With Halloween just around the corner, there is no time more fitting to talk about this candy company’s supply chain management disaster.
The Hershey Company is the North American leader in the manufacturing of sugar confections. Established in 1894 by Milton Hershey, the brand quickly became known and loved for producing delicious milk chocolate. Built from a strong community and good values, they established themselves as a trusted brand. As a result, they grew their loyal customer base and business acquisitions.
Growing into a multinational corporation overnight, a top-notch supply chain operations system was needed to support its growth. Hershey’s supply chain portfolio is impressive and is designed to handle complexity. However, with a failed attempt with an enterprise resource planning (ERP) system, all of Hershey’s supply chain came to a full halt in July 1999.
What Went Wrong?
It was in 1996 when Hershey set out to upgrade their IT systems. After selecting SAP’s R/3 ERP software, Manugistic’s supply chain management (SCM) software, and Seibel’s customer relationship management (CRM) software, they had to plan out their implementation timeline. The initial recommendation was to have a 48 month implementation period. This set them to go live in the beginning of 2001. However, because of concerns with the Y2K bug, they wanted to shorten the time frame and launch in July of 1999.
With a shorter time frame, the company had to cut out some of the testing phases. Skipping these crucial steps resulted in the overlooking of errors. As a result, there was a complete halt in operations when the system went live in July 1999. They were unable to deliver on over $100 million worth of Kiss and Jolly Ranchers orders right before their busy Halloween season.
What Can We Learn from This?
Before getting a system, be sure you have a sufficient amount of time and a realistic schedule. The Hershey Company knew that they would need 48 months. By cutting down the time frame from to 18 months, it was no wonder issues arose. When errors were found in tests, the company made corrections then moved on without running the tests again. By doing this ,they never ensured that a mistake was fully fixed before moving on. Instead, assuming the system would work. Upon launch, these mistakes returned and had major repercussions. Simple errors were not found because of the rushed time frame. This caused the entire system to come to a halt when it was launched. As a result, there was a major delay in Hershey’s supply chain. This is why time is critical in implementation.
The second lesson here is in the importance of testing. When implementing ERP software, you need to make sure you are thorough in your testing phases. Be sure to check every scenario possible.If an error does arise, be sure to re-test the system before moving on. Although this takes more time, it could also save you from a system failure when you go live. Hershey assumed that the corrections made solved the issues without verifying the results. They sacrificed being thorough for time and paid the price.
The Hershey Company is a strong brand with even stronger operations. This mistake may have cost them profit at the time, but they were able to learn and grow from it.
Implementing systems software can be a challenge, but it can also greatly improve productivity in any organization. It is critical to plan out your implementation over a realistic time period and are thorough throughout every step of the implementation process. It is more economic to take the time and do it right the first time than to have to try and recover from a complete system failure.