BISY2005/ISY2005/ISY205 Case Of Nestle And PepsiCo ERP System Implementation Assessment 2 Answer
CASE STUDY REPORT
The case of Nestle and PepsiCo ERP system implementation
The following report intends to provide knowledge and enlightenment over the advantages and challenges of implementing ERP software within the organisations. For this purpose, a critical analysis has been well structured and developed to the respect of two selected case study companies that are PepsiCo and Nestle. This analysis throws light on the significance of implementing and maintaining SAP ERP system within the organisations in order to mark the operational progress and growth. the scope was to mange the HRM and supply chain by the companies (PepSico and Nestle respectively). Moreover, the strategic success factors have become tremendously advantageous for the organisations in order to achieve success with smooth and effective operations of the companies.
The report significantly aims to assay the importance of the ERP (Enterprise Resource Planning) system. In order to analyse the essentiality of the ERP implementation, the paper has selected PepsiCo and Nestle as case study companies. PepsiCo is an American manufacturer of food, snack and beverage (PepsiCo, 2020). Nestle is the largest food company in the world that produces baby food, medical food and other products internationally (Nestle, 2020). These two companies have implemented SAP software in the ERP system in order to enhance the productivity for making the business profitable. Moreover, the report has discussed the strategic success factors of PepsiCo and Nestle while implementing SAP within the organisation.
Principles of the enterprise system and issues associated with the enterprise system
The study of Appelbaum et al.(2017) shows that an enterprise system is referred to as the Enterprise Resource Planning (ERP) System that mainly acts as a cross-functional data system. This system provides a large scale and small scale companies to accumulate information globally and integrate all the key organisational processes in order to accomplish every strategic objective of the organisation. There are major principles of this enterprise systemare discussed below:
Recognising essential stakeholders of the organisation
The companies possess different stakeholders who work for the welfare of the companies. Moreover,the enterprise system helps to recognise the essential stakeholders and their contribution to the respect of the company. However, customers, employees, suppliers and the other stakeholders equally work within the enterprise, and in this respect, the enterprise system helps in identifying the relevant stakeholders in order to determine value propositions of them.
Ensuring stability and flexibility within the organisation
The enterprise system acts as a beneficial factor to ensure the stability within the organisation for the determination of the current state of the enterprise. In this respect, this principle helps the enterprise to develop a plan for enhancement by addressing the necessities of the enterprise at the current state. Apart from this, this system is also suitable for maintaining a flow or flexibility of sharing information among the stakeholders smoothly.
The issues of this enterprise system are as follows:
Maintaining cost within the enterprise.
One of the major issues of the enterprise system is the cost of investment. The enterprise systems are in great need of regular maintenance that is aligned with the maintenance cost. Therefore, the enterprises encounter issues in maintaining a regular cost system after implementing the ERP system within the organisation.
Ineffective employees of using an enterprise system
For the implementation of the enterprise system, the enterprises need to train the staffs and users with highly modified skills and deliver such key information in order to operate this system. Otherwise, the employees become ineffective and cannot conveniently operate this system.
Analysis of SAP by PepsiCo
SAP is considered as an essential software that plays a key role in improving companies' productivity and accomplishes every operational activity with flexibility. The PepsiCo has started to implement this sap software since 2009 (Cowley, 2004). The company has implemented MySAP Business Suite software within the company, and 267,000 employees are working hard for using this software to bring out success for the company (Statista, 2020). Therefore, the company possesses the scope of utilising this MySap Business Suite software.
Scope of system
- MySAP Business Suite software has inevitably benefited the company in enhancing the primary business platforms by unifying business operations.
- The PepsiCo Company has standardised the organisational processes by integrating all the processes within the enterprise (Sdcexec, 2020).
- The selection of MySAP Business Suite software has also privileged the company to increase the efficiency across its entire divisions.
- This software has also helped the company for improving planning and forecasting, and consequently, the transparency of Information System (IS) has been increased (Lauchlan,2016).
Challenges associated with implementing an enterprise system and its impact and how company deal with challenges
In spite of the benefits, the PepsiCo Company has encountered certain challenges with the implementation of this software. Apart from this, the impact of these challenges have also created a major impact on the company, and also the company has taken the initiative to overcome these challenges.
Inflexibility of infrastructure
In order to implement the MySAP Business Suite software, the company has encountered that the infrastructure lacks flexibility, and as a result, the employees cannot effectively work (Cowley, 2020). Moreover, the company has attained tremendous involvement from the employees and in spite of that, they are still struggling with the inflexible infrastructure.Therefore, this fragmented technology infrastructure has alleviated the processes of using the MySAP Business Suite software within the organisation that culminates in fulfilling the objectives. In this respect, Chief Information Officer of PepsiCo, Tom Trainer has taken the initiative to involve Business Solutions Group in order to overcome this challenge.
