Facing major issues from a failed tech implementation of SAP’s R/3 ERP at Hershey. Significant delays in order processing and distribution messed up the company’s supply chain. I need insights on the exact impacts and how they recovered. Can anyone help?
Hershey’s implementation of SAP R/3 ERP was a classic case of what can go wrong if a project is not planned and executed correctly. They faced a multitude of issues that disrupted their operations profoundly.
To put it simply, Hershey’s attempted a ‘big bang’ implementation, integrating ERP with CRM (Customer Relationship Management) and SCM (Supply Chain Management) systems all at once. This was a massive, risky overhaul which was further complicated by their decision to carry out this implementation during their busiest season – the Halloween candy rush.
Immediate Impacts on Supply Chain
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Order Processing Delays: The ERP system was meant to streamline operations, but instead, it led to significant delays in order processing. Retailers experienced backlogs and failed order fulfillment. Orders that should have been processed in minutes were hanging for hours or even days.
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Distribution Failures: Distribution was another area hard hit. Trucks weren’t getting dispatched on time, and there were even situations where the system failed to correctly allocate inventory to shipments. This resulted in widespread distribution errors.
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Inventory Management: Incorrect inventory data led to either overstock or stockouts. Since the ERP system was not correctly integrated with inventory management, Hershey ended up with either too much or too little stock, further compounding their supply chain issues.
Financial Repercussions
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Revenue Loss: Halloween is one of the most critical periods for candy sales. The disruption caused by the ERP failure meant missing out on critical sales targets, and Hershey reported a shortfall of about $100 million in revenue.
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Market Share: As a direct consequence of their inability to fulfill orders, Hershey lost market share to competitors who were able to meet demand. In such a competitive market, missed opportunities had long-term repercussions.
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Stock Price: The issues took a toll on investor confidence, and Hershey’s stock price took a significant hit. This not only reflected immediate financial loss but long-term impacts on its market valuation.
Operational Disruptions
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Employee Productivity: Employees struggled with the new system because there was insufficient time for proper training and adjustment. The lack of user-friendliness and unfamiliarity with the new processes led to reduced productivity.
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Customer Relations: Retailers and distributors were left frustrated. Orders were wrong, late, or missing entirely, leading to a breakdown in customer relations. For a brand like Hershey, which relies heavily on retailer partnerships, this was a big setback.
Key Learnings for Future Implementations:
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Phased Rollout Over ‘Big Bang’: Instead of a widescale overhaul, a phased approach could have helped identify issues incrementally and allowed time for troubleshooting without disrupting the entire system.
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Pilot Testing: Before full implementation, pilot testing in smaller, controlled environments could have highlighted critical issues early on.
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Time Management: The implementation was scheduled during a peak business period, which was a strategic blunder. Business processes are naturally stretched during high demand times, and adding a tech overhaul added to the chaos. Implementing during a non-peak period would have minimized the impact.
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Adequate Training: Proper and comprehensive training is crucial. Many issues arose because employees were not well-versed with the new system, leading to mistakes and inefficiencies.
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Involving Stakeholders: Ensuring that all stakeholders, including key business users, are involved in every step of the process is essential. Their practical insights can preemptively address potential real-world issues that may not be apparent to the IT teams.
SAP R/3 ERP systems are robust when implemented correctly. However, Hershey’s experience highlights the critical importance of careful planning, adequate testing, stakeholder involvement, and choosing the right time for such a major transition. Without these, even the best of systems can lead to disastrous outcomes.
@byteguru, I hear ya, but I think the problem was even deeper rooted. Hershey’s failure wasn’t just about choosing a ‘big bang’ approach or poor timing. This was bad project management at its core. Anyone with half a brain could tell trying to run a major tech integration during Halloween season was asking for disaster.
Worse Than Disorganized Chaos
Straight up, they didn’t just mess up on the supply chain side. Their sales lost a ton of credibility. Retailers were left with empty shelves and raging customers, which has a trickle-down effect: when big stores lose trust, it’s a nightmare to win it back.
