Hershey's ERP Implementation Failure | Supply Chain Issues | MBA Case study analysis with Solutions
While it is true that successful implementation of an enterprise resource planning (ERP) system is a task of herculean proportions, it is not impossible. If your organization is to reap the benefits of ERP, it must first develop a plan for success. But “prepare to see your organization reengineered, your staff disrupted, and your productivity drop before the payoff is realized.”
Implementing ERP must be viewed and undertaken as a new business endeavor and a team mission, not just a software installation. Companies must involve all employees and absolutely and completely sell them on the concept of ERP for it to be a success.
A successful implementation means involving, supervising, recognizing, and retaining those who have worked or will work closely with the system. Without a team attitude and total backing by everyone involved, an ERP implementation will end in less than an ideal situation.
Many times, when companies decide to transition from outdated legacy systems to a central ERP platform, the result is sweet success. Unfortunately, that wasn’t the case for Hershey.
Though it’s been more than 25 years since Hershey’s ERP failure, there are still many valuable lessons we can glean from it.
When the ERP platform was adopted poorly, Hershey's was unable to satisfy more than $100 million worth of orders for products they actually had in inventory. The price of Hershey's stock dipped, and according to CIO Magazine, analysts didn't trust the company to properly deliver on promises again for nearly nine months. While your enterprise might not operate on that scale, you can imagine a comparable scenario based on your operating model.
In 1996, Hershey decided it was time to replace its legacy IT systems with an integrated ERP environment.
As you might expect, this was a complex implementation from the very beginning. Though the recommended timeline was four years, Hershey decided to expedite the project. They wanted it done in just 30 months, so it could go live before the projected Y2K bug was speculated to take place.
The official cutover was scheduled for July 1999, which wasn’t an ideal time for the company to transition to a new software platform. Hershey receives the bulk of its holiday orders in late summer, and it’s one of the company’s busiest periods of the year.
Not only did executives vastly underestimate the work required to get all systems live by that time, but they also failed to consider how imperfect deliveries would affect their bottom line.
To juggle the scheduling demands, project leaders took shortcuts and cut corners where possible. This included shortening the testing phase.
Hershey's case provides valuable lessons for companies implementing or planning to implement ERP. There are two key lessons to learn: 1. test the business processes and systems using a methodology designed to simulate realistic operating scenarios; and 2. pay attention to the ERP schedule. These tips can help a company mitigate failure risks and succeed with ERP.
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