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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Introduction Contd...

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 AG⁵ (SAP), Siebel Systems⁶ (Siebel) and Manugistics⁷ for the project, and some of the modules were implemented as per the schedule by the company in January 1999.

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However, the remaining modules which were to be implemented by April 1999 were delayed and were implemented only in July 1999. This overlapped with the time when the company usually started receiving huge orders for the impending Halloween and Christmas seasons.

In order to quicken the implementation process, Hershey opted for Big Bang implementation, where several modules were implemented simultaneously. Some of them could not be tested properly due to lack of time.

This led to several problems related to order management and fulfillment, and orders from many retailers and distributors could not be fulfilled, even though Hershey had the finished product stocked in its warehouses. The adverse affects of failed ERP implementation were immediate, with a significant drop in the revenues for third quarter of 1999.

Annual revenues for 1999 were US$ 150 million less compared to those in 1998, a drop of 12% (Refer Table I for the details of Hershey's financials during the third quarter of 1998, 1999 and 2000)...

Excerpts >>

5] Walldorf, Germany-based SAP AG is the largest business software enterprise in Europe. SAP is the pioneer of enterprise resource planning with its main product SAP ERP. In 2006, the company's revenues were at € 9.327 billion and net income was at € 1.871 billion.

6] Siebel Systems Inc. was founded by Thomas Siebel in 1993, and was involved in designing, developing, and marketing of CRM applications. In September 2005, Oracle Corporation acquired Siebel for US$ 5.8 billion.

7] Manugistics is a software application company founded in 1969 as Scientific Time Sharing Corporation. The name was changed to Manugistics in 1992. The company was a pioneer in supply chain software but its fortunes were adversely affected by cut-throat competition and the dotcom crash in March 2000. In 2006, it was sold to JDA Software.

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