Implementing SAP in Nestle: Challenges and Success Metrics

This report critically investigates the Nestle case of implementing SAP system called GLOBE across all of its affiliations around the globe. It describes Nestle and analyzes the problem and opportunity it faced in implementing GLOBE, the nature of SAP and the process by which it was selected and implemented, explanation and analysis of the difficulties Nestle faced in adopting the system and assessment of the success of SAP adoption and its metrics.

Implementing SAP in Nestle
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Executive summary
This report critically investigates the Nestle case of implementing SAP system called GLOBE
across all of its affiliations around the globe. It describes Nestle and analyzes the problem and
opportunity it faced in implementing GLOBE, the nature of SAP and the process by which it was
selected and implemented, explanation and analysis of the difficulties Nestle faced in adopting
the system and assessment of the success of SAP adoption and its metrics.

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Table of Contents
Introduction......................................................................................................................................4
First: Description of Nestle and the problems and opportunities it faced.......................................4
Second: The nature of SAP and the process by which it was selected and implemented...............5
Third: Explanation and analysis of the difficulties Nestle faced in adopting the system................6
Fourth: Assessment of the success of SAP adoption and its success metrics.................................7
Conclusions......................................................................................................................................8
References........................................................................................................................................9

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Introduction
Nestlé is the largest food company across the globe that combines global strategies and local
business processes. It depends mainly on implementing its business on trust and innovation. It
focuses on capturing opportunities to be able to offer high-quality nutrition that adds value to its
products (Nestle 2019). ERP systems have proved their efficiency in business organizations; they
are implemented to automate business processes and integrate diverse resources, information,
and functions within one application. Data is stored in one database that eliminated repetition.
The system enables fast response to management needs in taking the right decisions, fulfilling
the client needs, increasing product quality, maintaining efficiency in using the organizational
resources and enhancing the overall organizational performance (Al-Sabri & Al-Saleem, 2013).
This following section critically analyses Nestle implementation of SAP system called GLOBE.
It starts with a description of Nestle and the problem and opportunity it faced in implementing
GLOBE, the nature of SAP and the process by which it was selected and implemented,
explanation and analysis of the difficulties Nestle faced in adopting the system and assessment of
the success of SAP adoption and its success metrics.
First: Description of Nestle and the problems and opportunities it faced
Nestlé is the largest food company worldwide; it manufactures nutrition, wellness and health
products. Its products are traded and consumed in 194 countries and it manufactures more than 6
thousand products in 86 countries in North and South America, Europe and Africa, and the
Middle East. The zones are divided into markets that offer the goods according to the customer
segmentation’ needs. The organizational structure of the company used to be decentralized that
reflects its mission of product customization to satisfy the customers’ local needs. Decentralized

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resulted in IT management autonomy, the matter that enables about 150 chief information
officers (CIO) to control the technical architecture of the applied solutions and budget allocation.
IT employees are locally employed and they represent about 6000 employees. In the early 1990s,
Nestlé tried to standardize its information system, it was using SAP R/2 ERP systems in 14
countries in 1995. Every CIO operated the system in a different way, this means that if the
company decided to retrieve information for a global requirement, about 100 local systems
should be changed to match standardized requirements. Also, the cost of managing local IT
highly increased by about $575 Mn to $750 Mn a year due to many redundancies during 1994
and 1999. Other than the high cost, supply chains were differently configured, different methods
of forecasting demand and invoicing customers were applied (Haki & Legner 2013).
1.1 SAP opportunities
Implementing GLOBE worldwide in Nestle affiliations provided the management an opportunity
to monitor and control production, and increase the operational efficiency by linking the
consumers to the supply chain worldwide. The matter that enabled the company to monitor the
gaps between supply and demand and resource utilization across regions. Therefore, Nestle could
benefit from applying the one size fits all IT approach that was applied by deciding to use SAP
ERP software. During the 1990s, Nestle adopted SAP in major countries. By 2000, the company
was able to build capacity and knowledge of SAP. The company adopted a concept of
implementing SAP in every part of the system whenever it is possible, rather than building the
system from scratch. The centralized project of IT/IS integration is called “GLOBE”. It covers
all of the business parts, including supply chain, finance, HR, sales and marketing. Despite
spending $2 billion to implement GLOBE, it represented the biggest ERP implementation
around the world. The actual implementation took place in 2005 and about 250 thousand

