Nestlé Pieces Together Its Global Supply Chain

 
 
By Tom Steinert-Threlkeld  |  Posted 2006-01-20
 
 
 
VEVEY, Switzerland—Chris Johnson was under attack. Fifteen months into standardizing how Nestlé operates around the world, he was fending off a general revolt from managers in 40 countries.

Why should they spend money on his GLOBE project? The Global Business Excellence program, a worldwide initiative to implement a single set of procurement, distribution and sales management systems, would just hurt their bottom line. And—in their opinions—make it harder to run their businesses.

Johnson had been given the third day of a three-day meeting in October 2001 to sell the market managers on the importance of standardizing how Nestlé conducts business around the world. Improvising, he decided as the day started to take questions, any questions.

And by midday, he was still answering them.

During lunch, Johnson decided as head of the GLOBE program that he had to somehow take charge. Or he would lose control of the $2.4 billion project, which was critical to Nestlé's operating efficiency in 200 countries around the world. And, quite possibly, his job.

So, when the meeting resumed after the break, he offered to give his job away. To anyone.

"How many of you would like my job? Just raise your hand. If GLOBE doesn't work, I get fired. If I get fired, you know what's going to happen? Peter Brabeck [Nestlé's chairman and CEO] is going to pick one of you to run it. So, here's the deal: If you don't want my job, you'd better make this work."

No hands went up. Johnson had heard the complaints, but in the end, the project was going to happen. Whether it worked or not would depend on how well the market heads embraced what was a business initiative, not a technology initiative. The point was to find ways to streamline Nestlé's myriad and vast supply chains, for everything from paper to powders to chocolate to water; to eliminate wasteful purchasing practices; and to take the best administrative practices and spread them throughout the company's operations.

Johnson turned the floor over to José Lopez, head of the Malaysia and Singapore markets. This was one of three test markets where the new standardized systems for handling all back-office operations of a Nestlé business—such as taking orders, dealing with suppliers, running factories, calculating demand and paying invoices—would go live the following year. Lopez could not yet attest to the effectiveness of GLOBE, but he stood by the logic and was committed to taking the plunge.

Johnson kept his job. And his project.

In effect, Nestlé had put Johnson on a mission to create a "single source of truth" about how all of its far-flung operations worked. A common set of processes, in factory and in administration, backed by a single way of formatting and storing data; and a single set of information systems, to help it run its businesses. Nestlé had 14 different enterprise planning systems from SAP AG of Germany in place in different countries. It would not meld them into one. It would replace them all with a new one, based on new Internet-based software known as mySAP.com.

"Even though they may not have liked it, there was a realization among the [40] market leaders that they couldn't go any further with the systems they had," says Ronald Hafner, global relationship partner for Nestlé with IBM Business Consulting Services, a.k.a. PricewaterhouseCoopers. "Market by market didn't work anymore.''

For Nestlé, this wasn't an everyday project. When it built a factory to make coffee, infant formula, water or noodles, it was used to spending $30 million or $40 million. The idea of any initiative consuming billions in up-front capital was unheard of. The company made chocolate chips, not electronic ones.

Chief executive Brabeck had bet his reputation on the initiative's success. He wanted not just to control spiraling information-technology costs, but gain a five- or six-year lead on Nestlé's key global competitors, such as Unilever and Kraft Foods, in how a global food supplier could operate efficiently, even as its business entered more markets with more products at an increasingly rapid pace. Nestlé figured it could cut the number of suppliers on record to 167,000, from 600,000. And save $750 million a year in the process, Chief Financial Officer Wolfgang Reichenberger would figure in 2002.

If GLOBE succeeded, Nestlé—and Brabeck—would have greater operating profits to plow back into innovation, stocking shelves with popular products and satisfying its main multinational customers, like Wal-Mart Stores and Tesco, the large United Kingdom-based food retailer. If it failed, it would be an arrow in the quiver of European investors such as the Ethos Foundation that had criticized Brabeck for assuming additional power in April 2005, when Brabeck took over as chairman after Rainer Gut retired. Normally, the chief executive and chairman roles are kept separate by publicly traded companies in Europe, to keep any one executive from becoming too powerful.

The GLOBE project also stood as the largest-ever deployment of mySAP.com. But whether the software got rolled out to 230,000 Nestlé employees or 200 was not the point.

