Erp Implementation Case Study Hershey

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IBS Center for Management Research (2008)
This case examines in detail, the reasons behind the failure of enterprise resource planning (ERP) implementation at the US based Hershey Foods Corporation. In late 1996, Hershey began modernising hardware and software systems in the company. The company was running on legacy systems, and with the impending Y2K problems, it chose to replace those systems and shift to a client / server environment. As per the original plan, it was to switch over to the new ERP system by April 1999. It chose three software vendors: SAP, Manugistics and Siebel for implementing different software modules. The project was running to schedule until January 1999 and when it came to the last leg of implementation, the company faltered and was only able to switch over to the new system in July 1999. Hard pressed for time, Hershey went in for Big Bang ERP implementation, which led to several problems pertaining to order fulfilment, processing and shipping. The retailers who ordered Hershey's products could not get them on time, even though the company had ample supplies stocked at its warehouses. Hershey's revenues dropped by 12% during the third quarter of 1999 compared to the third quarter of 1998. This case is designed to enable students to: (1) understand the process of ERP implementation in a large organisation; (2) study the circumstances that led to ERP implementation failure at Hershey; (3) evaluate the role played by top management in ERP implementation; and (4) examine the factors that led to success or failure of ERP projects. The case is aimed at MBA / PGDBA students as part of the IT and systems and enterprise resource planning curriculum. The teaching note includes the abstract, teaching objectives and target audience, teaching approach, assignment questions, feedback of case discussion, references and suggested readings. It does not include an analysis of the case.
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In the decades since enterprise resource planning (ERP) technology was first introduced, there have been many high-profile successes and failures. However, the failures often draw more attention than ERP triumphs. One memorable case of ERP deployment fraught with operational issues is Hershey's adoption of a system in 1999.

When the ERP platform was adopted poorly, Hershey's was unable to satisfy more than $100 million worth of orders for products they actually had in inventory. The price of Hershey's stock dipped and according to CIO Magazine, analysts didn't trust the company to properly deliver on promises again for nearly nine months. While your enterprise might not operate on that scale, you can imagine a comparable scenario based on your operating model. 

According to Geneco Consulting, these are some of the reasons why that integration went disastrously:

Executives rushed the process. While Hershey's was given 48 months as a suggested deployment period, leaders at the company insisted on 30 months. Due to the rushed deployment, issues appeared that might have been resolved with more time. 

Too many systems were deployed at once. Rather than focusing on a single centralized solution, Hershey attempted to launch three different resource planning technologies at the same time. This created conflict among the various operations. 

"With respect to the Hershey's case, many authors have criticized the company's decision to roll out all three systems concurrently, using a 'big bang' implementation approach," writes Jonathan Gross of Geneco. "In my view, Hershey's implementation would have failed regardless of the approach. Failure was rooted in shortcuts related to systems testing, data migration and training."

The company was too busy. In 1999, hysteria about the impact of "Y2K" motivated Hershey to insist on implementation before the new year. Unfortunately, this meant the transition of critical systems happened during the busiest sales and distribution period of the company's fiscal year. In addition to raising the stakes, this window of time also made it harder to provide sufficient attention to the new technology. 

"Back in 1999, of course, it was a terrifying new prospect for investors to consider: Could a failed computer project take down a Fortune 500 company?" writes Christopher Koch of CIO . "Hershey's stock price fell more than 8 percent on that September day, and the computer system mystery made the front page of The Wall Street Journal."

The benefit of working with experts to deploy a business management software solution is that we can help determine worst-case scenarios and establish ways to avoid them. Contact Accent Software today to learn more about how our technology can optimize operations at your enterprise. 

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