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employees had to deal with it. GLOBE did not only represent an IS/IT project, but it represented
a way of integrating all of the company resources and processes that enable the company as a
whole to deal with (Mitra 2012; Kelly, Crawford-Brown & Pollitt 2012).
1.2 SAP challenges
Implementing enterprise systems (ES) and enterprise resource planning (ERP) reflects Nestlé
global leadership that required standardization of its IT/IS strategy. IT structure can add an
intangible benefit to the company performance that increases its competitiveness. Nestlé had to
manage a major challenge before 2002 when it had to map its use of resources across various
zones in an aggregate manner rather than scattered countries or zones. Formulation and
implementing an integrated IT strategy is likely to lead to high organizational performance
(Mitra & Neale 2014).
Second: The nature of SAP and the process by which it was selected and implemented
2.1 SAP ERP application
The SAP system is characterized by its ability to reduce the downtime needed for maintenance. It
could successfully minimize the downtime in case of upgrading the system to less than 20 hours
compared to 160 hours. The near-zero-downtime policy made Nestlé upgrade an easy process.
Also, SAP was delivered according to the allocated budget and on time. The project teams were
allocated across different regions with different time zones (Ifon 2013).
The implementation of SAP changed the pervading culture that the CEO in every country was
free to make decisions and manage day to day operations. This situation was changed and staff
from technical and standards’ team for IS/IT at Vevey had to travel to various countries to ensure
that the countries follow the guidelines and to give advice. Imposing a centralized template-
based design was completely changing the organizational culture. Accordingly, GLOBE

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represented a means for benefiting from the best practices across the company as a whole
(Herath & Herath 2018).
2.2 Principal dimensions of supply chain
Nestle supply chain management before and after implementing SAP is discussed according to
Mitra & Neale (2014), as follows
2.2.1 Sales order processing
Nestle used to depend on different ways to make its sales order processing (SOP) that used to
vary across areas. The supermarket chains decide its suppliers, the matter that makes Nestle and
its competitors in a highly competitive position. The design team at Nestle decided that SOP
should be considered on the basis of signed proof of delivery (POD) and only these records are
to be stored in SAP.
2.2.2. Purchasing
Purchasing represents a straightforward process from both the business view and the technical
view. Prior to GLOBE, the major countries like France, Germany, Italy and the UK used to adopt
different systems of purchasing and they had their selected suppliers. The company used to
spend about $35 on purchasing raw materials either directly or indirectly. Purchasing was done
on three levels of worldwide purchases, zone and country levels. But GLOBE could make
bottom-line savings.
2.2.3 Distribution
Before GLOBA, countries used to depend on highly automated big centralized warehouses. After
applying GLOBE, distribution was called materials handling (MH). It meant mainly for handling
finished pallets of products after production from the factory to be delivered to the warehouse. In

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case that the factory ran out of parking space, SAP sends an alerting message from the factory to
enable handling the produced pallet.
2.2.4 Demand and supply planning
Before GLOBE, demand planning was intrinsically implemented among sales and marketing
activities. After, GLOBE, demand planning and supply forecasting were separated and used to be
arranged before 18 months of delivery rather than selling what is already produced by the
factories. Demand planning was implemented by a team that consists of members from sales and
marketing, production, supply chain and finance. This function was very difficult to be
implemented by SAP modules, but the IT team succeeded in handling it within the system.
2.2.5 Manufacturing
Nestle manufactures all of its quality products, but GLOBE implementation changed many
aspects of operations. Before GLOBE, the factory manager had to manage to operate at full
capacity of the factory and to lower the unit cost to the minimum. The major change that
impacted the factory managers by implementing GLOBE was the demand and supply planning
that factories had to implement. They had to plan for production 18 months prior the due time by
adopting a unified calendar for production.
2.3 SAP alignment with the Nestle business processes and strategies
SAP significantly changed Nestle business processes and strategies. SAP is flexible and able to
add new changes that serve the business goals of future processes. Implementing SAP at Nestle
facilitated the business process, eliminated work redundancy and it was able to unify its
processes by integrating them within the system across various countries (Ng 2011 ).

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2.4 SAP system architecture
SAP system architecture integrates various types of business applications and this should be
considered on a continuous basis to guarantee the system effectiveness in the future. Internal
integration of applications refers to integrating intra organizational processes. External
integration integrates services delivered various suppliers linked with the supply chain activities
to support operations management, facilitate information exchange and cooperation across the
business value chain (Aderina & Nela 2010).
Third: Explanation and analysis of the difficulties Nestle faced in adopting the system
GLOBE represented a turning point in Nestlé’s techno local architecture. Along its lifetime,
Nestle adopted different processes of managing decentralized IS across various countries. After
deciding to implement full integration of processes in one SAP system could not be
implemented. The company ended up with different SAP systems. Standardization did not save
the expected cost-saving, but on the contrary, it resulted in increased IT costs. GLOBE resulted
in tension between local affiliations management and the company goal of cost reduction at
global level managed by headquarters in standardized. IS configuration resulted in time
consumption in getting necessary approval from headquarters to carry out local requirements.
Also, the processes considered market-specific requirements. Also, the initial archetypes were
required to balance between global integration and local consideration. This prolonged process
negatively affected the company relationship with local customers (Haki & Legner 2013). SAP
implementation in Nestle faced high resistance by the workers and executives. It was hard for
them to understand the newly developed process (Rahimi 2016).
Implementing a life cycle assessment in a food company is time-consuming. It faces challenges
of data diversity, the need for filtering redundant data and data configuration. For every product