The point was to make Nestlé the first company to operate in hundreds of countries in the same manner as if it operated as one. And that hadn't been achieved by any company—not even the British East India Co. at the peak of its tea-trading power—in the history of global trade.

Story Guide:

Nestlé Cooks Up a Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix It as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: One Supply Chain, 127,000 Products.

    Products">
    Nestlé may be known best for its chocolates, coffee, infant formula and condensed milk. But it's a lot more complex and sizable than that.

    It's the world's largest food company, with almost $70 billion in annual sales. By comparison, the largest food company based in the U.S., Kraft Foods, is less than half that size, with $33 billion in annual sales. Nestlé's biggest Europe-based competitor, Unilever, has about $54 billion in sales.

    The real trick: Nestlé gets to its huge size by selling lots of small-ticket items-Kit Kat, now the world's largest-selling candy bar; Buitoni spaghetti; Maggi packet soups; Lactogen dried milk for infants; and Perrier sparkling water.

    Nestlé operates in some 200 nations, including places that are not yet members of the United Nations. It runs 511 factories and employs 247,000 executives, managers, staff and production workers worldwide.

    For Nestlé, nothing is simple. The closest product it has to a global brand is Nescafé; more than 100 billion cups are consumed each year. But there are more than 200 formulations, to suit local tastes. All told, the company produces 127,000 different types and sizes of products.

    Out of this complexity, Brabeck, Nestlé's CEO since 1997, wanted to bring some order, at least in how the company operates the businesses that support the marketing of its vast array of brands, products and factories.

    Keeping control of its thousands of supply chains, scores of methods of predicting demand, and its uncountable variety of ways of invoicing customers and collecting payments was becoming ever more difficult and eating into the company's bottom line.

    From 1994 to 1999, the amount spent on its information systems went up by a third, from approximately $575 million to $750 million a year. Those costs were escalating, while the company was shrinking. Nestlé, under Brabeck, had been selling off some properties, such as Carnation, that it no longer felt were strategic.

    As a percentage of sales, keeping track of what Nestlé was selling, how it got to market and how it got paid had risen from 1.2% of its $48.1 billion in sales in 1994 to 1.6% of $46.9 billion in 1999.

    One of the culprits, according to Olivier Gouin, at the time chief information officer for the company's business in France, was uncoordinated introductions of planning and management systems from SAP, the progenitor of enterprise resource planning software. In 1984, Nestlé introduced its first SAP system. By 1995, 14 countries ran their businesses on SAP. And each implemented the same software, known as R/2, in a different way. Data was formatted differently. Forms were handled differently. As a result, the company's costs to maintain the system were going up, and the process of consolidating reports-to determine overall financial results-was becoming more difficult, not easier.

    Enough was enough. By April 2000, Brabeck, then-chief financial officer Mario Corti-who a year later would move to Swissair in an attempt to rescue that company-and Nestlé's entire executive board would back a $2.4 billion attempt to force its confederation of global businesses to operate as if they were a single unit.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Signed: Global Project Manager; Undefined: The Project

    : Global Project Manager; Undefined: The Project">
    Shortly afterward, Johnson got a call from Mike Garrett, then head of Nestlé's Asia, Africa and Oceania markets, and a member of the executive board that had launched what it would come to call GLOBE.

    Johnson, an American who stated as a Carnation products salesman, was head of one of the key Asian markets, Taiwan. His challenge: trying to promote sales of items such as probiotic milk products, which help digestion, kill bacteria and might even help ward off colon cancer.

    The call was vague, to Johnson's ears. Garrett had a project in mind, but made no mention of SAP. It was a business project with some sort of global significance.

    Johnson eventually signed on, even though, as he puts it, "I didn't really know what I was signing up for."

    But Johnson received three baseline edicts from Garrett and Corti: Harmonize processes. Standardize data. Standardize systems.

    This included how sales commitments are made, factory production schedules established, bills to customers created, management reports pulled together and financial results reported. Gone would be local customs, except where legal requirements and exceptional circumstances mandated an alternative manner of, say, finding a way to pay the suppliers of perishable products like dairy or produce in a week, rather than 30 days.

    And when was this all to be done? In just 3 1/2 years.

    The original GLOBE timeline, delivered to Johnson by the executive board, was to have 70% of the company's $50 billion business operating on the new unified processes by the end of 2003.

    No matter that Johnson hadn't quite learned how to spell SAP yet.

