ERP IMPLEMENTATION FAILURE IN HERSHEY’S

Introduction

Existing IT infra

The Plan

Actual Outcome

What went wrong?

Learning(what could have done)

Hershey today – The turnaround

Presentation Agenda

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

Brief Overview – Hershey’s

Reliable product availability is critical

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2

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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

A network of 19 manufacturing plants, eight contract manufacturers and more than 20 co-packers

To tackle Y2K problem Hershey decided to replace existing legacy systems

EXISTING SYSTEM

Production forecasting,

Scheduling and TM:

Manugistics Group Inc.

Managing CRM and

tracking effectiveness of

marketing activities:

Siebel CRM

A $112 million worth of combination of S/W for

CRM, ERP & Forecasting

Tasks

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Replace existing mainframe based legacy systems by

SAP R3 – Accenture

IT PARTENERS

April 1999

Enterprise 21 went live

Jan 1997

Replaced 5000 desktop computers Installed new TCP/IP network hardware

Jan 1996-Roll out of the plan

Tackle Y2K issue byJan 2000

Replace Mainframe with SAP R/3

Advanced final date to April 1999

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

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

Squeezed Deadlines

Wrong Timing

Big-Bang Approach

Un-entered

Data

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

Hershey now has an inventory location accuracy of 99.96 % and can turn orders within 24 to 48 hours of receiving an order

Hershey built a 1.2 million sq. ft. distribution center, to align its distribution function with the new ERP system

Began work on the upgrade to mySAP in July 2001, and check all the system after installing it..successful !

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

Again Hershey's, Reese's, Hershey's Kisses, Kit Kat, Twizzlers, and Ice Breakers are ruling the Market!!!

Prepared By:

Yuvraj Zala