ERP (Enterprise Resource Planning)

GROUP 13
I.−ERP History
Enterprise Resource Planning (ERP) is born in the early 1960s from a joint effort between J.I. Case, the
manufacturer of tractors and other construction machinery, and partner IBM. Material Requirements Planning
or MRP is the initial effort. This application software serves as the method for planning and scheduling
materials for complex manufactured products.
1970s.− Initial MRP solutions are big, clumsy and expensive. They require a large technical staff to support
the mainframe computers on which they run.
1972.− Five engineers in Mannheim, Germany begin the company, SAP (Systemanalyse und
Programmentwicklung). The purpose in creating SAP is to produce and market standard software for
integrated business solutions.
1975.−Richard Lawson, Bill Lawson, and business partner, John Cerullo begins Lawson Software. The
founders see the need for pre−packaged enterprise technology solutions as an alternative to customized
business software applications.
1976.−In the manufacturing industry, MRP (Material Requirements Planning) becomes the fundamental
concept used in production management and control.
1977.−Jack Thompson, Dan Gregory, and Ed McVaney form JD Edwards. Each founder takes part of their
name to create the company moniker. Larry Ellison begins Oracle Corporation.
1978.−Jan Baan begins The Baan Corporation to provide financial and administrative consulting services.
1979.− Oracle offers the first commercial SQL relational database management system.
1980.− JD Edwards begins focusing on the IBM System/38 in the early 1980s. MRP (Manufacturing
Resources Planning) evolves into MRP−II as a more accessible extension to shop floor and distribution
management activities.
1981.− Baan begins to use UNIX as their main operating system.
1982.− Baan delivers its first software product. JD Edwards focuses on the IBM System/38.
1983.− Oracle offers both a VAX mode database as well as a database written entirely in C (for portability).
1984.− Baan shifts the focus of their development to manufacturing.
1985.− JD Edwards is recognized as an industry−leading supplier of applications software for the highly
successful IBM AS/400 computer, a direct descendant of the System/38.
1987.− PeopleSoft is founded by Dave Duffield and Ken Morris in 1987.
1988.− PeopleSoft's Human Resource Management System (HRMS) is developed.
1990.− Baan software is rolled out to 35 countries through indirect sales channels. The term ERP (Enterprise
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Resource Planning) is coined in the early 1990's when MRP−II is extended to cover areas like Engineering,
Finance, Human Resources, and Project Management.
1991.− PeopleSoft sets up offices in Canada. This leads the way to their presence in Europe, Asia, Africa,
Central and South America, and the Pacific Rim.
1995.− Baan grows to more than 1,800 customers worldwide and over 1,000 employees.
1999.− JD Edwards has more than 4,700 customers with sites in over 100 countries. Oracle has 41,000
customers worldwide (16,000 U.S.). PeopleSoft software is used by more than 50 percent of the human
resources market. SAP is the world's largest inter−enterprise software company and the world's fourth
largest independent software supplier overall. SAP employs over 20,500 people in more than 50 countries.
To date, more than 2,800 of Baan's enterprise systems have been implemented at approximately 4,800 sites
around the world.
2000 and beyond.− Most ERP systems are enhancing their products to become "Internet Enabled'' so that
customers worldwide can have direct access to the supplier's ERP system.
II.− What is ERP?
Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planningit doesn't
do much of thatand forget about resource, a throwaway term. But remember the enterprise part. This is ERP's
true ambition. It attempts to integrate all departments and functions across a company onto a single computer
system that can serve all those different departments' particular needs.
That is a tall order, building a single software program that serves the needs of people in finance as well as it
does the people in human resources and in the warehouse. Each of those departments typically has its own
computer system optimized for the particular ways that the department does its work. But ERP combines them
all together into a single, integrated software program that runs off a single database so that the various
departments can more easily share information and communicate with each other. That integrated approach
can have a tremendous payback if companies install the software correctly.