    Gouin got a similar call from Lars Olofsson, the executive vice president of Nestlé's European operations and Garrett's counterpart there. Gouin also had almost no knowledge of what was going on. He certainly didn't know anything about GLOBE-or Johnson.

    But he did know how hard it had been to get managers in Nestlé's previously decentralized culture to work together. Even though standards and best practices had been urged by technology executives from Vevey in each of the 14 earlier SAP deployments, the company had still wound up with 14 different systems.

    What could be different this time? One part of the world, Asia, had shown that market managers could work together and create a common system for doing business with their customers. They had used a set of applications from a Chicago supplier, SSA Global, that allows manufacturers operating worldwide to manage the flow of goods into their factories, the factories themselves and the delivery of goods to customers, while making sure the operations meet all local and regional legal reporting requirements. The system was adopted by Indonesia, Malaysia, the Philippines, Thailand, even South Africa, and was dubbed the Business Excellence Common Application.

    Managers in the U.S. had committed themselves to a similar effort, also based on SAP software, called BEST (Business Excellence through Systems Technology). But it was Asia, where multiple countries and market heads had figured out how to resolve differences and protect their profits at the same time, that caught Corti's eye. Johnson and Gouin wound up with the burden of replicating Asia's success-with SAP software-everywhere Nestlé operated.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Project Plan: Finalized; Schedule: Not So Much

    : Finalized; Schedule: Not So Much">
    Ironically, the GLOBE initiative would be launched in earnest on a date that would have the most historic significance in the U.S.

    It was July 4, 2000. Independence Day, in America.

    But Johnson wasn't concerned about fireworks; he had his own explosive issues to deal with. A team that included Johnson, Gouin, a hand-picked group of 12 senior Nestlé executives from varying backgrounds-including marketing, production and finance-and advisers from SAP and PricewaterhouseCoopers had two weeks to figure out whether the GLOBE project could meet its baseline goal of getting 70% of the company onto a standard set of software-enforced best practices by the end of 2003.

    Nestlé "laid down the law: standardize everything," Hafner says. "The plan did not allow for any deviation."

    Changing the date or scope was a risky proposition. The board's target date-December 2003-had already been published in a company newsletter. But this was no small undertaking. Besides being unable to unify its 14 SAP systems, it had taken the confederacy nearly six years in the late 1980s and early '90s just to agree on a companywide e-mail system.

    And this project was orders of magnitude more involved and complex. Instead of just 14 countries, it would affect 200. Instead of just one business process-text communication-it would touch every aspect of every daily routine. Change would come in gobs, not small steps.

    Using benchmarks they could glean from competitors such as Unilever and Danone, and assistance from PricewaterhouseCoopers consultants and SAP's own deployment experts, Johnson and Gouin soon came to a conclusion they had largely expected going in: This project would take more people, more money and more time than the board had anticipated. Instead of measuring workers in the hundreds and Swiss francs in the hundreds of millions, as originally expected, the team projected that 3,500 people would be involved in GLOBE at its peak. And the cost would reach 3 billion Swiss francs-about $2.4 billion.

    The money required was possibly the easiest "surprise" to sell. In effect, Gouin figured the company would have to spend 4 billion francs, or about $3.2 billion, if it continued to let each country choose and manage its own systems over the next five years. By contrast, even with the costs of changing processes and putting in place new software and data centers, GLOBE would be cheaper. All up-front and operating costs could be kept to 3 billion francs with GLOBE, a savings of about $800 million.

    Besides recommending a multibillion-dollar spend, Johnson and Gouin were also saying that at the project's peak, 3,500 people would be working on rolling out GLOBE's processes and systems. And, oh, by the way, if you commit to spending all that money and putting all those staff and contractors to work, you'll have to push back your expectations of when you can have results.

    The new target: Putting the "majority of the company's key markets" onto the GLOBE system by the end of 2005, not 2003.

    Brabeck, according to Johnson, "was not that shocked." And Corti "probably knew" it would be costly. But the rest of the executive board was surprised, he says.

    Of course, the board had a surprise for Johnson in turn.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Drafting a Project Team of Business-Unit All-Stars

    of Business-Unit All-Stars">
    When Nestlé's board gave Johnson and Gouin a suggested team of a dozen technology staffers, Johnson noticed one common thread: All were nearing retirement. He knew he'd need a different team.

    First, he wanted a group of business managers, not technology managers, from all of Nestlé's key functions: manufacturing, finance, marketing, human resources. And from all across the world: Europe, Asia, the Americas, Africa, Australia.

