ONE SIZE FITS ALL: CASE STUDY OF ENTERPRISE SYSTEMS IMPLEMENTATION IN NESTL

Abstract: User resistance, organisational complexity, cultural complications, inadequate change management provisions are some of the well-known hurdles of Enterprise Resource Planning (ERP) systems implementation that have been reported so far. Whereas component based, phased, adaptive, evolutionary approaches have been advocated for most organisations as being effective in combating these hurdles, yet in contrast the literature has remained uninformed by research on large multinational corporations implementing singular ERP systems. Using a case study approach informed by documents, and accounts of key personnel involved in the development of single all encompassing ERP system in Nestl a critical assessment of the supply chain was undertaken. This study by examining the effects of ERP implementation on four critical facets of supply chain of Nestl aims to dispel the myth of inevitable failure that shrouds contemporary appreciations of ERP implementations in large multinational organisations. It is expected that the ERP development involving hundreds of representatives from all 70 locations of Nestl would enable lessons to be drawn for researchers and practitioners alike.

Keyword: ERP implementation, Multinational corporation, supply chain management, one size fits all 1 Introduction Motivations to introduce Enterprise Resource Planning (ERP) or Enterprise Systems (ES) in organisations have varied over the last few decades. Whilst today memories of challenges of Y2K seem to have faded yet at the time, there was considerable debate followed by frenetic activity in the software community to deal with the Y2K problem. Before the start of the new millennia, implementation of ERP systems seems to have been a measure aimed at addressing Y2K concerns of some organisations. Mabert et al. (2001) in their research found that simplification and standardising IT systems to be a driver for adopting ERP systems. Improving communications with customers and suppliers is also a strategic priority that has motivated multinational companies (MNCs) to implement ERP systems. The third common driver of ERP implementations are the advantages that accrue through greater access to data thus providing a strategic advantage. Such access to data is a pointer to the firms desire to improve business processes. Importantly, ERP implementation is considered (cf. Davenport 2000, Markus and Tanis 2000, Ross and Vitale 2000) as a business solution rather than an IT solution. As pointed out by Shang and Seddon (2002), most Enterprise systems implementation benefits have been premised on either a snapshot taken at one moment in the life of such systems or very high altitude picture of benefits of enterprise systems. This paper whilst using real time experiences of a key developer for Nestl, chronicles a case that revisits the micro dimensions of supply chain domain of ERP implementation as well as key macro strategic consequences.

Clemmons and Simon (2001) whilst examining control and co-ordination in global ERP configurations posited that it is vendors and implementation consultants who promote one size fits all solutions based on industry best practices. Such vendor motivated drives organisations, to follow best practices or embark on extremely costly reconfigurations. In the current example of Nestl the one size fits all approach was used to deal with implementing one system across a single organisation combining 70 localised/regional IS implementations. Therefore whilst Clemmons and Simon (2001) dwelt on applying the same solution across different organisations we are actually focused in this paper on a unitary implementation in a single organisation Nestl that had previously followed regional approaches in its IT operations in different parts of the world. Berente et al. (2010) in their research on NASAs enterprise systems implementation found that there is a theoretical response from employees to demonstrate satisfaction of control imperatives but in the long run such compliance has little bearing on practical execution of work. Yusuf et al.s (2004) research on ERP systems implementation in Rolls Royce points to similar challenges of legacy systems as in Nestl with lack of online access to customers, partners and suppliers. Integrating operations using Information Systems (ISs) in general and ERP in particular (Shehab et al 2004) to gain strategic advantage has been a key goal of organisations ever since ISs began to be widely used for commercial gains. Like in every domain where ISs have been implemented there has been cases of failure. Given long standing research in the dominion of ERP systems, research reports attribute such failure to non-compliance with among others phased implementation (adaptation) (Mitra 2001), component based approaches (Light et al. 2001), cultural complications (Davison 2002). In general, there seems to be a consensus that recognition of localised aspirations (cf. Yamauchi and Swanson 2010, Lorenzo et al. 2009, Madapusi and DSouza 2005), within a larger implementation is a way to ensure that there is adequate provision of reaping benefits when a global system becomes operational. Success gained through GLOBEs implementation in Nestl is likely to show that when consensus building measures go on over two years in a location where all key players subsequently responsible for running regional ERP implementations are co-located many of the usual challenges of conflicts between prevailing culture and organisational adaptation processes as portrayed by Boersma and Kingma (2005) can be avoided. Contrary to Morton and Hu (2008) arguments that integration of standardised business processes leads to failures.

