Nestlé Struggles with Enterprise Systems

1- Evaluate Nestlé SA and Nestlé USA by using the competitive forces and value chain
models.
2- What were the problems and issues that Nestlé SA faced that caused the company to
be so decentralized?
3- Do you think it was appropriate for Nestlé to distribute the decision making so
widely? Explain your answer.
4- Why did Nestlé's initial enterprise system project encounter so many problems? What
management, organization, and technology factors contributed to those problems?
5- If you had been in charge of the Nestlé enterprise system project, what could you have
done to prevent these problems?

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ANSWER:

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1. Evaluate Nestle SA and Nestle USA by using the competitive forces and value

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chain

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models.

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Nestlé has many problems with its value chain. This is apparent from the fact that
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each factory set up their own vendor masters and purchased on their own which lead
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to scenario where the company was paying 29 different prices for vanilla from the
same vendor. This happen because every plant would buy from the same vendor on
their own accord and the vendor in turn would just get whatever it thought it could
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get. Every division and every factory had assigned different name to the same product
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which make it impossible for the company to keep track of business transactions and
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caused excessive overstocking as well as spoilage. Having multiple purchasing

systems power to obtain lower prices for raw material. Fortunately, the changes in the
company information system and business process resulted in the installment of SAP,
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an ERP (enterprise resource planning) system and mySAP.com (enable SAP’s system
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to function in the web environment) which manage to standardize and coordinate the
company’s information and is able to produce better sales forecasts. Thus, manage to
achieve the company major concern to establish common system throughout global
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Nestlé to enable group buying which reduces costs.

Sum up, Nestlé's decentralized strategy created inefficiencies and extra costs for the
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company, increasing its vulnerability to external threats. Although Nestlé competes

against some heavyweights, one interesting threat is the company's suppliers. Because
of its decentralization,
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Nestlé was unable to leverage its buying power to obtain the best prices for its
materials.
The company obviously was not receiving the greatest benefit that it could from its
information systems. This was primarily the result of its decentralized strategy.
However, Nestlé recognized that it could use technology to better its competitive
position. Nestlé decided to standardize and coordinate its information systems and
business processes. Specifically, Nestlé wanted to integrate its material, distribution,
and accounting applications in the United States, Europe, and Canada. Nestlé is
extending its enterprise system to all of its facilities.

https://www.coursehero.com/file/17177537/Nestl%C3%A9-Struggles-with-Enterprise-Systems/
 2. What were the problems and issues that Nestle SA faced that caused the
company to be so decentralized?
As we can see, Nestle SA had many issues. They had nine different general ledgers
and 28 points of costumer entry. They had multiple purchasing systems. They had no
clue how much volume they were doing with a particular vendor because every
factory set up their own vendor masters and purchased on their own.
Nestlé allowed each of its local organizations to run its business in its own way,
reflecting the local conditions and business cultures. This focus on localization
resulted in inefficiencies, inventory mismanagement, extra costs, lack of data sharing,
and lack of data integration. Nestlé USA was organized around its brands, and each
brand operated independently. Although Nestlé later reorganized itself and brought the
brands under the parent American control, its division headquarters were still
dispersed. This decentralization approach resulted in 80 different information

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technology units running 900 IBM AS/400 midrange computers, 15 mainframes, and
200 UNIX systems, enabling observers to describe its infrastructure as a veritable

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Tower of Babel. Despite its size, the company has had no corporate computer center.

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3. Do you think it was appropriate for Nestle to distribute the decision making so
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widely? Explain your answer.
No, it’s was not appropriate. The distribution of decision making created many
problems for Nestlé. These problems included inefficiencies and extra costs,
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overstock and spoilage, inability to share data among subsidiaries, inability to gauge
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the effectiveness of its promotional activities, paying different prices for its vanilla,
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using different names for the same product, having different general ledgers, and
having multiple purchasing systems. that, they should of first started with a few of the
locations to take the time to train their employees appropriately, and to see how all the
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new changes were going to be working with the employees and to pay more attention
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on the little details.

4. Why did Nestlé’s initial enterprise system project encounter so many problems?
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What management, organization, and technology contributed to those problems?

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In my opinion, The Nestlé USA project was trying to bring together 8 or 9

autonomous divisions, and the global headquarters was dealing with more. Integrating
the company meant changing the company's culture, people, standard operating
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procedures, business processes, and politics.

One of the biggest problems was the reorganization of the business processes.
Another issue was the lack of communication that existed among management, the
development team, and the end users. Nestlé SA is moving from decentralized
systems to standardize and coordinate the whole company's information systems and
business processes. From a technology standpoint, the company must select
appropriate hardware, software, and communications technologies. Nestlé USA
originally chose to use SAP and Managistics. Using this software required training
Nestlé employees on how to use the software and also required changes to business
processes. The management should have been more organized and take the time to

https://www.coursehero.com/file/17177537/Nestl%C3%A9-Struggles-with-Enterprise-Systems/
 analyze the situation with more detail making the time to train the employees on the
new way of running things. The organization had issues too because they wanted to
cover s much in so little time. Their technology was up top, they just not integrated
the systems pretty well.

5. If you had been in charge of the Nestle enterprise system project, what could you
have done to prevent these problems?
As the authors point out, when developing a transnational information system
architecture, you should agree on common user requirements, introduce changes in
business processes, coordinate applications development, coordinate software
releases, and encourage local users to support it.
So that, if I had been in charge of the Nestle enterprise system project, I have been
done these problems were to take things slowly and to take the time to see all of the
little details and involved each and every employee on the process. Take the time to

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train each employee to make things easier for them and also to start just with a little

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part of Nestle.

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