    He avoided any volunteers. Instead, he spent his time looking for "untouchables"-the managers no one wanted to give up. The first team had to be everyone's first team.

    And they had to get to work in a hurry. Even with the time extension granted by the board, he had to have his team in place by the fall of 2000. Because by the following February, he wanted to recruit an even bigger team: 400 executives from across all disciplines and 40 different countries-users of the system that would go into place.

    He would have the program's charter established and ratified by January, and he wanted his troops on the ground in February. Their task: not to deploy software or consolidate data centers. Rather, to figure out how Nestlé worked.

    These would have to be people who knew how things actually worked-or should work. They would have to know how the company figured out demand for each of its products, how supplies were kept in the pipeline, even mundane things like how to generate an invoice, the best way to process an order, how to maintain a copier or other office equipment, and how to classify all of the various retail outlets, from stores to vending machines, that could take its candy bars and noodles. And allow managers to manage it all, from the Web.

    "All of these things were sort of oral history across the Nestlé world, but we never put it all together at once," Johnson says. "We've decoded the DNA of how Nestlé does business."

    The process for the 400, once lined up, would start with the team finding and then documenting the four or five best ways of doing a particular task, such as generating an invoice. Then, the GLOBE team would bring in experts with specific abilities, such as controlling financial operations, and use them as "challengers.'' They would weed out weaknesses, leaving the best practice standing.

    And once it figured out the DNA, the GLOBE team would, in effect, be poking, prodding and, ultimately, changing it. Converting to a single, templated set of processes and information systems sounds straightforward. In reality, says Nils Herzberg, senior vice president of manufacturing at SAP, "it's a great excuse to question the processes" you already have.

    At the end of that first year, Johnson, Gouin and their teams had built up the basic catalog of practices that would become what they would consider the "greatest asset of GLOBE": its Best Practices Library. This is an online repository of step-by-step guides to the 1,000 financial, manufacturing and other processes that apply across all Nestlé businesses. Grouped into 45 "solution sets," like demand planning or closing out financial reports, the practices are now online, available throughout the company, updated as necessary and commented on at any time, in electronic forums.

    Sometimes, it was not possible to choose one best practice. Perhaps the hardest process to document was what Gouin would come to refer to as G.D.: "generating demand."

    With so many thousands of products, hundreds of countries and local tastes to deal with, there were "many different ways of going to market" and many quite valid. Hard to fit into a single software template that would serve all market managers.

    So Johnson and Gouin practiced, in Johnson's words, "a bit more tolerance" on that score. The GLOBE template would include a half-dozen or so different ways of taking products to market around the world.

    But financial reporting? No leeway. The 400 executives had to come up with a rigorous step-by-step process that would not change.

    In the past, salespeople used to write commitments from customers on scraps of paper and toss them over to someone in Accounting to make heads or tails of; Johnson put a stop to that. With GLOBE processes, each salesperson not only has to enter the exact numerical commitments-say, each $100,000 order-into the system personally and in clear, standardized detail, but the data has to be entered by a specific deadline each month. Otherwise, manufacturing to fulfill the order can't commence. The software that drives the system is "kind of like handcuffs in a way to make you do the right thing,'' Johnson would say in June 2005.

    Some experts were brought in along the way to challenge each process. But in the end, one standard would, in this case, have to stand. Financial terms would be consistent. The scheme for recording dates and amounts would be the same. The timing of inputting data would be uniform. Only the output could change. In Thailand, there would have to be a deviation so that invoices could be printed out in Thai characters, so they could be legal-and readable. In the Philippines, dates would have to follow months, as in the U.S. Most of the rest of the world would follow the European practice of the day preceding the month.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Standardizing IT: No So Tough; Standardizing Managers: Not So Easy

    : No So Tough; Standardizing Managers: Not So Easy">
    No matter how he sliced it, however, Johnson was walking uphill, into the wind. Even though Brabeck had "stuck his name on that project,"' as computer systems consultant Robert Barton puts it, Nestlé managers had always conducted their businesses as they saw fit. Even standardizing on behind-the-scenes practices like how to record information for creating bills to customers could produce heat. Decision-making was being taken out of local markets and being centralized. Beyond that, someone had to pay the bill for the project itself. That would be the countries, too.

