Title Page Guidelines for Subject Group Project

Program & Batch:2014-2016

Term:Fifth

Course Name:Enterprise Resource Planning(ERP)

Name of the faculty:Dr. Poonam Garg

Topic/ Title :Cadbury and Hersheys ERP success & Failure and Analysis of Critical Factors that can led to ERP Implementation Failure

Original or Revised Write-up:Original

Group Number:Sixth (6)

Contact No. and email of Group Coordinator:7042472900/ ft14kamaljoshi@imt.ac.in

Group Members:Sl.Roll No.Name

1140103078Kamal Joshi

2140103148Saurabh Srivastava

3140102024Ankit Maheshwari

4140102083Nithin Nair

5140101135Rohit Raj

6140101168Shashwat Gupta

7140301014Pavan Narayan Rao

Table Of ContentsExecutive Summary2ERP Implementation in Cadbury3About the company3Company Organizational Structure3Implementation and Methodology challenges4Benefits to Cadbury through ERP Implementation6ERP Implementation at Hershey7About the Company7Impact of ERP Implementation at Hersheys9Reasons for Failure at Hershey10What went wrong?10Primary Research to find out the critical factors for ERP implementation failure in MNCs11Analysis11Factor Analysis12Inferences17Recommendations18Avoid inexperienced consultants and ineffective staff.18Avoid improper project management for implementation of ERP18Avoid selecting wrong Vendor19Get support of upper management19Focus on important requirements but also document all of your requirements and pain points19Mobile users are equally important19Before selecting ERP system carefully evaluate your options20Dont customize too much20Focus on change management21Appoint a centralized ERP artefact best -- and beleaguer him or her with acceptable people21Provide the all-important time and assets for training on the ERP system22References23

Executive Summary

Cadbury and Hersheys are two multinational companies that produce world-class chocolates and are among the largest market players worldwide.With revenue growth and increasing complexity both companies were directed to the implementation of ERP in order to gain efficiency and reduce duplicity and redundancy. However one was able to achieve success and the other was a failure.The following report enshrines why the two companies went for this solution, who are the key stakeholders, how the solution was implemented, the process and the complexity behind the implementation, the reasons for their respective success and failure, and also what can be achieved and learned from mistakes in order to improve implementation in future elsewhere.Last part of the project covers our research analysis. To understand the various critical factors that may lead to ERP implementation failure our team carried out secondary research as well as we interviewed 5 ERP consultants to form a questionnaire. Our questionnaire comprised of 20 questions and we got responses of 25 consultants. After capturing the whole data we have done the analysis using factor analysis. Finally we categorized all the factors into categories and also we have ranked them accordingly. A t last we have given recommendations in form of suggestions that the company has to take care of while implementing ERP for the organization.

ERP Implementation in Cadbury

About the company

Cadbury is a British multinational company specialized in manufacturing chocolates and candies. It is the 2nd largest confectionary across the globe from the revenue side. It is a subsidiary of Kraft Foods Inc. and has a revenue of about $50 billion. Present in 165 countries, it is a big player in cookies, chocolate, mint, toffee, caffeine and powdered drinks, with names like Oreo, LU and Nabisco; Cadbury, Cadbury Dairy Milk and Milka; Trident; Jacobs and Tang. Mondelez International also belongs to the S&P's 500 and NASDAQ 100.The company started its operation in India in 1948 by chocolate importation. After about 65 years of existence, it today has 5 manufacturing units basically in Thane, Pune, Gwalior, Bangalore and Baddi and has four sales office basically in New Delhi, Chennai, Kolkata and Mumbai. Their corporate office is located in Mumbai, the financial capital of India.Company Organizational Structure

