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Compiled By:Anubhav Sood 139278056Kapil Saini 139278009Kaustubh Kirti 139278054Rakesh Devadas 139278069Rohan Shukla 139278059

The Hersheys CompanyMilton S. Hershey founded it in 1894 as Hershey Chocolate Company.. By 1895, Hershey Chocolate Company was manufacturing more than 114 different varieties of chocolates. By 1960s, the company became one of the renowned chocolate producers in US.Moreover, to achieve its target the company needed to sell huge quantities of its products that were only possible with highly efficient logistics and supply chain systems. During that period of early 1990s, Hershey was using their legacy systems to support their business processes such as order proceeding and shipment. In order to make their business processes more efficient and managed; the company needed a different approach. Therefore, it decided to implement a new system called Enterprise Resource Planning (ERP) system.

Hershey's Legacy SystemUnisys Mainframe SystemThe Hershey System consists of one or more mainframe unitsIn addition to the mainframe unit, the Hershey System may consist of one or more satellite unitsDisadvantages Unisys Mainframe System:Looming Y2K ProblemRepairing Legacy Systems is not Cost-EffectivePoor documentation of programs in Legacy SystemsCOBOL language a relic of the SixtiesHigh maintenance and usage costsProblem of Silos will persistLack of integration of different systems

ERP SystemsSuite of integrated applications, used to store and manage data from every stage of businessERP provides an integrated real-time view of core business processes, using common databases maintained by a database management systemERP facilitates information flow between all business functions, and manages connections to outside stakeholders

ERP Pros and ConsProsBy keeping a company's internal business process running smoothly, ERP can lead to better outputs that benefit the companyERP supports upper level management, providing critical decision making informationERP makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the businessinternally and externallyA common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromisedERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systemsERP Pros and ConsERP ConsCustomization is problematicRe-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activitiesERP cost more than less integrated or less comprehensive solutions.High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.Overcoming resistance to sharing sensitive information between departments can divert management attention.Integration of truly independent businesses can create unnecessary dependencies. Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM).Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money (which we will se in the case)

Pre-selection ProcessPackage EvaluationProject PlanningGap AnalysisReengineeringConfigurationImplementation Team TrainingTestingEnd- user TrainingGoing LivePost implementation PhaseHersheys ERP implementation Life CyclePre evaluation screeningPackage EvaluationProject planningDecision for perfect package

Number of ERP vendors

Screening eliminates the packages that are not at all suitable for the companys business processes.

Selection is done on best few package available.

Package is selected on the basis of different parameter.

Test and certify the package and also check the coordination with different department

Selected package will determine the success or failure of the project.

Package must be user friendly

Regular up gradation should available.

Cost

Designs the implementation process.

Resources are identified.

Implementation team is selected and task allocated.

Special arrangement for contingencies.

Gap analysisReengineeringTeam TrainingMost crucial phase.

Process through which company can create a model of where they are standing now and where they want to go.

Model help the company to cover the functional gap

Implementation is going to involve a significant change in number of employees and their job responsibilities.

Process become more automated and efficient.

Takes place along with the process of implementation.

Company trains its employees to implement and later, run the system.

Employee become self sufficient to implement the software after the vendors and consultant have leftTestingGoing LiveEnd User TrainingPost ImplementationThis phase is performed to find the weak link so that it can be rectified before its implementationThe work is complete, data conversion is done, databases are up and running, the configuration is complete & testing is done.

The system is officially proclaimed.

Once the system is live the old system is removed

The employee who is going to use the system are identified and trained.This is the maintenance phase.

Employees who are trained enough to handle problems those crops up time to time.

The post implementation will need a different set of roles and skills than those with less integrated kind of systems.

An organization can get the maximum value of these inputs if it successfully adopts and effectively uses the system.

Hersheys - Need IdentificationThe company was going to face the problems of Y2K bug by 2000Growing demand from retailers for client/server environmentRetailers wanted to Hershey's to data share data about product deliveriesRetailers wanted to maintain optimum inventory levels and reduce cost (low inventory levels, less holding cost and better service)

Implementation was made to keep customer in mind1) enhance our competitiveness2) enhance customer service3) system to manage change

Project Enterprise 21 was launched to bring about the above mentioned changes.

Project Enterprise 21

Objective Modernisation of hardware and software used by the companyGoals:Upgrade and standardize the hardwareShift to client/server environment from existing mainframe based environmentMove to TCP/IP network

The new ERP software was expected to help Hershey reorganise its business processSAP AGs R/3 Enterprise Resource Planning finance, purchasing, material management, warehousing, order processing and billingManugistics transport management, production, forecasting and schedulingSiebel- managing customer relationship, pricing module and tracking products.