Financial Fallout Isn’t a Surprise
It’s obvious - a company botches a major season rollout and profits tank. $100 million is catastrophic but preventable. Let’s face it: Hershey treating their ERP upgrade like some weekend DIY was bound to hit wall street like a lead balloon.
Training Isn’t a Magic Wand
While training is essential (duh), people often overlook the real issue - the software wasn’t even working properly out of the gate. You can train employees all you want, but if the system itself is broken, does training magically fix it? I don’t think so.
Competitors Had a Field Day
Competitors like Mars and Nestle probably had a good laugh. Hershey’s blunder gave them a free pass to snatch up market share. I’d argue the long-term impact is more brutal than the short-term financial losses. Consumer trust is hard to regain.
Not Just ‘Pilot Testing’ and 'Phased Rollout’
Yes, those are decent recommendations, but how about properly vetting the software and understanding your business needs? It seems like they didn’t even do the basics right. Even an extended pilot wouldn’t necessarily catch systemic flaws if the entire planning methodology is flawed.
Real Takeaway Lessons
- Understand Your Limits: Hershey tried to do something beyond their capabilities. Know when and where to get external expertise.
- Check Competitors: Instead of just playing it safe, why didn’t they observe how competitors handle similar implementations?
- ERP System Alternatives: In hindsight, maybe SAP R/3 wasn’t the best match. They could’ve looked into Oracle ERP, JD Edwards, or even more modern solutions with agile frameworks.
It’s not just about the software, but how you integrate it into your company culture and systems. Hershey’s failure was so colossal that it should be a corporate case study on what NOT to do in ERP implementations.
Oh boy, the Hershey fiasco! As a comparison reviewer, I’d say this ERP rollout failure really puts a spotlight on the importance of methodical planning and execution. Hershey’s experience seems like a cautionary tale that mirrors some of the worst ERP nightmares out there.
ERP Choices Matter
First up, let’s talk alternatives. Sure, SAP R/3 is renowned, but not all tools fit every company. Hershey probably should’ve done a more thorough comparison with other ERP systems like Oracle E-Business Suite or Microsoft Dynamics. These alternatives could potentially offer more gradual implementation processes, lessening the risk inherent to a full-scale deployment.
Misaligned Business Strategy
Implementing an ERP system shouldn’t feel like Jackson Pollock painting – chaotic and all over the place. By choosing to go full throttle during Halloween, Hershey failed to align its tech upgrade with its business cycles. Critical lesson: always consider the timing and impact on the busiest business periods!
Training vs. System Stability
Totally with @byteguru on the training. Training is crucial, but it’s almost futile if the system itself isn’t fully tested and stable. It’s like giving someone a race car to drive without ensuring the engine works. If the ERP system is full of bugs, no amount of employee training will save the day.
Customer & Retailer Trust
Losing retailer trust is like depriving your car of oil – it might keep running for a while, but eventually, it’ll seize up. Hershey’s distribution failures and order processing delays were catastrophic on retail relations. Competitors, as @techchizkid alluded to, were licking their chops to grab that market share.
Deeper Rooted Issues
Beyond ERP selection and implementation strategy, this was undoubtedly a failure in robust project management. If Hershey had taken incremental steps or executed a comprehensive pilot program, the scale of the disaster would likely have been mitigated.
Real Takeaways:
- ERP Vetting: Invest substantial time in choosing the right ERP and consider alternatives.
- Strategic Rollout: Implement incrementally, specifically targeting non-peak business periods.
- Stakeholder Collaboration: Active involvement of stakeholders, right from initial planning to execution and post-implementation.
- Risk Management: Have a robust risk mitigation plan to foresee and manage potential failures.
- Competitor Analysis: Look more closely at how your competitors are handling similar implementations – valuable lessons might be hidden there.
To be honest, it’s a combination of these elements that could steer future implementations in a more successful direction. Hershey’s story should be a must-read for any company embarking on an ERP journey.