Economía y Empresa
Enterprise Resource Planning (ERP) is born in the early 1960s from a joint effort between J.I. Case, the manufacturer of tractors and other construction machinery, and partner IBM. Material Requirements Planning or MRP is the initial effort. This application software serves as the method for planning and scheduling materials for complex manufactured products.
1970s.- Initial MRP solutions are big, clumsy and expensive. They require a large technical staff to support the mainframe computers on which they run.
1972.- Five engineers in Mannheim, Germany begin the company, SAP (Systemanalyse und Programmentwicklung). The purpose in creating SAP is to produce and market standard software for integrated business solutions.
1975.-Richard Lawson, Bill Lawson, and business partner, John Cerullo begins Lawson Software. The founders see the need for pre-packaged enterprise technology solutions as an alternative to customized business software applications.
1976.-In the manufacturing industry, MRP (Material Requirements Planning) becomes the fundamental concept used in production management and control.
1977.-Jack Thompson, Dan Gregory, and Ed McVaney form JD Edwards. Each founder takes part of their name to create the company moniker. Larry Ellison begins Oracle Corporation.
1978.-Jan Baan begins The Baan Corporation to provide financial and administrative consulting services.
1979.- Oracle offers the first commercial SQL relational database management system.
1980.- JD Edwards begins focusing on the IBM System/38 in the early 1980s. MRP (Manufacturing Resources Planning) evolves into MRP-II as a more accessible extension to shop floor and distribution management activities.
1981.- Baan begins to use UNIX as their main operating system.
1982.- Baan delivers its first software product. JD Edwards focuses on the IBM System/38.
1983.- Oracle offers both a VAX mode database as well as a database written entirely in C (for portability).
1984.- Baan shifts the focus of their development to manufacturing.
1985.- JD Edwards is recognized as an industry-leading supplier of applications software for the highly successful IBM AS/400 computer, a direct descendant of the System/38.
1987.- PeopleSoft is founded by Dave Duffield and Ken Morris in 1987.
1988.- PeopleSoft's Human Resource Management System (HRMS) is developed.
1990.- Baan software is rolled out to 35 countries through indirect sales channels. The term ERP (Enterprise Resource Planning) is coined in the early 1990's when MRP-II is extended to cover areas like Engineering, Finance, Human Resources, and Project Management.
1991.- PeopleSoft sets up offices in Canada. This leads the way to their presence in Europe, Asia, Africa, Central and South America, and the Pacific Rim.
1995.- Baan grows to more than 1,800 customers worldwide and over 1,000 employees.
1999.- JD Edwards has more than 4,700 customers with sites in over 100 countries. Oracle has 41,000 customers worldwide (16,000 U.S.). PeopleSoft software is used by more than 50 percent of the human resources market. SAP is the world's largest inter-enterprise software company and the world's fourth largest independent software supplier overall. SAP employs over 20,500 people in more than 50 countries. To date, more than 2,800 of Baan's enterprise systems have been implemented at approximately 4,800 sites around the world.
2000 and beyond.- Most ERP systems are enhancing their products to become "Internet Enabled'' so that customers worldwide can have direct access to the supplier's ERP system.
II.- What is ERP?
Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planning—it doesn't do much of that—and forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.
That is a tall order, building a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. That integrated approach can have a tremendous payback if companies install the software correctly.
Take a customer order, for example. Typically, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and rekeyed into different departments' computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse's computer system to see whether the item has been shipped. "You'll have to call the warehouse" is the familiar refrain heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single unified software program divided into software modules that roughly approximate the old standalone systems. Finance, manufacturing and the warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped. Most vendors' ERP software is flexible enough that you can install some modules without buying the whole package. Many companies, for example, will just install an ERP finance or HR module and leave the rest of the functions for another day.
Some key vendors could be Oracle, SAP, PeopleSoft or BAAN.
