Hershey Foods Corporation:
Failure and Success with Information Technology
Point of View
Managerial Point of View
To examine the reasons behind the SAP AG’S R/3 ERP implementation failure at Hershey’s Food Corporation Problem
What could have done otherwise to avoid the SAP AG’S R/3 ERP implementation failure at Hershey’s Food Corporation? Areas of Consideration
In late 1996, Hershey Foods Corporation the leading manufacturer of chocolates, confectionaries and beverages in United States of America began modernizing hardware and software systems in the company. In an attempt to manage Y2K issues, it chose to replace those systems and shift to client/server environment, which suggest that the company had pressing needs which forced the implementation. It was to switch over to the new ERP system by April 1999 as per original plan. It chose three software vendors - SAP, Manugistics, and Siebel for implementing different software modules. The company spent $112 million and 30 months on their ERP project. The project was running as per schedule till January 1999, and when it came to the final phase of the implementation, the company faltered. Time pressed, they went live in July 1999 which led the company experienced several problems pushing orders through the system, resulting in shipping delays and deliveries of incomplete orders. The retailers who ordered for Hershey's products could not get them on time, even though the company had ample supplies stocked at its warehouses. However, it was too late for Hershey to respond to this problem. As a result, Hershey's revenues dropped. Many reasons have been cited for the Hershey ERP failure. One, the project was originally scheduled to take four years, but the company forced the implementation to go live in just 30 months. Two, the company simultaneously implemented a customer-relations package and a logistics package, largely increasing the overall complexity and employee learning curve. Three, the company went live at their busiest time of the year, just before Halloween, and the resulting delays caused profits to fall. Though SAP was blamed for Hershey's disaster, the company's management viewed it differently. Hence, the top management of the company as well as industry analysts began looking at other reasons for the problems at Hershey. Alternative Courses of Action
1. Before opting to deploy a new ERP system, try to consider upgrading your old version of system rather than instantly launching for a new one.
Before trying to replace those systems and shifting to new ones, try to know the factors affecting or contributing to success and failures that you might encounter along the implementation. Evaluate the needs first before making a decision. Also before opting to deploy a new system, try to stabilize first the phases of its implementation before going on live. Make sure that the old version of system is running standstill during the first phase of implementation of the new system. Lest the new system suddenly fall short, you still have the old version of system to back you up during mid-operations. 2. Never have multiple vendors within one project.
ERP systems must be installed in a more staged manner, especially when applications from multiple vendors are involved. Roll out the modules in stages and don’t attempt to implement other applications simultaneously.
3. Choose the right time for implementation.
Implementing it in a wrong time is a messed up. The company would have very well avoided this trouble if only they thought of going ahead with ERP during those occasions when the business process in the whole market experiences a slow movement. And never went to the extent of spending the whole time and efforts on implementing ERP. This will disrupt the normal functioning of the business and creates confusion in the company. Since attention was wholly diverted to ERP it was not possible to rectify the...