Take a customer order, for example. Typically, when a customer places an order, that order begins a mostly
paper−based journey from in−basket to in−basket around the company, often being keyed and rekeyed into
different departments' computer systems along the way. All that lounging around in in−baskets causes delays
and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the
company truly knows what the status of the order is at any given point because there is no way for the finance
department, for example, to get into the warehouse's computer system to see whether the item has been
shipped. "You'll have to call the warehouse" is the familiar refrain heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and
replaces them with a single unified software program divided into software modules that roughly approximate
the old standalone systems. Finance, manufacturing and the warehouse all still get their own software, except
now the software is linked together so that someone in finance can look into the warehouse software to see if
an order has been shipped. Most vendors' ERP software is flexible enough that you can install some modules
without buying the whole package. Many companies, for example, will just install an ERP finance or HR
module and leave the rest of the functions for another day.
Some key vendors could be Oracle, SAP, PeopleSoft or BAAN.
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So we can summarize what is ERP in these points:
• Enterprise Resource Planning
• A single, integrated information system
• Streamlines data flows
• Potential for dramatic gains in performance
• Expensive, complex, less customized
• Imposes comprehensive structure
• Across diverse business functions
III.− Use of EAI as alternative to ERP
The implementation of the systems ERP requires one of a large quantity of time, commitment and economic
resource. As alternative, or supplementary technology, the concept of Integration of the Business Applications
exists (EAI), which consists of automate the process of integration with a smaller effort that the required with
ERP. EAI implies plans, methods and tools oriented to modernize, to consolidate and to coordinate the
functionality computational of the business. Typically in the businesses, and the PyMEs are not the exception,
bequeathed systems exist, which is desired that they continue being utilized al same time that are added or
emigrates to capable applications of exploiting Internet, the electronic commerce, extranets and some other
new technologies.
The Business Integration of Applications can require the development of a new vision of the business and
their applications, determining in what way the present systems will adjust inside the new vision, to later
determine the form in which said systems will be reused efficient, al same time that be to added new
applications. As opposed to the traditional integration, in which was required of the written of codes to be able
to communicate the systems, which was very costly and delayed, in EAI are utilized middle wares special (to
see figures 3), that serve like a bridge among the different applications that will be integrated. In this manner
the applications can communicate freely among itself through an interfaz common.
The previous thing can be taken like an option alternative to the adoption of a system ERP for a PyME, since
is considered that it has a smaller impact in resources and time, nevertheless not to stops representing a large
effort. They exist in the diverse market suppliers that offer the platforms middleware, among the ones that are
found Vitria, Activate Software, Software Technology and Cross Worlds.
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The figure of Integration EAI vs. Traditional integration
The most important positive aspect of EAI in comparison of ERP situates in which the implementation of this
last one is considered as push−oriented, that is to say, the system obliges al business to be adapted to the
standards established by the ERP, which implies that the individuals in the business cannot elect the way in
which they will carry out their internal processes. From there it is born great part of the resistance al change
that occurs during the projects of implementation of ERP, one of the main problems that are found. The focus
of EAI is pull−oriented, that is to say, that splits himself of the processes and existing applications to map and
to integrate functions that at present are separated, which occurs in a way more flexible for the business, in
this way a PyME, and any business in general, achieves that the information stored in its systems can flow
freely among the same, without affecting so drastically the processes of business, as The case of the ERP (to
See the Board).
Technical
ERP
Degree of engineering Medium/High
Integration Method
Período Implementación
Cultural
Degree of Resistance
Processes of Business
EAI
Under/Medium
Processes Integration
long
High
Centralized
Map of Processes
Médium
Low
Decentralized
Board : Characteristic techniques and cultural of ERP and EAI
These are the main services, solutions, offered by two of the main ERP providers, Oracle and SAP; then
follows a short comparison of the quality of those services between both.
We mainly focus on the Business solutions, than in the industrial ones, because they are more important and
they aren't specialized in special sectors (like the industrial ones do).
IV.− Comparation between ORACLE versus SAP
ORACLE
BUSINESS
Application Development
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Software developers are under increasing pressure to create high quality applications in record time. Emerging
technologies and development approaches result in shorter development time and increased functionality,
Oracle simplifies using these technologies so they won't be out of reach for any developer.
A wider range of developers is building enterprise software today − from systems programmers, and business
analysts, to Web developers. All have different skill−sets and backgrounds, yet they expect to use their own
approach to development. Developers are looking for agile and flexible tools that address their skills and offer
the highest level of productivity for their preferred development approach and the specific requirements of
their projects.
