Hershey’s Chocolate is one of the leading chocolate manufacturers across the world. The company was in need of a reliable and efficient logistics system to cater for large numbers of seasonal requirements. The company relied on ‘legacy systems’, it had a network of nineteen manufacturing plants, eight contract manufacturers and more than twenty co-packers. However this system was not performing so they decided to replace those systems and move to a client/server environment.
The system expected to create the following benefits: 1. Fine tune deliveries to suppliers. 2.Upgrade companies business processes. 3. Reduce order cycle times and boost inventory accuracy. 4.Reduce inventory costs.
However, this was the actual scenario that occurred: Hershey’s were unable to deliver $100 million worth of ‘Kisses’ and ‘Jolly Ranchers’ for Halloween 1999. The stock price decreased to 35%. Earnings had fallen by 18%. Order fulfilment time doubled from six days to twelve days. Several deliveries were shipped late and at that many deliveries were incomplete.
‘What went wrong’
1. Squeezed deadlines: The company initially scheduled the project for four years however the project was completed in two and a half years.
2.Wrong timing: The project went live at the company’s busiest time, just before Halloween.
3.Big Bang Approach: Implemented a customer-relations package and a logistics package, some of the modules weren’t even tested, this essentially increased the overall complexity.
4.Un-entered Data: Capacities were not recorded as storage points in the ERP. Orders to retailers were not completed and Hershey had the products waiting in their warehouses.
Clearly, this ERP system failed however the company learnt three important factors to success in implementing any system, these being:
1. Go slow- the evolutionary way, test each module before it is released and implemented.
2. Data is King -data migration is of great importance aswell as strict discipline in inventory levels.
3. Overall Matters- management should keep on top of each phase and everyone should be working for a common goal.
Today, Hershey’s have revenues of almost $5 billion, a team of almost 13,000 employees worldwide. It has an inventory accuracy of 99.96% and can turn orders around between 24-48 hours.