Joy Deep Tiwary 155 PG Finance

CASE STUDY ERP IMPLEMENTATION FAILURE AT HERSHEY FOODS CORPORATION

Hersheys is a very old company in terms of existence and quiet big in terms of operations. Their products are sold in more than 90 countries around the world. To bring this huge operation on a single platform it was decided in 1997 that Hersheys would be revamping their software/hardware. They wanted to implement a organization wide ERP system. They had selected three vendors for ERP implementation SAP AS, Siebel Systems and Manugistics. Y2K was another reason why they were going in for a major overhaul. The implementation could only be done in the off peak season to avoid any major issues. Now the timelines given to the vendors were April 1999 but they didnt roll out till July. This had a cascading effect on the system and the implementation failed. Following are some of the reasons why the ERP implementation failed: 1. No clarity in the top management about the goals of the new system. Hardly any experience of any major IT implementation project. No post of CIO. 2. No training given to the employees about the new system. They hardly have time during the peak season and expecting them to take to the new system would be impossible. 3. No time for overall testing and integration testing. 4. Customization was not proper. 5. The implementer and the designer are different so they are usually not on the same page as far as the business functions and requirements are concerned. 6. Taking the big bang approach for implementation without proper planning or testing was a major reason for failure. 7. The initial deadlines were unrealistic. This might have been due to the inexperience of handling such large scale projects. 8. The existing information system in the company was not very good. It took a lot of time and effort to get information to the top brass. Once the failure was widely reported and the stock price took a hit the management and employees got together to quickly put an end to the problem. This was seen in September-October 2000 when most of the initial problems with the ERP system were fixed and in July 2001, Hershey redesigned the process and started working with SAP R/3 4.6. Within 11 months, the system was implemented successfully. It was done ahead of the schedule with 20% less costs. This helped Hersheys to get high level of performance from the employees and higher growth with lower cost.