    "In a case like Nestlé, you're saying, well, you used to decide locally how you work. Well, we're globalizing supply chain, and if everybody does it differently, it's not going to work. So, let me explain it to you. You're all going to do your supply chain like this," says Barton, a former Computer Sciences Corp. consultant who studied Nestlé for his 2003 book, Global IT Management.

    Which is why Johnson found himself under attack by October 2001, when he pulled the country managers together to go over the purpose of the project and how to get the processes deployed.

    The managers saw a "unified" solution as a "central" solution. It was ridiculous, they said, to think all back-office operations could be standardized. And if they were to be standardized, it's my country's practices that should be the template. Because they're the best. And GLOBE might mean you couldn't be best at anything.

    And so, when the market heads were brought together once more in May 2003, Johnson again let the executives let off steam. And then again let their peers speak. But this time, at least a handful of market heads could actually describe the "operational efficiencies" they had achieved, like getting faster financial reports and demand forecasts, so they could run their businesses better.

    And by May 2005, when the market heads met a third time, 20 of them could speak from experience. The general consensus: Another mass meeting was probably not necessary.

    If Brabeck, however, had expected GLOBE to curb the company's information-technology expenses, which had steadily risen in the last half of the '90s, he was mistaken. From 1.6% of sales in 1999, the project was pushing costs toward 2% of sales. That was a Rubicon the chairman was not willing to cross.

    So, before 2003 even rolled around, Johnson and Gouin had to reset the schedule. Again.

    Brabeck put a cap on spending at 1.9% of sales, per year. Which meant, in order to hit that new target, the project would have to last longer.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Project Costs: Capped; Project Schedule: Changed Again

    : Capped; Project Schedule: Changed Again">
    To stay under the 1.9% cap, the third GLOBE rollout plan would call for 80% of the company to be on GLOBE by the end of 2006.

    This central benchmark would have a side benefit: It produced a local benchmark as well. Each country would have to keep its technology spending, even during the rollout, to less than 1.9% of its sales. Which ensured that costs would not go out of control and profits-which determine bonuses and other benefits-would be protected as well.

    As 2002 turned into 2003, the cap served its purpose. In Europe, Asia and elsewhere, all rollouts spent less than 1.9% of sales on software, hardware, training and operations. Even as 2005 came to a close, Johnson noted that no rollout had burst through the ceiling.

    By the fall of 2005, almost 25% of Nestlé was running on the GLOBE templates. And Johnson was confident that, indeed, 80% of the company would operate on the new standardized processes by the end of 2006.

    At the end of September 2005, 15 countries were in the middle of rolling out GLOBE methods of conducting business. Just like his mid-2000 prediction, 3,500 people were at work deploying GLOBE templates and practices.

    At GLOBE's technology center in Vevey, 250 Nestlé engineers and managers worked in sparse cubicles in a former warehouse, developing and adjusting the information systems that would enforce the company's revamped processes. Another 200 contractors joined them. In each rollout, 100 business and technology executives managed the deployment, or 1,500 all told, at the time.

    Another 1,500 worked in the three regional GLOBE data centers, one for each major zone: the Americas, Europe and Asia-Oceania-Africa.

    Of course, that was five years into a project that was supposed to be largely completed two years earlier. And getting to 3,500 hadn't seemed like a layup in October 2001, when Johnson offered, seriously or as a stunt, to give up his job to any taker.

    Back then, he had each country appoint a GLOBE manager, to ensure buy-in and create a network of managers around the world who could consult with each other on challenges they faced and solutions they'd found. Of course, that wasn't part of the pitch. "What exactly they were going to do wasn't so clear at the time," Johnson says. But it was a start.

    He also created a steering committee in Vevey. These were senior Vevey-based executives, from finance, marketing, production and human resources, as well as a vice president from each zone. The VPs would act as the ears and agents of the zone chiefs, such as Garrett and Olofsson.

    Together, they would establish schedules for rollouts and manage the rollout teams. They would oversee the collapse of 100 data centers into just three regional centers, plus the fourth in Vevey. This would cut down on duplicative operations, and reduce staff and overhead. Yet it would make each region a part of the GLOBE infrastructure, responsible for its upkeep; each zone would manage and maintain its own data center. The Vevey center would maintain the templates, best-practices libraries and central functions.

