Failed Implementation Of ERP System In Hershey †Free Samples

Question: Discuss about the Failed Implementation Of ERP System In Hershey. Answer: Introduction to the Project The ERP failure of Hershey was one of the biggest failures in the history of ERP system implementation in country. It was the worst case scenario for the company, as the company $112 million invested by the company were not able to handle the systems and the operations in the country. It resulted in 19 percent drop in the quarterly profits of the company. Along with it, there as eight percent decline in the stock price (Chen, 2001). Even after the implementation of the system, there were issues in the manufacturing and the distribution operations of the company. In 1996, the company proposed to upgrade its IT system and implement a new ERP system in the organization. The company chose SAPs R/3 ERP software, supply chain management software, and customer relationship management software. The project management team proposed that the total turn-around time of the implementation of the software will be 48 months. However, the company pressurized to deploy the software in 30 months, so that the software can be rolled-out before 21st century. As there were strong scheduling demands, cutover was planned for the system. However, the go-live scheduling of the system collided with the busiest period of the organization. It was the end of the year, and the company received bulk orders at the time of Christmas and Halloween. Due to the limited time for the development of the software, the project management team had to cut the testing phase of the organization (Gargeya Brady, 2005). The ERP system of the organization went live on the July, 1999; however, it was unsuccessful right from the implementation. There were some unforeseen issues, which prevented the system to process the upcoming orders to the organization (Barker Frolick, 2003). Due to these technical errors, the company was not able to process, $100 million worth of orders, although, there was manufactured product for the organization. There are several benefits of the ERP system. Even when the business organizations are large or small, most of the business organizations avail from the enterprise resource planning (Vogt, 2002). The Enterprise Resource Planning is the suite or the group of customizable applications, which supports and manages important processes. There are several advantages of the ERP software, which compels the companies to invest in the ERP software. However, it has been identified from the case studies that the most experienced IT professionals find the selection and the implementation of the ERP software challenging (Amid, Moalagh Ravasan, 2012). In the purchase and the implementation of the ERP software, the cost required for the implementation and the management of the business operations is quite challenging. However, it is important to note that it is better to invest in more pricey software with the comprehensive package, instead of investing in economic software package with fewer specif ications. It is also important to assure that the software meet the needs of the organization. The ERP solution can assist the organization in availing its goals (Muscatello, Small Chen, 2003). The return on investment (ROI) of the ERP system implementation depends on the values derived from the ERP system. The best-fit ERP system is one, in which the requirements of the present and the future are met in the specific time. The ERP system is an Information Technology (IT) solution, which provides assistance for the ERP services. In the IT system, the companies conduct research for the implementation of the system. The ERP selection team includes the stakeholders which can support the business operations of the department. In the ERP implementation of the organization, the functionality of the ERP software is an important criterion (Wong, Scarbrough, Chau, Davison, 2005). In the implementation of the software, the best selection strategy is dependent upon two features (Gargeya, Brady, 2005). The software company can meets the requirements of the company by meeting the needs of the target customers, without overwhelming them with unnecessary needs. Range of Control Systems used including cost, schedule, quality, and scope The implementation of the ERP system is a costly affair, which requires heavy investment in terms of time and cost. Therefore, a range of external systems are required, which assures that the initial target of the project is met. The company chose an external ERP system expert for the selection of system (Chen, 2001). The selection of the external consultant will be beneficial for the selection and the implementation of the software. The internal team of the organization remains busy as the team is busy in managing the day-to-day to operations of the organization. However, it is important that the IT department plays a leading role in the process as their experience and insights regarding the operations of the organization can prove valuable information to the organization (Amid, Moalagh Ravasan, 2012). The consultants will have a better understanding of the software, the IT team will have a significant role in applying the knowledge of the company so that the external ERP system ca n be aligned with the needs of the organization. The failure of the Hersheys $112 million computer system is a significant example of the ERP system failure. There were several reasons regarding the poor design and the implementation of the system, which resulted in the organization to fulfill its orders of the regional distributors (Muscatello, Small Chen, 2003). The company experienced a 19% drop in the third quarter profits as a result of this experience. In addition to it, it resulted in the loss of the 3% market share. As a result of the problem, the company lost its market share to Nestle and Mars. There are several factors, which contribute to the failure of the ERP system. The implementation of the ERP system is a complex process and the implementation of the system is difficult, time-consuming, and expensive project. The technology of the ERP system is integrated with the organization (Vogt, 2002). It requires commitment from all the divisions so that the business organizations can work. The