Enterprise source of information planning (ERP) includes virtually every facet of information technology (IT); therefore, its implementation is vital to the entire effectiveness of organization's IT functions. In 2008, the Hershey Foods Firm was the target of a study conducted from 1997-2002 during which time Hershey's try to implement ERP was failing. In 1996, Hershey's changed to modernize its hardware and software from legacy systems to a consumer/server environment by April 1999. The software module execution was to be outsourced to three software vendors (SAP, Manugistics, and Siebel); however difficulties delayed the projected turn to July 1999. To bypass the issues, Hershey chose Big Bang ERP execution but that choice proven fruitless as retailers experienced issues with order fulfillment, control and shipping. Hershey's warehouse covered sufficient inventory but suppliers still received shipments late. Through the third quarter of 1999, Hershey's revenues fell by 12%. The purpose of this review is to examine the past failing of Hershey's ERP execution, while reviewing current information and data to determine the efficiency of Hershey's work since 2002. Studying the circumstances that resulted in Hershey's ERP implementation failure will aid in illustrating the process of ERP execution in large organizations with give attention to the role management has in ERP success or inability and exactly how these factors can be avoided in the foreseeable future.
Contents
Executive Summary 2
Contents 3
Terms of Guide 4
Literature Review 6
Evaluation of Alternatives 10
Recommendations 13
References 15
Terms of Reference
Background
In 1894, the Hershey Foods Organization (Hershey) was founded by Milton Hershey as the Hershey Chocolate Company. Hershey's corporate headquarters is found in Hershey, Pennsylvania. Since its founding, Hershey has grown from a one-product company to a multi-billion dollar firm with sales exceeding $1. 41 billion through the first quarter of 2010 (Wahba 2010). After having a tumultuous entry in to the twenty-first century, Hershey is finally overcoming some of the obstructions that led to a significant decrease in sales. Advertising spending was raised significantly through the first quarter of 2010 with programs to increase advertising spending up to 40% over summer and winter. The business was one of many that experienced a drop through the global economic crisis but Hershey's strong leadership and conscious attempts to revamp its image has proven effective in enhancing sales. Primary target during 2010 has been on increasing sales for Hershey's Kisses, System at, and Twizzlers brands. Increased advertising is expected to put these products well above the "25-30% range recently forecast" (Wahba 2010). Currently, about 85% of Hershey's sales are made in the U. S. , but it offers failed to meet up with the desired results in international marketplaces, placing Hershey behind its major competitor, Nestle. When Nestle began sales in appearing market segments its sales rose by more than 10% (Wahba 2010).
Problem
Hershey has a long history of success and failure, mixed with both effective and poor leadership at the very top management level. However, one of the business's most remarkable failures is its original attempt to use ERP. At the moment, sales are rising amid a rocky economy but Hershey is still rebounding from the stigma of the failed ERP implementation. Reported sales are most affordable among its opponents, indicating Hershey's dependence on improving its creation strategies is of the most importance. Effective ERP execution coupled with a strong top management team is one method of improving productivity and increasing sales -both local and in foreign countries.
Scope of Study
By analyzing the past ERP implementation efforts, this research will demonstrate how Hershey's production will benefit from a highly effective ERP solution. Information reviewed during this analysis includes, but is not limited to, academic journals, corporate and business reports, past circumstance studies pertaining to the Hershey Company, administration resources, and print out and online library sources. The information obtained during the course of this study assist in fostering a knowledge of the relationship between your information system and the external environment, strategy, business procedures, composition and culture, and information technology infrastructure of an organization. The outcome of the personal references reviewed will provide sufficient data to conduct an evaluation of the potential impact putting into action ERP has on Hershey. Following the submission of the record, the reader will understand the value of employing ERP as a essential component of an organization's IT system, specifically for Hershey and its growing needs amid the global current market.
Literature Review
When Hershey began planning to apply an enterprise resource planning (ERP) system, the company's top management was unaware of the pitfalls it would encounter.
ERP systems are management information systems that combine and automate lots of the practices linked to general procedures and production of a company, including developing, logistics, syndication, inventory, delivery, invoicing and accounting. An ERP system is integrated with a relational database system that, when implemented effectively, can increase the efficiency of the organization's business procedures. However, the procedure involves extensive worker training and retraining and the development of revised or new work procedures. Due to the cross-functional and extensive character of the ERP system, all useful departments must be involved in functions and productions. The advantage of an ERP system for Hershey is the systems efficiency in bettering and automating a lot of the processes linked to the supply string while increasing timelines for shipments. Hershey opted to put into practice SAP because of its reputation as a head among IT solutions in the early 1990s.