So we can summarize what is ERP in these points:
Enterprise Resource Planning
A single, integrated information system
Streamlines data flows
Potential for dramatic gains in performance
Expensive, complex, less customized
Imposes comprehensive structure
Across diverse business functions
III.- Use of EAI as alternative to ERP
The implementation of the systems ERP requires one of a large quantity of time, commitment and economic resource. As alternative, or supplementary technology, the concept of Integration of the Business Applications exists (EAI), which consists of automate the process of integration with a smaller effort that the required with ERP. EAI implies plans, methods and tools oriented to modernize, to consolidate and to coordinate the functionality computational of the business. Typically in the businesses, and the PyMEs are not the exception, bequeathed systems exist, which is desired that they continue being utilized al same time that are added or emigrates to capable applications of exploiting Internet, the electronic commerce, extranets and some other new technologies.
The Business Integration of Applications can require the development of a new vision of the business and their applications, determining in what way the present systems will adjust inside the new vision, to later determine the form in which said systems will be reused efficient, al same time that be to added new applications. As opposed to the traditional integration, in which was required of the written of codes to be able to communicate the systems, which was very costly and delayed, in EAI are utilized middle wares special (to see figures 3), that serve like a bridge among the different applications that will be integrated. In this manner the applications can communicate freely among itself through an interfaz common.
The previous thing can be taken like an option alternative to the adoption of a system ERP for a PyME, since is considered that it has a smaller impact in resources and time, nevertheless not to stops representing a large effort. They exist in the diverse market suppliers that offer the platforms middleware, among the ones that are found Vitria, Activate Software, Software Technology and Cross Worlds.
The figure of Integration EAI vs. Traditional integration
The most important positive aspect of EAI in comparison of ERP situates in which the implementation of this last one is considered as “push-oriented”, that is to say, the system obliges al business to be adapted to the standards established by the ERP, which implies that the individuals in the business cannot elect the way in which they will carry out their internal processes. From there it is born great part of the resistance al change that occurs during the projects of implementation of ERP, one of the main problems that are found. The focus of EAI is “pull-oriented”, that is to say, that splits himself of the processes and existing applications to map and to integrate functions that at present are separated, which occurs in a way more flexible for the business, in this way a PyME, and any business in general, achieves that the information stored in its systems can flow freely among the same, without affecting so drastically the processes of business, as The case of the ERP (to See the Board).
Degree of engineering
Map of Processes
Degree of Resistance
Processes of Business
Board : Characteristic techniques and cultural of ERP and EAI
These are the main services, solutions, offered by two of the main ERP providers, Oracle and SAP; then follows a short comparison of the quality of those services between both.
We mainly focus on the Business solutions, than in the industrial ones, because they are more important and they aren't specialized in special sectors (like the industrial ones do).
IV.- Comparation between ORACLE versus SAP
Software developers are under increasing pressure to create high quality applications in record time. Emerging technologies and development approaches result in shorter development time and increased functionality, Oracle simplifies using these technologies so they won't be out of reach for any developer.
A wider range of developers is building enterprise software today - from systems programmers, and business analysts, to Web developers. All have different skill-sets and backgrounds, yet they expect to use their own approach to development. Developers are looking for agile and flexible tools that address their skills and offer the highest level of productivity for their preferred development approach and the specific requirements of their projects.
Oracle Application Development tools rely on implementations of best practices; visual declarative capabilities across the entire application life cycle; and support for the latest standards to optimize productivity while giving maximum choice. Choice of development approaches, development languages, technology and third party tools, and choice of deployment platform.
Segmented data, disparate applications, lack of automation, and a disconnected supply chain are slowing you down and costing you money.
Oracle Application Server is a single platform for all of your integration challenges: it provides application-to-application, business-to-business, business process management, data integration, and Web services integration. With Oracle Application Server Integration, you can connect disparate information sources to seamlessly exchange data, streamline business processes, and collaborate with your partners.
