Erp Implementation In Hersheys Business Model Management Essay

Enterprise resource planning ( ERP ) about includes every facet of information engineering ( IT ) ; hence, its execution is of import to the overall effectivity of an administration ‘s IT processes. During 1997 – 2002, Hershey ‘s suffered a failure of ERP execution. In 1996, Hershey ‘s decided to overhaul its hardware and package from bequest systems to a client/server environment by April 1999. The package faculty execution was to be outsourced to three package sellers, which are SAP, Manugistics, and Siebel ( Gupta, V. , and Perepu, I. , 2008 ) . However complications delayed the undertaking switch to July 1999. To short-circuit the complications, Hershey chose to utilize ERP execution but that pick proved useless as retail merchants experienced jobs with order fulfillment, processing and transportation. Hershey ‘s warehouse contained sufficient stock list but retail merchants can non have cargos on clip. During the 3rd one-fourth of 1999, Hershey ‘s grosss dropped by 12 % ( Wahba, P. , 2010 ) .

Historically, Hershey frequently makes bad determinations, which have been often linked to its direction squad ( Stedman, C. , 1999 ) . As the information examined within this study reveals, the options available to Hershey ‘s are related more to the capablenesss and construction of its direction squad than to proficient issues that are frequently linked to ERP system execution. Pre-implementation research and rigorous planning can be recognized as options that help Hershey run a better ERP execution. Because good direction squads are required to manage pre-implementation research and stringent planning, the recommendation, hence, is to transport out intensive preparation of current and future staff at all degrees.

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Footings of Mention

Background

In 1894, the Hershey ‘s Foods Corporation ( Hershey ) was founded by Milton Hershey. Its corporate central office is located in Pennsylvania. Since its initiation, Hershey has grown from a one-product company to a multi-billion dollar corporation with gross revenues transcending $ 1.41 billion during the first one-fourth of 2010 ( Wahba, P. , 2010 ) . After a bad entry into the 21st century, Hershey eventually overcame some of the obstructions that led to a important diminution in gross revenues. Advertising disbursement was raised significantly during the first one-fourth of 2010 with programs to increase advertisement passing up to 40 % throughout the twelvemonth. The company was one of many which suffered gross revenues diminution during the planetary economic crisis but Hershey ‘s strong leading and witting aids revamp its image which has proven effectual in hiking gross revenues. Its primary focal point during 2010 is the gross revenues figures for Hershey ‘s Kisses, Kit at, and Twizzlers trade names. Increased advertisement is used to set these merchandises good above the “ 25-30 % scope antecedently forecast ” ( Wahba, P. , 2010 ) . Presently, approximately 85 % of Hershey ‘s gross is obtained in the U.S. , as it has failed to run into the coveted result in international markets, seting Hershey behind its major rival, Nestle. When Nestle began its gross revenues in emerging markets, it is rose by more than 10 % ( Wahba, P. , 2010 ) .

Aim

The intent of this survey is to analyze the past failure of Hershey ‘s ERP execution, and reexamine its current information and information to analyze the effectivity of Hershey ‘s attempts since 2002. To analyze the fortunes that led to Hershey ‘s ERP execution failure will assist exemplify the procedure of ERP execution in Hershey with focal point on the function which direction dramas in ERP success or failure and how to avoid failure in the hereafter.

Problem

Hershey has a long history of success and failure, assorted with both effectual and hapless leading at the top direction degree ( Gupta, V. , and Perepu, I. , 2008 ; Stedman, C. , 1999 ) . However, one of the company ‘s most memorable failures is its first effort to implement ERP. At present, Hershey ‘s gross revenues are lifting in a bouldery economic system but it is still bouncing from the stigma of the failed ERP execution ( Wahba, P. , 2010 ) . Due to the cross-functional and extended nature of the ERP system, all functional sections must be involved in operations and productions. Hershey ‘s functional sections include production, stock list, and transportation. Production depends on the reception of stuffs used in production in a timely mode ; otherwise, the productiveness of other sections is affected. Inventory and transportation besides play a major function in the ERP system, peculiarly from the point of view of the supply concatenation. ( Accounting Software Advisor, 2010 ; Simchi-Levi, D. , Kaminsky, P. and Simchi-Levi, E. , 2004 ; Wailgum, T. and Worthen, B. , 2008 ; Wisner, J. D. , Leong, G. K. , & A ; Tan, K. C. 2004 )

