Erp Failure In Hershey’s
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Hershey, a leading chocolate manufacturer, needed to replace its legacy systems to address Y2K issues and enable more efficient operations. It implemented SAP, Siebel, and Manugistics software in a big bang approach over 30 months. However, the system went live during their busiest season, and they were unable to fulfill Halloween orders, which significantly hurt sales and profits. Key lessons learned were that enterprise software requires business process change, adequate testing is needed, and careful timing of go-live is important. After upgrades and improvements, Hershey now has near 99.96% inventory accuracy and can fulfill orders within 24-48 hours.
Erp Failure In Hershey’s
- 2. Introduction Need for an ERP implementation IT Partners The Plan Actual Outcome What went wrong? Learnings Hershey today – The turnaround
- 3. 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.
- 4. A network of 19 manufacturing plants, eight 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.
- 5. 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.
- 7. 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.
- 8. 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.
- 9. “ Enterprise software isn’t just software. It requires changing the way you do business.”
- 11. 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.
- 12. Successful ERP
- 14. 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.
- 15. 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.
- 16. 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.