Compiled By: Anubhav Sood 139278056 Kapil Saini 139278009 Kaustubh Kirti 139278054 Rakesh Devadas 139278069 Rohan

Shukla 139278059

Milton S. Hershey founded it in 1894 as Hershey Chocolate Company.. By 1895, Hershey Chocolate Company was manufacturing more than 114 different varieties of chocolates. By 1960s, the company became one of the renowned chocolate producers in US. Moreover, to achieve its target the company needed to sell huge quantities of its products that were only possible with highly efficient logistics and supply chain systems. During that period of early 1990s, Hershey was using their legacy systems to support their business processes such as order proceeding and shipment. In order to make their business processes more efficient and managed; the company needed a different approach. Therefore, it decided to implement a new system called Enterprise Resource Planning (ERP) system.

Unisys Mainframe System The Hershey System consists of one or more mainframe units In addition to the mainframe unit, the Hershey System may consist of one or more satellite units Disadvantages Unisys Mainframe System: Looming Y2K Problem Repairing Legacy Systems is not Cost-Effective Poor documentation of programs in Legacy Systems COBOL language a relic of the Sixties High maintenance and usage costs Problem of Silos will persist Lack of integration of different systems

Suite of integrated applications, used to store and manage data from every stage of business ERP provides an integrated real-time view of core business processes, using common databases maintained by a database management system ERP facilitates information flow between all business functions, and manages connections to outside stakeholders

Pros By keeping a company's internal business process running smoothly, ERP can lead to better outputs that

benefit the company ERP supports upper level management, providing critical decision making information ERP makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the businessinternally and externally A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems

ERP Cons Customization is problematic Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities ERP cost more than less integrated or less comprehensive solutions. High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses. Overcoming resistance to sharing sensitive information between departments can divert management attention. Integration of truly independent businesses can create unnecessary dependencies. Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM). Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money (which we will se in the case)

Hersheys ERP implementation Life Cycle

Pre-selection Process Package Evaluation Project Planning

Gap Analysis
Implementation Team Training

Reengineering

Configuration

Testing

End- user Training

Going Live Post implementation Phase

Pre evaluation screening Decision for perfect package Number of ERP vendors Screening eliminates the packages that are not at all suitable for the companys business processes. Selection is done on best few package available.

Package Evaluation

Project planning

Package is selected on the basis of Designs the implementation different parameter. process. Test and certify the package and also check the coordination with different department Selected package will determine the success or failure of the project. Resources are identified. Implementation team is selected and task allocated. Special arrangement for contingencies.

Package must be user friendly

Regular up gradation should available. Cost

Gap analysis Most crucial phase. Process through which company can create a model of where they are standing now and where they want to go. Model help the company to cover the functional gap

Reengineering

Team Training

Implementation is going to Takes place along with the involve a significant change in process of implementation. number of employees and their job responsibilities. Company trains its employees to implement and later, run the Process become more automated system. and efficient. Employee become self sufficient to implement the software after the vendors and consultant have left

Testing
This phase is performed to find the weak link so that it can be rectified before its implementation

Going Live
The work is complete, data conversion is done, databases are up and running, the configuration is complete & testing is done. The system is officially proclaimed. Once the system is live the old system is removed

End User Training

The employee who is going to use the system are identified and trained.

Post Implementation
This is the maintenance phase. Employees who are trained enough to handle problems those crops up time to time. The post implementation will need a different set of roles and skills than those with less integrated kind of systems. An organization can get the maximum value of these inputs if it successfully adopts and effectively uses the system.

The company was going to face the problems of Y2K bug by 2000 Growing demand from retailers for client/server environment Retailers wanted to Hershey's to data share data about product deliveries Retailers wanted to maintain optimum inventory levels and reduce cost (low inventory levels, less holding cost and better service)
Implementation was made to keep customer in mind 1) enhance our competitiveness 2) enhance customer service 3) system to manage change

Project Enterprise 21 was launched to bring about the above mentioned changes.

Objective Modernisation of hardware and software used by the company Goals: - Upgrade and standardize the hardware - Shift to client/server environment from existing mainframe based environment - Move to TCP/IP network The new ERP software was expected to help Hershey reorganise its business process 1) SAP AGs R/3 Enterprise Resource Planning finance, purchasing, material management, warehousing, order processing and billing 2) Manugistics transport management, production, forecasting and scheduling 3) Siebel- managing customer relationship, pricing module and tracking products. The three system was integrated by IBM Global Services. Project management Cost US $110million

1.