Hershey's initial attempt to put into action SAP spanned over 3 years and was conducted during the company's peak periods. The execution process was to be completed more than a period of time to allow the business to continue development and sales; however, the problems that Hershey experienced hindered its production and sales. The impact of such a drastic change through the optimum sales period created a significant setback producing a significant reduction in gains and sales ("Analyzing" n. d. ). The business retained full compliance with the vendor during the execution process. However, the condition stemmed from timing issues. Hershey's choice to use the change during its peak period provided detrimental to production and sales and put the entire organization vulnerable. In retrospect, the business's most important errors were related to the timing of the designed implementation and the implications regarding workloads.
Based on the business's sales history, Hershey's top management must have been aware of the risks putting into action a major solution would have on the organization's techniques. The impact was experienced whatsoever levels, particular during times when confectionary products are in highest demand. The company's order control systems were impacted the most. Retailers complained that requests weren't received, were delayed or that the incorrect products were received (Stedman 1999). The partnership between Hershey and its customers were bruised and trust was dwindling. The fiasco opened up the entranceway for competitors to part of and take the slack Hershey remaining in the marketplace. Because of this, Hershey's gross annual sales plummeted and the competitor's twelve-monthly sales soared.
When putting into action an ERP solution, the initial planning process is most important. Hershey's top management was alert to peak sales cycles; therefore, the authorization to continue with a drastic organization-wide change was the first error. The initial proposal for execution should have raised red flags among the company's executives, however the plans moved onward and the effect was devastating for the company, its customers and employees.
The use of It will deliver results opposite of that which was achieved at Hershey's. IT, particularly ERP systems, are made to create barriers to competition, lower the costs of market access, shorten timelines, swiftness cash flow, lower out intermediaries, build bridges, and keep carefully the organization better informed than its competitors (Benson and Standing 2002). Technology, in the framework of organizations a lot like Hershey, can transform production, business functions and organizations, like the potential to improve and maximize the probable of social structures and relationships (Benson and Standing up 2002).
When contemplating IT changes the organization's management must absorb the regions of the business which may be influenced by the change. Regardless of the belief that success in one portion of business usually comes at the price of another, this does not have to be true (Benson and Standing up 2002). Understanding the organization's strengths and weaknesses aids in the look process. Management will have the ability to plan for potential road blocks and implement an alternative solution before complications put the business at risk. Beneath the same premise, Hershey's decision to apply SAP was not the issue, poor management and ineffective planning was the company's significant problem. Hershey's error was associated with ineffective restructuring of its business operations and the amendments had a need to accommodate the business's production through the ERP implementation period. Furthermore, the company pushed to put into action a process in 30 a few months when the normal implementation process averages about four years. The rapid implementation attempt disrupted the business's normal working and created mass confusion and issue at both an interior and external level. "Since [Hershey's] attention was wholly diverted to ERP, it had not been possible to rectify the uncertainties that emerged in the business as a result of ERP" ("Analyzing" n. d. ). The business's work, although limited, were unbalanced. Hershey found it difficult to concentrate on both the regular techniques of executing business and the ERP execution. The result was a reduction in sales, irate customers, turmoil among employees, and an evergrowing reputation as a seller that cannot be trusted. The problem was worsened at the end of the 30 month period when Hershey recognized the implementation had not been effective "because the ERP systems were not working in full capacity" scheduled to "some final touches which were not done" ("Analyzing" n. d. ).
The maximum solution for ERP implementation is to plan the process around an organization's maximum periods. If Hershey got started the implementation process during sluggish periods, the outcome could have been different. However, the impact of absent "final touches" would be a concern. Again, the mistake falls to the business's management team, who's ultimately responsible for ensuring that such major changes start only when the business is least susceptible. Implementing during gradual market periods gives the company the time needed to make the change, to get ready its departments and individual employees for the change, and emerge more robust than prior to the change was made.
Evaluation of Alternatives
ERP is a intricate process that will require stringent maneuvering and processing within the business. Prior to start the ERP implementation, Hershey must have put more effort into ensuring the success of the process. Hershey should continue with the process only after researching and likely to ensure that enough time and efforts had a need to achieve successful change was possible. Instead, Hershey chose to proceed throughout a time when its sales were highest and risks were compounded. Most disturbing is the fact the business was no stranger to utilizing IT processes. Before, Hershey had implemented a CRM solution, so it should have recognized the difficulties that can happen. The company simply find the wrong time for you to use the ERP solution, and timing is everything.
