Abstract The case examines in detail the reasons behind the failure ERP implemen
ID: 3787889 • Letter: A
Question
Abstract The case examines in detail the reasons behind the failure ERP implementation at the US based Hershey Foods Corporation. In late 1996, Hershey began modernizing 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 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 as per schedule till January 1999, and when it came t the last leg of implementation, the company faltered and could switch over to the new system only in July 1999 Hard pressed for time, Hershey went in for Big Bang ERP implementation which led to several problems pertaining t order fulfillment, processing and shipping. The retailers who ordered for Hershey's products could not get them on time, even though the company had ample supplies stocked at warehouses. Hershey's revenues dropped by 12% during the third quarter of 1999 compared to the third quarter of 1998. The case explains in detail, the events leading to the failure of ERP implementation and examines the reasons behind i Introduction In the third quarter of 2000, Hershey Foods Corporatio (Hershey), the US based manufacturer of chocolates and sugar confectionary, announced that its revenues increased to USS 1.197 billion as compared to USS 1.097 billion in the third quarter of 1999 an increase of 12% During the same period, profits increased by 23% from USS 87.6 million to US$ 107.4 million. The company's management and shareholders were pleased at this announcement, as Hershey's revenues and profits for the third quarter of 1999 as well as for the year 1999 a a whole had been adversely affected due to problems related to ERP systems implementation in the company. According to Kenneth L. Wolfe wwolfe), CEO and Chairman, Hershey, "Admittedly, we were in the depths of our shipping difficulties during last year's third quarter. ERP system, as well as a revamped distribution facility in the Eastern US, were both much improved during this period o high demand for our domestic confectionery business. Hershey had started revamping its hardware and software infrastructure in 1997. In 1999, Hershey faltered during the final leg of the ERP implementation. Hershey had selected the services of three vendors SAP AG (SAP), Siebel Systems (Siebel) and Manugistics for the project, and some of the modules were implemented as per the schedule by the company in January 199Explanation / Answer
Critically discuss the process of ERP implementation in a larger organization:
Let us go through each step of ERP implementation for a larger organization
USER Requirements
All the business units of larger organizations must be involved in requirements gatheirng.
Poer users must be identified from each unit and they play a key role in the each step ahead.
Formats for input forms and output reports need to be collected from each business unit.
An acceptable solution must be prepared in a user requirement document form which is acceptable to all the business units and the top management.
The domain knowledge of how the organization works is with the power users. The implementation team must work closely and observe the process in detail by job shadowing, interviews, going through the current manual process or application.
Analysis
Implementation team plays an important role here and when their are multiple vendors involved, the interfaces and connectivity between the multiple applications must be studied in detail. The roles and responsibilities of management team, project management team, each vendor, power users should be defined in detail.
Project Execution
The project timeline should be prepared in detail, considering various bottlenecks. The hardware/ Software / resources needed during each step and their availability should be checked in detail.
The availability of power users considering the predicted peak order/manufacturing schedule and the holiday season must be planned.
The unit testing/ integrated testing by various business units must be done thoroughly.
After the corrections are done, the testing needs to be repeated.
Testing must be done by IT people as well as the actual users of the system.
Change Management
Anything that is different than initial project should not be mixed up with the current project and should be taken as a change management.
User Training
On a mock system the complete traning must be given including weekly/monthly/annual tasks.
Feedback from users during the training must be discussed with the management as it can save lot of time if the problems are detected after the system goes live.
Go-Live
Parallel run should be planned for a few weeks. Additional manpower should be planned during this timeframe. Users, Vendors and Customers should be informed about the new implementation periodically.
Customers should be encouraged to complete some orders before the GO-Live by giving some discounts approved by the management.
Contingency Planning
The transition plan B should be in place to use some spreadsheet tracking sheets in case the system is not availbale for some entries during migration.
Critically discuss the circumstances that led to ERP implementation failure at Hershey
1. User Training
2. Parallel run
3. Additional manpower during the implementation
4. Domain knowledge of Industry Vs IT Project implementation knowledge
5. Risk management/ Contingency planning
6. Letters to be sent to vendors and customers in addition to the internal communication
7. Internal staff to be informed about the change
8. Plan to deliver some orders before time and plan B for the orders in progress
e.g. Tracking sheets
9 Data entry from tracking sheet after going live
10. Migration and data validation (Additional staff)
11. Combining Y2K and implementations
Above points can be discussed in detail for rest of the quesitons as well. The timeframe to understand the question for reference is as below:
107.4 M Profits
Quarter Observations Background 4 years apprenticeship with a candy maker Candy Store Candy store closed Making caramel using fresh milk 1894 Hershey was founded 1990 Target Sale US$ 5 Billion 1996 1997 Revamp of H/w S/w 3rd Quarter of 1998 Jan 1999 Some modules were implemented 01/04/99 Module to be implemented got delayed July 1999 Delayed implementation overlapped with peak order timeframe 3rd Quarter of 1999 Testing could not be done propoerly; faltered during the final leg of the ERP implementation. Shipping difficulties; Problems in order management and fulfilment; orders from many retailers and distributors could not be taken. Ware house had huge stocks. Revenues dropped by 12% 87.6 M Profits 1999 Revenues less by 150 million 3rd Quarter of 2000 Profits increased by 23% Revenues 1.197 Billion Revenues increased by 12%107.4 M Profits