51.1 billion
-As you can see, The food business represents the GDP of a larger nation
-While it seems like it only has 2% of the world market, it makes Nestlé the world’s largest food company with operations in 80 countries
Source: Nestlé SA

5. Nestlé is the World’s leading food company
2000 food & beverage sales (alcoholic beverages excluded)
($ in millions)
Unilever
Quaker Oats
General Mills
Pillsbury
Keebler
Phillip Morris
-Snap shot of the US food business landscape with Nestle the market leader ahead of competitor Kraft
Source: Nestlé SA

6. NESTLÉ Trading Worldwide Sales: USD 51,112 million
RESULTS 2001
Worldwide Sales: USD 51,112 million
Trading Profit: USD 5,766 million
Net Profit: USD 3,617 million
Factories: in 85 Countries
Operating companies 200
Employees: ,541
Real Internal Growth: 4.4 %
-US operations account for nearly 20% of worldwide sales for Nestlé

7. GEOGRAPHIC SPREAD OF GLOBAL SALES
Zone Europe 40.3%
Zone Americas 39.0%
Zone AOA 20.7%

8. History of Nestlé
1867
1929
1938
1947
1960s
-Infant food developed for a neighbour’s child unable to breast feed
-Most recent acquisition Ralston Purina
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.

9. 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.
-Some quotes from US Business sources

10. 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
-As you can see US operations account for nearly 20% of total sales for Nestlé
Source: Nestlé SA

11. 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
-Jeri Dunn is the CIO for Nestlé USA and the driving force behind the SAP implementation
-She believes that it is imperative to get the end users involved in the system redesign
Source: CIO Magazine 2002

12. 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.
-The reason we couldn't even check is because every division and every factory got to name vanilla whatever they wanted to.
-So you could call it 1234, and it might have a whole specification behind it, and I might call it 7778.
-We had no way of comparing."
Jeri Dunn
-This was one of the findings of the team
- The team also found that each operating division had its own tools for core business processes which would need to be standardized
Source: CIO Magazine 2002

13. 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
- Nestlé introduces corporate strategy to transform the individual operating units into one integrated company
Source: CIO Magazine 2002

14. 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 pan-Nestlé way
-When the management team looked at possible solutions to the problems at Nestlé USA, they neglected to get management groups involved in the solution.
-This left end users unaware of how the business processes would be implemented
Source: CIO Magazine 2002

15. 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 brand-new 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.
-APO was SAP’s supply chain management tool that had recently been released
Nestlé did not want to risk a new module at this critical time in implementation
-Manugistic’s product was a SAP approved pluggin
Source: CIO Magazine 2002

16. 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
-The project team was very large and required careful task planning
-A detailed project plan was completed in 2001 after the near collapse of the project
-Risk management was considered however the biggest risk that the project faced was end user acceptance
-No risk response was developed for this eventuallity

17. 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
"We made it very clear that this would be a business process reorganization and that you couldn't do it without changing the way you did business. There was going to be pain involved, it was going to be a slow process, and this was not a software project."
Jeri Dunn
Source: CIO Magazine 2002

18. SAP project code-named BEST
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
-What was initially a 3- 5 year project to implement turned into 6 years with a 10 million cost over run
“The light at the end of the tunnel”
“The last rollouts will take place at beginning of 2003”
Jeri Dunn
Source: CIO Magazine 2002

19. 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
"We were always surprising the heads of sales and the divisions because we would bring something up to the executive steering committee that they weren't privy to."
Dunn’s fatal mistake
Source: CIO Magazine 2002

20. 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.
-The system worked great however the project team neglected to consider how the modules would connect to finance, planning and sales groups
Source: CIO Magazine 2002

21. 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
-The project takes on a new focus and re-groups
Jeri Dunn decides to go back to users and re-define the business processes that require changes -
Source: CIO Magazine 2002

22. 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.
-Manugistics is dropped in favour of SAP’s APO supply chain module
-Project gets the green light to continue despite major set backs
-Agree to keep stakeholders aware of planned changes
Source: CIO Magazine 2002

23. 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
-Jeri Dunn is not ashamed of the length of the project or the numerous dead ends
- She insists that slow and steady wins the race
Source: CIO Magazine 2002

24. 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
“Focus first on changing business processes and achieving universal buy-in, and then and only then on installing the software “
Jeri Dunn
Source: CIO Magazine 2002

25. Lessons Learned from Nestlé's ERP
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
-Keep key stakeholders updated on project process and upcoming changes

26. Managing Change at Nestlé
Benefits of the the ERP Implementation at Nestlé USA:
Allows Nestle USA to forecast demand with great precision giving the company a competitive advantage
Generated first year savings of $ 325 million
ERP paid for itself in less than a year after being rolled out across the organization
Stopped the high staff turnover (77% yearly) of the demand forecasting department
-It is clear that the ERP solution at Nestlé has generated savings and standardized business processes across all divisions
The cost of this however is the high turnover of staff
-Training and lost productivity are also challenges that Nestlé had to face as well

27. Managing Change at Nestlé
Nestlé SA to implement ERP tools across all its operating divisions
Nestlé has operations in 80 countries
Company sees ERP as a global advantage
ERP to standardize business processes across all operations
Challenge is to get stakeholders to buy in to benefits of ERP
-From the experience at Nestlé USA, it is obvious that teams with prior ERP experience with transition are essential in generating the promised savings of standardized business practices

28. Thank you