Implementation and Methodology challenges

Cadbury India was the first unit of Cadbury over the world to implement ERP in its departments and processes. They started from the very basic stage as they were the first. They looked for the best practices followed all over the industry and tries to develop and build on the past systems to strengthen their process. Cadbury had to standardize the process in 16 locations across the globe for implementation in first phase.ERP initiative in Cadbury was to bring complete integration of the major processes in the company. The various departments namely procurement, finance, HR etc. are highly decentralized and working in silos which was the cause of high operational cost and inefficiencies. ERP was to serve as the integrating system and solution for their existing decentralized system. The implementation started in 1995 and they started with a big bang approach. The major expectation was to help the management for better work as was not provided by earlier systems. The critical factor for implementing ERP was to align with an expert partner and Cadbury choose Siemens and IBM for ERP implementation and infrastructure requirement. Cadbury started with Finance department and then moved to production and supply chain process. They implemented the ERP across all the module in the company in a tenure of 1 year and went with big bang approach across departments. The implementation was top management driven and the process has saved a lot of efforts now. The data is entered only once in the system and all the departments are updated regarding the same. It is totally system driven data entry today.The process implementation in divided into 5 phases:1. Phase1: Project PreparationThe main points under this phase was Recruitment of key project members Training of internal IT transfer Develop and install development system Preparation of blue print

2. Phase2: Detailed design and requirements

This phase of detailed design and requirement includes

Identification of risks Identification of opportunities Identification of business applications Mapping of global application Finalize global scope Drafting of change management Capabilities roadmap generation

3. Phase3:

Conversion of master data Configuration of global template Exceptions agreement Cycle unit testing Cycle integration testing Documentation and global training

4. Phase4:

Training program and end user training Readiness assessment Finalization of cutover plan DIL Tests Production system preparation

5. Phase5:

Master data conversion of production Execution of cutover plan Onsite support Monitoring of processes and system

Due to implementation of ERP implementation Cadbury supply chain is improved and is as shown below

Benefits to Cadbury through ERP Implementation

Cadbury reaped many benefits through the implementation of ERP. The major benefits are listed below. Cadbury with 16 locations and various depots was a highly decentralized organization. Management was bent on solving these problems and thus SAP-ERP helped them achieve efficiency. At the time of ERP implementation, Cadbury was going through an ultra-high growth rate. The legacy systems installed were not capable to cater to the growing needs of all departments to sustain this high growth. ERP implementation supported the high growth phase of Cadbury smoothly. All 16 locations were following their processes which was not at all standardized. ERP implementation helped standardize processes across all locations and in bringing them up to best industry practices. Earlier, the warehouse management system was highly unstructured which was eliminated after ERP implementation. The manufacturing processes were earlier working as standalone processes in silos. ERP helped integration of the processes which has greatly benefited Cadbury. Huge cost savings were realized after the initial years. ERP also made the inventory management and vendor management process robust. Earlier, these were run through other software and integration with legacy system was a challenge.

ERP Implementation at Hershey

About the Company

The Hershey Company (NYSE: HSY) based in Pennsylvania (United States) is a worldwide player in confectionery known for chocolates, candies and other edibles. Hershey has about 22,000 workers worldwide. The organization has roughly 80 brands worldwide, including names like Hershey's, Reese's, Hershey Kisses, Jolly Rancher, Ice Breakers and Brookside. Hershey is working on increasing its availability in major foreign economies while leveraging its market position in the home continent. In addition, Hershey is looking to diversify its product mix in groups beyond confectionery.

Instead of low price products, Hershey targeted US $5 billion sales .For this huge quantities of products need to be sold. At that time, Hershey used legacy systems which works through several mainframe systems for different function ranging from Human resources to Order processing. For generating higher revenues, highly efficient logistics and supply chain systems duly supported by Information Technology (IT) need to be implemented.

In 1996, Hershey Management gave approval to Project named Enterprise 21 for modernizing Hardware and Software. The main goal of Enterprise 21 project was to upgrade and standardize the Hardware, shift to client-server environment from legacy mainframe based systems and move to TCP/IP Network etc. BY implementing software, Hershey aimed for better coordinated deliveries of its products, helping retailers maintain low inventory and reduce inventory holding costs, and on the whole providing better customer service. Hershey information system division wanted to switch over to new ERP system by April 1999 due to turn up of Y2K problems. Enterprise - 21 project team redesigned the whole business process with the customers in mind by enhancing competitiveness and Customer service.