project managers used process templates to reduce the process and accelerate the implementation of the process. These templates are short and simple, and can speed up the process (Wong, Scarbrough, Chau Davison, 2005). It promotes generalization of the process, increase the performance and the competitive advantage of the organization. Other than that, conformance of the process logic was used for increasing the efficiency of the implementation of the project. The company ensured that the process templates used in the implementation process reflect the best practices of the organization. In several modules, the organization should use the standardized processes (Gargeya, Brady, 2005). It makes the process easier, as the organization utilize the process, which are highly unique for the organization. The company also assured that the expertise is currently available in the organization, before the project initiation. The involvement of the expert in the project initiation will define the role of the consultant. The project lead interviewed the staff involved in the project. It should ensure that the contract is given to the people, who are capable of working in the project. The remuneration of the project employees is based on the successful completion of the project (Hong Kim, 2002). Moreover, the consultants were integrated with the corporate staff so that there is easy transfer of knowledge at the conclusion of the project. The companies also ensured that there is adequate provision of training for the employees. There were several personnel as well as third party professionals, who conducted the training. However, several users faced the issue of difference in the language. The company should hire someone, who understands the new processes and could relate to the new business processes It is important to recruit third party trainers and develop training courses which can internally develop the organization (Xue, Liang, Boulton, Snyder, 2005). The project manager also discriminates between the education and the training of the professionals. It also realized that it is important that the organization focuses on a broader training rather than the basic, software-based training. The training should involve how information flows within the organization. A training program was implemented, in which before the project going live, the employees have to attend a course in which the organization will explain, why it is going more standardized (Umble, Haft Umble, 2003). The users, who will be affected by the change in the process will be further educated regarding the integration of the process in the supply chain. The training personnel also assured that the training should be given immediately before the project goes live, so that the training remains fresh. In the project management of the IT projects, several different types of risks are encountered. The process risk is a type of risk, which can bring significant financial loss or loss to the reputation of the organization. It can impact on the overall operations of the organizations. There are different types of risks, such as performance dips, project fight, process fumbles, and process failures. The performance dips refer to the drop in the efficiency, and the employees learn new skills and technology. The project fight refers to the phenomenon in which when the problems occur, the management drops the project (Wong, Scarbrough, Chau, Davison, 2005). The process fumble is the phenomenon in which, project is quite big and challenging, and the organization is not able to handle the issues of the time slip and the performance management. The process failure is the process in which the project does not work, after it goes live. In the ERP implementation of the project, there are severa l process barriers. The first is the focus on the technology. It means that the software alone cannot solve the business processes (Akkermans van Helden, 2002). The organization should focus on the requirements and the integration of the software with the business processes. Another major challenge is the ignorance of the requirements of the organization. It means that the process must be adapted so that they fit with the software or the technology within the organization. It should be assured that there is adequate time for implementation of the software. It is important that the organization should not jump to the direct implementation (Aladwani, 2001). In regard to the above problem, the company took several initiatives. Firstly, it is important to note that the training process cannot substitute for the real-time interaction with the employees. As a result, the performance dips can easily occur with the organization. Therefore, the aim of the project management team is to reduce the performance dip with adequate training of the user community. Although the top management was not completely committed to the project, the project management team used training for the employee education (Chen, Law Yang, 2009). The fumbles and the failures of the project can be reduced by developing a good team. Other than that, the project should be headed by a project lead, who can carry out a strong implementation plan. The project manager should also implement good performance metrics. It should manage the risks, which can be done by changing the manner in which the risk is measured, managed, and rewarded. Good metrics should help the managers to assess the performance in a more accurate manner. It was also used to identify the problems in the project. Reasons for the cost and time overrun in the project The result of the failure was the lack of control and testing system used for the implementation of the system. The project management team made the severe mistake of ignoring the testing phase of the organization. Due to the lack of testing phase, there were significant data, process, and system integration issues, which remained undetected until the last moment. The testing phase of any phase is an important phase, which should not be compromised, even if, the testing increases the launch date of the organization (Finney Corbett, 2007). The negative impact of leaving the testing phase is far greater than the benefits of launching the system early. There should be appropriate testing, which encompasses