Oracle Application Development tools rely on implementations of best practices; visual declarative
capabilities across the entire application life cycle; and support for the latest standards to optimize
productivity while giving maximum choice. Choice of development approaches, development languages,
technology and third party tools, and choice of deployment platform.
Business Integration
Segmented data, disparate applications, lack of automation, and a disconnected supply chain are slowing you
down and costing you money.
Oracle Application Server is a single platform for all of your integration challenges: it provides
application−to−application, business−to−business, business process management, data integration, and Web
services integration. With Oracle Application Server Integration, you can connect disparate information
sources to seamlessly exchange data, streamline business processes, and collaborate with your partners.
Business Intelligence
Gain timely and accurate insight into internal business operations, customers, and suppliers for greater
business profitability with Oracle BI solutions. Only Oracle provides a complete and cost−effective solution
to address the full spectrum of business intelligence requirements: data quality, data analysis, and information
access. Oracle's standards−based BI solutions help you improve ROI and benefit from:
• Accurate business insight right when you need it
• Enterprise−role based views of your business
• Timely deployment of solutions
• Lower total cost of ownership
Corporate Governance: Visibility. Control. Efficiency.
If you don't have a complete, real−time view of your business operations, you can't make the right decisions
about your company's future − and you can't meet the demands of new regulations that govern fiscal
reporting.
Only Oracle offers complete, integrated business intelligence and analytics that provide your management
team with continuous, current, customized information about every aspect of your business−from finance and
human resources to supply chain and marketing. Find out how Oracle can help you improve your business
operations in the areas critical to good Corporate Governance:
• Visibility − Access timely, relevant, accurate information across your organization
• Control − Centralize and secure policies, processes, and procedures
• Efficiency − Roll up and reconcile data quickly and accurately while eliminating administrative
overhead
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Customer Relationship Management
With Oracle CRM you know more about your customers, products and results using real time information
across your business. Your organization can do more because Oracle CRM focuses on driving profitable
customer relationships, not just automation of activities. Only Oracle offers breakthrough opportunities for
savings on software implementations and maintenance to ensure that you spend less for better results.
Enterprise Portals: Access and Organize Information and Applications with an Enterprise Portal
You already trust Oracle with managing your most critical data. Now, let Oracle provide your organization
with a solid portal platform for secure information access, online collaboration, and process automation. With
Oracle Application Server Portal (OracleAS Portal) you can:
• Increase productivity through efficient access to relevant content and applications
• Share information and collaborate more effectively with customers, partners, and suppliers using a
secure infrastructure
• Streamline business processes and reduce costs by connecting applications that eliminate paper−based
and other manual procedures
Oracle Grid Computing
Grid computing is the coordinated use of a large number of servers and storage acting as one computer.
Businesses no longer need to worry about spikes in demand and the cost of maintaining excess capacity.
Computing power is now available when you need it.
Grids are built with low cost modular components, so you can start small and preserve your investment as
your business grows. Turn 64 small servers into a giant mainframe. It's fast, it's cheap...and it never breaks.
When a server goes down, your system keeps on running. Oracle Grid Computing includes:
• Computing power delivered on demand
• Automatic load balancing of your systems
• Easy management of your IT Infrastructure with Grid Control
Next step: Get your business on the grid in 3 Steps to Grid Computing.
• Three Steps To Grid Computing
Adopting grid technologies can be done with minimal investment, zero disruption, and fast return on
investment, starting with three steps:
Standardize on low−cost servers and storage based on technology such as Intel Itanium processors, blade
servers, and Linux
Consolidate your databases, application servers, and storage
Automate day−to−day management tasks, so a single administrator can simultaneously handle hundreds of
servers in a grid
IT Consolidation
Consolidation of your database systems and middleware equates to lower incremental growth costs, higher
availability, fewer upgrades and patches to apply, and less work for your administrators.
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• Consolidate and reduce IT costs by 20−50%.
• Consolidate to improve business processes.
• Manage your all your systems through one integrated management view.
Managing Your Enterprise
Oracle Enterprise Manager 10g featuring new Grid Control enables enterprises to manage IT operations cost
effectively. Using it enterprises can:
• Maximize quality of service through proactive monitoring and management of business service levels.
