Nestlé's ERP Odyssey

Von Ben Worthen

ERP projects are notorious for taking a long time and a lot of money.Jennifer Chew, an analyst at Cambridge, Mass.-based ForresterResearch, found that 54 percent of respondents to a recent survey saidthat their project lasted more than two years (the other 46 percentbrought theirs to fruition in less than two years). Nestlé USA'sproject "sounds on the high side" for both time and money, says Chew.Still, success is ultimately measured by what the projectaccomplishes. Chew points out that Kmart had to write off $130 millionfor an ERP project that was never completed.

Dunn herself is not ashamed of the length of the project or thenumerous dead ends. She insists that slow and steady wins the race.Nestlé USA has already achieved significant ROI, she says, with thelargest chunk of savings from better demand forecasting. "The oldprocess involved a sales guy giving a number to the demand planner,who says, 'Those guys don't know what the hell they are talking about;I'm going to give them this number,''' Dunn says. "The demand plannerturns [that number] over to factory, and the factory says the demandplanner doesn't know what the hell he's talking about." Then thefactory changes the number again.

With SAP in place, common databases and business processes lead tomore trustworthy demand forecasts for the various Nestlé products.Furthermore, because all of Nestlé USA is using the same data, Ramagesays, Nestlé can forecast down to the distribution center level. Thatallows the company to reduce inventory and the redistribution expensesthat occur when too much of a product is sent to one place and notenough to another. Ramage says that supply chain improvementsaccounted for a major chunk of the $325 million Nestlé says it hassaved from SAP.

If Dunn were to do it over again, she'd focus first on changingbusiness processes and achieving universal buy-in, and then and onlythen on installing the software. "If you try to do it with a systemfirst, you will have an installation, not an implementation," shesays. "And there is a big difference between installing software andimplementing a solution."

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