The Milk Chocolate
“Uh Oh”
Hershey Foods Corporation
ERP Implementation Failure
Bobby Robinette | Carlos Herrera| Hector Tapia | Steve Zeigler
Enterprise
21
The Team…
Bobby
“Jolly Rancher”
Robinette
Carlos
“Cookies ‘n’ Cream”
Herrera
The Team… continued
Hector
“Ice Breaker”
Tapia
Steve
“White Chocolate”
Zeigler
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Hershey Food Corporation
Hershey Food Corporation
Hershey Food Corporation
Hershey Food Corporation
Sales of $334M USD
Y2K
2012
Sales of $6.6B USD
ERP Implementation …
Hershey Food Corporation
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Enterprise Resource Planning (ERP)
• Suite of integrated applications
• Information readily available and easily visible
• Can help a business with:
– Material shortages, productivity enhancements, customer service, cash management, inventory problems, quality problems, prompt delivery, etc
ERP Visualized
Financial
Management
Customer
Relationship
Management
Human
Resource
Management
ERP
System
Supply Chain
Management
Manufacturing
Resource
Planning
Why ERP for Hershey?
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Legacy System
Shared data to customers
Need for improved supply chain system
Y2K Concerns
Hershey ERP Selection
• SAP AG’s R/3 Enterprise Resource Planning suite
– Finance, purchasing, materials management, warehousing order processing, and billing
• Manulogistics
• Software for transport management, production, forecasting and scheduling.
• Siebel
– Manage customer relations, track effectiveness of marketing. Hershey ERP Selection
• IBM Global Services
– Integration company
• $110M USD Estimate
• April 9th 1999 – Original project plan completion date • Project Name:
Enterprise
21
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
ERP Risk Management
• ERP projects affect the whole organization
– Large scale, complexity, impact, and cost
• Typically associated with changing business practices “We redesigned the whole business process with the customer in mind. We’re implementing this No. 1 to enhance our competitiveness, and No. 2 to enhance our customer service.”
– Kevin Costello , Enterprise 21
Project Team Member (Hershey)
Enterprise
21
Risk Management – Known Risks
• Information Systems Known failures
Key Risks in ERP Implementation, Eugene A. Khvalev (2011)
Probability and Impact
• Risk = P + (2 * I)
• Risk and Probability are a number 1-5
Risk Management
“Project cost and time overruns can occur because of lack of a measurement system for assessing and controlling project risk” (Ewusi-Mensah, 1997).
• Risk Management can help prevent a big mess
• Hershey did not do a good job of Risk management Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Agenda
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Hershey Food Corporation
What the “ERP”?
Risk
Schedule
Cost
Integration
Conclusion
Schedule Plan
Jan. 1996:
Roll out of the plan
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Modernize hardware and software Replace legacy system with SAP R3
Jan. 1997
Implementation start
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Replace 5000 desktop computers New TCP/IP network
Switch to Client/Server applications April 1999
Enterprise 21 live
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Enhance Competitiveness
Enhance customer service Network Planning Model (CPM)
Network Planning Model (CPM)
Network Planning Model (CPM)
25
2
5
Total time:
48 Month
3
3
What went wrong
1. Squeezed Deadline
• Project originally schedule to last 48 month
• Company management forced the implementation to
30 month.
• Project become three
