Nestlé Struggles with Enterprise Systems

1.Evaluate Nestlé’ SA and Nestlé USA by using the competitive forces and value chain models.

Nestlé has plentiful problems with its value chain. This is apparent from the fact that each factory set up their own vendor masters and purchased on their own which lead 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 get. Apparently, every division and every factory had assigned different name to the same product which make it impossible for the company to keep track of business transactions and caused excessive overstocking as well as spoilage.

Having multiple purchasing systems definitely make matter worse as it prevented Nestlé from leveraging its worldwide buying 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, an ERP (enterprise resource planning) system and mySAP.com (enable SAP’s system 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 Nestlé to enable group buying which reduces costs.

2.What were the problems and issues that Nestlé SA faced that caused the company to be so decentralized?

Nestlé SA is a big company that operates virtually all over the world. It has more than 230000 employees at 500 facilities in 80 countries. It sales thousand items where each item adapted to fits local market. Each organization in this company has allowed to conducts the business as it fits to the environment, condition and business cultures. This company has 80 different information technology units that run nearly 900 IBM AS/400 midrange computers, 15 mainframes and 200 UNIX systems to support this decentralized strategy. Nestlé SA do not have standardize and coordinate information system business process as a guide for their business operations. Besides, the corporate culture is also one of Nestlé SA problem. The stakeholder failed to realize how important the information system software is to improve the business process.

3.Do you think it was appropriate for Nestlé to distribute the decision making so widely? Explain your answer.

No, I do not think that it is appropriate for Nestlé to distribute the decision making so widely because allowing local differences created inefficiencies and extra costs that could prevent the company from competing effectively in electronic commerce. The lack of standard business processes foil the company means of data gathering to facilitate data sharing among subsidiaries and produce a reliable and up-to-date sales forecast. Furthermore, it left the company to be in a disadvantage situation where the vendors could manipulate the prices to their liking. It also makes one lost sight of the bigger picture of a problem if all one focus at is the problem at one division. This might lead to a bigger problem and by the time it was realized, it was already too late to do anything and lead to nothing but a downfall.

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

From the case, it appears that Nestle management

5.If you had been in charge of the Nestlé enterprise system project, what could you have done to prevent these problems?

If we had been charge of the Nestle enterprise system project, we will give them motivation and explain to them how important this system is. Beside that, we also will give them more time to adapt with the system. The seminar will be provided to them, so that they will more understand the system.The lowel level workers will be teached how to use the new systems and try to intergrate the various modules.