Ineffective performance of Executive Information System
Due to the greater involvement into the MySAP Business Suite software, the PepsiCo enterprise has faced that Executive Information System (EIS) is not effectively running with its primary operations and as a result, the company has not received a transparent overview over the relevant information (Kalia, 2020). EIS system tends to provide smooth operation in respect of sending data. Howeer, this ineffectiveness has caused trouble within the organisations. As a result, this SAP software becomes ineffective in tracking the data record for the welfare of the company. In this respect, the CEO of PepsiCo, Ramon Laguarta, has provided some operational managers in order to update regular information to the respect of smooth operations of MySAP Business Suite software.
Understanding of enterprise system development life cycle from selection acquisition implementation and maintenance
The study of Sofyanet al., (2016) shows that the System Development Life Cycle (SDLC) is referred to as a frequentative process that provides help for technical and non-technical activities of an organisation for meeting with the business needs and expectations. The PepsiCo has followed this SDLC framework within the enterprise while implementing the MySAP Business Suite software. This framework is essential for providing the knowledge regarding selection, acquisition, implementation and maintenance of MySAP Business Suite software within the organisation.
Planning: It has been found that PeopleSoft’s software had not benefited the PepsiCo companies as ERP software (Lauchlan, 2016). Therefore, the company planned in order to introduce a new sap software named MySAP Business Suite software with the proper planning of CEO, operational managers and CFO of the company.
Selecting and analysing the requirements: After making the plan, the PepsiCo Company has analysed the requirements of using this MySAP Business Suite software by developing a well understanding of functional requirements. However, the users has taken time in grasping the knowledge regardig MySAP Business Suite. Albeit,the vice president of PepsiCo, George Legge, has accumulated the users and held a meeting in order to provide the information that is highly required to operate this sap software (Cowley, 2004). As a result, the requirements are analysed among all the users, and they are informed regarding the utilisation of MySAP Business Suite.
Developing and integrating: At this stage, the developers of PepsiCo Company take the initiative to develop an effective organisational plan where the operational activities of PepsiCo regarding the MySAP Business Suite are executed effectively.
Implementing and maintaining: At this stage, all the essential and required data of MySAP Business Suite software are disseminated among the users by the management of the company (Cowley, 2004). Moreover, the CEO of the company has appointed software expertise in order to maintain regular data accordingly.
Strategic success factors in enterprise resource planning, design, and implementation
As mentioned by Mochama (2020), strategic success factors are regarded as essential and vital factors that play a key role in addressing the success of the business with an effective plan. The strategic success factors of PepsiCo Company are discussed below for implementing sap software.
Quality data: The PepsiCo Company’s subsidiaries respectively, Frito-Lay, Tropicana and Gatorade are enjoying as independent companies and the management of these companies provide relevant data to the authority of PepsiCo Organisation (Cowley, 2004). However, the companies make delay in providing the data at accurate time. The company receives high-quality data regarding the consumer needs, market demand and demand of the suppliers. Consequently, the company diffuses this data to the staff for the designing process of the MySAP Business Suite software. As a result, the company perceives the output with great contentment.
Staff orientation: According to Curran (2017), staffs and their active perfomance are the key factors to bring organisational success. Staffs are considered as the backbone of the organisation. The engagement and orientation of staff make the workforce productive and competitive. In this respect, the CEO of this PepsiCo Company, Ramon Laguarta, has undertaken the job to amplify employee engagement by the effective performance of Human Resource Management (HRM).As a result, the company has experienced 267,000 employees (Statista, 2020). Their collaboration has brought out unpredictable success in designing the process of MySAP Business Suite software successfully and with confidentiality.
Training and education: In order to achieve success, trained and skilled employees are highly required by the workplace. The PepsiCo Company has undertaken the job to train its employee through computer-based simulation process (PepsiCo, 2020). In this process, the employees experience a safe environment and virtually learn about the effective skills, competencies for becoming more productive. If the employees are not properly trained, they will become ineffective and disgruntled that culminate in creating troubles for this enterprise system.This key success factor for designing the enterprise system, MySAP Business Suite software has benefited the PepsiCo company immensely. Moreover, the employees become skilled and compatible with the implementation of this software within the organisation.
Analysis of SAP for Nestle
Nestle SA is the parent company of the candy-making giant, and its headquarter in Switzerland (Nestle, 2020). The company has invested $200 billion for the SAP software to the respect of its enterprise resource planning system (Worthen, 2020). Moreover, the company has generated the number of employees, and as a result, the company has attained 230,000 employees around the world (Nestle, 2020). Therefore, the company has possessed specific scope of using the SAP ERP software.
Scope of system
- The SAP software of the Nestle company has increased employee performance over the past two years.
- The SAP software has benefited the company to centralise and control data with transparency and accuracy.
- The SAP software has also made an advancement to the respect of supply chain improvements, and as a result, the company gets accurate data regarding the necessary Nestle products for the target audience.
Challenges associated with implementing an enterprise system and its impact and how the company overcome it
Despite providing the advantages to the enterprise, there remain some challenges within the Nestle Company while implementing the SAP software. These challenges have created an adverse impact on the company, and respectively, the management of the company has taken some major measurements in order to overcome these challenges.
