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Name:hessah Saad Mohamed Al-Fhaid: Erp Implementation Level:6

Hershey's implemented an ERP system called Enterprise21 at a cost of $10 million to integrate SAP, Manugistics, and Seibel software. It demanded the 4-year implementation be completed in 2.5 years using a "big bang" go-live instead of a phased approach. This led to order fulfillment problems, increased inventories, lost sales of $150 million, and a 19% drop in profits. The key reasons for failure were an unreasonable timeline, a rushed implementation without proper testing, and going live during their busiest season. Lessons learned are to avoid rushed timelines, not compromise on testing, and avoid cutovers during peak business periods.

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75 views4 pages

Name:hessah Saad Mohamed Al-Fhaid: Erp Implementation Level:6

Hershey's implemented an ERP system called Enterprise21 at a cost of $10 million to integrate SAP, Manugistics, and Seibel software. It demanded the 4-year implementation be completed in 2.5 years using a "big bang" go-live instead of a phased approach. This led to order fulfillment problems, increased inventories, lost sales of $150 million, and a 19% drop in profits. The key reasons for failure were an unreasonable timeline, a rushed implementation without proper testing, and going live during their busiest season. Lessons learned are to avoid rushed timelines, not compromise on testing, and avoid cutovers during peak business periods.

Uploaded by

hessahsaad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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name:hessah saad mohamed

al-fhaid
level:6
ERP IMPLEMENTATION
group:ACASE STUDIES- FAILURES

ERP Implementation Failures

Company Background

Hershey's is the largest chocolate manufacturer in North


America.

Its headquarters are in Hershey, Pennsylvania, which is also


home to Hershey's Chocolate World.

Chocolate Business was started by Mr. Milton S. Hershey in


1876

The Hershey Company was established in 1894

Hershey's products are sold in about sixty countries


worldwide.

Hershey's sales are roughly 80% chocolate and 20% nonchocolate.

Hersheys Competitors include Mars, Nestle, Russell Stover,


Palmer and Nabisco

ERP Implementation
To enhance companys competitiveness and Customer Service

During late1996, the management of Hershey gave its


approval to a project named Enterprise21

For this Hershey selected SAP's R/3 ERP software, Manugistics


SCM software and Seibel's CRM software and IBM Global
Service so as to manage integration among these three
systems.

Overall Project Cost was US $10 Million

The recommended implementation time for the project was 4


yrs. and Hershey demanded for 2.5 yrs.

Hershey decided to go with Big Bang Approach instead of


phased approach.

Impact of ERP Failure

Problems pertaining to order fulfillment, processing and


shipping started to arise; Hershey would not be able to meet
its committed date of delivery

Several of Hershey's distributors who had ordered the


products could not supply them to the retailers in time, and
hence lost their credibility in the market

Product inventory started to pile up and by the end of


September 2000; the inventories were 25% more than the
inventories during the previous year

After Hersheys announcement in the market about problems


due to malfunctioning of the newly installed computer
systems, Hershey's stock price plunged by 8% on a single day.

Hershey's failure to implement the ERP software on time cost


the company US $150 million in sales. Profits for the third
quarter 1999 dropped by19% and sales declined by l2%, in its
1999 annual report.

Reasons of Failure

Over-squeezing implementation schedules

Big Bang Approach instead of Phased Approach

Mistake of sacrificing systems testing for the sake of


expediency

Cutover Activities and Go-Live was scheduled in Hersheys


busiest business periods.
Learning from Failure

An ERP implementation project should not be forced into an


unreasonable timeline. Over-squeezing implementation
schedules is a sure-fire way to overlook critical issues.

Testing phases are safety nets that should never be


compromised.

Never schedule cutover during busy seasons. Even in a bestcase implementation scenario, companies should still expect
steep learning curves and operational performance dips. By
timing cutover during slow business periods, the company
gives itself more slack time to iron out systems kinks. It also
gives employees more time to learn the new business
processes and systems. In many cases, it is even advisable to
reduce orders in and around the cutover period. This tactic is
aimed at minimizing exposure to damages .

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