Presentation By,Parth V. Purohit - Rohan Mehta - Vaibhav Parakh

ERP Implementation Failure

In Hershey’s

Contents• Benefits Of ERP

• Problems Of ERP

• Risks In Implementing ERP

• Risks In System Project

• Introduction Of The Company

• Need for an ERP implementation

• IT Partners

• The Plan

• Actual Outcome

• What went wrong?

• Failed Strategic Decisions

• Learning

• Hershey today – The turnaround

What Is ERP

• ERP (enterprise resource planning) is an industry term for

the broad set of activities that helps a business manage the

important parts of its business.

• The information made available through an ERP system

provides visibility for key performance indicators (KPIs)

required for meeting corporate objectives. 

ERP System

Benefits Of ERP

• A single system to support rather than several

small and different systems

• A single applications architecture with limited

interfaces

• Access to management information unavailable

across a mix of applications

• Access to best practice systems and procedures

• More integration hence lower costs

• More "automation" of tasks Generic Costs and

Impacts

Problems With ERP

• The cost is likely to be underestimated

• The time and effort to implement is likely to be underestimated

• The resourcing from both the Business and IT is likely to be

higher than anticipated

• The level of outside expertise required will be higher than

anticipated

• The changes required to Business Processes will be higher than

expected.

• Scope control will be more difficult than expected

• There will never be enough training - particularly across different

modules

Risks In Implementing ERP

Risk in ERP System Project

• One of the leading chocolate manufacturer across world.

• Large chunk of sales from Valentine’s Day, Easter, “back to

school,” Halloween and Christmas – 40% of profit.

• Need of an efficient and reliable logistics system to cater to

these large no. of seasonal requirements .

• Reliable product availability is critical.

Hershey’s – A Brief Overview

Existing System

• A network of 19 manufacturing plants, 8 contract

manufacturers and more than 20 co-packers.

• The company was running on legacy systems, and with the

impending Y2K problems, it chose to replace those

systems and shift to client/server environment.

• To tackle Y2K problem Hershey decided to replace existing

legacy systems.

IT Partners

• A $112 million worth of combination of softwares for CRM,

ERP and forecasting.

• Replace existing mainframe based legacy systems by SAP

R3 – Accenture.

• Production forecasting, scheduling and transportation

management – Manugistics Group Inc.

• Managing customer relations and tracking effectiveness of

marketing activities– Siebel CRM.

Implementation Plan for Enterprise 21

April 1999

Enterprise 21 went live

Jan 1997

Replaced 5000 desktop computers

Installed new TCP/IP network hardware

Jan 1996-Roll out of the plan

Tackle Y2K issue by Jan 2000

Replace Mainframe with

SAP R/3

Advanced final date to April 1999

Expected Benefits

• Fine-tune deliveries to suppliers.

• Upgrade and standardize companies business processes.

• Efficient customer driven processes capable of managing

changing customer needs.

• Reduce order cycle times and boost inventory accuracy.

• Reduce inventory costs.

• Better execution of business strategy of emphasizing core

mass market candy business.

Actual Scenario

• Unable to deliver $100 million worth of Kisses and Jolly

Ranchers for Halloween in 1999.

• Stock price down 35%

• Earnings drop 18%

• Order fulfillment time doubled to 12 days!

• Lost prominent shelf space for the season!!!

• Several consignments were shipped behind schedule, and

even among those, several deliveries were incomplete.

“Enterprise software isn’t just software.

It requires changing the way you do business.”

What Went Wrong?

Squeezed Deadlines

Wrong Timing

Big-Bang Approach

Un-entered Data

• Squeezed deadlines:– Project originally scheduled for 4 years– Company forced the implementation to 30 months

• Wrong timing:– The company went live at their busiest time– Released the solution just before the Halloween

• Big-Bang Approach:– To quicken the implementation process, Hershey opted for

Big Bang implementation.– Simultaneously implemented a customer-relations package

and a logistics package even without testing some of the modules

– Increased the overall complexity and employee learning curve

• Un-entered data:– “Surge Storage” capacity not recorded as storage points in

the ERP– Orders from many retailers and distributors could not be

fulfilled, even though Hershey had the finished product stocked in its warehouses.

What went wrong?

Failed Strategic Decisions

• Unrealistic Expectations

• The Big Band Implementation

• Implementation of Systems from 3 different Companies

• No CIO to look after IT before implementation

Successful ERP

Learnings• The evolutionary way• Test each module before

releaseGo Slow

• Data migration is important.• Discipline in inventory.

Data is King

• Management should keep a close watch.

• Work for a common goal.Oversight Matters

To restore confidence in distribution systems following the 1999 breakdown; to extract additional efficiencies from the supply chain.

A New Challenge

The Turnaround Hershey made sure to take the time and resources to

thoroughly test the computer systems.

Testing included putting bar codes on empty pallets and

going through the motions of loading them onto trucks so

that any kinks would be worked out before the distribution

center opened for business.

Began work on the upgrade to mySAP in July 2001.

Hershey Foods said it had completed an upgrade to

mySAP.com — completed in 11 months, 20% under budget.

Hershey now has an inventory location accuracy of 99.96

% and can turn orders within 24 to 48 hours of receiving

an order as opposed to the previous 10-plus days that it

took.

Eastern Distribution Center, EDC III

Opened in 2000, to help custom pack some products at its

distribution centers, removing co-packers from the chain.

To strengthen the overloaded physical logistics

infrastructure.

To help with errors in forecasting.

Enabled by WMS from Mc Hugh DM+.

In its few short months of operations, EDC III nearly has

halved the company’s order-cycle times of a year ago while

dramatically boosting inventory accuracy.

Hershey’s Today

Revenues of nearly $5 billion and almost 13,000 employees

worldwide.

In 2005 & 2006, Hershey acquired the Berkeley, California-

based boutique chocolate-maker Scharffen Berger, Joseph

Schmidt Confections, the San Francisco-based chocolatier

and Dagoba Organic Chocolate, a boutique chocolate maker

in Oregon.

Markets Hershey's, Reese's, Hershey's Kisses, Kit Kat,

Twizzlers, and Ice Breakers.

General Solutions

• Justify Enterprise-wide Projects.

• Both the Software & Business Processes should FIT together.

• Identify And Implement Strategies For Reskilling The Existing It

Workforce And Acquire External Expertise Through Vendors And

Consultants When Needed.

• Project management team should have both Business Knowledge

And Technology Knowledge.

• Make A Commitment To Training.

• Manage Change Through Leadership, Effective Communications

And The Role Of A Champion.