Hershey's ERP System Implementation: Goals, Customization & Change

This case study examines Hershey's Enterprise Resource Planning (ERP) system implementation, focusing on the company's key goals, the pros and cons of system customization, and change management strategies. Hershey aimed to enhance customer service, gain a competitive advantage, and establish a reliable logistics system to manage seasonal demands by implementing an ERP system. The company sought to replace its outdated legacy systems with SAP R3 to improve forecasting, transportation management, and supplier relationships. While customizing the system offered potential benefits like integrating business functions and automating transactions, it also posed risks such as high costs, implementation challenges, and the need for extensive employee training. The case study highlights how Hershey's failure to adequately manage change during the ERP implementation, particularly regarding timing, supply chain considerations, and employee training, led to significant disruptions and losses. Ultimately, the analysis suggests that Hershey should have prioritized thorough planning, realistic expectations, and comprehensive training to ensure a successful ERP implementation.

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What are the key goals Hershey wanted to achieve using an ERP system?
Hershey wanted to achieve some key goals by implementing the ERP system. First of
all, the company wanted to achieve enhanced customer service by redesigning their entire
business process to keep the customer in mind. The main goal was to attain competitive
advantage.
Moreover, for catering to a huge number of seasonal requirements, the company
needed to set up a reliable and efficient logistics system which was only possible with the
implementation of an Enterprise Resource planning or ERP system. With the help of the ERP
system, Hershey wanted to achieve efficient transportation management, scheduling,
forecasting and production. Manugistics provided the required software to attain these goals.
Later Siebel provided a software to track the marketing effectiveness of the company and
how Hershey was managing customer relations (Ptak and Schragenheim 2016).
Hershey already had a huge network of nineteen manufacturing plants. It had over twenty co
packers and 8 contract manufacturers. Initially the company used legacy systems.
With the introduction of Y2K bug, it was evident for the company that the legacy
system was outdated and needed to be updated. Using the ERP system, the company wanted
to move to a client- server environment (Chauhan 2014). One of the reasons for adopting an
ERP system was that Hershey did not want to repeat the same mistake they did with legacy
system and wanted to tackle the Y2K issue. Hershey wanted to replace the existing legacy
system with SAP R3. It needed the ERP system so that Hershey will be able to properly
forecast production and manage the transportation efficiently.
With the new system, Hershey wanted to improve the delivery process to their
suppliers. This will have improved their supplier relationship indirectly benefitting the
company in the long run. Moreover, the company wanted to standardize and upgrade the

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business processes. Hershey also wanted to make the customer service efficient which could
be able to handle changing customer needs (Kapp, Latham and Ford-Latham 2016). The new
ERP system would have allowed Hershey to improve their inventory accuracy and reduce the
order cycle times. This would have resulted in low inventory costs benefitting the company.
Finally, Hershey wanted to achieve proper execution of its business strategy to emphasize on
its market candy business.
Discuss the pros and cons to customising the system.
There are several advantages and disadvantages of customising the system.
Customizing the system will help Hershey to integrate all the business functions of separate
departments into a single unit. The company could have improve the organisational levels
present in the business and could have managed the business processes efficiently. Moreover,
the customizing could have given Hershey an advantage of managing and tracking all the
manufacturing activities from a single hub. The customized system would have given
Hershey the benefit of automating the business transactions making the entire process more
efficient (Hwang and Min 2013). It would have allowed the company to support all types of
business process flows, practices and processes. Moreover, customizing the system would
have allowed the company to better manage the accounting processes and predict forecasting,
planning and reporting. It would have also allowed the employees to enjoy a better user
interface unlike the previous systems which used legacy software. The customized system
would have allowed Hersheys to check different processes efficiently such as sales and
distribution, material management, HRM, CRM and accounting (Chung, Ahmad and Tang
2015). Customization of the system would have allowed the company to better tracker sales
order and forecast future profits and sales. The customized system would have also allowed

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the company to make the data more secure by disallowing unauthorized users from accessing
confidential data.
Customizing the system will be highly expensive for the company as the equipments
are hard to implement and purchase. The new customized system has the added risk of not
able to adjust with the business procedures of the company (which is what precisely
happened with Hershey). A new customized system would require extra pair of hands to
manage and maintain. Moreover, the employees need to be trained for understanding the new
customized system and the procedure can be time consuming as well as expensive.
Customizing the entire system for a business process is often time consuming and takes up to
1 or 2 years to implement properly. The cost savings/ payback would not be realized
immediately after implementation which makes the effectivity of the customized system hard
to determine (Samara 2015). A new customized system often has added costs such as WAN
link upgradation. Migrating the existing data from an old system (legacy) to the new
customized system can take up a lot of resource and time of the company.
How should Hershey have handled change management during ERP implementation?
During the ERP implementation, Hershey could have analysed the peak sale history
of the company and should have planned the implementation process in the least productive
times of the company. The company instead planned the implementation process in the peak
times overloading the workers and increasing complications which resulted in the loss of
sales and trust from prospective consumers. The implementation timing of the whole system
was wrong. Secondly, the management team of the company should have considered the
function of the supply chain management (Efthymiou 2015). Failure to do so resulted in
issues in internal as well as external processes of shipping, order fulfilment and production.

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The management team should have checked the current balance of the company and
accordingly planned the implementation phase. Hershey should have invested their time on
accurate planning of the ERP implementation. The company should have handled the
implementation by properly training the staffs, making realistic expectations, providing
options for timeline flexibility and managing corporate culture (Zhao and Wang 2013).
Inadequate training of the management was one reason why Hershey failed in ERP
implementation. The company should have invested their time in streamlining the external
and internal processes by properly training their workforce.

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References
Chauhan, J.S., 2014. ERP IMPLEMENTATION FAILURES: A CASE OF SMALL AND
MEDIUM ENTERPRISES.
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in enterprise systems implementation. International Journal of Business Information
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Efthymiou, I., 2015. CASE STUDY ON FAILED IMPLEMENTATION OF ERP
SYSTEMS.
Hwang, W. and Min, H., 2013. Assessing the impact of ERP on supplier
performance. Industrial Management & Data Systems, 113(7), pp.1025-1047.
Kapp, K.M., Latham, W.F. and Ford-Latham, H., 2016. Integrated learning for ERP success:
A learning requirements planning approach. CRC press.
Ptak, C.A. and Schragenheim, E., 2016. ERP: tools, techniques, and applications for
integrating the supply chain. Crc Press.
Samara, T., 2015. ERP and Information Systems: Integration Or Disintegration. John Wiley
& Sons.
Zhao, Z.H. and Wang, Y.J., 2013. Analysis of Cause and Solution to Blocking in Domestic
Enterprises ERP Implementation. In Applied Mechanics and Materials (Vol. 411, pp. 2447-
2450). Trans Tech Publications.