the methodological simulation of the real-time operating conditions. If realistic and appropriate testing scenarios are implemented, several critical issues can be identified which cannot be discovered later. There were several reasons of the problems in the implementation of the ERP system. There were time overruns, as some of the modules were implemented as per the schedule, whereas, other modules were delayed. Due to the pressure of the peak demand time, there were several issues in the designing of the system. These issues persisted, as there was no time to test the system for bugs and glitches. There were significant issues in the order processing, delay in shipping, and fulfilling orders even when the company has the stock in its inventory. However, the present case, the distributors lost their credibility and the reputation of the organization was at stake. There were several reasons for the failure of the system (Noudoostbeni, Yasin, Jenatabadi, 2009, April). Firstly, there was no significant data about the previous transactions as the old systems were replaced. The company can only find the information about their orders, by asking the customers about their orders and the shipme nt times. The company also stored information regarding the storage of the products in several formal and informal places. However, there was no way of relocating the inventory in the informal places. The executives of the organization were not able to find these products, other than the specific places such as distribution centers and the warehouse (Chen, 2001). The excess stock was placed in the temporary storage spaces, which lead to inaccuracy in the inventory management. These stock levels cannot be identified through SAP R/3 ERP software. Moreover, the higher management of the organization was not able to understand the scope of the project. The company did not have knowledge of implementing such large software in the organization. Therefore, they did not have the infrastructure to develop and implement such kind of software. The deadlines set for the project were unrealistic, and there was no buffer for the system to be implemented (Gargeya, Brady, 2005). The implementation timing of the software was also challenging, as it was the peak time, with high level of demand due to Halloween and Christmas. There were significant issues with the management. As a result, there was no coordination in the lower level employees. The employees were not able to understand the functioning of the system and the different modules working as part of the system. This reason was especially prominent because the ERP system was complex. There were two additional applications, which the needed to be learnt by the employees (Barker, Froli ck, 2003). The employees had to learn several complex skills in a small period of time. The Responsibility of the Project Execution team for the incurred time and cost overruns The above case states that there were several issues in the execution of the ERP system implementation in the organization. One of the key issues identified from the research is that the management and the project execution team did not have the proper understanding of the technology before its implementation. The senior management should be more involved in the implementation process (Amid, Moalagh, Ravasan, 2012). It will ensure that the infrastructure and the network are compatible with the ERP system. It was important that the company set realistic deadlines so that the organization detects bugs. The testers should be able to detect that ERP can align and work with all the facilities. The company forgot to align the new distribution system with the current ERP system. It was due to lack of research in the planning phase (Muscatello, Small, Chen, 2003). It can be critiqued that it is important to obtain the feedback from the customers as well as from the employees, after the end of each phase. It can be analyzed that there are several different benefits of the ERP system. The ERP system can reduce the order cycles and reduce the operating costs of the supply chain. Overall, it can increase the logistics efficiency. The ERP system can enhance the coordination of the product deliverables, by making a report of the stock and the inventory whereabouts (Wong, Scarbrough, Chau Davison, 2005). It can be analyzed that the implementation of the ERP software takes a longer time, and the implementation of the software should be done in phases. The implementation requires learning for the staff members, as they should understand the fundamentals of the ERP system and the motive of its implementation in the company. The business practices of the organization should also be aligned with the ERP system. The company can also choose alternate software for identifying the optimal situation (Gargeya Brady, 2005). The major reasons for the failure of the ERP system failure are discussed in the below section: Excessive rush to the process: The project management team determined that the deployment period should be 48 months. However, the companys leader suggested that the period of installation should be 30 months. It rushed the whole deployment process, and several issues emerged at the last moment (Chen, 2001). Collective deployment of a large number of systems: In the implementation process, it was identified that the organization did not focus on a single process. Rather, it focused on the deployment of different solutions at a single time (Amid, Moalagh, Ravasan, 2012). The company focused on deploying three different steps concurrently. The business of the organization: There was hysteria about the arrival of 21st century. It resulted in the motivation of the organization to implement the system before the New Year. It meant for the company that the transition of the system will occur at the busiest sales and the distribution period of the organization (Muscatello, Small Chen, 2003). It was the responsibility of the project management team to plan the launch at the slow periods of the organization. It is important that the organization roll-out the project in stages. The complete focus should be on a single project and the organization should not attempt to implement other applications simultaneously (Wong, Scarbrough, Chau, Davison, 2005). It is important