    But when they got started, they didn't even have a basic way to know if they were doing well in whatever they were supposed to be doing. There was no criterion for success.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain

    : Fix it as You Go; Goal: Customer Can't Feel the Pain">
    Brabeck took the committee out of that analytical abyss in short order. His criterion: The customer should feel no pain. After you turn the system on in a given market, it should work. You should be able to take orders, produce products, ship them, generate invoices and collect money. Without anyone who is buying food from you noticing the changeover.

    Lopez wasn't so sure he could live up to that benchmark, as one of the first three test markets.

    To stay on track, the first three markets would be in the middle of a systems storm. First, they would be implementing the first version of the GLOBE template for mySAP planning systems. Any bugs or unexpected outcomes would have to be resolved, in progress of deployment.

    Second, they would have to implement processes that were being developed at the same time the systems were being put in place. There was not enough time to nail down the processes first. They would be developed in parallel.

    Because of that, the third disadvantage would be a lack of training for workers and managers in each of those first pilot markets. They'd have to learn on the job-and hope customers wouldn't notice.

    "It was almost like teaching somebody how to fly a plane, and just showing them a presentation and not even letting them get into a simulator," Johnson recalls.

    The hardest part: Getting managers and workers to understand that their jobs would change, in practical ways. In many instances, workers would be entering data on raw materials as they came into or through a factory. Keeping track of that would be a new responsibility. Doing it on a computer would be a wholly new experience. And figuring out what was happening on the screen could be a challenge. Minutiae? Maybe. Considerable change? Definitely.

    "The biggest challenge is in the mind,'' says Martial Rolland, chairman and managing director of Nestlé India. "Yes, it's an equipment change. But, ultimately, it's a mind change.''

    But the templates got installed and business went on, in Switzerland, Malaysia/Singapore and the Andean region. Those first three rollouts stayed out of the newspapers, one of the GLOBE team's informal goals. Only if things went wrong, Johnson figured, would it make print, in any given market.

    In each successive rollout, the managers of a given market would have nine months or more to document their processes and methodically adjust them to the templated practices. In 2003, Thailand, Indonesia and Poland would go live. In 2004, Canada, the Philippines and the Purina pet food business in the United Kingdom.

    But, by then, the system was bumping up against some technical limits. In particular, the mySAP system was not built for the unusual circumstances of the Canadian food retailing market. Food manufacturers have lots of local and regional grocery chains to sell to, and promotional campaigns are rife. MySAP was not built to track the huge amount of trade promotions engaged in by Nestlé's Canadian market managers. Too many customers, too many products, too many data points.

    For instance, in Malaysia, the SAP software was set up to collect sales and procurement data at the product level, say, Crunch Bars and Nescafé canisters, according to IBM's Hafner. In Canada, managers wanted to keep data at the stock-keeping unit (SKU) level-maintaining extensive records on every flavor and size of every product. Trying to report sales figures every morning at the SKU level would swamp the SAP software.

    Nestlé and SAP had to come up with a "multiple angles approach'' to solve this unexpected hitch, says Emiel Van Schaik, a SAP vice president and head of the company's consumer products and life sciences unit. The storage of data would have to be separated, according to the market from which it came. Canada's trade promotion information might be allotted 50 gigabytes, and Brazil's 5; and the data kept apart.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: SAP Project: Global; Computing Resources: Limited

    : Global; Computing Resources: Limited">
    The amount of data that Canada would have to store also would be streamlined. Each of its grocery store, discount chain, and other retail customers in that country would be slotted into one of six customer groups. Uniform sets of data on trade promotions would be kept in each of those categories. Hewing to form would keep down the size of files.

    But it hasn't been easy, even with country managers and SAP staff working on the problem. Even as late as Sept. 16, 2005, Canadian managers were meeting face-to-face with Gouin and Johnson in Vevey to wrestle with details on how to track and manage the trade promotions.

    In India, changing over in mid-2005 was complicated by the fact that not only was Nestlé overhauling all of its business processes, but it didn't know what some of the key financial processes would have to be. At the same time it was converting to the GLOBE system, India was changing its tax structure, in all 29 states and six territories. Each would get to choose whether and how to implement a fee on the production and sale of products, known as a value-added tax. Meeting a May go-live date involved intestinal fortitude, Rolland says. Up until the last minute, the country's managers didn't know what would happen. That almost meant pulling the plug on the launch.

    And the world over, managers learned that the smallest hitch in standardized systems means that product can get stopped in its tracks.