Gain timely and accurate insight into internal business operations, customers, and suppliers for greater business profitability with Oracle BI solutions. Only Oracle provides a complete and cost-effective solution to address the full spectrum of business intelligence requirements: data quality, data analysis, and information access. Oracle's standards-based BI solutions help you improve ROI and benefit from:
Accurate business insight right when you need it
Enterprise-role based views of your business
Timely deployment of solutions
Lower total cost of ownership
Corporate Governance: Visibility. Control. Efficiency.
If you don't have a complete, real-time view of your business operations, you can't make the right decisions about your company's future - and you can't meet the demands of new regulations that govern fiscal reporting.
Only Oracle offers complete, integrated business intelligence and analytics that provide your management team with continuous, current, customized information about every aspect of your business-from finance and human resources to supply chain and marketing. Find out how Oracle can help you improve your business operations in the areas critical to good Corporate Governance:
Visibility - Access timely, relevant, accurate information across your organization
Control - Centralize and secure policies, processes, and procedures
Efficiency - Roll up and reconcile data quickly and accurately while eliminating administrative overhead
Customer Relationship Management
With Oracle CRM you know more about your customers, products and results using real time information across your business. Your organization can do more because Oracle CRM focuses on driving profitable customer relationships, not just automation of activities. Only Oracle offers breakthrough opportunities for savings on software implementations and maintenance to ensure that you spend less for better results.
Enterprise Portals: Access and Organize Information and Applications with an Enterprise Portal
You already trust Oracle with managing your most critical data. Now, let Oracle provide your organization with a solid portal platform for secure information access, online collaboration, and process automation. With Oracle Application Server Portal (OracleAS Portal) you can:
Increase productivity through efficient access to relevant content and applications
Share information and collaborate more effectively with customers, partners, and suppliers using a secure infrastructure
Streamline business processes and reduce costs by connecting applications that eliminate paper-based and other manual procedures
Oracle Grid Computing
Grid computing is the coordinated use of a large number of servers and storage acting as one computer. Businesses no longer need to worry about spikes in demand and the cost of maintaining excess capacity. Computing power is now available when you need it.
Grids are built with low cost modular components, so you can start small and preserve your investment as your business grows. Turn 64 small servers into a giant mainframe. It's fast, it's cheap...and it never breaks. When a server goes down, your system keeps on running. Oracle Grid Computing includes:
Computing power delivered on demand
Automatic load balancing of your systems
Easy management of your IT Infrastructure with Grid Control
Next step: Get your business on the grid in 3 Steps to Grid Computing.
Three Steps To Grid Computing
Adopting grid technologies can be done with minimal investment, zero disruption, and fast return on investment, starting with three steps:
Standardize on low-cost servers and storage based on technology such as Intel Itanium processors, blade servers, and Linux
Consolidate your databases, application servers, and storage
Automate day-to-day management tasks, so a single administrator can simultaneously handle hundreds of servers in a grid
Consolidation of your database systems and middleware equates to lower incremental growth costs, higher availability, fewer upgrades and patches to apply, and less work for your administrators.
Consolidate and reduce IT costs by 20-50%.
Consolidate to improve business processes.
Manage your all your systems through one integrated management view.
Managing Your Enterprise
Oracle Enterprise Manager 10g featuring new Grid Control enables enterprises to manage IT operations cost effectively. Using it enterprises can:
Maximize quality of service through proactive monitoring and management of business service levels.
Manage more applications, databases and application servers with fewer human resources through automated administration.
Meet changing demand for IT resources through automated provisioning.
Simplify IT complexity through policy enforcement.
Monitor and manage custom applications using comprehensive extensibility framework
Solutions for Real Estate Management
In today's economy, real estate is no longer regarded as a fixed cost. Corporations are pressuring real estate executives to reduce the impact of occupancy cost on the bottom line. Retailers are looking at inventive ways to better manage current obligations and strategically plan for growth while minimizing the overheads of store operations. Investment real estate companies are scrutinizing their portfolios for under performing holdings.
