Erp failure- Implementation Failure Hershey Foods Corporation
- 1. ERP Implementation Failure In Hershey’s Presentation By, Parth V. Purohit - Rohan Mehta - Vaibhav Parakh
- 2. 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
- 3. 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.
- 4. ERP System
- 5. 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
- 6. 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
- 7. Risks In Implementing ERP
- 8. Risk in ERP System Project
- 9. Hershey’s – A Brief Overview • 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.
- 10. 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.
- 11. 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.
- 12. Implementation Plan for Enterprise 21 Jan 1996-Roll out of the plan Tackle Y2K issue by Replace Mainframe Advanced final date to Jan 2000 with SAP R/3 April 1999 Jan 1997 Installed new TCP/IP network Replaced 5000 desktop computers hardware April 1999 Enterprise 21 went live
- 13. 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.
- 14. 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.
- 15. “Enterprise software isn’t just software. It requires changing the way you do business.”
- 16. What Went Wrong? Squeezed Deadlines Wrong Timing Big-Bang Approach Un-entered Data
- 17. What went wrong? • 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.
- 18. Failed Strategic Decisions • Unrealistic Expectations • The Big Band Implementation • Implementation of Systems from 3 different Companies • No CIO to look after IT before implementation
- 19. Learnings • The evolutionary way • Test each module before Go Slow release • Data migration is important. • Discipline in inventory. Successf Data is King ul ERP • Management should keep a close watch. Oversight Matters • Work for a common goal.
- 20. A New Challenge To restore confidence in distribution systems following the 1999 breakdown; to extract additional efficiencies from the supply chain.
- 21. 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.
- 22. 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.
- 23. 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.
- 24. 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.
Editor's Notes
- #20: -> Pitfalls of enterprise systems implementation revolve around governance issues. At Hershey, he suspects that business and technology managers aligned with different parts of the business were pulling in different directions, and no one at the top pulled these demands together to guide the creation of a system that would work for the whole business. That's very typical, Sawyer says: "You get 100 little committees, with no oversight."
- #22: -> 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.
- #23: Also, Hershey customizes some of its products at the distribution centers to help with errors in forecasting. With these steps in place, a new distribution center, EDC III, was built. WMScross-train the workers so that they can all co-pack and work in the warehouse.