• Manage more applications, databases and application servers with fewer human resources through
automated administration.
• Meet changing demand for IT resources through automated provisioning.
• Simplify IT complexity through policy enforcement.
• Monitor and manage custom applications using comprehensive extensibility framework
Solutions for Real Estate Management
In today's economy, real estate is no longer regarded as a fixed cost. Corporations are pressuring real estate
executives to reduce the impact of occupancy cost on the bottom line. Retailers are looking at inventive ways
to better manage current obligations and strategically plan for growth while minimizing the overheads of store
operations. Investment real estate companies are scrutinizing their portfolios for under performing holdings.
Whether you are in the real estate business or manage real estate for your enterprise, businesses that can
effectively manage utilization and costs associated with these assets stand to reap substantial benefits to the
bottom line. A complete, integrated, web−based solution that supports end−to−end automation of all critical
business functions is the foundation for effective real estate management.
Small & Midsize Business
Know more − Gain enterprise visibility to make better business decisions
Do more − Make your company "easy to do business with"
Spend less − Unify technology on a single, integrated business platform
Oracle Security
Consolidation maximizes security and reduces costs. In today's economic climate, businesses are seeking a
security strategy that helps achieve business objectives without adding complexity and costs. With 25+ years
of experience managing critical data and infrastructure, Oracle's security solution provides the following
benefits:
• Allows multiple communities of users to securely share consolidated data
• Integrated user provisioning and access management across the enterprise
• Single sign on for J2EE, web and legacy applications
• Enterprise−class LDAP−compliant Directory
Supply Chain Management
Oracle Supply Chain Management lets you gain global visibility, automate internal processes and readily
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collaborate with your suppliers, customers, and partners. Built−in flexibility and intelligence let you respond
quickly to changes and opportunities to gain competitive advantage.
INDUSTY SOLUTIONS
The main sectors in which Oracle can offer solutions are:
Aerospace and Defence Energy High Technology Professional Services
Automotive Engineering and Construction Higher Education Retail
Chemicals Financial Services Utilities Healthcare
Travel and Transportation Communications Government Life Sciences
Consumer Package Goods Industrial Manufacturing
Comparing the main technology, functionality (maybe the most important performance area), and based in
some specific criteria's we can qualify both companies, and other interesting ones, like:
SAP Good/Very Good
Oracle Good/Very Good
JD Edwards Good
Lawson Software Fair
And this evaluation is basically based in some criteria's:
Financials
Human Capital Management performance management, recruitment, career development, and succession
planning.
Supply Chain Management execution (warehouse management, transportation management, global trade
management, global logistics, supply chain visibility), planning (demand planning, supply planning,
replenishment planning, production planning/scheduling, transportation planning, tactical network
optimization), and supplier relationship management/procurement.
Customer Relationship Management rational, analytical, and collaborative CRM
Capabilities.
Localization/Globalization Language, currency, regulatory, technology, standards, and cultural support.
Integration/Interoperability Application interoperability (internal), integration capabilities/toolsets.
Core Technology Architecture
Technology Implementation/Application Management
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Functionality is ranked compared to best−of−breed niche vendors, and each ERP provider excels in particular
functional areas (e.g., Oracle in core financials; SAP in SCM execution;). On the other hand, technology is
evaluated based on comparison to best−case.
RESUME OF ORACLE (ERP)
• Advantages: Procurement cards are highly integrated with the General Ledger. Design−to−Order and
Manufacture−to−Order cost and schedule information is very useful. Repair action recording and
sales forecasting are also strong.
• Disadvantages: Online Expense reports were cumbersome and not user friendly. Identification of
components without suppliers was difficult. Oracle has no out of the box dashboard or scorecard
functionality. Use of a shipper's memo to drive stock transactions is poor. The ability to accumulate
labor against a work order was limited. Many industry specific forms are not available out of the box.
• Overall: Oracle has very tight integration between its application modules and its database. In
general, functionality in financials and manufacturing is very strong.