that the organization should not speed up the timeline, and focuses on the critical aspects of the project implementation, which includes testing, and training of the price. Relationship between the identified problems and the needs and the influence of the stakeholders The system of the Enterprise Resource Planning (ERP) is implemented to address the shortcomings of the manufacturing resource planning. The implementation process requires that the organization manages and plan the organizations resources in the most efficient manner. It is an information system, which strategically connects all the aspects of the information system. The ERP system can be used to achieve competitive advantage by managing resources and handling the business environment of the organization (Gargeya Brady, 2005). The ERP system also reduces the redundant data entry and other issues in the transaction processing system of the organization. The company can establish connection between the disparate structures, both software and hardware with the help of ERP system. There are several instances of the hidden information, which can be used for the strategic planning of the organization. It can be used to maintain the competitive advantage of the organization. There are seve ral competitive factors, such as mergers and acquisition, which can be used to attain competitive advantage (Hong Kim, 2002). It is observed that due to the short life cycle of the products, and the competition in the business environment; the investment for the ERP system will be efficient use of the organizations resources. The role of the project management team to control the project and its stakeholders to increase the chances of successful delivery The project management team has a significant role in the control of the project and managing the stakeholders to increase the overall efficiency of the organization. It can be critiqued that the organization priced its products low to achieve the high sales target. However, the manufacturing and the logistics of the bulk level of products require high level of logistics and supply chain management system. Previously, the company used the legacy system to handle the logistics of the organization (Xue, Liang, Boulton, Snyder, 2005). The legacy system used the mainframe systems, which can be used for the operations of the human resources to the order processing. The management team of Hershey developed software for the modernization of the hardware and he software of the organization. At the advent of the 21st century, the organization may face the problem related to the changes in the date. It can create significant issues in the legacy system of the organization. As a result, Hershey chose to replace the system rather than spending high level of money on the legacy system of the organization (Umble, Haft, Umble, 2003). The main goal of the system is to increase the efficiency of the legacy system of the organization. It will also upgrade and standardize the hardware, and the client/server software. At this time, the other stakeholders, namely, retailers and the suppliers can share the data about the deliverables of the products, so that they can maintain an optimal level of the inventory. The implementation of the new software will result in better coordinated activities and reduce the overall cost to the organization. The implementation of new software can result in coordinated delivery of the product (Wong, Scarbrough, Chau, Davison, 2005). It means that the retailers have to keep a low level of the inventory, and reduce the overall cost to the organization. The project manager of the project assured that the whole system is designed so that it can address each and every need of the customers. The primary focus of the organization is to increase the competitiveness of the organization, and develop the customer service to the organization (Akkermans van Helden, 2002). In the confectionary and the food product industry, the customer service is highly valuable. The project management team wanted to enhance the overall consumer experience. When the customer places orders, the system should be able to mention the delivery date of the customers, and if the product is not available, it should mention the date when the software will be available. It was assumed by the project management team that the new ERP software will support the organization in reorganizing the business processes. As a result, the company chose SAP AGs R/3 Enterprise Resource Planning Suite. The company also bought the companion n software from two other companies, namely, Manugistics and Siebel. The software from the SAP module included different modules, such as finance, purchase, order processing, billing, and warehousing. The software provided by Manugistics provided assistance to the transport management, production, project scheduling, and forecasting. The software obtained from Siebel assisted the organization in managing the customer relations and evaluate the marketing activities of the organization in terms of total effect on sales (Chen, Law, Yang, 2009). While the system launched the SAP software, some of the modules were behind the schedule. Therefore, the organization was under the pressure of the implementation schedule. Conclusion The present report is focused on the case study of Hershey. The company failed in the implementation of ERP system. There were several reasons for the failed implementation of the ERP system. The organization rushed the whole process. There was no testing phase; therefore, there were several issues at the moment of launching. Other than that, the organization obtained three different products, which were needed to be launched simultaneously. There was delay in some of the products, which resulted in the failure of the system launch. The upper management of the company was not able to appreciate the project scope. The company did not have knowledge of implementing big software in the organization. Therefore, they did not have the infrastructure for the implementation. The deadlines set for the project was also impractical, and there was no buffer for the system to be implemented. It resulted in the failure of the system. References Akkermans, H., van Helden, K. (2002). 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