For reorganizing business process, Hershey selected 3 implementation partners:1. SAP AGs R/3 Enterprise Resource Planning Suite for Finance, Purchasing, Material management, Warehousing, Order processing and Billing1. Manguistics provide software for transport management, production, forecasting and scheduling.1. Siebel provide software for CRM and Pricing promotions module for Marketing.

Hershey chose IBM Global Services to integrate the three different vendors software and put all the systems on a single integrated platform. The total cost of the project was expected to be US $ 110 million. Hershey installed bar coding systems for its products and plants with the aim to reduce production costs, track the inflow and outflow of the materials and improve the overall logistics management.

Due to impending Y2K problem and Confectionarys companies sales season, Hershey wanted to shift to new system by April 1999 when sales were lower compared to other months. Due to these reasons, Project had to be finished in a span of 30 months instead of 48 months. Up to January 1999, SAP Financial, MM, Purchasing and warehousing had been implemented. Other Modules critical order processing and billing systems module from SAP, Planning and Scheduling modules from Manugistics and Pricing and promotions package from Siebel were behind schedule which were added in July 1999. Due to Y2K Problem and big orders from retailers, Hershey was not in position to extend the implementation schedule.

Hershey decided to go for Big-Bang approach instead of phased approach of implementing and testing one module at a time and then taking up the Next module. The phased approach allowed a company to find and correct bugs before moving to Next phase. Hershey was thinking to fulfil its Halloween orders through Big Bang approach.

Impact of ERP Implementation at Hersheys

After doing through Big-Bang approach, following impact comes:

1. Problems in order fulfilment, processing and shipping : After smooth rolling in initial times, order fulfilment, processing and shipping problems started to rise. Several consignments were late out of which several deliveries were incomplete. Due to busy systems and without any product data, Hershey forced to call up customers and inquire about quantity details ordered and received.

2. Credibility lost in market: Hershey maintained more supplies for addressing problems during implementation time. But after three weeks of the implementation of the new system, the shipment was taking 12 days instead of 5 days to deliver their orders. Due to late delivery to Retailers by Distributors, Hersheys product lost credibility in the market. They lost precious shelf space for high competitive products.

3. Inventory piled up: Hershey was unable to send the consignments on time due to problems in order entry, processing and fulfilment. The warehouses were piled up with the products ready to be shipped as the manufacturing process was running smoothly. Company missed out on the deliveries, in spite of having enough products at warehouses.

4. Stock price plunged by 8%: company was not able to identify the real problem whether it was poor software quality, implementation or problems in information flow between systems. This news made into Major business newspapers headlines and made stock price plunged by 8% on a single day. Due to problems widely reported in media, profits and sales for 3rd quarter declined by 19% and 12% respectively.

Reasons for Failure at Hershey

Hershey was the first American company to mass-produce Milk chocolate. They became so successful that by 2000s they were producing over 3300 varieties of chocolates and were exporting their products to over 90 countries. Their products were cheaper compared to their rivals; they differentiated in this price point. To achieve sales of $5 billion, due to this reduced price, they had to sell large quantities. With this 3300 varieties and that kind of large sales made it difficult for them to handle the operations. The usual inventory turnover for Hershey was 5 days, but later it reached 8 days, which was not good for the business. The then existing functions were in silos and operated through several mainframe independent systems. That is why they decided to roll out the ERP implementation. The implementation of ERP was a failure for them, they made some big planning mistakes. The cost they had to pay was huge, which we have already described in the earlier sections. What went wrong?

Initially everybody pointed his or her fingers towards SAP for the failure. Later on analysis, a number of reasons came to light. The main problems were, first of all they planned to go on with a big bang approach without enough time. They were also using multiple vendors for different modules; this will complicate the system much more. The implementation partner IBMs recommended duration for the implementation was 48 months, but Hershey wanted it to be rolled out in 36 months. Another issue was that, with the impending Y2K problem, they wanted to roll out the program in the spring of 1999. ThisSince they were employing multiple vendors, instead of big bang approach they should have rolled out each of the vendor modules in phases and check for integration issues. According to analysts ERP is a complex implementation and problems will occur especially when they are using multiple vendors. Each component was required to be tested independently and also in the integration process for their compatibility. In that short span of time, it was not able to test all component modules carefully. The decision to go with big bang approach was a huge mistake. Live roll out of ERP in a big bang approach will be disastrous if not planned accordingly. It will affect the lifeblood of a company, its order processing. SAPs R/3 ERP in itself is a very complex software, by adding two more softwares to it, they made it much more complex and squeezed the time line also.Another reason cited is that Hersheys inexperience in implementing an application of this magnitude. They had only implemented some small-scale implementations; an implementation with this much complexity and magnitude was not in their league.Primary Research to find out the critical factors for ERP implementation failure in MNCs