Methodology

By analyzing the past ERP execution attempts, this survey will exemplify how Hershey ‘s production will profit from an effectual ERP solution. Information reviewed for this survey includes, but is non limited to, books, academic diaries, and corporate studies, past instance surveies refering the Hershey Corporation, authorities resources, and print and on-line library beginnings. The information obtained for this survey helps understanding the relationship between the information system and the external environment, scheme, concern procedures, construction and civilization, and information engineering substructure of an administration. The result of the mentions reviewed will supply sufficient informations to carry on an rating of the possible impact implementing ERP has on Hershey. Following the entry of this study, the reader will understand the importance of implementing ERP as a critical constituent of an administration ‘s IT system, peculiarly for Hershey and its spread outing demands in the planetary market place.

Literature Review

ERP systems are direction information systems that incorporate and automate many of the patterns linked to general operations and production of a company, including fabrication, logistics, distribution, stock list, transportation, invoicing and accounting ( Gupta, V. , and Perepu, I. , 2008 ) . An ERP system is integrated with a relational database system that, when implemented efficaciously, can better the efficiency of the administration ‘s concern procedures. However, the procedure involves extended employee preparation and retraining and the development of modified or new work processs.

The benefit of an ERP system for Hershey is the systems ‘ effectivity in bettering and automatizing much of the procedures linked to the supply concatenation while bettering timelines for cargos. Hershey chose to implement SAP because of its repute as a leader among IT solutions in the early 1990s ( Gupta, V. , and Perepu, I. , 2008 ) . Hershey ‘s initial effort to implement SAP costs over three old ages and was conducted during the company ‘s extremum periods ( Gupta, V. , and Perepu, I. , 2008 ) . The execution procedure was to be completed over a period of clip to let the company to go on production and gross revenues ; nevertheless, the complications that Hershey faced hindered its productiveness and gross revenues. The impact of such a drastic alteration during the peak gross revenues period created a major reverse ensuing in a important loss in net incomes and gross revenues ( ERPWire, 2010 ) . The company maintained full conformity with the seller during the execution procedure. However, Hershey ‘s pick to implement the alteration during its peak period provided harmful attempts to production and gross revenues and put the overall administration at hazard. In retrospect, the company ‘s primary mistakes were related to the timing of the planned execution and the deductions sing work loads linked to the company ‘s continued production during the execution period.

Based on the company ‘s gross revenues history ( Wahba, P. , 2010 ; Gupta, V. , and Perepu, I. , 2008 ) , Hershey ‘s top direction should hold been cognizant of the hazards that implementing a major solution would hold on the administration ‘s procedures. The impact was felt at all degrees, peculiar during periods when confectionary merchandises are in highest demand. The company ‘s order processing systems were impacted the most. Retailers complained that orders were non received, were delayed or that the incorrect merchandises were received ( Stedman, C. , 1999 ) . The relationship between Hershey and its clients were acquiring worse. The failure gave the opportunities to rivals who obtained Hershey ‘s portion in the market place. As a consequence, Hershey ‘s one-year gross revenues fell and the rival ‘s one-year gross revenues increased ( Wahba, P. , 2010 ; Gupta, V. , and Perepu, I. , 2008 ) .

When implementing an ERP solution, the initial planning procedure is most of import. Hershey ‘s top direction was cognizant of extremum gross revenues periods ; hence, the determination of continuing with a drastic whole organizational alteration was the first mistake ( ERPWire, 2010 ) . The initial proposal for execution should hold warned the company ‘s executives, but the programs went frontward and the consequence was lay waste toing for the company, its clients and employees.

