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A Bitter Sweet truth

A Bitter Sweet truth. Press Conference. The Hershey Company is the largest chocolate manufacturer in North America, with its headquarters in Pennsylvania .

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A Bitter Sweet truth

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  1. A Bitter Sweet truth Press Conference

  2. The Hershey Company is the largest chocolate manufacturer in North America, with its headquarters in Pennsylvania. •  It was founded by Milton S. Hershey in 1894 as the Hershey Chocolate Company and is one of the oldest chocolate companies in the United States. • The Hershey Pennsylvania plant is the largest chocolate factory in the world.

  3. Its revenue for the year 2011 was $6.1B. • It is an American icon for its chocolate bars and is also the maker of Twizzlers and Reese’s. • Hershey also acquired the rights to manufacture, distribute and market Kit Kat, Rolo and many Cadbury-branded products in the United States.

  4. Previous State The legacy systems Late 1996 the company started to update its hardware and software infrastructure Mainly because of Y2K problems Enterprise 21 was the new system implemented and according to management: “We redesigned the whole business process with the customers in mind.”

  5. Y2K Problem • Existed in old mainframe systems • Programs recognized dates till 1999 • Dates beyond that would be recognized as starting from 1900 again • Due to the way the programs were coded, many • would fail to function properly from the 2000’s • Creating a need for change

  6. Implementing ERP system Replace existing mainframe based legacy systems by SAP R3-Accenture. Approved in 1996 under project name “Enterprise 21”

  7. ImplementingERP system AIM Modernise hardware and software used by Hershey Upgrade and standardise the hardware Provide better customer service

  8. Implementing ERP system SAP AG's R/3 ERP completed with companion software from two vendors : Manugistics- Transport and logistics management Siebel- Customer relationship management Installation of bar-coding system in 6 U.S Plants to improve stock control system.

  9. Implementing ERP system • Overall cost estimation of new project US$ 110 million. • Estimated time completion Within 30months, by the end of April 1999. • Why APRIL? • However, 3 months lag in implementation. • Solution Adoption of Big Band approach

  10. Benefits of Enterprise 21 One of the reasons to implement ERP system was to overcome the expected Y2K problem in the existing system. The ERP system was supposed to allow Hershey to change and streamline its business processes. If implemented correctly, the ERP system would have helped eliminate redundancies and improve accuracy. Different employees can access data simultaneously in ERP systems.

  11. Benefits of Enterprise 21 (cont…) The execution of the ERP system was to improve the quality of the operation and also to reduce operation costs. ERP implementation would have enabled the organization to analyse the value chain as a system, from supplier to firm to customer. With the help of ERP, Hershey aimed at better coordinated deliveries of its products.

  12. How it went wrong Poor timing Unrealistic timelines Lack of IT understanding Glitches in existing system during implementation Inability to complete project on time (Spring 1999)

  13. How it went wrong Lack of co-ordination between operations & technical people ‘BIG BANG’ approach Lack of proper infrastructure to support upgrade Lack of integration between ERP developers No CIO in place prior to implementation problems

  14. How it went wrong Lack of experience in software implementation of this magnitude No adequate training No proper communication with top management

  15. Order fulfillment time doubled 15 days delay on orders Accumulating inventories (+25%) Effects of Hershey ERP failure

  16. -0.5% market share

  17. THE COMEBACK Hershey's efforts • Stabilized and updated to new SAP systems • Redesigned the entire process • Software updates timed accurately (during off peak periods) • Rigorous testing of software before implementation • Updates implemented in parts rather than Big Bang • Upgrading project completed earlier than projected and at 20% lower cost

  18. Getting it right Project tenure included time to identify and fix existing glitches Employees received thorough training before using using software New software/upgrades developed by consulting all the departments involved Appointed new CIO to overlook the entire operation

  19. Literature on Critical Success factors in Enterprise Systems Source: Hedman, 2010, pp. 7.

  20. Critical Success Factors* * As identified by Finney & Corbett (2007)

  21. Critical Success Factors

  22. Hershey’s Updated Status (Mar 2012) • As per Hershey’s Annual Report of last Quarter 2011 • Hershey’s share price and revenue have sweetened by nearly 20% and 7% respectively over the past year.

  23. The only kiss With no Strings Attached. Ok, Maybe one! Enjoy The Chocolaty Goodness!

  24. References • Finney, S. and Corbett, M. (2007), “ERP implementation: a compilation and analysis of critical success factors”, Business Process Management Journal, Vol. 13 No. 3, pp. 329-47 • Hedman, J (2010). “ERP Systems: Critical Factors in Theory and Practice.” Available from: http://www.cbs.dk/caict (Accessed 02 March 2012). • Hong, K. K. and Y. G. Kim (2002). "The Critical Success Factors for ERP Implementation: An Organisational Fit Perspective." Information and Management 40(1): 25-40. • Parr, A. and G. Shanks (2000). "A Model of ERP Project Implementation." Journal of • Information Technology 15(4): 289-303. • Skok, W. and M. Legge (2002). "Evaluating Enterprise Resource Planning (ERP) Systems using an Interpretive Approach." Knowledge and Process Management 9(2): 72-82. • Somers, T. and K. Nelson (2001). The Impact of Critical Success Factors across the Stages of Enterprise Resource Planning Implementations. Hawaii International Conference on Systems Sciences.

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