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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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ERP Implementations Failure

Hershey's Failure

Background:

• 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:

• For better competition and enhanced customer service, 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 four Years of implementation schedule time and have followed the phased approach.

• I would have verified the warning signs of implementation schedule and way of approach used while implementing the ERP systems.

Hewlett-Packard Failure:

Background:

• 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.

• I would have verified the warnings of software loops and chances of glitches and schedule date for planning, integration and execution.

Nike Failure

Background:

• Nike is an American based Multinational corporation aimed at design, manufacture, develop and marketing of footwear, apparel, accessories and services.

• The company has its headquarters near Beaverton, Oregon, in the Portland metropolitan area.

• The company was founded as Blue Ribbon Sports in 1964 by Bill Bowerman and Phil Knight and announced officially as Nike in 1971.

• Nike is the world's largest suppliers of shoes and apparel and also a manufacturer of sports equipment with leading business in sports materials.

ERP Failure and Reasons:

• Nike decided to implement supply chain management i2 software, a major competitor in the field of ERP systems.

• In February, 2001, Nike went air and announced implementing a new complex supply chain management planning system results into several issues.

• Phil Knight, CEO, announced in a quarterly meeting that supply chain problems has caused problems with inventory.

• Nike cited that software problems, glitches and  integration issues causing $100 million revenue shortfall

• In significant cases, Nike slashed prices to get rid of additional inventory keeping additional focus margins and profits, which resulted in knocking 20% of company stocks.

• The main reasons for the failure are using the big bang approach rather than the phased approach.

• As per analysts it is provided that Nike didn't implement the software change as the way it was recommended.

Lessons and Conclusion:

• The first lesson learnt from the failure was never rush the programmers to provide the software in a short span of time which resulted in lot of bugs and errors.

• The second lesson learnt from the mistake was always adopting a mixed approach is a failure, since Nike turned the whole business into new system rather than step by step or part by part approach.

• As a project manager I would have implemented the adoption of supply chain management as step by step rather than whole system and would have provide enough time for programmers to design the software.

• I would have verified the warnings of implementation process and time schedule defined for building the software.

ERP Implementation Success

Cadbury Success:

Background:

• Cadbury is a British multinational confectionery, American company owned by Mondelez International.

• It is the second largest confectionery brand in the world after Wrigley's.

• Cadbury was founder by John Cadbury in 1824 in Birmingham, United Kingdom.

• Currently, Cadbury India operates in four categories namely Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years.

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