When businesses decide to change from antiquated legacy systems to a modern, centralised ERP platform, the results are almost always positive. Unfortunately, an ERP implementation can also fail.
The company
The Hershey Company is a prominent confectionery company known for bringing delicious goodness to the world through its iconic snack brands.
With approximately 17,000 employees, the company has more than 90 brands around the world that drive more than $8 billion in annual revenues.
What happened?
Despite its success, Hershey faced challenges with its ERP implementation in 1999.
Given the impending Y2K crisis, the firm was keen to deploy its ERP solutions in time for the start of the new millennium.
They sought to deploy the ERP implementation in 30 months, rather than the recommended 48 months, and the results were nothing short of bewildering.
The organisation decided to replace its legacy IT systems with an integrated ERP environment. In all, the platform consisted of three main components:
- SAP R/3 ERP software
- Supply chain management (SCM) software
- Customer relationship management (CRM) software
They attempted to deploy all three technologies at the same time (bad idea!).
What followed was a mess of bickering among the company’s units. Various departments were in conflict with one another, resulting in failed systems testing, erroneous data migration, and flawed training.
The situation was so severe that Hershey failed to fulfil an estimated $100 million worth of orders even though they had the item in their inventory. This was a perfect example of business process and systems issues causing operational paralysis.
As a result, Hersey’s stock plummeted by 8% and its quarterly profits by 19%, and the undoing ended up on the front page of the Wall Street Journal.
Although Y2K is a relic of the past, Hershey’s experience is a cautionary tale for any business embarking on an ERP journey.
Lessons from Hershey’s ERP failure
- It is important to plan carefully and thoroughly when implementing an ERP system, especially if multiple components are involved.
- Do not try to deploy an ERP system in an unrealistic timeframe.
- Make sure all departments are on board with the implementation and that they have a clear understanding of their roles and responsibilities.
- It is important to test your systems thoroughly before going live and make sure all staff are properly trained.
- Always carefully assess the potential risks and impacts of an ERP implementation, both on your business operations and your bottom line.
- Phased implementation could curb implementation catastrophe.
- Timely and clear communication is essential to ERP success.
Don’t make the same mistakes!
If you are thinking of implementing an ERP system to help streamline your business processes, be sure to learn from the mistakes of the past and do your due diligence. This will help ensure a smooth, successful ERP implementation that delivers results for your organisation.
With careful planning, testing, and training, you can avoid an ERP implementation disaster and reap the many benefits of a centralised and integrated ERP platform.
Talk to us today to learn more about how we can help you with your ERP implementation needs.
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FAQs
1. Hershey Company. The Hershey Company is one of the world's largest chocolate manufacturers, with over $11 billion in annual revenue. Hershey's decided to implement a new ERP to modernize their supply chain, but poor planning and inadequate testing resulted in over $100 million in losses.
Which company failure is seen in ERP case study? ›
ERP case study #1: Hershey Candies – A Bitter Failure
An expensive lesson on the importance of synergy; this case study reviews the failure of Hershey, a 147-year-old confectioner, headquartered in Hershey, Pennsylvania. The enterprise saw the implementation of an ERP platform as being central to its future growth.
How was Hershey impacted by a failed technology implementation by SAP R3 ERP software? ›
Overview - Hershey's ERP Implementation Failure
Business process and systems issues caused operational paralysis, leading to a 19-percent drop in quarterly profits and an eight-percent decline in stock price.
What were some of the key problems that Hershey encountered with their new ERP system? ›
Some of the key problems that Hershey encountered were; the proper people at top management level like the CIO to make important decisions on implementation lacked. With no one at the top integrating the decisions, lower level managers were making decisions that were aligned to their functional areas of business.
What are the reasons for ERP implementation failure? ›
The causes of ERP failure include
- Poor software fit /inaccurate requirements.
- Business leadership is not committed to the implementation.
- Insufficient team resources.
- Lack of accountability to make timely, high quality decisions.
- Lack of investment in change management.
- Insufficient training/support.
- Insufficient funding.
The failure factors in implementing an enterprise resource planning (ERP) solution include poorly defined system requirements, a lack of data hygiene, unrealistic project timelines, fluctuating budgets, a lack of executive buy-in, poor employee training and incomplete ERP testing before the system is officially ...
What ERP does Hershey use? ›
3 In April 2005, Hershey Foods Corporation was renamed as The Hershey Company. pioneer of enterprise resource planning with its main product SAP ERP.
Why did Nike fail with ERP implementation? ›
The failure of Nike's ERP system was due to a number of factors, including: Poor planning: Nike did not adequately plan for the implementation of the new system. This led to a number of problems, such as inadequate training for employees and insufficient testing of the system.
Why do 75% of all ERP projects fail? ›
One of the leading causes of ERP project failure is inadequate planning and strategy. Rushing into implementation without a clear roadmap can lead to budget overruns, scope creep, and ultimately, project failure.
How was Hershey impacted by a failed technology implementation by SAPS? ›
The failure caused substantial disruptions in Hershey's supply chain, leading to missed shipments, lost sales, and a decrease in market share, ultimately resulting in hundreds of millions of dollars in lost revenue and damage to the company's reputation.
Inadequate Training: Insufficient training is also one of the major reasons of ERP implementation failures. Inadequate training leads to poor and ineffective use of the ERP system.
What are the three key issues which determine the success of ERP implementation? ›
For a successful implementation, you need structured project management, full transparency, and buy-in from users at every level of the organization.
What are the five biggest challenges for ERP system implementations? ›
ERP systems are crucial for enhancing operational efficiency, improving data accuracy, and facilitating informed decision-making.
- Implementation. ...
- Customization and Flexibility. ...
- Data Quality and Integration: The Library of Efficiency. ...
- User Adoption and Training: Navigating the ERP Voyage. ...
- Cost Overruns and ROI Delays.
Cost and complexity
ERP systems can be expensive, and the cost of implementing an ERP system can be significant - especially for small and medium-sized businesses. Alongside cost, ERP systems are often complex, and require specialised knowledge and expertise to implement and maintain properly.
Which is an issue of ERP implementation? ›
Inadequate data integration is the most common ERP implementation challenge, accounting for up to one-fifth of the most common problems, experts quote. Poor data migration can lead to erroneous data and raise issues updating the live inventory.
What ERP system does Hershey use? ›
The organisation decided to replace its legacy IT systems with an integrated ERP environment. In all, the platform consisted of three main components: SAP R/3 ERP software. Supply chain management (SCM) software.
Why does the implementation process fail? ›
Adequate and Competent Resources. Another reason why implementations fail is that adequate and competent resources are not assigned to the project. Successful implementation requires a high level of planning and precision to be successful. As such, not having the right resources could mean its downfall.