    In Indochina, for instance, pallets get loaded with 48 cases of liquids or powders, then moved out. If a worker fails to manually check off that the right cases have been loaded on a particular pallet, all dispatching stops are held up until the pallet is checked. "A few small errors can cause a lot of problems," says Graham Campbell, the market head.

    Even now, Johnson is not happy with the state of reports that are being generated for heads of factories and country managers. Summary reports on everything from raw material usage to labor spending are marred by delays and data that "is not that great." For now, Johnson is content with capturing exactly what materials are flowing through factories and making sure they are coded properly, so one type of sugar does not appear around the world as 12 different types.

    But he wants reports that can quickly aggregate information from multiple plants worldwide, for faster response to sales trends. Now, at times, he has to settle for factory production reports being completed overnight and available at 9 a.m. each day for review.

    Johnson would like to see the system available 24/7, with each screen of information coming up instantly. Even now, however, this is proving to be a "tuning challenge."

    By September 2005, though, Nestlé had its rollouts pretty much in gear, and could handle one major go-live every month.

    GLOBE has already taught Nestlé how to operate as a truly global company. Hafner points out that managers from the water businesses initially rejected the idea of collecting, managing and disseminating data in the same way as their counterparts in chocolate and coffee.

    "Some managers figured that if they were able to produce all of the water or all of the chocolate they needed for their market locally, that should be enough," he says. "But the idea was to get Nestlé's vast empire to think, order and execute as one rather than a collection of disparate companies."

    This could mean that a particular manufacturing plant in a particular manager's region might be asked to produce double or triple the amount of coffee it had in the past. Or it might mean that particular plant would be shuttered.

    So, while the company did away with data centers for individual countries, each one does now have a data manager. The task: Make sure the information that goes into GLOBE's data centers is accurate and complete.

    If Nestlé can indeed achieve its original three goals-standardized processes, data and systems-it figures its country managers can concentrate more on what really matters: serving customers.

    "If a market drops or a market takes off, you want to respond," says Bob Belshaw, the chief operating officer of Insight, a supply chain consulting firm.

    The overall effect on the company is still being quantified. Only 30% of its business ran on GLOBE processes by the end of 2005. The goal by the end of this year: 80%.

    But 100% perfection will never be possible, Johnson says, if speed is also part of the equation. "With speed comes a tolerance for a lack of perfection," he says. "And that is a very important point. Because Nestlé [tends to be] quite perfect on things. And this tolerance that, OK, I'll take 80% today versus 100% five years from now, is a challenge.

    "Hey, it's not all going to work perfectly," he says, just before he embarks across a side street in Vevey to tackle the Canadian trade promotions problem.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job

    Next page: Nestlé By the Numbers

    é By the Numbers">

    Headquarters: Avenue Nestlé 55, CH-1800, Vevey, Switzerland
    Phone: 41-21-924-21-11
    Business: The world's largest manufacturer of food products; has extensive holdings in coffee, chocolate, baby formula and bottled water.
    Chief Executive Officer: Peter Brabeck-Letmathe
    Project Leader: Chris Johnson
    Financials in 2004: Net income of $5.4 billion on sales of $69.9 billion
    Challenge: Implement a single set of procurement, distribution and sales management systems and processes worldwide.

    BASELINE GOALS:
    Save $2.4 billion by the end of 2006, from supply chain, sales generation
    and support activities.

  • Spend no more than $2.4 billion in capital, to get these savings.
  • Cap spending on information technology, companywide, at 1.9% of sales each year.
  • Increase percentage of company operating on GLOBE systems to 80% by end of 2006, from 30% at end of 2005.

    Story Guide:

    Nestlé Cooks Up A Global Supply Chain

  • One Supply Chain, 127,000 Products
  • Signed: Global Project Manager; Undefined: The Project
  • Project Plan: Finalized; Schedule: Not So Much
  • Drafting a Project Team of Business-Unit All-Stars
  • Standardizing IT: No So Tough; Standardizing Managers: Not So Easy
  • Project Costs: Capped; Project Schedule: Changed Again
  • Rollout: Fix it as You Go; Goal: Customer Can't Feel the Pain
  • SAP Project: Global; Computing Resources: Limited
  • Nestlé By the Numbers
    Player Roster: Who's Who Among Nestlé Project Planners
    Roadblock: Regional Managers
    Hurdles Overcome: Deploying a Common Global System
    Base Technologies: Nestlé
    SAP: Not Pretty, But It Did the Job