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group there is a wide range of ingredients and packaging materials supplied by various suppliers
and different quantities. Handling and recording data from diverse sources across different IS
and providing unified metrics for them represented a serious challenge to Nestle SAP
implementation (Miah et al. 2015).
SAP and Nestle strategies influence one another. Both of them are built by managers in order to
fulfill the organizational goals. Nestle had to be open to the influence of the system requirements
and get the advantages of adopting the new technologies. Despite this the interaction between the
company and the system is complex and many mediating factors take place, including the system
structure, processes, policies, cultural differences, various market needs and compromising
between local management needs and the central management needs (Laudon & Laudon 2011)
The GLOBE teams had to start their analysis from a very low level of details to be able to
identify how the system will work. They had to lay down exactly the way in which SAP will
function to carry out a specific action and what output data would look like and the type of
reports to be retrieved from the system. CEOs had to manage to understand exactly all of the
system related documentation and find gaps that need to be fulfilled. Documentation was huge in
size and time consuming (Mitra 2012).
Fourth: Assessment of the success of SAP adoption and its success metrics
SAP has many benefits that impacted the business processes nature at Nestle. They are
represented in strategic benefits that impacted the central management decisions and transformed
decision-taking after 2000 from the CEOs in countries (horizontal structure) to the centralized
management in the headquarter in Switzerland (top-down hierarchical). This shift in decision
making facilitated managing the business processes on the global level and enabled management
to map the gaps between various regions. On the tactical level, it is considered a reengineering of

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business processes to be integrated into one system. On the operational level, workers were
trained to use GLOBE to be aware of its functions (Elmeziane, Chuanmin & Elmeziane 2011;
Staehr, Shanks & Seddon 2012). The digital acceleration teams effectively contributed to the
evolution of Nestlé’s new culture. These teams are selected from the company various locations,
they are used to make combinations between strategic work, hacking and training then they go
back to the markets in which they become ambassadors of the company digital method of work
(Accenture 2014). This method helped in developing an entrepreneurial hub which is able to
reinvent collaborative work. GLOBE assisted in developing a sharing mindset across company
global affiliations characterized by agility, speed, diversity and flexibility (Capgemini Consulting
2017; Huang & Handfield 2015).
Nestle was able to reduce the technical downtime of upgrade from 5 days to only 2 hours. The
total downtime accounted for 20 hours per year. This highly supported business continuity and
access to business innovation by using SAP. Accordingly, despite the high risk, high expenses
and workers resistance to SAP, it resulted in great benefits for the company at the global level
and its suppliers (Ifon 2013; Park, Jun & Lee 2017; Chang 2013).
Also, Nestle had to establish new alliances and partnerships with financial institutions to enhance
payments. The standardized processes of SAP increased the clients trust in Nestle. The sales
processes were streamlined, where e-commerce represented new channel of dealing with clients
and suppliers. SAP involved a high degree of certainty with minimal probability of error
occurrence in processing of sales orders that could be monitored from everywhere around the
globe (Teo 2017).

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Conclusions
Nestlé had to manage a major challenge before 2002 when it had to map its use of resources
across various zones in an aggregate manner rather than scattered countries or zones. The near-
zero-downtime policy made Nestlé upgrade an easy process. Also, SAP was delivered according
to the allocated budget and on time. The implementation of SAP changed the pervading culture
that the CEO in every country was free to make decisions and manage day to day operations.
Before GLOBE, demand planning was intrinsically implemented among sales and marketing
activities. After, GLOBE, demand planning and supply forecasting were separated and used to be
arranged before 18 months of delivery rather than selling what is already produced by the
factories. Implementing SAP at Nestle facilitated the business process, eliminated work
redundancy and it was able to unify its processes by integrating them within the system across
various countries.
A major challenge that faced Nestle took place after deciding to implement full integration of
processes in one SAP system could not be implemented. The company ended up with different
SAP systems. Also, GLOBE resulted in tension between local affiliations management and the
company goal of cost reduction at global level managed by headquarters in standardized. SAP
implementation in Nestle faced high resistance by the workers and executives.
The interaction between the company and the system is complex and many mediating factors
take place, including the system structure, processes, policies, cultural differences, various
market needs and compromising between local management needs and the central management
needs.

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