The usage of IT should give consequences opposite of what was achieved at Hershey ‘s. IT, peculiarly ERP systems, are designed to make barriers to competition, lower the costs of market entry, shorten timelines, velocity hard currency flow, cut out mediators, physique Bridgess, and maintain the administration better informed than its rivals ( Benson, S. , and Standing, C. , 2002 ) . Technology, in the context of administrations similar to Hershey, can alter production, concern procedures and administrations, including the possible to alter and maximise the potency of societal constructions and interactions ( Benson, S. , and Standing, C. , 2002 ) .

When sing IT alterations, the direction degree must pay close attending to the countries of the concern that may be impacted by the alteration. Although the success in one country of concern normally comes at the cost of another, this does non hold to be true ( Benson, S. , and Standing, C. , 2002 ) . Understanding the administration ‘s strengths and failings AIDSs in the planning procedure. Management will so be able to be after for possible barriers and implement an alternate before complications put the administration at hazard.

Under the same premiss, Hershey ‘s determination to implement SAP was non the job, hapless direction and uneffective planning was the company ‘s major job. Hershey ‘s mistake was linked to uneffective restructuring of its concern procedures and the amendments to suit the production during the ERP execution period. In add-on, the company pushed to implement a procedure in 30 months when the typical execution procedure norms about four old ages. The rapid execution effort disrupted the company ‘s normal maps and created mass confusion and struggle at both an internal and external degree. “ aˆ¦Since [ Hershey ‘s ] attending was entirely diverted to ERP, it was non possible to rectify the uncertainnesss that emerged in the concern as a consequence of ERPaˆ¦ ” ( ERPWire, 2010 ) .

Hershey found it hard to concentrate on both the regular procedures of carry oning concern and the ERP execution. The consequence was a decrease in gross revenues, angry clients, unhappy employees, and a bad repute that could non be trusted. The state of affairs was acquiring worse at the terminal of the 30 month period when Hershey realised the execution was non effectual, “ because the ERP systems were non working in full capacity ” due to “ some concluding touches which were non done ” ( ERPWire, 2010 ) . However, the context of the execution and the deficiency of “ concluding touches ” mattered small given the company ‘s primary job: hapless planning and unequal preparation of employees.

Evaluation of Options

ERP is a complex procedure that requires rigorous manoeuvring and processing within the administration. Prior to get downing the ERP execution, Hershey should hold put more attempt into guaranting the success of the procedure. Hershey should continue with the procedure merely after researching and be aftering to guarantee that adequate clip and attempts needed to accomplish successful alteration was possible. Alternatively, Hershey chose to continue during a clip when its gross revenues were highest and hazards were compounded. Hershey was no alien to implementing IT processes. In the yesteryear, Hershey had attempted to implement a CRM solution, so the company ‘s direction squad should hold been cognizant of the complications that can originate. The company merely chose the incorrect clip to implement the ERP solution, and timing is everything ( Gupta, V. , and Perepu, I. , 2008 ) .

In the modern-day concern universe, with the rapid engineering development, Hershey ‘s chief focal point should be on keeping productiveness. However, the usage of ERP solutions is necessary to run into the turning demands of the consumer. Customers want easy ordination options, fast order processing, and rapid order reception. The ERP system is designed to better these maps in concerns and for an effectual execution procedure that will give the coveted consequences, Hershey must carefully take the clip for the execution procedure -even if that means spliting the procedure into phases. By sectioning the execution procedure, Hershey would run into its aims of a streamlined IT procedure while keeping productive operations and retain satisfied clients ( ERPWire, 2010 ) .

An ERP system can assist increase a concerns ‘ efficiency, which increases client satisfaction. Alternatively of concentrating on independent sections for processing and meeting aims, the ERP system controls everything in the procedure from production to transportation and beyond. Prior to get downing the ERP execution, Hershey should hold met with section directors who, in bend, would explicate the approaching procedures including how the execution procedure would impact production within the company. From there the employees would be prepared and cognize how to manage issues that could originate, e.g. order fulfillment issues, or transportation. Overall, the bottom line is to be after consequently so that the ERP execution procedure can be efficaciously achieved while the administration ‘s regular procedures are non negatively affected ( Earl, M. J. , 1996 ) .

