E-Commerce And ICT Integration In Nestle Company Effect On Value For Customers And Shareholders Essay Example

Executive summary

This research project contains an introduction that introduces the Nestle company in the ERP implementation part; the paper focuses on how the company has used the SAP in meeting its objectives and how they have incorporated the system with the internet and able to bring up an e-commerce model. SAP has some advantages such as increased productivity but it is faced with problems such as it is very expensive

Contents

3Executive summary

6Introduction

7ERP implementation

10Problems associated with ERP

10Benefits associated with ERP

12Conclusion

13References

Introduction

In this paper, it focuses on a company called Nestle which is a leading food production company has adopted an ERP systems called ERP to meet the core business activities Nestle is the company that was started in 1866 in Switzerland and was incorporated in 1990with its headquarters located in the Glendale United States of America (Gerstman, 1999). The company has over 33 production sites and over ten distribution centers and 30 sales offices in the USA alone and over 700 facilities located in over 100 countries worldwide. The Company has employed over 20000 employees. Nestle is one of largest food manufacturing companies in the world and were listed the largest company in Fortune magazine globe 50as the largest food company. In 2012, the company had annual sales of over 20 billion dollars in the USA alone, and averagely the company has a budget of 3 billion US dollars annually. Nestle deals with the production of products such as products from milk, food for an infant, chocolate food, food for pets and healthy food such dietetic foods among others (Adshead, 2002). The company main objectives is to create best practices that would aid in business process, create a standard system to be implemented in all branches and to achieve this the company decided to integrate ERP with SAP to assist the headquarters control the material supply, sales, promotional activities, customer management and also integrate the accounting and control systems and make all business as a single business. The company is has a strong brand name with the worldwide market and has competitors such as Unilever, Mars, Pepsi, Cadbury and general mills (Worthen, B., 2002). As explained by Brancheau, in (1997) he explained that management system is very essential to meet company objectives.

ERP implementation

With the company becoming global in 1999 it needed to unify the products that had different prices and sold in the different location. Regardless of becoming the best food production company, it was the least efficient among its competitors. In the year 2000, the company entered into an agreement with the SAP for over 250million dollars for an ERP system (Konicki,2000) The main aim of the systems was to assist in controlling stock to reduce overstocking, enable data sharing among branches and control procurement of raw materials and data sharing. SAP came with other modules to assist in functional activities of the company these included a standardized SAP accounting software, SAP sales marketing and distribution module and a shared database management to ensure effective control and a data entry plan that was standardized (lee, 1999)

The ERP had a Shared SAP Data base that enabled each branch to perform accounting and inventory management and conform to government regulation. This ERP system also adds option for companies to use systems they assumed to assist the company, for example, the US Nestle used Manugist8ics rather than the planner and optimizer enabling the company to save over the save over 400 million dollars in the year 2004 as shown in Figure 1below. The systems also enabled for customization and used for different language and an online client application system that the company communicate to customers and suppliers and get feedback to improve on the system. The system had organizational planning and costing methods, to ensure that there was quality management. Data was transmitted by Client server through a GUI interaction and 3-tier client server framework that was accessible in all the operating systems such as all version Windows, MAC OS, and LINUX (Boersma, 2005)

Class

This process, however, faced a setback in 2001, which it brought a lot of confusion to the employees, but it was reorganized to cover this. By the end of the year 2006, the company was over 30% standardized system and database in all its branches worldwide saving over 900 billion shillings on cost. The systems also enabled the management information systems intelligence order system that assisted in the separation of each branch supplier (Bosilj 2005.).The ERP had an interactive marketing system that was user oriented making it among the best as it was the error of introduction of the internet. The company increased its efficiency and later had an E-commerce platform that had incorporated online sales and delivery such as Kit Kat chocolate. Customer management is very important in any company with the development of Nestlé Internet Resource Framework (NIRF) the company was able to collect customer feedback and ensure continuous improvement enabling it to be a step ahead of its competitors. Following figure shows how the company had been integrated.