The three system was integrated by IBM Global Services. Project management Cost US $110million

Next Stage Implementation StrategyTypes of ERP Implementation StrategiesBig Bang Transition StrategyInstallation of ERP systems of all modules happens across the entire organization at onceAll the business functions across the entire enterprise are concurrently transferred to the new legacy system over a period of few daysIt promises to reduce the integration cost in the condition of thorough and careful executionOne of the drawback being it consumes too many resources to support the go-live of the ERP system

Types of ERP Implementation Strategies2. Phased Transition StrategyAutonomous modules of ERP systems are installed in each unit while integration of ERP modules is done at a later stage of the projectMost commonly used method of ERP implementation where each business unit may have its own instances of ERP and database3. Parallel Transition StrategyIt keeps both the inheritance system and the new ERP system active concurrently for a length of timeAdvantageous because the industrys business process will not break if the new ERP system breakdowns

Types of ERP Implementation Strategies4. Process Line Transition StrategySimilar product lines are transferred from inheritance system to the new ERP system one after the otherThis step-by-step success helps to build industrial faith in the new ERP system thereby increasing its overall prospect of being successful5. Hybrid Transition StrategyCombination of any of the implementation strategy like process line, parallel and phasing implementation strategyFlexible in adapting to the specific needs of the situationIndustries can exclusively adjust implementations for their needs

Parallel and Process Line Transition Strategy

Big Bang and Phased Transition Strategy

Hersheys - Implementation PhaseFinish date of implementation was kept at April 1999 (offseason for confectionary market)Hershey installed bar coding system across its products and plants to reduce production cost and track goods flowJanuary 1999 financials, material management, purchasing and warehousing have been implementedOther SAP modules and Manugistics modules were behind schedulePost April orders started filling in Hersheys transferred from a phased approach to Big Bang approach to meet Halloween ordersBy July orders were twelve days late and by August orders were 15 days lateThere were problems in order entry , processing, fulfilment and inventory. In spite of having high inventory at warehouse the company was facing issues. What Hersheys did was since it was not able to meet deadlines it shifted to Big Bang approachIt could not meet orders and the market share and the goods availability was being affected

Major Reasons for Failure1. Idealistic AnticipationsHershey Foods Corporation assumed the new system to perform excellent and made idealistic expectations. The company must have miscalculated the time, resources and other key factors to implement the new system. The management of Hersheys should have realized that the new system is complicated and tricky. 2. Poor ManagementIn order to implement ERP system in a perfect approach, the management team should be properly familiar with scope and dimension of an ERP implementation. Hersheys did not have a CIO position and nobody to overlook the implementationIndustry analysts of Hershey Foods Corporation concurred that problems in project management were to blame for the debacle (Gupta and Perepu 2008).3. Wrong TimingHershey Foods Corporation implemented the ERP system at the time of peak season. So the company did not have enough time to resolve the errors that were produced during the implementation process. If the company planned to implement the ERP system during normal season and before Halloween then they would have been able to manage time to solve the problems concerned with the new system.

Major Reasons for Failure4. Big Bang ApproachUnlike phased approach, the big bang approach merges all the system together for quick processing without any testing. Whereas, phased approach helps in identifying exact mistakes by performing every task thoroughly. 5. Compatibility IssuesThe employees were unable to enter data in the new system and the company was facing problems with the flow of data from the old system to the new one. This clarifies that the mismatch of some technical components were causing significant blunders in the business processes of Hershey Foods Corporation.6. Insufficient Training and KnowledgeIn the case of Hershey Foods Corporation, the personnel performing the implementation task might not have been trained properly. Since the proper training and knowledge were inadequate, the company failed to recognize errors and bugs appeared during the implementation process. Also, the employees were working under a lot of pressure since it occurred during the peak season of Halloween. Major Reasons for Failure7. Lack of Implementation and Integration StrategyThree parallel project implementation instead of single focused implementation.This approach lead to confusion and failed implementationAlso, top management failed to correctly gauge the scope of the projectLearnings from the failureHow did the company bounced backCase analysis : ERP Implementation Big Bang vs Phased ApproachL. Mohan27Case Study - Big Bang Strategy FailureNike Says Profit Woes Due To IT Philip Knight, Nikes Chairman and CEO, blamed the complications arising from the impact of implementing our new demand-and-supply planning systems and processes for the shortages of some products and excess amounts of others as well as late deliveries.Result: Profits Fell Short of Estimate by 33%I guess my immediate reaction is: This is what we get for $400 million?Source: Computerworld, March 5, 2001L. Mohan28Some Causes for the Nike ProblemBIG Global Supply-Chain ProjectSuppliers in Indonesia, Malaysia, China. A Real ChallengeHigh degree of Customizationi2s Supply Chain application had to be linked with SAPs ERP and Siebels CRM systemsWide range of footwear products in a multitude of styles and sizesComplexity in mapping the supply-chain software to the companys internal business processes

Source: Computerworld, March 5, 2001

L. Mohan29A Success Story: Asian Paints IT Funded Global Acquisitions $20M investment in IT Benefit: $80M operating cash flow generated over 3 years Implemented SCM from i2 before ERP from SAP Inventory Turns: 11.6 in 2002 vs. 6.5 in 1998

Source: Computerworld, March 5, 2001

---------- SUCCESS

--------- FAILURE

@ ASIAN PAINTS

FACTOR

@ NIKE

Restricted to India

Number of locations

Suppliers across the globe

Decided to install SCM software before ERP software

Top management insight

Did not recognize the complexity of a global Supply Chain Project

Phased First SCM, then ERP, last CRMImplementation strategy

Three packages simultaneously Nike IT staff spread thinRestructured in 1998, before SCM Project only modest customization needed in the softwareOrganization issuesHeavy customization of i2 software to fit Nikes business processes no pilot test due to aggressive time-tablei2 played a proactive role - suggested implementing smaller modules one at a time.i2s role

i2 did not adhere to what it did usually it adopted a big-bang rollout approach