In a customer-driven market it is non the merchandise or service that matters most ; alternatively the greatest value remainders in how the client perceives their overall relationship with the company. It is the value factor. The direction squad should hold been cognizant of the client ‘s position ; so it should hold approached the execution procedure consequently to guarantee the client ‘s demands were non ignored. In retrospective, Hershey ‘s direction squad should hold known, prior to the ERP execution, how the company would keep client satisfaction during the procedure. Both internal and external factors should hold been better analyzed. Hershey failed to analyse the very constituents that achieve client satisfaction. Management should hold focused on its alteration in a manner that would non damage its relationship with current clients, their usage of the company ‘s merchandises, and their feeling of Hershey ‘s service. The information obtained during the pre-planning stage is more of import than the overall jutting alteration since this information is a guiding point for successful ERP execution ( ERPWire, 2010 ; Gupta, V. , and Perepu, I. , 2008 ) .

Inadequate preparation is a common ground which causes the failure in ERP execution. Hershey failed to develop its employees on how to manage possible alterations that would happen during the execution procedure, while besides fixing for developing for the new system. It is really a failure in the direction degree. While pre-implementation research and planning is one option to effectual execution, the company ‘s direction squad should hold been paying more attendings to manage its duties for the administration. Therefore, the company should hold taken a closer expression at its direction squad to find where the mistake started. The complications occurred at the direction degree making a Domino consequence where the company ‘s single sections were impacted and the client was neglected ( Gupta, V. , and Perepu, I. , 2008 ) .

Recommendations

When Hershey decided to implement an ERP system, it failed to analyse the company ‘s history of peak gross revenues periods and program the execution procedure around the most productive periods ( Gupta, V. , and Perepu, I. , 2008 ) . Alternatively, the company began execution during its extremum period which resulted in overload of its work force and complications from production to transporting that led to a important loss of gross revenues, a bad repute which led to the loss of trust among its clients. The determination to implement an ERP system was a good thought but the timing was incorrect ( ERPWire, 2010 ) . Timing is everything, particularly when the hazards involve non merely the administration and its employees but besides the loss of clients. Furthermore, Hershey ‘s direction squad failed to see its supply concatenation direction maps and the result was pandemonium within the internal and external procedures associated with production, order fulfillment, and transportation. The pre-planning should get down with reexamining the company ‘s current balance ( Caruso, D. , 2007 ) . When direction has a position of what it takes to maintain the administration productive, so the planning stage can get down.

When accurate planning is achieved, the hazards to the administration are minimized. Surveies ( Caruso, D. , 2007 ; Widener, S. K. , 2006 ) reveal that one of the most common grounds the execution of alteration consequences in failure is linked to unplanned or under planned stages of execution. Planning is important for effectual execution of an ERP system. However, there is no cosmopolitan individual point of failure linked to unsuccessful ERP executions. In the instance of Hershey, nevertheless, the causes are straight linked to attempts that are easy remedied: unequal preparation ( Gupta, V. , and Perepu, I. , 2008 ) .

Hershey has since worked hard to guarantee the same errors are non repeated. Its current direction squad is more fitting to the demands of all the administration ‘s stakeholders. Adequate preparation within Hershey has become paramount to all other maps. The company should gain that unequal preparation is a taking cause of organizational failure. Now, the company should concentrate on how to make concern otherwise, instead than buying on new computing machine package. While developing for the ERP system was a focal point, it was non the focal point in the first topographic point. Hershey learned the difficult manner that alterations had to be made internally before an ERP solution could be effectual in streamlining its internal and external procedures. Many ERP undertakings are bound to neglect because employees are non trained to manage the factors that come with alteration. In its subsequent efforts to streamline operations, Hershey needs to guarantee that the system was to the full tested and ready for execution to avoid negative effects similar to those the company experienced in 2002.