Question

Prepare a list of the key benefits and drawbacks of a company of your choice that implemented web-enabled ERP systems.

Answer 1

ERP: Enterprise Resource Planning is a business process management software used by companies to integrate and manage the important parts of the business and automate many back office works or functions related to to technology, services and human resources.

ERP helps to manage integrat planning, purchasing inventory, sales, marketing, finance, and human resource etc.

For ERP implementation we will consider HERSHEY company:

Overview of Hershey

• Hershey is an American multinational company and one of the leading chocolate manufacturer across world.Its a major supllier of halloween and christmas chocolates. It even makes chcolate syrup, cookies, cakes, milk shakes, drinks and many more.

ERP Implemetation in 1999

Existing System

• Hershey has 90 manufacturing plants, 8 contract manufacturers and more than 20 co packers
• During existing system the company was running on legacy systems, and with the impending Y2K problems, it wanted to shift this sytem to client/server based environmnet.
• To tackle Y2K sproblem Hershey wanted to implement ERP to remove this existing legacy system .

IT partners

Hershey invested $110 million worth money to the project which included combination of CRM, ERP and forecasting. It aslo wanted to replace existing mainframe based legacy systems by SAP R3 Accenture.

Hershey made deal with two companies

1. The first one was with Manguistics Group Inc. for production forecasting, scheduling, warehousing and transportation management
2. The other one was Siebel CRM for managing customer relations, managine customer orders and tracking effectiveness of marketing activities

Expected benefits from this project

• This project implementation would help hershey to reduce inventory costs.
• Ease and fine tune deliveries to suppliers
• Standardized and upgraded companies business process which would help to manage the business activities.
• Enabling CRM activity would help in efficient customer driven processes capable of managing changing customer needs.
• This will reduce order cycle time and boost inventory accuracy
• Better execution of business strategy of emphasizing core mass market candy business.

Actual Scenario created

• Sales dropped by 12% due to lack of fullfillment of demand of the customers
• Downfall in the stock price by 35%
• Earnings dropped by 18%
• The Company was unable to deliver $100 million worth of Kisses and Jolly Ranchers for Halloween in 1999
• Order fullfillment time dobled to 12 days
• It lost the main festival sale of christmas and Halloween
• Lost its prominent space shelf for the season due to lack of supply of products.
• Customers preferred other brands like nestle as the products were not available in the market
• Several consignments were delivered behind the scheduled due dates and many orders were left incomplete
• The products were manufactured and were kept in stock due to lack of communication or we can say lack of managing skills they were not delivered.

What went wrong with this implemetation?

1. Squeezed dealines: The project was actually scheduled for 4 years but company forced the implementation to 30 months. Even after implementation the managers lacked the skill to utilize these implementation and it failed badly.
2. Wrong timing: The company could have waited for some time and implemented the ERP during off season. The comapny went live during the busiest season and released the solution just before Halloween.
3. Big Bang Approach: Hershey opted for big bang implementation to quicken the implementation process. The company simultaneously implemented a customer relation package and a logistics package without testing some modules. It was all of a sudden which led to the overall complexity and employee learning curve.
4. Un entered data: Surge storage capacity not recorded as storage points in the ERP . The order from many retailors and super markets remain unfullfilled even when the Hershsy had full stock in the warehouse.

What can be learned from this failure?

1. Go slow: Test all the modules before implementing it to check the efficiency of the module.
2. Data : Data is always a king so data migration is important and discilpine in inventory is important.
3. Oversight matters: Management should keep a close watch and train the employee towards new system.