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 (HP) Company is an American multinational IT company with its headquartered in Palo Alto, California.
• The company was founded by Bill Hewlett and David Packard in California in 1938.
• It developed and provided hardware as well as software components for customers in government, health and education sectors.
• 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, 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 first founded as the 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.
• http://www.scribd.com/doc/39650132/ERP- IMPLEMENTATION-AT-CADBURY%E2%80%99S
• http://en.wikipedia.org/wiki/Enterprise_resource_planning
• http://www.webopedia.com/TERM/E/ERP.html
• http://www.scribd.com/doc/39650132/ERP- IMPLEMENTATION-AT-CADBURY%E2%80%99S
• http://en.wikipedia.org/wiki/Enterprise_resource_planning
• http://www.webopedia.com/TERM/E/ERP.html
• http://www.itbusinessedge.com/cm/blogs/lawson/kraft- cadbury-deal-means-major-erp-integration-work/?cs=38891
• http://www.ft.com/cms/s/0/1cb06d30-332f-11e1-a51e- 00144feabdc0.html#axzz2vdMyHJ14 http://www.ft.com/cms/s/0/1cb06d30-332f-11e1-a51e- 00144feabdc0.html#axzz2vdMyHJ14