ERP system: Case study Hershey Company

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  1. Explain how Hershey evaluated the risk of setting up an ERP System. (SWAT)

ANS: Hershey food is a huge network of food chain with more than 19 manufacturing plants and more than 20 co-packers and bundles of contractors. With this great range of chain it was very difficult to maintain its all information with the existing system which having Y2K problems in it. To control the risk of losing its customers and internal threats related to the finance of the company, Hershey Food wanted to establish its new ERP system to manage and centralize its chain of command and restrict the area of authority of its employees. Hershey Food had greater risk in the departments of MRP (Management Resource Planning) and FRM (Finance Resource Planning), to evaluate and monitor the effects of failure of these departments, company’s management should adopt the new and developed resource planning system.

  1. Discuss the process used by Hershey’s to implement an ERP System.?

ANS: Hershey wanted to develop a system which modernized company’s hardware and software. It took up three companies’ software to establish that system which carefully understands the troubles confronted by the company’s management. First company SAP ERP suite provides the following schedules related to the finance, raw materials, debtors, creditors, inventory storing, ordering and billing. The second company provided software related to Artificial Intelligence about production, transport and forecast management. Third company supported Hershey through its customer relation, economy trend and market demand analytical software. After that Hershey was introduced its products through bar coding process.

  1. What role did management play in the decisions made regarding the software vendor that would be utilized in the implementation of an ERP System?

ANS: Management’s main aim was to modernize its hardware and software system. ERP system converts the company’s mainframe based environment into the client, server and standardized hardware system. The main demand of its customers, retailers and suppliers was to provide all related information of its product should be available at their main server. It was the great challenge faced by the management. The next process was to make better coordination between demands and their deliveries on time, availability of the stocks if not then when it will be delivered all the data will be available at a single platform without any trouble to anyone. Ultimately management expected that such system will be able to centralize its all data and helps them to reduce the work force of management as well as it vendors, customers and other suppliers.

  1. What circumstances led to the failure of Hershey Food’s ERP implementation failure? Discuss in detail.

ANS: First and main reason of failure of ERP system in Hershey food was; the projected time to implement such system was 45 months period but the company’s management wanted to complete the whole project in 30 month, so the developers unintentionally ignored the hidden problems of that system and its application problem in the Hershey industry environment .

Second reason of failure is that there were no emergency plans available to cope up with the in short inventory level and no deadlines were given to the system for inventory turnover.

Third reason was that the test implementation of ERP was running in the peak season and there were no chances for the mistake because it was directly affect the company’s credibility. At that time, they have no much time to rectify their programmed, mistakes.

Fourth reason was that the company tested its components on sample basis which showed different results from the actual situation. They decided their decisions on the basis of sampling results.

Most valuable reason of failure was that the company did not have any proper infrastructure which would compatible with the ERP system arrangements.

Complexity of ERP system was also a main issue which leads the company to the failure of its system. Because it has many number of interfaces and hundreds of small software packages.

There was compatible and capable IT department heads at that time when the ERP was implemented and operated.

Another reason was inexperienced top management which had no proper homework about the ERP system before its implementation.

When the demand was at its top and the over load was more than the normal routine, all the employees needed a training about how to use an ERP system and how it does work in their working environment.

There was Lack of Technological competence and the seniors were failed to understand about the project and its scope.

  1. Discuss the problems encountered with fulfilling orders (processing and shipping) after the ERP system was implemented.

ANS: After the implementation of ERP system, it was working at its efficient way, but after sometime, many problems were detected and arise related to the order demand, processing and shipping. Most of the consignment were not in arrangement with its schedule even some of them were incomplete. Sometime it required calling up customers and suppliers about the details of their orders and quantity specifications but it was all in vain. After some new implementation in the system company’s management discovered that it was not be able to meet the requirements and need of its customers and its deadlines. After a month later the company was lose its credibility among its customers, vendors and suppliers.

  1. How did Hershey’s resolve the problems with the ERP system?

ANS: Firstly, SAP R/3 software required to identify the inventory at its programmed locations and mentioned it to the main office. The data base was required to fully up dated to the day end and all previous days data were also required to update. After that the company appointed a CIO and the new SAP system was carefully tested and implemented under the supervision of such CIO, named by George David. After covering up its previous position in the year of 2000 Hershey was back on the track.

  1. What steps do you feel Hershey Company should have taken to prevent the problems?

ANS: According to my opinion, Hershey adopted an unwise way to implement that system. It must establish a department for research the ERP system and its working environment and make up the better resemblance between them. It must hire highly experienced personnel for such purpose. After meeting the feasibility criteria, it must consider and solve those factors which are against the adoption of ERP system. Then the 2nd phase will be started that is development phase. The CIO should be appointed at the start of the project and whole the project must be operated under the supervision of that person.

  1. Relate Hershey’s problems in implementing an ERP system to what you have learned about AIS systems in this class.

ANS: The AIS system is used to identify the required data in ERP system. If the data is not properly updated then AIS will not be able to identify the correct data at the correct location. If data is properly updated in sequence the AIS will easily be able to understand and identify its location. Under the Hershey Foods, the main problem was the communication gap between technical and IT department which ultimately led to the failure of ERP system. If the data was timely updated in the main server it would be cope up within due time but the AIS system could not detect that problem because of data was not properly updated.

  1. If you had been hired to help implement the system, what recommendations would you have made to Hershey Food’s to make sure the distribution of the Halloween candy would be timely?

ANS: The main thing in every project, which is the root cause of its failure or success, is the deadlines of the project. I would recommend the following things to complete the task at time.

  • The time duration, available to complete the task.
  • The areas in which Halloween candy will be supplied.
  • The deadline of each of the presented and future orders.
  • Processing related to the each of the orders supplied.
  • Inventory level available in the stocks to meet the task requirements on time.
  • Using the MBO techniques to ensure each employee to do their work on time with the available resources.
  1. Should Hershey Company have blamed lost earnings on the failure of the new ERP system?

ANS: Because of wrong planning and earlier implementation of the ERP system, yes up to the certain extent company’ top management could have been blamed about the loss in the shape of reduction in sales and time US$ 150 million. They wanted to meet the Christmas and New Year Eve demands on time through the ERP system; therefore they didn’t apply the correct way for implementation. Due to the strong competitors company loss its valuable customers in earlier stage and after that the company’s stock market badly affected by such wrong application of ERP system.