SAP BUSINESS
SAP provides a global enterprise resource planning (ERP) solution, my SAP! ERP, designed to provide a
comprehensive solution to today's changing demands on ERP. While leveraging existing IT assets, my SAP
ERP allows companies to regain active control of their whole administrative and operations environment and
thereby increase efficiency and profitability. Powered by SAP® NetWeaver!, the comprehensive integration
and application platform, my SAP ERP combines traditional ERP functionality with portal−based
collaboration across the extended enterprise.
Key Functional Areas of my SAP ERP
• ANALYTICS
Strategic enterprise management − Enables companies to execute strategies quickly and successfully while
managing business performance throughout the entire organization; supports integrated strategic planning,
performance monitoring, business consolidation, and effective stakeholder communication, thus enabling
value−based management.
Business analytics − Allows managers and knowledge workers within an integrated framework to identify
and exploit value−adding opportunities within the daily business−enabling optimization of operational
performance, accurate forecasting, and business planning; identifies opportunities to create additional value
through better exploitation of tangible and intangible assets, such as customer value, human capital, or the
R&D pipeline value.
• FINANCIALS
Financial accounting − Helps companies to monitor real−time all values from financially relevant
transactions out of value−creation processes and to maintain a consistent, reconciled, and auditable set of
books for statutory reporting, management support, and as a source for analytic applications.
Managerial accounting − Helps companies optimally monitor and control all performance relevant
information in an environment that is completely integrated with all operative transactions throughout the
company. Managerial accounting helps a company take control of its profitability.
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Financial supply chain management − Enables financial collaboration within the enterprise and its business
networks using defined corporate policies and shared services to handle all customer− and supply
chain−related financial processes; helps automate the financial supply chain using the Web and other new
electronic service models.
Manager self−service − Provides business managers with access to all relevant business information as well
as related services through financial portal solutions. Additionally, this capability helps manage financial
shared service centres. The portals provide convenient Web−based access to internal and external
applications, business content, and services that may be key to tasks, processes, or business decisions.
• HUMAN RESOURCES
Employee transaction management − Streamlines a comprehensive range of HR services and processes
necessary to efficiently run the Human Resource environment. This includes a global system meeting the
needs of local regulatory compliance requirements as well as international best practices.
Employee lifecycle management − Provides automation and optimization of the following phases of the
employee life cycle−attract/hire, deploy, influence, develop, and retain−resulting in increased human capital
efficiency through better hiring practices, more efficient deployment, focused employee development, and
increased employee retention and loyalty.
E−recruiting − Helps locate the best people and coordinate team collaboration to identify and evaluate
candidates. Some elements are talent warehouse, recruiter, service center, and analytics.
Employee relationship management − Provides companies with the ability to enable employees throughout
the company to build collaborative relationships with fellow employees, managers, third−party suppliers, and
the company itself. Knowledge management and portal technology are utilized to significantly change the HR
service delivery model and efficiency of the workforce.
Employee self−service − Content and application services offer a multitude of ready−to−use individual ESS
services available in thirty−two languages for thirty−two countries, giving employees control over multiple
administrative tasks. With life−and−work events capabilities, individual transactions are seamlessly combined
with expert content and knowledge so that the employee experience is efficient and enjoyable.
HCM analytics − Provides data analysis and reporting tools as well as strategic enterprise management
capabilities to support informed HR policy and decision−making.
• OPERATIONS − Enables a company to efficiently streamline the logistic operations for the optimal
execution of all orders resulting from purchasing, sales, production and change management
environments.
Purchase order management − enables the efficient handling and execution of Purchase Orders integrated
within the entire logistics process.
Inventory management − allows a company an integrated management of stock and inventories in an
integrated operative environment.
Production management − enables the efficient management and execution of the enterprise production
process.
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Maintenance & quality − allows a company to efficiently handle the plant maintenance and quality control
process within the company.
Delivery management − executes the delivery and transportation processes to efficiently support a sales
environment.
Sales order management − enables the sales order fulfilment process allowing for fast and efficient
execution of customer sales orders.
• CORPORATE SERVICES − Enables the efficient provision of central and decentral corporate
services to the organisation.
Real estate management − Provides a complete solution with capabilities to support every stage of the real
estate portfolio life cycle and streamlines business processes allowing companies to optimally utilize and
manage their real−estate assets.
Incentive and commission management − Processes all types of variable remuneration for employees, sales
forces and partners, such as incentives, commissions, and brokerage fees, etc.