Whether you are in the real estate business or manage real estate for your enterprise, businesses that can effectively manage utilization and costs associated with these assets stand to reap substantial benefits to the bottom line. A complete, integrated, web-based solution that supports end-to-end automation of all critical business functions is the foundation for effective real estate management.
Small & Midsize Business
Know more - Gain enterprise visibility to make better business decisions
Do more - Make your company "easy to do business with"
Spend less - Unify technology on a single, integrated business platform
Consolidation maximizes security and reduces costs. In today's economic climate, businesses are seeking a security strategy that helps achieve business objectives without adding complexity and costs. With 25+ years of experience managing critical data and infrastructure, Oracle's security solution provides the following benefits:
Allows multiple communities of users to securely share consolidated data
Integrated user provisioning and access management across the enterprise
Single sign on for J2EE, web and legacy applications
Enterprise-class LDAP-compliant Directory
Supply Chain Management
Oracle Supply Chain Management lets you gain global visibility, automate internal processes and readily collaborate with your suppliers, customers, and partners. Built-in flexibility and intelligence let you respond quickly to changes and opportunities to gain competitive advantage.
The main sectors in which Oracle can offer solutions are:
Aerospace and Defence Energy High Technology Professional Services
Automotive Engineering and Construction Higher Education Retail
Chemicals Financial Services Utilities Healthcare
Travel and Transportation Communications Government Life Sciences
Consumer Package Goods Industrial Manufacturing
Comparing the main technology, functionality (maybe the most important performance area), and based in some specific criteria's we can qualify both companies, and other interesting ones, like:
SAP Good/Very Good
Oracle Good/Very Good
JD Edwards Good
Lawson Software Fair
And this evaluation is basically based in some criteria's:
Human Capital Management —performance management, recruitment, career development, and succession planning.
Supply Chain Management — execution (warehouse management, transportation management, global trade management, global logistics, supply chain visibility), planning (demand planning, supply planning, replenishment planning, production planning/scheduling, transportation planning, tactical network optimization), and supplier relationship management/procurement.
Customer Relationship Management — rational, analytical, and collaborative CRM
Localization/Globalization — Language, currency, regulatory, technology, standards, and cultural support.
Integration/Interoperability — Application interoperability (internal), integration capabilities/toolsets.
Core Technology Architecture
Technology Implementation/Application Management
Functionality is ranked compared to best-of-breed niche vendors, and each ERP provider excels in particular functional areas (e.g., Oracle in core financials; SAP in SCM execution;). On the other hand, technology is evaluated based on comparison to best-case.
RESUME OF ORACLE (ERP)
Advantages: Procurement cards are highly integrated with the General Ledger. Design-to-Order and Manufacture-to-Order cost and schedule information is very useful. Repair action recording and sales forecasting are also strong.
Disadvantages: Online Expense reports were cumbersome and not user friendly. Identification of components without suppliers was difficult. Oracle has no out of the box dashboard or scorecard functionality. Use of a shipper's memo to drive stock transactions is poor. The ability to accumulate labor against a work order was limited. Many industry specific forms are not available out of the box.
Overall: Oracle has very tight integration between its application modules and its database. In general, functionality in financials and manufacturing is very strong.
SAP provides a global enterprise resource planning (ERP) solution, my SAP! ERP, designed to provide a comprehensive solution to today's changing demands on ERP. While leveraging existing IT assets, my SAP ERP allows companies to regain active control of their whole administrative and operations environment and thereby increase efficiency and profitability. Powered by SAP® NetWeaver!, the comprehensive integration and application platform, my SAP ERP combines traditional ERP functionality with portal-based collaboration across the extended enterprise.
Key Functional Areas of my SAP ERP
Strategic enterprise management - Enables companies to execute strategies quickly and successfully while managing business performance throughout the entire organization; supports integrated strategic planning, performance monitoring, business consolidation, and effective stakeholder communication, thus enabling value-based management.