To understand the factors that can led to ERP implementation failure we carried out a primary research. Our primary research comprised of an online questionnaire comprising of 20 questions. We floated the questionnaire to various ERP consultants. We got a total of 25 responses which we found out to be consistent to give us important insight about the critical failure factors in ERP implementation.Online Survey link: https://docs.google.com/forms/d/1QM6CMWHBWkDPtxFHc7-f8iZFc4bpLSCRSKQKqEkbyP0/viewform

Analysis

The current survey is an exploratory research to identify 20 critical factors which were responsible for ERP implementation failure. Quantitative approach has been used for the survey. 20 ERP consultants from different companies of India have been selected for data collection (using non-probability sampling). The primary data has been collected by using a self-structured close-ended questionnaire. A Likert scale has been designed with every statement with five alternatives to choose from Strongly Disagree=1, Disagree=2, Neutral=3, Agree=4 and Strongly Agree=5 for the questionnaire.

20 critical factors identified for failure of ERP implementation are:

Factor Analysis

Now these 20 factors identified were tested on SPSS to reduce into less factors and then categorize them into group factors. For factor Analysis, Rotation Component Matrix has been taken into consideration.

SPSS: 20 Critical Failure Factors identified

Now these 20 Critical Factors were checked for Factors reduction and with scree plot diagram, the eigenvalue was set to 7. Scree Plot

Variance of these 7 components can be checked with the below mentioned results:

With Varimax rotation up to 250 standard iterations, we can easily group the factors into 7 components:

Rotated Component Matrix for Critical Failure Factors

On the basis of their variance and components, we can easily categorize them into 7 different categories:

Also the ranking among these 20 critical factors was done based on their mean values.10 Key Critical Failure Factors were identified based on their mean values. The results are as mentioned below:

Ranking based on mean values

Inferences

There is a significant relationship between Critical Key Factors identified and ERP implementation Failure in the organizations ERP Software misfit is the top most concern for failure followed by poor consultant and top management ineffectiveness 20 Critical Factors have been grouped into 7 Key Factors for failure of ERP implementation Technology and vendor related Category is the major concern for ERP implementation failure

Recommendations

For abounding companies, the continued and sometimes annoying action of selecting an ERP arrangement is advised simple compared to what awaits next the ERP implementation. Clearly, the ERP accomplishing is as appropriately important as the alternative process, although an accomplishing is broadly advised a added circuitous and alarming activity which can be absolutely confusing to a business abnormally if things go wrong. That can be accurate just by account the abundant abhorrence belief in the industry columnist about massive calibration ERP failures accomplished by some of the arch and acclaimed all-around brands. The amusing media apple takes that a footfall added and appearance endless blogs, tweets or postings by users absorption about unmet expectations from their ERP implementations. Its not hasty again that a lot of companies feel a abysmal faculty of alarm over a awaiting ERP implementation. While around any ERP accomplishing can be circuitous and challenging, a acknowledged accomplishing can be the barometer and not the exception.Some of our recommendations to avoid ERP failure are given below:Avoid inexperienced consultants and ineffective staff.Consultants play an important role in ERP implementation. Consultants might have very specific domain knowledge or the consultant have experience only in one sector. Therefore it is very important to hire a consultant who is fully acquainted with the sector you are in and have rich experience to deliver good results. Also take care about the staff as they play a important in smooth ERP implementation.Avoid improper project management for implementation of ERPProject management is critically important for the implementation of ERP. A good, strict and well managed project management ensures that project is achieving all the milestones in the scheduled time and also takes care of cost overrun.