Travel management − Provides applications for business travel management that support and optimize travel
processes; includes travel manager's marketplace, which supports procurement of travel services. With
seamless integration to expense reporting travel management allows for the optimal management of the entire
business travel cycle.
RESUME OF SAP (ERP)
• Advantages: Document Management tools can handle sophisticated importing of Engineering Bill of
Materials that are made up of multiple engineering documents. The ability to view and move Kanban
locations is very powerful and visual. Tight integration with FEDEX enables automatic generation of
FEDEX tracking numbers.
• Disadvantages: Out of the box scorecard and dashboard functionality is very limited.
• Overall: SAP is more functionally robust than any other vendor. The company has native PDM,
CRM and APS.
V.− Case Example: Nestlé Odyssey
There are thousands of companies that have acquired ERP software suites since its birth in the earlier 80's. For
some companies, the implementation of such technology has saved them millions of dollars reducing costs,
has powered them to create new more profitable ways of doing businesses and, finally, has resolved critical
problems of the IT systems of the company, like the Y2K problem or old−legacy systems. But for many other
firms, the decision of adopting an ERP solution has meant the beginning of a nightmare without an easy
solution, normally restarts the project from zero.
Even if it is successful, the process in a big enterprise, like a Fortune 500 one, took on average between 18
and 24 months. Also, the initial budget and go−live date are usually never reached. Find a successful project
without any of these problems it's quite difficult, especially because it's probable it doesn't exist, as much the
ERP developers try to show to the prospective customers.
We are going to examine a SAP implementation in Nestlé USA, which tried to integrate the operations of
these divisions.
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Nestlé's ERP Odyssey − It's not software, it's business
It's June 2000, Nestlé SA, the well−know swiss consumer products multinational, announces the sign of a
contract with SAP to install an ERP system for the global enterprise, more than 200 companies in over 90
countries all around the world. The total cost of the project is $200 million plus additional $80 millions for
consulting and maintenance. The result Nestlé Stock recommendation was downgraded only a year after as a
direct consequence of this decision.
Why did it happen? To understand it we have to look to Nestlé USA, the United States subsidiary. It's 1997,
Nestlé USA decides to embark on a SAP project code−named BEST (Business Excellence through Systems
Technology). Even the smaller size the project has not finished after 6 years of work and the total amount of
money spent is more than $200 millions, the same amount budgeted for Nestlé's project. In spite of this and
the costly mistakes taken, the BEST project is considered to have saved Nestlé USA $325 million,
compensating much of the economical and organizational effort taken.
Jeri Dunn, CIO of Nestlé USA, says a relevant quote about the ERP that can help us to understand what
exactly is: When you move to SAP [or to any ERP solution], you are changing the way people work. You are
challenging their principles, their beliefs and the way they have done things for many, many years. ERP is not
only a software program, it's a way of doing business, and if you miss that, like in this case, you get on
trouble.
The Problem
Twenty−nine different prices for vanilla. That can be the summary of the situation of Nestlé in 1997. A big
legacy of the times of independent companies made Nestlé USA a holding instead of an unified company. The
integration between divisions didn't exist. That lead to the situation that the different plants bought vanilla to
the same vendor at 29 different prices, and there was no way to know it without a study or change it.
The problem was the lack of integration between the brands, in Financial, Supply Chain Management, etc.
Regardless of standards procedures, each division act by their own. The company had to work as it was only
one to acquire scale economies, buying power and integrated data. The solution was clear: We need ERP.
The Proposal
One Nestlé, that was the term that reflects the objective of becoming an integrated company. The first
reunions were placed in June 1997 with the executives of Finance, Supply Chain, Distribution and
Purchasing. They had to show the major issues of each department. The situation was so ugly to imagine that,
for example, there were nine general ledgers, 28 points of customer entry and multiple purchasing systems not
inter−connected.
They realise of the structure difficulties involved in the project, and the slow speed of implementing, but they
still thought it was only about installing a program. The seed for problems was just sprouting.
By October 1997, one team of 60 people, top managers and IT specialists, were created to implement the
system. Another smaller team examined the data to make it consistent. Also decide not to use the SCM
module offered by SAP, that was brand−new, and use the most know Manugistics' module.
