ERP Implementation Failure at Hershey Foods Corporation

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Case Details:

Case Code : ITSY059
Case Length : 14 Pages
Period : 1997-2002
Pub Date : 2008
Teaching Note :Not Available
Organization : Hershey Foods Corporation
Industry : Confectionary
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The Hershey debacle is not an indictment of ERPs per se, but it should caution any company that chooses to implement such a broad suite to make sure that system will function smoothly before entering a peak sales period."¹

- Chain Store Age, in 1999.

"There is no doubt that 1999 was a most difficult and disappointing year for Hershey Foods Corporation. While the year got off to a slow start due to excessive retail inventories, we fully expected a strong finish in the second half of the year. Instead, the implementation of the final phase of the Corporation's enterprise-wide information system created problems in the areas of customer service, warehousing and order fulfillment. These difficulties were exacerbated by our growth in recent years which had resulted in shipping capacity constraints. As a result, Hershey's sales and earnings fell well short of expectations for the year."²

- Kenneth L Wolfe, Chairman & CEO, Hershey Foods Corporation, in 1999.

Introduction

In the third quarter of 2000, Hershey Foods Corporation³ (Hershey), the US based manufacturer of chocolates and sugar confectionary, announced that its revenues increased to US$ 1.197 billion as compared to US$ 1.097 billion in the third quarter of 1999 - an increase of 12%.

During the same period, profits increased by 23% from US$ 87.6 million to US$ 107.4 million.

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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 as a whole had been adversely affected due to problems related to ERP systems implementation in the company.

According to Kenneth L. Wolfe (Wolfe), 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 of high demand for our domestic confectionery business."⁴

ERP Implementation Failure at Hershey Foods Corporation - Next Page>>

1] Matt Nannery, "When the Candy Man Can't," Chain Store Age, December 1999.

2] Hershey Annual Report, 1999, (filed on March 13, 2000), www.sec-edgar-online.com.

3] In April 2005, Hershey Foods Corporation was renamed as The Hershey Company.

4] Marc L Songini, "Halloween Less Haunting for Hershey this Year," Computerworld, November 06, 2000.

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