Class 1

Sales department

Customers

Accounting

Class 2Class 3

Database

Class 4Class 5

Purchasing

Warehouse

Class 6Class 7

Class 8

Class 9

Sample developed by davenport 2000

Problems associated with ERP

Regardless the company was able to meet the meet its objective, in the long run, the project had a lot of disadvantages that in future for a company trying to use ERP has to consider (Somers, 2004). Implementation of either ERP or e-commerce is very expensive to maintain and also to implement for the first year the company had used over 500 million dollars. To be fully usable and implementable it took over two years which is time-consuming as most employees were resistance to change and that they it took to take the time to train them. By use of this system, the company is prone to risks such as cyber crimes and disclosing the vital information. In 2006, the company had faced a vital problem with the systems that had broken for two days stopping all the services in branches (Worthen, 2002)

Benefits associated with ERP

With the use of ERP, the company had the following advantages accrued from the implementation of the ERP in the company processes. With the use of SAP, the company was able to forecast properly on issues such as trends and know the peak and off-peak seasons to be able to plan well (Cross, 2000). The SAP detailed planning and accounting tools in the year 2005 had improved forecast accuracy by 15%. The systems also resulted to the economy use of resources by ensuring that the company used the system such as lean supply to reduce the cost of inventory and able to meet customer needs effectively and efficiently (Cronin,1997). The tool was also used in efficiently in marketing the products and created joint promotions and lastly for the company it was able to plan strategically and had a competitive advantage. The system enabled a decentralized platform that leads the global company into a single company by enabling the management make proper decisions (Fraser, 1999).

Conclusion

In summary despite the added disadvantage the company faces it is very important to use the e-commerce and ERP in business functions. The plan to implement such a plan should follow a good plan and be flexible to incorporate changing business environment. The systems used should be able to meet all the companies’ objectives and issues, and the company must use the right technology to be supported by all the shareholders and deal with all issues (Granovetter, 1973)

References

Gerstman, R.B., Meyers, H.M. and Edstrom, R.C., The Nestle Company, Inc., 1999. Food container. U.S. Patent D250,929.

Adshead, Antony. SAP: The Climb Gets Easier. Computer Weekly, Dec 12, 2002; pg. 26-27.

Worthen, B., 2002. Nestlé’s ERP Odyssey; Nestle USA’s Costly and Protracted Struggle with its SAP Project Is a Cautionary Tale for Any Company Intent on an Enterprisewide Implementation. CIO, 15(15), p.62.

Worthen, Ben. Nestle’s ERP Odyssey. CIO, May 15, 2002. [Online]. Available: http://www.cio.com/archive/051502/nestle.html (Jun 18, 2004

Somers, T.M. and Nelson, K.G., 2004. A taxonomy of players and activities across the ERP project life cycle. Information & Management, 41(3), pp.257-278.

Bosilj-Vukšić, V. and Spremić, M., 2005. ERP System Implementation and Business Process Change: Case study of a pharmaceutical company. CIT. Journal of computing and information technology, 13(1), pp.11-24.

Boersma, K. and Kingma, S., 2005. Developing a cultural perspective on ERP. Business Process Management Journal, 11(2), pp.123-136.

Konicki, Steve. Nestle Taps SAP for E-Business. InformationWeek, Jun 26, 2000; pg. 185.

Brancheau, J.C. and Wetherbe, J.C. 1987. Key issues in information systems Management. Management information Systems quarterly, Vol. 11, No. 1, pp. 23-45.

Cronin, M.J. 1997. Nets at work; knowing how employees use the Intranet is good business. Available:http://library.northernlight.com/SG19990714110006004.html

Cross, R. and Baird, L. 2000. Technology is not enough- Improving performance by building organizational memory. Sloan Management Review, Spring.

Davenport, T.H. and Short, J.E. 1990. The new industrial engineeringInformation technology and business process redesign. Sloan ManagementReview, Summer, pp.11–27.

Fraser, S. 1999. Intranets Become Mainstream. Available: http://www.advisor.com/Articles.nsf/ID/OA990903.FRASS58

Granovetter, M. 1973. The strength of weak ties. American Journal of
Sociology, Vol. 78, pp.1360-1380.

Lee, G., 1999. ERP vs. Best-of-Breed. Strategic Finance, 80(9), p.62.

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