At March 1998 everything was decided and they set a deadline, before year 2000. They didn't take on account
all the incidences that can happen in this type of projects, the seed continued growing into a huge plant.
The Process
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Like the popular Nestlé's Crunch chocolate, the company was cracking. In late 1999, with only two modules
implemented, there was a rebellion within the employees. The reason was simply: None of the groups directly
affected were represented in the stakeholders team. They didn't know what was happening; it was a surprise
after surprise. That was the biggest mistake of the entire project.
By early 2000, the rollout had converted into chaos. Users didn't understand how to use the program and even
the new processes, they were unable to work. Divisional executives were as confused as their employees. The
whole company was in danger of being halted. Employees refused to change their way of work and learn the
new program and processes.
Finally, due to the efforts to beat the Year 2000 deadline, they forget to work and test the connections between
modules. The company changed divisional silos for process silos, even a worse position.
In June 2000 the project was halted and four months later the project was redesigned completely. Key users
come into the development team and the importance switch from a deadline to reach the business
requirements. Lastly, the Manugistics' module had to be changed for the SAP module because it had become a
standard in Nestlé SA during these three years. And this time, user would knew when, why and how are going
to be the changes.
The End
In April 2001, the blueprint for the redesigned project was finished. An intensive communication between
user and the team was going to be the key for success. They were taking consideration of all the possible
problems before rollout the module, no more Crunch.
With the BEST project finished, Nestlé USA is able to do trustworthy demand forecasts, reduce inventory
level, supply chain improvements saved $325 million.
Even with all this problems, analysts consider this project a success. ERP is not a children's game.
Conclusions
Nestlé USA was in 1997 a group of companies with any relationship excepting the owner between them.
Different IT systems were used in each division; there were decentralized purchase and sales operation,
separated financial topics, etc. The company was not able to reduce costs using its size and to share
information. There was a necessity to virtually integrate the separate divisions into one company in order to
fight in highly competitive home products market, with huge players like Kraft or Unilever.
The solution to this big headache was use an ERP solution. The chose of using SAP as provider was right and
didn't create problems. SAP R/3 was reliable and offered the needed functionality to the company without
doing great changes on the code or writing new programs. This time, like in other implementations, the
problems didn't reside in the program
The problems resided this time in the way of doing the implementation. An intelligent decision saved the
problem when it crashed in 2000. The choice to make a wave implementation instead of a big−bang go−live
made possible to realise of the problems, late, before finishing the project and be able to change it and
redesign the process. These problems are fundamentally two: the separation between user and the program
team and the set of a deadline.
The key stakeholders' team thought that this was only a software installation, like a domestic user that upgrade
from different applications to Microsoft Office. As mentioned above, ERP changes the way the company
works in the day−by−day for all the employees of the company (white−collar employees). They didn't take
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mechanisms to train correctly the users and get a feed−back of their reactions, problems and petitions about
the program. That led to confused and angry users, who had to fight with a program conceived by people who
don't know too much about the exact processes of each division. The separation between the two groups made
a feeling within the users of looseness and refusal against the program and the new procedures.
The second big mistake was the deadline. The date was set without taking on account the requirements of the
business, only the necessity to resolve the Y2K problem. The haste to reach the date made the team work too
fast, rolling out programs with important bugs, or without testing the correct work of them, like the
disconnection among different modules, with a great repercussion in the whole system.
Those big mistakes made the project crashed.
After the halt, solutions to these problems were taken. First, a relationship between implementers and users
were created. That is basic for any ERP implementation, final users have to feel comfortable with the system,
and they have to collaborate in its developing. IT department cannot impose a system to the user without a big
fight and a rebellion of the employees. At least, the one who is going to enter that customer order is going to
be an employee, not an IT professional.
Secondly, to set a deadline they first examine the requirements needed and the predictable time to reach every
stage of the operation, and one time calculated set the deadline, but only as an indication, not as a mandatory
obligation, with no possibility of changes.