Business analytics - Allows managers and knowledge workers within an integrated framework to identify and exploit value-adding opportunities within the daily business-enabling optimization of operational performance, accurate forecasting, and business planning; identifies opportunities to create additional value through better exploitation of tangible and intangible assets, such as customer value, human capital, or the R&D pipeline value.
Financial accounting - Helps companies to monitor real-time all values from financially relevant transactions out of value-creation processes and to maintain a consistent, reconciled, and auditable set of books for statutory reporting, management support, and as a source for analytic applications.
Managerial accounting - Helps companies optimally monitor and control all performance relevant information in an environment that is completely integrated with all operative transactions throughout the company. Managerial accounting helps a company take control of its profitability.
Financial supply chain management - Enables financial collaboration within the enterprise and its business networks using defined corporate policies and shared services to handle all customer- and supply chain-related financial processes; helps automate the financial supply chain using the Web and other new electronic service models.
Manager self-service - Provides business managers with access to all relevant business information as well as related services through financial portal solutions. Additionally, this capability helps manage financial shared service centres. The portals provide convenient Web-based access to internal and external applications, business content, and services that may be key to tasks, processes, or business decisions.
Employee transaction management - Streamlines a comprehensive range of HR services and processes necessary to efficiently run the Human Resource environment. This includes a global system meeting the needs of local regulatory compliance requirements as well as international best practices.
Employee lifecycle management - Provides automation and optimization of the following phases of the employee life cycle-attract/hire, deploy, influence, develop, and retain-resulting in increased human capital efficiency through better hiring practices, more efficient deployment, focused employee development, and increased employee retention and loyalty.
E-recruiting - Helps locate the best people and coordinate team collaboration to identify and evaluate candidates. Some elements are talent warehouse, recruiter, service center, and analytics.
Employee relationship management - Provides companies with the ability to enable employees throughout the company to build collaborative relationships with fellow employees, managers, third-party suppliers, and the company itself. Knowledge management and portal technology are utilized to significantly change the HR service delivery model and efficiency of the workforce.
Employee self-service - Content and application services offer a multitude of ready-to-use individual ESS services available in thirty-two languages for thirty-two countries, giving employees control over multiple administrative tasks. With life-and-work events capabilities, individual transactions are seamlessly combined with expert content and knowledge so that the employee experience is efficient and enjoyable.
HCM analytics - Provides data analysis and reporting tools as well as strategic enterprise management capabilities to support informed HR policy and decision-making.
OPERATIONS - Enables a company to efficiently streamline the logistic operations for the optimal execution of all orders resulting from purchasing, sales, production and change management environments.
Purchase order management - enables the efficient handling and execution of Purchase Orders integrated within the entire logistics process.
Inventory management - allows a company an integrated management of stock and inventories in an integrated operative environment.
Production management - enables the efficient management and execution of the enterprise production process.
Maintenance & quality - allows a company to efficiently handle the plant maintenance and quality control process within the company.
Delivery management - executes the delivery and transportation processes to efficiently support a sales environment.
Sales order management - enables the sales order fulfilment process allowing for fast and efficient execution of customer sales orders.
CORPORATE SERVICES - Enables the efficient provision of central and decentral corporate services to the organisation.
Real estate management - Provides a complete solution with capabilities to support every stage of the real estate portfolio life cycle and streamlines business processes allowing companies to optimally utilize and manage their real-estate assets.
Incentive and commission management - Processes all types of variable remuneration for employees, sales forces and partners, such as incentives, commissions, and brokerage fees, etc.
Travel management - Provides applications for business travel management that support and optimize travel processes; includes travel manager's marketplace, which supports procurement of travel services. With seamless integration to expense reporting travel management allows for the optimal management of the entire business travel cycle.
RESUME OF SAP (ERP)
Advantages: Document Management tools can handle sophisticated importing of Engineering Bill of Materials that are made up of multiple engineering documents. The ability to view and move Kanban locations is very powerful and visual. Tight integration with FEDEX enables automatic generation of FEDEX tracking numbers.