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3 Role of ERP systems for Nestl within IS/IT infrastructure As far back as 1990 Nestl took a strategic decision to deploy SAP as its ERP provider. Throughout the 90s the bigger Nestl businesses in the UK, France, Germany, Italy, Spain and the USA started to implement modules of SAP. By 2000 there was a lot of SAP experience and knowledge within Nestl and the above countries were well on the way to running significant parts of their businesses on SAP. The corporate decision that said If you can implement it (a certain functionality) using SAP then you should (rather than build it from scratch). Bespoke systems design and development was by now seen as slow to implement, expensive to build and maintain and, crucially, lacking in the sort of integration which SAP was famous for providing. In late 2000 the decision was taken by the main Board (the EBM) in the headquarters at Vevey, Switzerland that a centralised project called GLOBE should be funded to design a SAP template which would provide standard functionality covering all parts of the Nestl business Finance, Supply Chain, Factories, HR & Payroll, Sales & Marketing. This was a very bold move which involved 700 people mostly drawn from areas within the actual business rather than the various IS/IT departments and which was publicly stated to have a budget of $2 billion attached to it. All Nestl businesses were told they would implement this template and aggressive timelines were drawn up to implement in all 70 countries where Nestl operated by 2005. All 250,000 employees would be affected. This was the start of the biggest ERP implementation in the world. At the outset it was very clear that CEO Peter Brabeck was not only the chief sponsor but also, and very importantly, was passionate about the +aims and objectives of the project. Indeed, he went so far as to say that GLOBE would be his chief legacy to the company and that his success as CEO should be judged by the success of GLOBE. It is important to understand 2 things at this stage one to do with Nestls culture at that time, the other to do with the way the project was presented at its unveiling to the heads of the individual Nestl businesses the Country Managers annual Conference in early 2001. The culture had always been that the individual businesses in each country were king. They had almost total independence on a day-to-day basis. Once, the annual business plan had been signed off by HQ in Vevey the CEO in the country was free to do largely as (s)he pleased. This was the way the company had always been, would always be and was, indeed, seen as a strength by senior Nestl people; it was, in fact, the conventional wisdom was that the company had been successful down through the decades because of this independence. Staff from the Centre had to ask for permission to come and visit a country and it was not unknown for requests to be turned down. There was a Technical & Standards team for IS/IT at Vevey but it was very weak and the major Nestl businesses certainly did not follow its guidelines nor rely on it for any advice. So, a dictat to implement a template-based design from the Centre was hugely counter-cultural. The second point is to do with the projects marketing. Brabeck understood very well that he was going for broke by having such an ambitious and expensive vision. So, from the very beginning GLOBE was always presented as not an IS/IT project but as a way of allowing the whole company to benefit from the Best Practice that GLOBE would discover within the company and then spread throughout it. The phrase was delivered over and over again GLOBE will deliver common Best Practice, using common data based on common infrastructure. It would allow the company to be big on the inside so it could be big on the outside - in other words economies of scale which Nestl should have been enjoying (but wasnt prior to GLOBE) would result from everybody doing the same things in the same ways. To really nail down this idea that it was not an IS/IT project a group of Business Excellence people were formed who worked parallel to but separate from each of the functional design teams. Their remit was to look specifically at the business processes within their area and then pronounce on how things should be done. This group were freed from the constraints of having to work within what was possible within SAP. Indeed, many of the BE people gloried in the fact that they knew nothing about SAP and did not want that to change! There was undoubtedly a governance issue between the 2 different groups who was actually able to make the decision when differences in opinion could not be settled? In hindsight, it was an inspired move by Chris Johnson, the Head of the Project - each group kept the other one honest. 4 What does one size fits all mean? Referred to within Nestl as The Template. How specific was the design undertaken by the central team in Vevey in 2001/2 going to be? How many changes, if any, would a country be able to make during their implementation project? How would countries be able to tell whether a specific GLOBE-designed process could actually be operated within their specific business environment? What was set up right at the outset were very tightly defined tiers of governance whereby a country could raise an exception, have it assessed by the experts, receive an acceptance or rejection, have a right of appeal etc. This very tortuous, political and arduous process became known as Fit/Gap. As found by Wang et al (2008) there is need for consistency in factors that facilitate ERP implementations. In technical terms the GLOBE teams were busy defining down to a very low level of detail exactly how the system would work. Across all business areas several thousand Process Level 5s were defined and documented. Each of these laid out exactly what SAP transaction was to be used to carry out a specific action, what input data would be required and where that data would be sourced from, what transformation would be performed on that input data by the transaction, what output data would be produced by this transformation and which other transactions would make use of that output data. Countries had to read and understand all of this documentation (which ran to tens of thousands of pages) and if, they raised no gap for any specific Level 5 transaction then they were understood to accept the process behind the transaction, in other words that part of the overall process was deemed to fit their business. As an example of the level of detail required a purchase order henceforth a mandatory requirement before anybody could buy anything on behalf of the company was a complex document containing information about what was to be bought, from whom, when and at what price would bring together several key processes and hence contain implicit acceptance of several dozen Fits. 8. Nestl case study questions: 1) If all FMCG companies do SAP (or similar) how does a particular company in that sector derive any competitive advantage? 1000 word

3) Does the biggest payback come from i) IT savings ii) savings elsewhere in the business iii) higher sales iv) something else? 1000 word