Now, Nestlé USA has finished the BEST project, but Nestlé SA initiates the global project. Lessons learned in
this project must be used and taking on consideration, specially the communication with the final users, more
important due to the difference between countries, cultures and languages. To have success, the program must
be slightly adapted to the particularities of each country. Setting a deadline it's completely no useful, nobody
can know the difficulties that can appear. To resolve them, a wave/stage implementation is needed; a
big−bang would be chaotic. Finally, the budget has to be continuously revised, because the initial $280
million sound insignificant for this huge project.
Finally, the big remark, ERP is not software that came on CDs and just install, it's a decision to change the
company culture towards a shared−centralized knowledge company able to compete in this globalization
times.
VI.− Conclusions and lessons learned
First of all we have learned the advantages of the ERP. We learned before in Tektronix's case.
Some advantages of the implementation of a ERP
Some of the benefits that can be acquired with the implementation of a ERP can be:
1.− Integration of information between different areas.
2, Information available and immediate for the taking of decisions.
3, Increase in the productivity.
4, Improvement in the response times.
5. Fast adaptation to the changes.
6, Scalability of the system.
7, Integrity of the data.
8, Security user defined for the information handling.
Costs of Implementation of a ERP
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Systems ERP generate advantages competitive that can be able to give to fast answer to the changes of market
or any other change but it is necessary to mention some aspects of the difficulty of the implantation, such as
the human and material cost, resources or the time that are going away to use.
Also, it is necessary to consider that to implant a software able to integrate the necessities of the company
with those of its clients and suppliers are not something simple.
All it forces to elaborate a work plan that considers points before essential, during and after the adoption of
the ERP, to take advantage of the resources available to the maximum, but not only to make the project less
complicated.
There are no magical prescriptions for successful implantations, only work and aspects that must be taken care
of before and during the implantation process, and inclusively when the system enters function. For that
reason, before, during and after the implantation of a ERP he is advisable to carry out the following processes:
· Definition of results to obtain with the implantation of a ERP
· Definition of the business model
· Definition of the management model
· Definition of the implantation strategy
· Evaluation of opportunities for complementary software to product ERP
· Alignment of the structure and technological platforms
· Analysis of the organizational change
· Delivery of a complete vision of the solution to implant
· Implantation of the system
· Controls of Quality
· Audit of the technical surroundings and the surroundings of development
· Benchmarking of the implantation.
Several criteria exist to evaluate and to choose the correct solution of a ERP. To orientative way we can
indicate the following ones:
· Degree of integration between the different components from the system
· Scalability of the system
· Level of complexity of the solution
· Time of implementation
· Technology
· Availability of regular updates
· Total cost of the project
Conclusion
Systems ERP are a tool that nowadays cannot lack in our organizations. This type of systems is derived from
the systems MRP (Planning of requirement of materials) that were directed towards the production area and
that nowadays in computer science applications has consolidated like ERP (Enterprise Resource Planning;
Planning of enterprise resources) which are systems that by their nature, if well they are implanted, can give to
the organization competitive advantages him like maintaining truthful and efficient information inside and
outside the company, to improve the bows of communication between the diverse departments and levels of
the organization being caused a fluid communication between the departments and improving their form to
work. In addition to these competitive advantages that the ERP's provide the organization we could add that it
reduces to the duplicity or redundancy of the information and makes integration more efficient of the
commercial processes of the organization.
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These are single some of the advantages of a good implantation of a system ERP that can help our
organizations to improve their commercial, organizational level and in addition to quickly respond to the
changes of products and services or new markets.
This case is based in Nestlé's ERP Odyssey by Ben Worthen and published in CIO Magazine 15 May, 2002.
Source: http://www.cio.com/archive/051502/nestle.html
The total sales of Nestlé Group were $71 billion in 2002. Also has more than 255,000 employees in the world.
Source: www.ir.nestle.com
Nestlé USA is divided in 8 divisions, has 22,000 employees nationwide and has a sales $11.1 billion in 2002.
Source: www.nestleusa.com
Nestlé chose to implement five SAP Modules: Purchasing, Financials, Sales and Distribution, Accounts
Payable and Accounts Receivable; and the Manugistics' Supply Chain Module
This is the commercial name for SAP Release 3 Application Suite, the Sap's ERP Solution. It's the evolution
of the firstly one created in the beginning of the company. Based on a client−server technology was the most
powerful solution during the 90s, and permitted SAP got the highest market share during these years.
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