Big Bang Transition Strategy Installation of ERP systems of all modules happens across the entire organization at once All the business functions across the entire enterprise are concurrently transferred to the new legacy system over a period of few days It promises to reduce the integration cost in the condition of thorough and careful execution One of the drawback being it consumes too many resources to support the go-live of the ERP system

2. Phased Transition Strategy Autonomous modules of ERP systems are installed in each unit while integration of ERP modules is done at a later stage of the project Most commonly used method of ERP implementation where each business unit may have its own instances of ERP and database 3. Parallel Transition Strategy It keeps both the inheritance system and the new ERP system active concurrently for a length of time Advantageous because the industrys business process will not break if the new ERP system breakdowns

4. Process Line Transition Strategy Similar product lines are transferred from inheritance system to the new ERP system one after the other This step-by-step success helps to build industrial faith in the new ERP system thereby increasing its overall prospect of being successful 5. Hybrid Transition Strategy Combination of any of the implementation strategy like process line, parallel and phasing implementation strategy Flexible in adapting to the specific needs of the situation Industries can exclusively adjust implementations for their needs

Finish date of implementation was kept at April 1999 (offseason for confectionary market) Hershey installed bar coding system across its products and plants to reduce production cost and track goods flow January 1999 financials, material management, purchasing and warehousing have been implemented Other SAP modules and Manugistics modules were behind schedule Post April orders started filling in Hersheys transferred from a phased approach to Big Bang approach to meet Halloween orders By July orders were twelve days late and by August orders were 15 days late There were problems in order entry , processing, fulfilment and inventory. In spite of having high inventory at warehouse the company was facing issues.

What Hersheys did was since it was not able to meet deadlines it shifted to Big Bang approach It could not meet orders and the market share and the goods availability was being affected

1. Idealistic Anticipations Hershey Foods Corporation assumed the new system to perform excellent and made idealistic expectations. The company must have miscalculated the time, resources and other key factors to implement the new system. The management of Hersheys should have realized that the new system is complicated and tricky. 2. Poor Management In order to implement ERP system in a perfect approach, the management team should be properly familiar with scope and dimension of an ERP implementation. Hersheys did not have a CIO position and nobody to overlook the implementation Industry analysts of Hershey Foods Corporation concurred that problems in project management were to blame for the debacle (Gupta and Perepu 2008). 3. Wrong Timing Hershey Foods Corporation implemented the ERP system at the time of peak season. So the company did not have enough time to resolve the errors that were produced during the implementation process. If the company planned to implement the ERP system during normal season and before Halloween then they would have been able to manage time to solve the problems concerned with the new system.

4. Big Bang Approach Unlike phased approach, the big bang approach merges all the system together for quick processing without any testing. Whereas, phased approach helps in identifying exact mistakes by performing every task thoroughly. 5. Compatibility Issues The employees were unable to enter data in the new system and the company was facing problems with the flow of data from the old system to the new one. This clarifies that the mismatch of some technical components were causing significant blunders in the business processes of Hershey Foods Corporation. 6. Insufficient Training and Knowledge In the case of Hershey Foods Corporation, the personnel performing the implementation task might not have been trained properly. Since the proper training and knowledge were inadequate, the company failed to recognize errors and bugs appeared during the implementation process. Also, the employees were working under a lot of pressure since it occurred during the peak season of Halloween.

7. Lack of Implementation and Integration Strategy Three parallel project implementation instead of single focused implementation. This approach lead to confusion and failed implementation Also, top management failed to correctly gauge the scope of the project

Case Study - Big Bang Strategy Failure

Nike Says Profit Woes Due To IT
Philip Knight, Nikes Chairman and CEO, blamed the complications arising from the impact of implementing our new demand-and-supply planning systems and processes for the shortages of some products and excess amounts of others as well as late deliveries.

Result: Profits Fell Short of Estimate by 33%

I guess my immediate reaction is: This is what we get for $400 million?
Source: Computerworld, March 5, 2001

L. Mohan

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Some Causes for the Nike Problem

BIG Global Supply-Chain Project Suppliers in Indonesia, Malaysia, China. A Real Challenge High degree of Customization i2s Supply Chain application had to be linked with SAPs ERP and Siebels CRM systems Wide range of footwear products in a multitude of styles and sizes Complexity in mapping the supply-chain software to the companys internal business processes
Source: Computerworld, March 5, 2001
L. Mohan 28

A Success Story: Asian Paints IT Funded Global Acquisitions

$20M investment in IT Benefit:
$80M operating cash flow generated over 3 years
Implemented SCM from i2 before ERP from SAP Inventory Turns: 11.6 in 2002 vs. 6.5 in 1998

Source: Computerworld, March 5, 2001

L. Mohan 29

---------SUCCESS

--------- FAILURE

@ ASIAN PAINTS Restricted to India Decided to install SCM software before ERP software Phased First SCM, then ERP, last CRM Restructured in 1998, before SCM Project only modest customization needed in the software i2 played a proactive role suggested implementing smaller modules one at a time.

FACTOR Number of locations Top management insight

@ NIKE Suppliers across the globe Did not recognize the complexity of a global Supply Chain Project Three packages simultaneously Nike IT staff spread thin Heavy customization of i2 software to fit Nikes business processes no pilot test due to aggressive time-table i2 did not adhere to what it did usually it adopted a bigbang rollout approach

Implementation strategy

Organization issues

i2s role