Hershey’s and HP’s failures

Hershey’s Failure

• Hershey’s also known as the Hershey Foods Corporation is the largest chocolate manufacturer in the North America.
• The homeland of the Hershey’s Chocolate world is its headquarters situated in Hershey, Pennsylvania.
• Mr. Milton S. Hershey started the business in 1876 and Hershey Company was established in 1894.
• Hershey’s sales are roughly 4:1 ratio chocolate and non-chocolate products with competitors like Mars, Nestle, Palmer and Russell Stover.
ERP Failure and Reasons:
• In order to enhance the customer service and competition, Hershey’s selected SAP R/3 ERP Software with an overall cost of 10 Million and time schedule of 4Years.
• Hershey’s demanded for 2.5year implementation time and decided to go with Big bang approach instead of phased approach.
• Due to which problems related to order handling, shipping and procurement started to arise resulting in loss of credibility and failure in committed deliveries.
• Hershey’s went air in 1999 and officially announced about problems due to failure of ERP systems resulting in prices to plunge by 8% on same day.
• The failure costed the company for $150 million in sales. Profits for third quarter of 1999 dropped by 19% and sales declined by 12%.
• Reasons for Failure are Over-Squeezing the time period to 2.5 Years, implementation of Big Bang approach over Phased approach are the key factors.
Lessons and Conclusion:
• The first lesson learnt from the failure was to never over-squeeze implementation schedule time, which will overlook critical issues and safety zones likes testing phases will be neglected.
• The second lesson learned is to emphasize employees on new business process such that sufficient knowledge on technology emphasis errors due to less trained users.
• As a project manager I would have opted for 4Years of implementation schedule time and have followed the phased approach.

Hewlett-Packard Failure:

• The Hewlett-Packard Company (HP) is an American multinational IT company with its headquartered in Palo Alto, California.
• It developed and provided hardware as well as software components for customers in government, health and education sectors.
• The company was founded in California in 1938 by Bill Hewlett and David Packard.
• It is specialized in manufacturing computing, data storage and networking hardware.
ERP Failure and Reasons:

• HP has implemented mySAP ERP and the migration resulted in decreased revenues. SAP has already rolled out 4 times and this was number 5.
• Gilles Bouchard, CIO and Executive Vice-president (EVP) of global operations is responsible for both the supply chain and ERP software implementations.
• HP revealed that execution technical glitches and issue with contingency planner were the main reasons for ERP failure. There were also other issues like data integration, demand forecasting and poor planning.
• Due to unstable data integrity and increase in demand caused backlogs and improper routing of orders till the end of August 2004.
• Migration of data has ended up costing $160 million dollars in backlogged orders and lost revenues, which is more than five times the project estimated to cost in 2004.
• Reasons for failure are large number of rollouts while implementing mySAP, technical glitches during execution and issues with planning and integration.
Lessons and Conclusion:

• The first lesson learnt from the failure is that too much pressure and careless planning of implementation resulted in many rollouts.
• The second lesson was that as per analysts the Company culture did not support active involvement of employees which acts as drawback to get valuable suggestion from employees.
• Even though HP has spent huge amounts of money to makeup the failure impact, it was unable to speed up the delayed orders.
• As a project manager I believe success of any implementation will depend upon the planning such that business process and technical aspects need to be balanced.

Source: ChinaStones - https://china-stones.info/essays/business/hersheys-hps-failures/


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