In the modern day business world, particular amid a period of quickly advancing technology, Hershey's main target should be on preserving productivity. However, the utilization of ERP alternatives is crucial to meet up with the growing requirements of the consumer. Customers want easy ordering options, fast order handling, and fast order receipt. The ERP system is designed to improve these functions in businesses but also for an effective implementation process that will deliver the desired results, the company must carefully choose the time for the execution process -even if which means dividing the process into stages. By segmenting the execution process, Hershey would meet its aims of your streamlined IT process while preserving productive businesses and maintain satisfied customers.
An ERP system can help increase a businesses' efficiency, which boosts customer satisfaction. Instead of focusing on unbiased departments for handling and meeting objectives, the ERP system streamlines the procedure from creation to shipment and beyond. Prior to beginning the ERP execution Hershey must have met with division heads who, subsequently, would describe the upcoming procedures including the way the execution process would impact creation within the business. From there the employees would be competent in how to handle conditions that could occur (e. g. order fulfillment issues, transport, et al). Overall, the end result is to plan accordingly so the ERP implementation process can be effectively achieved while the organization's regular techniques aren't negatively influenced.
Inadequate training is a common element in ERP implementation failing. Hershey failed to educate its employees about how to handle potential changes that could occur during the execution process, while also finding your way through training for the new system. All the way around, management failed. While pre-implementation research and planning is one option to effective implementation, the business's management team should have been more diligent in controlling its responsibilities for the business. Therefore, the business should have considered a closer look at its management team to find out where the mistake originated. The issues originated at the management level developing a domino effect where in fact the company's specific departments were impacted and the customer was left in the freezing.
In a customer-driven market it isn't the merchandise or service that matters most; instead the best value rests in how the customer perceives their overall marriage with the business. It's the value factor. The management team should have been aware of the customer's view; then it will have approached the execution process accordingly to guarantee the customer's needs weren't ignored. In retrospective, Hershey's management team must have known, prior to the ERP implementation, the way the company would maintain client satisfaction during the process. Both inside and external factors should have been better analyzed. Hershey failed to analyze the components that achieve client satisfaction. Management should have targeted its change in a manner that would not jeopardize its marriage with current customers, their use of the company's products, and their impression of Hershey's service. The info obtained during the pre-planning period is more important than the overall projected change since this information is a guiding point for successful ERP implementation.
Recommendations
When Hershey made a decision to implement an ERP system, it didn't analyze the business's background of peak sales durations and plan the implementation process round the most productive durations. Instead, the business began execution during its peak period which led to overload among its labor force nd issues within production and delivery that resulted in a significant lack of sales, a tarnished reputation, and a lack of trust among its customers. Your choice to implement an ERP system was a good idea however the timing was incorrect. Timing is everything, especially when the risks entail not only the business and its employees but retaining customers. Furthermore, Hershey's management team failed to consider its source chain management functions and the outcome was chaos within the internal and external functions associated with production, order fulfillment, and delivery. The onset of pre-planning begins with reviewing the business's current balance (Caruso 2007). When management has a view of what must be done to keep the organization productive, then your planning phase will start.
When appropriate planning is achieved the potential risks to the business are minimized. Studies disclose any particular one of the most common reasons the implementation of change leads to failure is linked to unplanned or under designed phases of execution. Planning is crucial for effective implementation of your ERP system. However, there is absolutely no universal sole point of inability associated with unsuccessful ERP implementations. In the case of Hershey, however, the complexities are directly associated with efforts that are often remedied: insufficient training, corporate and business culture, timeline overall flexibility, and unrealistic anticipations.
Hershey has since worked hard to guarantee the same mistakes are not repeated. Its current management team is more in melody to the needs of all the organization's stakeholders. Satisfactory training within Hershey is becoming paramount to all or any other functions. The business's management team realizes that insufficient training, especially at the management level, is a leading reason behind organizational failing. Now, the business focuses about how to conduct business differently, somewhat than training on new software applications. While training for the ERP system was a concentration, it was not the predominant concentration. Hershey learned the hard way that change needed to be made internally before an ERP solution could be effective in streamlining its inside and external processes. Many ERP assignments are bound to are unsuccessful because employees are not trained to take care of the factors that include change. Timeline versatility is vital to success, as well. In its following efforts to streamline operations, Hershey worked well to ensure that the machine was fully tested and ready for implementation to avoid negative effects much like those the business experienced in 2002.
