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Hershey Case Study

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Hershey Foods Corp of Hershey, Pennsylvania was founded in 1894. They have recorded over billions of dollars in sales since then by selling around 3,000 different candy items in various shapes, sizes, and flavors. Their peak sales occur in the 4th quarter covering the Halloween and Christmas seasons. The company has over a dozen plants internationally and domestically, employing over 14,000 people. Hershey’s plan, named Enterprise 21, was to modernize their software and hardware in the beginning of 1996. The plan was scheduled to take up to four years to complete. The plan’s goals were to upgrade and standardize the company’s hardware and move from a mainframe-based network to a client-server environment. During this plan, Hershey replaced 5,000 desktop computers and moved to TCP/IP networking based on newly installed network hardware. They did this because it was determined that Hershey needed to be able to use and share its data more efficiently due to industry demands. Upgrading their system would give them the ability to increase production and customer satisfaction and service. Enterprise 21 would replace the company’s current system with a more up-to-date resource planning software called SAP. The SAP software would be paired with software from Manugistics Group Inc. and from Siebel Systems Inc. The software from Manugistics would provide support for production forecasting and scheduling, and for transportation management. The software from Siebel would assist Hershey in managing customer relations and in tracking the effectiveness of its marketing activities. The management believed implementing these changes would help Hershey better execute its business strategy of emphasizing its core mass-market candy business. Hershey recognized that one of the bigger risks of this plan was the costly transition to the new software programs. They currently had low IT costs but because of this, their software was old and outdated. This could take away their competitive edge if others knew they did not have the most current process and software. They also knew that changing over would be a tedious and labor intensive task that would take around 4 years to complete. One problem they didn’t think of but should have was that there may be a time that the systems would go down leaving them without product to put on the shelves. During the transition, the cutover strategy did not go as smoothly as planned. The SAP modules were being put into production but the project ran behind schedule. The full system didn’t come online until mid-July. This was a major issue because Hershey needed to fill orders promptly to meet the needs for the Halloween season. Because the software was not completely online when it was supposed to be, the project actually cost Hershey $112 million. Another problem that occurred, because of the delay in the system coming online and not being able to fill orders was that shelf spaced in grocery stores was lost. Many stores substituted Hershey’s brand with others because they didn’t want the space to be empty. Once that space was filled by other brands it’s difficult for Hershey to get it back. This placed the long range sales for Hershey at risk. Hershey should have approached the situation in a different way. They should have had a backup plan in the event that the system went down or was delayed so they could have avoided the empty shelves and lack of product problem. They should have taken a proactive approach when they knew there was going to be a delay in processing orders. By doing that they could have saved some of the supporters rather than letting them believe the stores were to blame for the lack of Hershey’s candy. Rather than trying to phase all of the software in at the same time, they should have done it in incremental steps with one program at a time. Having a well-conceived plan would have prevented many of these issues.…...

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