ERP Implementation Failure at Hershey Foods Corporation

Presented By:Ashish Agarwal (121115)Manasi Puranik (121130)

Shuchi Bhatnagar (121154)Aditi Sharma (121165)

How it all started…

• Leading North American manufacturer of quality chocolate and non-

chocolate confectionery and chocolate-related grocery products.

• Leader in the gum and mint category.

• Founded by Milton Hershey as Hershey Chocolate Company(HCC) in

1894.

How it all started…

• By 1895, the Hershey Chocolate Company was manufacturing 114

different items in all sorts of sizes and shapes.

• Many were flavoured with vanilla and given luxurious-sounding names

like LeRoi de Chocolate, Petit Bouquets and Chocolate Croquettes.

Chocolate “segars” and cigarettes were also quite popular.

How it changed over time…

• On August 1, 1898, the company adopted  small child in a cocoa bean pod appeared on cans of HERSHEY’S COCOA up until 1936.

• It was finally replaced by the block lettering familiar today.

• In 1927 HCC was incorporated as Hershey Chocolate Corporation.

• It is known for its innovations and diverse variants.

The different brands…

Some more facts..

• Products exported to more than 90 countries across the world.

• Hershey sold nearly 3300 products including candies with variations in

shapes and sizes.

• The sales of Hershey which were at US$ 334 million in 1969 grew to US$

4.94 billion by 2006.

• As of 2006 the company has 14,300 employees.

• It also has diversified into a pasta manufacturing.

A sheer bad timing…

• Revamping of its hardware and software infrastructure in 1997.

• In 1999, Hershey failed during the final leg of the ERP implementation

• Delay in implementation by 3 months from April to July.

• A decision that changed the fate of Hershey “Big Bang implementation” of

ERP

• Revenues dropped by 12% in 1999 from last year.

“In order words, most corporations don’t fail so dramatically the first time, so their repair is never so good”

Steve Sawyer, Professor,

Information Science and TechnologyPennsylvania State University

What is ERP ?

• In ERP solution there is only one database that is used by all departments, such as Sales, Production, Finance and Accounting, Maintenance and Engineering, Purchasing, etc.

• ERP applications contain several modules. Each module consists of the best business practice that can be implemented for the company. ERP helps to break down barriers between departments within a company.

• By utilizing an ERP system, all departments have access to the up-to-date information that is needed to operate smoothly within any manufacturing environment..

Implementing ERP

Early 1990

Legac

y Syste

m

1996

Approval for Enterprise 21 Projec

t

January

1999

Phase 1 of

Implementation

July 1999 Phase 2 of Implementation

Implementing ERP

• In early 1990s, Hershey, like most of the other companies, used legacy mainframe systems for different functions ranging from human resource to order processing.

• In 1996, Enterprise 21 project was approved. Hershey’s information system division wanted to implement ERP by April 1999 to face Y2K problem at the turn of the century; to enhance competitiveness and to enhance customer service. They implemented Bar coding as a part of this project across the products. •

SUCC

ESS

Expected Benefits

• Tackle Y2K problem.

• Fine tune deliveries to Suppliers.

• Efficient Customer driven process capable of managing changing customer

needs.

• Reduce order cycle time and boost inventory accuracy.

• Better implementation of Business Strategy.

IT Partners

IBM Global Services

IT Partners

• SAP included modules for finance, purchasing, material management,

Warehousing, Order Processing and Billing.

• Siebel was to provide support In managing customer relationships and in

tracking effectiveness of company’s marketing through pricing promotions

module.

• Manugistics provided software for transport management, production,

forecasting and scheduling.

Actual Implementation

January 1999 Some of the modules were implemented (SAP Financial, Warehousing, Material Management, purchasing)

Aprill 1999 Missed Deadline

July 1999 Implemented all the Modules using Big Bang Approach

Order Processing Module

customer

Sales order

warehousedelivery

billing

17

The Problems

Improper co-ordination b/w operations and implementation team

Improper information flow

Flawed order entry, processing and shipping

Unentered Data

Shipping Times Delayed

Usual delivery time

• 5

July 99 delivery time

• 12

Consequences

.5% loss in market share

$150 million sales lost 19% drop in profit 12% drop in sales

What went wrong?

Who really was culpable in this situation? Was it Hershey’s management

for not realizing that its business sales period probably was not the best

time to activate the new ERP system?

Wrong timing

Unrealistic deadlines(April 99)

No Buffer time for testing

(3 -6 weeks post implementation)

Deadlines could not be met

(delayed till July 99)

Results

Lost hallow

een sales

Verge of losing

christmas sales

Losing 40% of the total

sales

Complexity

SAP R/3

CRM (Siebel)

IBM

Supply Chain

(Manugistics)

Inexperienced ManagementNot enough groundwork by Top Management

Lack of synergy b/w Technical and business managers

Bouncing Back

• George Davis appointed CIO

• Rigorous initial testing program implemented

• Process redesigned, July 2001

• Implemented successfully:

– Duration- 11 months

– Costs- 20% lesser than estimates

• Learnt from previous mistakes:

– Thorough testing

– Adequate training to employees

• Immediate benefits were experienced

• Broader scope- brand management, order management, etc.

• Strengthening of distribution system:

– 1.2 mn sq ft distribution centre aligned with ERP

• Continuous improvements

• Easy execution

• Higher level of performance

Bouncing Back

• Strong program management

• Executive leadership

• Diligent planning

• Extensive testing and training plan

Key Factors which led to Success

Thank you!!