Disadvantages: Out of the box scorecard and dashboard functionality is very limited.
Overall: SAP is more functionally robust than any other vendor. The company has native PDM, CRM and APS.
V.- Case Example: Nestlé Odyssey
There are thousands of companies that have acquired ERP software suites since its birth in the earlier 80's. For some companies, the implementation of such technology has saved them millions of dollars reducing costs, has powered them to create new more profitable ways of doing businesses and, finally, has resolved critical problems of the IT systems of the company, like the Y2K problem or old-legacy systems. But for many other firms, the decision of adopting an ERP solution has meant the beginning of a nightmare without an easy solution, normally restarts the project from zero.
Even if it is successful, the process in a big enterprise, like a Fortune 500 one, took on average between 18 and 24 months. Also, the initial budget and go-live date are usually never reached. Find a successful project without any of these problems it's quite difficult, especially because it's probable it doesn't exist, as much the ERP developers try to show to the prospective customers.
We are going to examine a SAP implementation in Nestlé USA, which tried to integrate the operations of these divisions.
Nestlé's ERP Odyssey - It's not software, it's business
It's June 2000, Nestlé SA, the well-know swiss consumer products multinational, announces the sign of a contract with SAP to install an ERP system for the global enterprise, more than 200 companies in over 90 countries all around the world. The total cost of the project is $200 million plus additional $80 millions for consulting and maintenance. The result… Nestlé Stock recommendation was downgraded only a year after as a direct consequence of this decision.
Why did it happen? To understand it we have to look to Nestlé USA, the United States subsidiary. It's 1997, Nestlé USA decides to embark on a SAP project code-named BEST (Business Excellence through Systems Technology). Even the smaller size the project has not finished after 6 years of work and the total amount of money spent is more than $200 millions, the same amount budgeted for Nestlé's project. In spite of this and the costly mistakes taken, the BEST project is considered to have saved Nestlé USA $325 million, compensating much of the economical and organizational effort taken.
Jeri Dunn, CIO of Nestlé USA, says a relevant quote about the ERP that can help us to understand what exactly is: “When you move to SAP [or to any ERP solution], you are changing the way people work. You are challenging their principles, their beliefs and the way they have done things for many, many years.” ERP is not only a software program, it's a way of doing business, and if you miss that, like in this case, you get on trouble.
Twenty-nine different prices for vanilla. That can be the summary of the situation of Nestlé in 1997. A big legacy of the times of independent companies made Nestlé USA a holding instead of an unified company. The integration between divisions didn't exist. That lead to the situation that the different plants bought vanilla to the same vendor at 29 different prices, and there was no way to know it without a study or change it.
The problem was the lack of integration between the brands, in Financial, Supply Chain Management, etc. Regardless of standards procedures, each division act by their own. The company had to work as it was only one to acquire scale economies, buying power and integrated data. The solution was clear: “We need ERP”.
One Nestlé, that was the term that reflects the objective of becoming an integrated company. The first reunions were placed in June 1997 with the executives of Finance, Supply Chain, Distribution and Purchasing. They had to show the major issues of each department. The situation was so ugly to imagine that, for example, there were nine general ledgers, 28 points of customer entry and multiple purchasing systems not inter-connected.
They realise of the structure difficulties involved in the project, and the slow speed of implementing, but they still thought it was only about installing a program. The seed for problems was just sprouting.
By October 1997, one team of 60 people, top managers and IT specialists, were created to implement the system. Another smaller team examined the data to make it consistent. Also decide not to use the SCM module offered by SAP, that was brand-new, and use the most know Manugistics' module.
At March 1998 everything was decided and they set a deadline, before year 2000. They didn't take on account all the incidences that can happen in this type of projects, the seed continued growing into a huge plant.
