Hershey Food Corporation

Introduction

Hershey Food Corporation, the biggest manufacturer of candy products in the United States, decided to implement a new Enterprise Resource Planning system titled Enterprise 21 starting in 1996. The ERP system consisted of many different software systems. These systems included SAP AG, Manugistics, and Siebel systems. With the implementation of these software systems, Hershey believed its mass market candy business strategy would be emphasized.

Hershey's Expected Benefits of Enterprise 21

Hershey had many goals for Enterprise 21. In general, Hershey had a goal of upgrading and standardizing the hardware and software systems. In attempt to upgrade the hardware, Hershey moved from a mainframe-based network to a client-server network. This upgrade would allow for Hershey to use and share its information with people inside the company as well as distributors outside the company, a critical aspect of establishing good customer relationships.

The upgrade and standardization of the software system was a much larger goal. The SAP system, which allows for communication within company functions, was to be installed with other software systems. Manugistics software system would be used to forecast production and scheduling. Manugistics would also be useful as a transportation management system. The benefit of this system would greatly lower inventory holding costs and transportation costs, the two largest expenses in logistics management. Hershey also decided to implement Siebel systems, which is designed to aid in establishing and maintaining customer relationships, as well as a measuring device of the effectiveness of marketing strategies.

Hershey's Implementation Approach

The first part of Hershey's implementation process started with the installation of a bar-coding system. A bar-coding system is necessary to improve logistic management by tracking inbound and outbound materials and products. Due to a modification of the SAP system, Hershey decided to move the target date of the installation of the system to April of 1999. This new date meant the company had only thirty nine months to complete the implementation instead of the forty eight months originally forecasted. Due to the delay of the implementation of the full SAP system, the Siebel and Manugistics systems were also delayed. Because of the delays, the implementation of the new ERP system immediately caused problems because by mid July, when Halloween orders were arriving, the system had just been installed.

Due to Halloween orders already arriving, Hershey's information technology personnel decided to implement the ERP system using the cutover strategy, a very risky approach where all systems go into affect all at once. This approach failed, causing shortages with distributors of Hershey products. These shortages lead to bad customer relationships with distributors which further lead to bad relationships with their customers. Hershey could have used a much better implementation approach by slowly implementing their new system. The cutover