Project Management: A Case Study of Failed Implementation of ERP System in Hershey

Running Head: PROJECT MANAGEMENT 1
Project Management

Project Management 2
Executive Summary
The present report is focused on the case study of failed implementation of ERP system in
Hershey. The company failed to implement ERP system. There were several reasons for the
failure in the implementation process. Due to the pressure of the higher management, project
manager rushed the whole process. The project team ignored the testing phase; therefore, there
were several issues at the moment of launching. Other than that, the organization obtained three
different products, which were needed to be launched simultaneously. There were also delay
issues in some of the products, which led to the failure. The upper management of the company
was not able to appreciate the project scope. The company did not have knowledge of
implementing big software and the mass level of implementation. Therefore, they did not have
knowledge as well as the infrastructure for the implementation. The deadlines set for the project
was also impractical, and there was no buffer in the whole process. It resulted in the failure of the
system.

Project Management 3
Table of Contents
Table of Contents.............................................................................................................................3
Introduction to the Project...............................................................................................................4
Range of Control Systems used including cost, schedule, quality, and scope................................6
Reasons for the cost and time overrun in the project.....................................................................10
The Responsibility of the Project Execution team for the incurred time and cost overruns.........11
Relationship between the identified problems and the needs and the influence of the stakeholders
.......................................................................................................................................................13
The role of the project management team to control the project and its stakeholders to increase
the chances of successful delivery.................................................................................................14
Conclusion.....................................................................................................................................16
References......................................................................................................................................17

Project Management 4
Introduction to the Project
The ERP failure of Hershey was one of the biggest failures in the history of ERP system
implementation in country. It was the worst case scenario for the company, as the company $112
million invested by the company were not able to handle the systems and the operations in the
country. It resulted in 19 percent drop in the quarterly profits of the company. Along with it,
there as eight percent decline in the stock price (Chen, 2001). Even after the implementation of
the system, there were issues in the manufacturing and the distribution operations of the
company. In 1996, the company proposed to upgrade its IT system and implement a new ERP
system in the organization. The company chose SAP’s R/3 ERP software, supply chain
management software, and customer relationship management software. The project
management team proposed that the total turn-around time of the implementation of the software
will be 48 months.
However, the company pressurized to deploy the software in 30 months, so that the software can
be rolled-out before 21st century. As there were strong scheduling demands, cutover was planned
for the system. However, the go-live scheduling of the system collided with the busiest period of
the organization. It was the end of the year, and the company received bulk orders at the time of
Christmas and Halloween. Due to the limited time for the development of the software, the
project management team had to cut the testing phase of the organization (Gargeya & Brady,
2005). The ERP system of the organization went live on the July, 1999; however, it was
unsuccessful right from the implementation. There were some unforeseen issues, which
prevented the system to process the upcoming orders to the organization (Barker & Frolick,