Like the popular Nestlé's Crunch chocolate, the company was cracking. In late 1999, with only two modules implemented, there was a rebellion within the employees. The reason was simply: None of the groups directly affected were represented in the stakeholders team. They didn't know what was happening; it was a surprise after surprise. That was the biggest mistake of the entire project.
By early 2000, the rollout had converted into chaos. Users didn't understand how to use the program and even the new processes, they were unable to work. Divisional executives were as confused as their employees. The whole company was in danger of being halted. Employees refused to change their way of work and learn the new program and processes.
Finally, due to the efforts to beat the Year 2000 deadline, they forget to work and test the connections between modules. The company changed divisional silos for process silos, even a worse position.
In June 2000 the project was halted and four months later the project was redesigned completely. Key users come into the development team and the importance switch from a deadline to reach the business requirements. Lastly, the Manugistics' module had to be changed for the SAP module because it had become a standard in Nestlé SA during these three years. And this time, user would knew when, why and how are going to be the changes.
In April 2001, the blueprint for the redesigned project was finished. An intensive communication between user and the team was going to be the key for success. They were taking consideration of all the possible problems before rollout the module, no more Crunch.
With the BEST project finished, Nestlé USA is able to do trustworthy demand forecasts, reduce inventory level, supply chain improvements saved $325 million.
Even with all this problems, analysts consider this project a success. ERP is not a children's game.
Nestlé USA was in 1997 a group of companies with any relationship excepting the owner between them. Different IT systems were used in each division; there were decentralized purchase and sales operation, separated financial topics, etc. The company was not able to reduce costs using its size and to share information. There was a necessity to virtually integrate the separate divisions into one company in order to fight in highly competitive home products market, with huge players like Kraft or Unilever.
The solution to this big headache was use an ERP solution. The chose of using SAP as provider was right and didn't create problems. SAP R/3 was reliable and offered the needed functionality to the company without doing great changes on the code or writing new programs. This time, like in other implementations, the problems didn't reside in the program
The problems resided this time in the way of doing the implementation. An intelligent decision saved the problem when it crashed in 2000. The choice to make a wave implementation instead of a big-bang go-live made possible to realise of the problems, late, before finishing the project and be able to change it and redesign the process. These problems are fundamentally two: the separation between user and the program team and the set of a deadline.
The key stakeholders' team thought that this was only a software installation, like a domestic user that upgrade from different applications to Microsoft Office. As mentioned above, ERP changes the way the company works in the day-by-day for all the employees of the company (white-collar employees). They didn't take mechanisms to train correctly the users and get a feed-back of their reactions, problems and petitions about the program. That led to confused and angry users, who had to fight with a program conceived by people who don't know too much about the exact processes of each division. The separation between the two groups made a feeling within the users of looseness and refusal against the program and the new procedures.
The second big mistake was the deadline. The date was set without taking on account the requirements of the business, only the necessity to resolve the Y2K problem. The haste to reach the date made the team work too fast, rolling out programs with important bugs, or without testing the correct work of them, like the disconnection among different modules, with a great repercussion in the whole system.
Those big mistakes made the project crashed.
After the halt, solutions to these problems were taken. First, a relationship between implementers and users were created. That is basic for any ERP implementation, final users have to feel comfortable with the system, and they have to collaborate in its developing. IT department cannot impose a system to the user without a big fight and a rebellion of the employees. At least, the one who is going to enter that customer order is going to be an employee, not an IT professional.
Secondly, to set a deadline they first examine the requirements needed and the predictable time to reach every stage of the operation, and one time calculated set the deadline, but only as an indication, not as a mandatory obligation, with no possibility of changes.
Now, Nestlé USA has finished the BEST project, but Nestlé SA initiates the global project. Lessons learned in this project must be used and taking on consideration, specially the communication with the final users, more important due to the difference between countries, cultures and languages. To have success, the program must be slightly adapted to the particularities of each country. Setting a deadline it's completely no useful, nobody can know the difficulties that can appear. To resolve them, a wave/stage implementation is needed; a big-bang would be chaotic. Finally, the budget has to be continuously revised, because the initial $280 million sound insignificant for this huge project.
