ERP Implementation Failure at Hershey Food Corporation: A Case Study

This case study examines the ERP implementation failure at Hershey Food Corporation in 1999. The project, intended to modernize the company's operations, faced significant challenges including a rushed timeline, simultaneous implementation of multiple technologies, and the Big-Bang approach. These factors led to critical bugs, operational issues, and substantial financial losses, including a decline in market share and revenue. The study assesses the reasons for the project's failure, including poor planning and testing, and the resulting benefits of the failure, such as the company's revised management strategy and understanding of the importance of planning and testing. The failure resulted in decreased customer engagement, damage to brand value, and competitive advantages for rivals, but Hershey's rebounded successfully with a new ERP system. The case highlights the importance of careful planning, testing, and management in ERP implementations, illustrating the potential consequences of poor decision-making in enterprise resource planning projects.

ERP Implementation Failure at Hershey Food Corporation
Table of Contents
ERP Implementation Failure at Hershey Food Corporation..................................................................2
Introduction.......................................................................................................................................2
Background Summary.......................................................................................................................2
Assessment – Reasons for Failure.....................................................................................................2
Assessment – Resulting Benefits.......................................................................................................3
Conclusion.........................................................................................................................................3
References.............................................................................................................................................4
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ERP Implementation Failure at Hershey Food Corporation
ERP Implementation Failure at Hershey Food Corporation
Introduction
Hershey’s Food Corporation is the US manufacturer of chocolates and sugar confectionary.
There have been numerous success and failure stories related with Enterprise Resource
Planning (ERP) projects. One of the high-profile failure in the history is Hershey’s adoption
of the business in the year 1999.
Background Summary
ERP platform was poorly adopted by Hershey that made it unable to cater the requirement of
$100 million of order of the products. As a result, the market share of the company went
down. The annual revenue earned by the company in 1999 was US$ 150 million lesser than
the revenue earned in 1998 (Ukessays, 2015).
Assessment – Reasons for Failure
There are a few reasons that can be concerned as the prime factors in the failure of the
project. The recommended deployment period for the project was 48 months; however, senior
management insisted to restrict the time period to 30 months (Accenterp, 2015). This led to
rushed deployment and it also coincided with the busiest period of the company which led to
emergence of implementation and deployment issues. The company also did not focus upon a
single point of focus. It rather decided to launch three varied resource planning technologies
simultaneously. This brought many conflicts as an outcome. The company wished to launch
the project before Y2K that made it mandatory to carry out conversion processes in the
busiest sales and distribution period of the company. The Big-bang implementation approach
proved to be a primary factor behind the project failure. Also, ERP systems could not be
properly tested due to this approach that led to the presence of critical and major bugs in the
final release (Pemeco, 2011).
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ERP Implementation Failure at Hershey Food Corporation
Assessment – Resulting Benefits
ERP is one of the most widely used technologies in the present time; however, it was a fairly
new technology back in 1999. It was a big deal to suffer such huge losses during that time.
However, the project failure came up as a significant lesson for the company. There were
multiple incorrect managerial decisions that led to the failure of the project along with
implementation and operational issues (Koch, 2002). The company revised its management
strategy and approach to come up as a winner in the market. The project also allowed the
company to understand the significance of planning and testing phases in the business tasks
and activities.
Conclusion
Apart from the monetary losses and fall in the market shares, the company also had to face
some extremely adverse implications. The level of customer engagement and customer trust
also went down and it took a lot of time for the company to re-establish its customer base.
The media covered the story and the brand value of the company also fell down. Due to the
project failure, the competitors of the company gained a competitive advantage in the market.
Hershey’s rebounded quickly and came back strongly in September 2002 with the
implementation of mySAP.com. The ERP systems allowed the employees of the company to
improve their productivity which led to the enhancement of the performance of the
organization as a whole. The company entered in the phase of continuous improvement
mode.
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ERP Implementation Failure at Hershey Food Corporation
References
Accenterp. (2015). What we can learn from the 1999 Hershey's ERP failure. Accent ERP.
Retrieved 12 November 2017, from http://www.accenterp.com/erp/what-we-can-learn-
from-the-1999-hersheys-erp-failure/
Koch, C. (2002). Supply Chain: Hershey's Bittersweet Lesson. CIO. Retrieved 12 November
2017, from https://www.cio.com/article/2440386/supply-chain-management/supply-
chain---hershey-s-bittersweet-lesson.html
Pemeco. (2011). A Case Study on Hershey's ERP Implementation Failure– Driving
successful enterprise software projects. Pemeco.com. Retrieved 12 November 2017,
from https://www.pemeco.com/a-case-study-on-hersheys-erp-implementation-failure-
the-importance-of-testing-and-scheduling/
Ukessays. (2015). Resource Planning At Hershey Foods Corporation. UKEssays. Retrieved
12 November 2017, from
https://www.ukessays.com/essays/information-technology/enterprise-resource-planning-
at-hershey-foods-corporation-information-technology-essay.php
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