Avoid selecting wrong VendorAlways try to list all of your requirements and streamline as number of requirements possible. This helps the vendor to write a good proposal and also if will help the organization to select the best vendor for them. Some of the vendors specialize in specific area like peoplesoft for HR. So it is better to understand your main requirement after streamlining all of your requirements and choose specific vendor accordingly.Get support of upper management"Companies that tend to attempt the a lot of [with ERP] are the ones that abridgement high administration akin involvement," says Daniele Fresca administrator of Marketing, IQMS, a provider of industry-specific ERP solutions. "Resources at the lower akin tend to not be edicated and affianced with the accomplishing activity after chief akin involvement," she says. That said, "executives don't charge to get to the point of alive every individual agreement detail. But [they charge to] be acquainted of the issues that are causing delays to the project."Focus on important requirements but also document all of your requirements and pain pointsBegin by anxiously defining the ambit of your project," says Ed Talerico, director, Industry & Solution Strategy, Infor, a provider of action applications. "Focus on specific business processes and arrangement requirements. The added specific you can be upfront, the added abundant your vendors can be in their proposals." "If you get one affair right, accomplish it the up-front requirements acquisition process," says Brian Shannon, arch business action administration architect, Dolphin Action Solutions. "Few things derail activity budgets and timelines as the 'assumptive' or absent requirements." So accomplish abiding you appoint with end users, IT and chief management. "Too often, humans baddest an ERP arrangement based on factors such as price, accepted technology fizz or the arrangement that is the flashiest," adds Fresca. "But after a acceptable fit, companies are larboard with big-ticket customization and anchored calm solutions," she notes. The solution: "Find an ERP arrangement that is industry-specific, with accoutrement and appearance advised to break your business requirements. The ROI and abiding allowances of a acceptable applicable arrangement are extensive."Mobile users are equally important"As advancement and BYOD admission beyond industries, accessing ERP systems from desktops alone is no best an option," says Ilan Paretsky, carnality admiral of Marketing, Ericom Software, a provider of access, virtualization and RDP dispatch solutions. Choose an ERP band-aid that "allows users to be advantageous on smartphones and tablets." Yet at the aforementioned time will ensure that acute advice is secure.Before selecting ERP system carefully evaluate your options "Poorly run and aside appraisal projects can advance to poor implementations," says Tom Brennan, carnality admiral of Marketing, FinancialForce.com, a provider of cloud-based ERP solutions. "Dicey claim definitions and ambiguous priorities can advance to the amiss bell-ringer selection."In addition, "lack of accord and ascribe from key stakeholders in the appraisal date can advance to poor accepting and user adoption. And don't overlook that delays active the appraisal activity itself ultimately adjournment the go-live date and the time to benefit.""Another account abounding organizations absence during the alternative appearance of an ERP arrangement is advertisement and metrics," says Tiffani Murray, an HR technology consultant. "What do you wish to be able to barometer from the system? Is this accessible via the existing, prebuilt letters in the arrangement or will you accept to pay added to get custom metrics that will drive your business, hiring and resourcing? Acquisition this out in the alternative appearance and not afterwards you've active a multi-year contract."Also, do not overlook about integration. An ERP band-aid that does not plan with your absolute bequest and/or analytical appointment systems is not a band-aid but addition big-ticket section of bare or abstract software.Finally, "find a accomplice that specializes in your industry," says Jim Shepherd, arch action officer, Plex, a accomplishment ERP provider. "Better yet, acquisition one that is committed to your industry. Those aggravating to accouterment the absolute ERP apple can't action the aforementioned expertise."Dont customize too much"Consider the bulk of customization appropriate to configure and deploy," says Steve Bittner, carnality admiral of Professional Services, Unanet, a provider of Web-based software for managing humans and projects. "Highly customized systems will accomplish college cost, not alone in the antecedent deployment but if advance from absolution to release," he says.Popular On CIO.com Job Hunting tips for the IT ProField Test: Samsung Galaxy S6 activegmail vs. inboxGoogle tests $2 custom Gmail addresses "Those businesses with different requirements charge to accede whether those requirements