A Case Study on Hershey's ERP Implementation Failure: The Importance of Testing and Scheduling Imagine waking up one day to find out that your company's supply chain has ground to a halt, making it impossible to fulfill $100 million worth of orders. For Hershey's confectionary manufacturing and distribution operations, this nightmare came true in 1999. Read this case study on Hershey's ERP implementation failure. Learn about the importance of ERP system testing and project scheduling. OVERVIEW - HERSHEY'S ERP IMPLEMENTATION the bulk of its Halloween and Christmas orders FAILURE To meet the aggressive scheduling demands. When it cutover to its $112-milion IT systems, Hershey's implementation team had to cut Hershey's worst-case scenarios became reality. comers on critical systems testing phases. Business process and systems issues caused When the systems went live in July of 1999. operational paralysis, leading to a 19-percent unforeseen issues prevented orders from drop in quarterly profits and an eight-percent flowing through the systems. As a result, decine in stock price. In the case study Hershey's was incapable of processing $100 analysis that follows, I use Hershey's ERP million worth of Kiss and Jolly Rancher orders, implementation failure as a case study to offer even though it had most of the inventory in advice on how effective ERP system testing stock and project scheduling can mitigate a This is not one of those "hindsight is 20-20" company's exposure to fallure risks and related cases. A reasonably prudent implementer in damages. Hershey's position would never have permitted failure and exposure to damages were simply KEY FACTS too great. Unfortunately, too few companies Here are the relevant facts: In 1996, Hershey's have learned from Hershey's mistakes. For our set out to upgrade its patchwork of legacy IT firm, it feels like Groundhog Day every time we systems into an integrated ERP environment. It are retained to rescue a failed or failing ERP chose SAP's R/3 ERP software, Manugistic's project. In an effort to help companies supply chain management (SCM) software and implement ERP correctly - the first time - I have Seibel's customer relationship management decided to rehash this old Hershey's case. The (CRM) software. Despite a recommended two key lessons I describe below relate to implementation time of 48 months. Hershey's systems testing and project scheduling. demanded a 30 -month turnaround so that it could roll out the systems before Y2K. Based on these scheduling demands, cutover was planned for July of 1999. This go-live scheduling coincided with Hershey's busiest periods - the time during which it would receive ERP SYSTEMS TESTING The third and final testing phase - the Hershey's implementation team made the Integrated Pilot Phase - is the most realistic of cardinal mistake of sacrificing systems testing the tests. In this "day-in-the-life" piloting phase, for the sake of expediency. As a result, critical the users test the system to make sure that all data, process and systems integration issues of the various modules work together as may have remained undetected until it was too intended. late. With respect to the Hershey's case, many Testing phases are safety nets that should authors have criticized the company's decision never be compromised. If testing sets back the to roll out all three systems concurrently, using launch date, so be it. The potential a "big bang" implementation approach. In my consequences of skimping on testing outweigh view. Hershey's implementation would have the benefits of keeping to a longer schedule. In failed regardless of the approach. Failure was terms of appropriate testing, our firm advocates rooted in shortcuts relating to systems testing. a methodical simulation of realistic operating data migration and/or training, and not in the conditions. The more realistic the testing implementation approach. Had Hershey's put scenarios, the more likely it is that critical issues the systems through appropriate testing, it will be discovered before cutover. could have mitigated significant failure risks. For our clients, we generally perform three distinct rounds of testing, each building to a more realistic simulation of the client's operating environment. Successful test completion is a prerequisite to moving onto to the next testing implementation mistake - this time in relation to phase. project timing. It first tried to squeeze a complex By timing cutover during slow business periods, of the most important lessons are: test the the company gives itself more slack time to iron_business processes and systems using a out systems kinks. It also gives employees methodology designed to simulate realistic more time to learn the new business processes operating scenarios; and pay close attention to and systems. In many cases, we advise our ERP scheduling. By following these bits of clients to reduce incoming orders during the advice, your company will mitigate failure risks cutover period and put itself in a position to drive ERP success. In closing, any company implementing or planning to implement ERP can take away Contact us to learn more. valuable lessons from the Hershey's case. Two Read the Article Case: ERP Implementation at Hershey. Then in a Word document answer the following questions: 1. The undertaking of which activity and by which company is discussed in this article? (5pts) 2. Describe in your own words the sequence of events leading up to the implementation failure that is discussed in this article. (5pts) 3. The authors use the words "Hershey's set out to upgrade its patchwork of legacy IT systems into an integrated ERP environment". What is a legacy IT system? What is an integrated ERP environment? ( 5 pis) 4. According to the author, what were the two main reasons for this failure? Discuss each reason in about three to four sentences using your own words. (10 pts) 5. Describe the business fallout from this implementation failure in about two to three complete sentences. (5 pis)