Involvement of impromptu users: It has been found from the report of Worthen (2020), that the Nestle Company has involved such impromptu and improvised users in the process of operating the SAP software. As a result, the company has faced certain challenges regarding getting data in late that culminates in doing the work with ineffectiveness. In this respect, the company has sought help from the project management team in order to develop proper planning with the deserved, experienced and skilled users for designing the process of SAP ERP software conveniently.
Time constraints: The report of Worthen (2020) shows that the company has faced such time-related issues. The company has not made any proper time schedule in order to accomplish the work with deadline while implementing the SAP ERP system. As a result, the company has faced risks in fulfilling the tasks within the designated time that result in exceeding the time. Therefore, the CEO of Nestle company, Ulf Mark Schneider, has undertaken the job to maintain a proper time schedule with the maintenance of a logbook that daily updates the working record.
Understanding of enterprise system development life cycle from selection acquisition implementation and maintenance
The study of Martias (2018) shows that Enterprise System Development Life Cycle (ESDLC) is referred to as the framework through which the enterprise develops a plan in every phase from inception to completion. There are mainly four phases through which the Nestle company has implemented some plans for implementing the SAP ERP system and to maintain for having organisational growth.
Planning: It has been reviewed that the Nestle Company has developed the "Big Bang" approach as an implementation strategy of SAP ERP system within the organisation (Worthen, 2020). Therefore, the users got rid of the existing system and showed alacrity in involving themselves with the new enterprise system when the SAP system is supposed to be installed throughout the organisation.
Designing and developing: According to Davenport and Kudyb (2016), desinging and developing are considered as critical factors to make the workplace effective and productive by maintaining and updating data with active computer processing system. The Nestle Company has integrated key 19 stakeholders and executives in order to make them conscious regarding the designing process of the SAP ERP system for attaining development in respect of the business (Worthen, 2020).
Implementing: The Nestle Company has selected a "phased implementation" strategy through which the users are informed, trained and realised the significance of implementing a new ERP system (Worthen, 2020). However, this cannot be possible without the contribution of respective persons of the organisation. In this respect, the company has hired a managing director who has worked as a mediator between the users and the functional activities of designing the process of SAP ERP system.
Maintaining: After the implementation phase, the Nestle Company has employed the experts in order to maintain and secure the accumulated data from the SAP ERP system. If the data are not maintained properly, the company can face issues regarding accomplishing goals and objectives within the enterprise.
Strategic success factors in enterprise resource planning, design, and implementation.
According to Sing and Khamba (2016), key strategic success factors are known as remarkable factors to address the success of the company with effectiveness and convenience. In this respect, the contribution of certain strategic success factors for Nestle Company regarding the implementation of the SAP ERP system is inevitable.
Communication: Communication is addressed as a strong and effective tool in order to maintain a positive workplace culture while working employees are interrelated with each other and with the functional department of the organisations (Bonaccio et al., 2016). However, ill communication hinder the organisational growth severely. In this respect, the Nestle Company has followed ‘upward communication’ system in which the employees are sincerely welcomed and represent their thoughts and ideas. In this respect, members of the general management of Nestle Company intend to address the disgruntled staff and solve their problems (Worthen, 2020). Consequently, they are informed regarding the knowledge and intellectuality of designing the SAP ERP system within the Nestle Company. As a result, the company achieved success through this effective communication system.
Finances: According to Gebre (2019), the Finance Department is an essential functional department and the company’s progress relies on the effectiveness of this department. In order to implement SAP ERP software, the function of the finance department of this company is incomparable. Here, the Chief Financial Officer (CFO) of Nestle, Francois-Xavier Roger has made a budget of $200 billion for implementing the SAP ERP system within the organisation (Nestle, 2020). Without having any proper budget, it would be difficuelt for the company to introduce an effective ERP system. Therefore, this estimated budget has helped the company to accomplish every task within the designated budget. Therefore, the company has not experienced any issues regarding budget and thus, gets success to the respect of the business.
Management Commitment: The top-level management of Nestle Company has shown assiduousness and concentration from the commencement to the completion of the planning process of designing SAP ERP software within the organisation (Nestle, 2020). This effective planning has made all the functional and operational activities agile, and they are soon accomplished with the sincere collaboration of the Nestle employees. As a result, the Nestle Company achieves success.
From the analysis of these two case study companies, it is transparent that the Enterprise Resource Planning system has earned an irreparable position within the organisations. It has been ascertained from the discussion that the SAP software enables all the functions with proficiency. Moreover, the identified challenges are also amended by the management of the companies in order to maintain suitable and comfortable workplace culture. In addition to it, the findings of the discussion also show that the development life cycle is a key framework to mark the progression of a system from its inception to the accomplishment. Through this phase of development, the companies distinctively observe the performance and contribution of key strategic factors that have initially and eventually privileged both of the companies. This remarkable contribution of the strategic success factors has integrated all the staffs, expertise, different departments, employees and the other signified persons of the organisations into one team in order to plan the design process of implementing the SAP ERP system within the organisations.