can be mainstreamed to annihilate the abrupt amount curve," Bittner says. In addition, businesses charge "to accept [their tolerance] for best accomplishing cycles, best ROIs, added instability, [which can appear with customization]," he says. "A turnkey band-aid may action beneath adaptability but added stability, and beneath antecedent and advancing cost." "Generally speaking, abounding companies' basal business processes are around the aforementioned (like paying invoices, accession acquirement and accretion supplies)," says Greg Palesano, controlling carnality president, Applications Services, HCL Technologies, a all-around IT casework company. "This is why ERP was congenital in the aboriginal place. Companies can yield advantage of accepted processes that are arch chic and accept been activated by abounding added companies," he says. "If a accurate business action believes they accept a case for a customization, accomplish abiding they prove it," he argues. "Remember, the amount of the customization is not alone autograph and testing the cipher for antecedent implementation, but accouterment abiding abutment of the custom cipher and alleviative any customizations as exceptions every time you advancement your software," he says. "Keep it simple and try not to acquiesce customization into your ERP program."Focus on change management"Organizational change administration is cardinal to the success of your project," says Matt Thompson, carnality admiral of Professional Services, EstesGroup, an ERP managed casework and technology solutions provider. "Typical ERP projects facilitate massive change in organizations that can cover alteration of day to day job descriptions or eliminating job descriptions in total. [These] changes appulse the ability of your aggregation and after accurate ascendancy and advice affairs and workshops you can actualize an adverse acknowledgment to ERP [resulting in] barriers [to] accomplishing and adoption."Appoint a centralized ERP artefact best -- and beleaguer him or her with acceptable people "Do not await on the vendor-appointed activity administrator only; accept anyone on your agents for this," says Morris Tabush, principal, the TabushGroup, a provider of managed IT services. Select anyone aural the organization, who knows or is adequate managing software systems, to serve as the activity manager," he advises. "This being will be amenable for "collecting all the end user requirements, acquirements the new arrangement central and out, alive with the bell-ringer on abstracts conversion, analogous training and acting as the point of acquaintance for all employees." "One of the a lot of accepted mistakes fabricated by companies during ERP accomplishing is spending cogent time, activity and money selecting the appropriate software and accomplishing partners, alone to accredit their own 'B' aggregation to the program," adds Palesano. "This after-effects in abundant issues during architecture and implementation, apathetic accommodation authoritative and delays. While it's difficult to charge less up your brightest assets from their full-time jobs, ERP implementations are not simple and they can be acutely expensive," he credibility out. So it's important to "put your best humans on the job. Not just your best IT people, your best people, period." Provide the all-important time and assets for training on the ERP system "Learning a new way of operating will crave a cogent time charge for everyone, so the activity aggregation have to yield proactive measures to abate the accountability on employees," says Joel Schneider, cofounder, Liberty Technology Advisors, an IT consulting close that specializes in ERP, business processes and activity rescue. "Identify department-specific needs, acceptance for acceptable time to advance and bear training programs." Furthermore, it's important to "recognize that the a lot of able training may not appear from alfresco sources. Tech-savvy advisers aural departments can be accustomed the befalling for added all-embracing apprenticeship to become able assets for their adolescent employees," he explains. "Having a readily accessible abutment acquaintance aural an operational accumulation reduces the 'us vs. them' activating that can adulteration the accomplishing process."

References

1. http://www.pemeco.com/a-case-study-on-hersheys-erp-implementation-failure-the-importance-of-testing-and-scheduling (Accessed on: 24 Aug 2015)

2. http://www.cio.com/article/2440386/supply-chain-management/supply-chain---hershey-sbittersweet-lesson.html (Accessed on: 24 Aug 2015)

3. http://www.infor.com/shared_resources/casestudies/cadburyplc.pdf (Accessed on: 25 Aug 2015)

4. http://erp.technologyevaluation.com/search/for/cadbury-case-study-erp-implementation-pdf.html (Accessed on: 25 Aug 2015)

5. http://www.trexin.com/key-success-factors-for-an-erp-implementation/ (Accessed on: 25 Aug 2015)

6.http://www.researchgate.net/publication/229022123_Critical_Success_Factors_for_ERP_Projects (Accessed on: 25 Aug 2015)1