ERP Implementation Failure In Hershey’s Presentation By

ERP System

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

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.

It requires changing the way you do business.” “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

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.

Failed Strategic Decisions Unrealistic Expectations The Big Band Implementation Implementation of Systems from 3 different Companies No CIO to look after IT before implementation

Learnings Successful ERP The evolutionary way Test each module before release Go Slow Data migration is important. Discipline in inventory. Data is King Management should keep a close watch. Work for a common goal. Oversight Matters Successful ERP -> 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."

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

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. -> 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.

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. 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. WMS cross-train the workers so that they can all co-pack and work in the warehouse.

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.