Finally, the big remark, ERP is not software that came on CDs and just install, it's a decision to change the company culture towards a shared-centralized knowledge company able to compete in this globalization times.
VI.- Conclusions and lessons learned
First of all we have learned the advantages of the ERP. We learned before in Tektronix's case.
Some advantages of the implementation of a ERP
Some of the benefits that can be acquired with the implementation of a ERP can be:
1.- Integration of information between different areas.
2, Information available and immediate for the taking of decisions.
3, Increase in the productivity.
4, Improvement in the response times.
5. Fast adaptation to the changes.
6, Scalability of the system.
7, Integrity of the data.
8, Security user defined for the information handling.
Costs of Implementation of a ERP
Systems ERP generate advantages competitive that can be able to give to fast answer to the changes of market or any other change but it is necessary to mention some aspects of the difficulty of the implantation, such as the human and material cost, resources or the time that are going away to use.
Also, it is necessary to consider that to implant a software able to integrate the necessities of the company with those of its clients and suppliers are not something simple.
All it forces to elaborate a work plan that considers points before essential, during and after the adoption of the ERP, to take advantage of the resources available to the maximum, but not only to make the project less complicated.
There are no magical prescriptions for successful implantations, only work and aspects that must be taken care of before and during the implantation process, and inclusively when the system enters function. For that reason, before, during and after the implantation of a ERP he is advisable to carry out the following processes:
· Definition of results to obtain with the implantation of a ERP
· Definition of the business model
· Definition of the management model
· Definition of the implantation strategy
· Evaluation of opportunities for complementary software to product ERP
· Alignment of the structure and technological platforms
· Analysis of the organizational change
· Delivery of a complete vision of the solution to implant
· Implantation of the system
· Controls of Quality
· Audit of the technical surroundings and the surroundings of development
· Benchmarking of the implantation.
Several criteria exist to evaluate and to choose the correct solution of a ERP. To orientative way we can indicate the following ones:
· Degree of integration between the different components from the system
· Scalability of the system
· Level of complexity of the solution
· Time of implementation
· Availability of regular updates
· Total cost of the project
Systems ERP are a tool that nowadays cannot lack in our organizations. This type of systems is derived from the systems MRP (Planning of requirement of materials) that were directed towards the production area and that nowadays in computer science applications has consolidated like ERP (Enterprise Resource Planning; Planning of enterprise resources) which are systems that by their nature, if well they are implanted, can give to the organization competitive advantages him like maintaining truthful and efficient information inside and outside the company, to improve the bows of communication between the diverse departments and levels of the organization being caused a fluid communication between the departments and improving their form to work. In addition to these competitive advantages that the ERP's provide the organization we could add that it reduces to the duplicity or redundancy of the information and makes integration more efficient of the commercial processes of the organization.
These are single some of the advantages of a good implantation of a system ERP that can help our organizations to improve their commercial, organizational level and in addition to quickly respond to the changes of products and services or new markets.
This case is based in Nestlé's ERP Odyssey by Ben Worthen and published in CIO Magazine 15 May, 2002. Source: http://www.cio.com/archive/051502/nestle.html
The total sales of Nestlé Group were $71 billion in 2002. Also has more than 255,000 employees in the world. Source: www.ir.nestle.com
Nestlé USA is divided in 8 divisions, has 22,000 employees nationwide and has a sales $11.1 billion in 2002. Source: www.nestleusa.com
Nestlé chose to implement five SAP Modules: Purchasing, Financials, Sales and Distribution, Accounts Payable and Accounts Receivable; and the Manugistics' Supply Chain Module
This is the commercial name for SAP Release 3 Application Suite, the Sap's ERP Solution. It's the evolution of the firstly one created in the beginning of the company. Based on a client-server technology was the most powerful solution during the 90s, and permitted SAP got the highest market share during these years.