Enterprise resource planning or ERP implementation failure explanation with an example of Hershey and HP and general solution on the basis of that ERP implementation.

1. Presentation By,
- SAMANWAY BERA (06)
- DEBRUDRA PAL (09)
- IIEST, Shibpur
ERP Implementation Failure

2. Contents
• What is ERP ?
• ERP System
• Benefits of ERP
• Problems with ERP
• Risk in Implementing ERP
• Hershey’s Overview
• Existing System
• Why they decided to implement ERP ?
• Implementation Plan
• Expected Benefits
• Actual Scenario
• What went wrong ?
• Lesson Learned
• HP Disaster
• Reason of Failures
• Outcome of Failures
• General Solution

3. What Is ERP ?
• It is an Integrated enterprise wise information system
solution that integrates all the parts in an organization
across functions, across management hierarchies and
across locations.
• It An ERP system is usually based on a common database
that allows every user to store and retrieve information on
real time.

4. ERPSystem:-

5. Benefits Of ERP
• Eliminates inefficient manual processes.
• Integrate all the units in an organization.
• Availability of real time data.
• Access to best practice system and procedures.

6. Problems With ERP
• The cost is likely to be underestimated
• The time and effort to implement is likely to be underestimated
• The resourcing from both the Business and IT is likely to be higher
than anticipated
• The level of outside expertise required will be higher than anticipated
• The changes required to Business Processes will be higher than
expected.
• Scope control will be more difficult than expected
• There will never be enough training - particularly across different
modules

7. Risks In Implementing ERP

8. Risk in ERP SystemProject

9. • One of the leading chocolate manufacturer across world.
• Large chunk of sales from Valentine’s Day, Easter, backto school,
Halloween and Christmas – 40% of profit.
• Need of an efficient and reliable logistics system to cater to these large
no. of seasonal requirements .
Hershey’s – A BriefOverview

10. Existing System :-
• A network of 19 manufacturing plants, 8 contract manufacturers
and more than 20 co-packers.
• The company was running on legacy systems, and with the
impending Y2K problems, it chose to replace those systems and
shift to client/server environment.
• To tackle Y2K problem Hershey decided to replace existing legacy
systems.

11. Why Hershey’s Decided to implement ERP:-
• Hershey’s redesigned the whole process keeping customer in mind, to
enhance their competitiveness, and to enhance their customer service.
• Hershey’s need of an efficient and reliable logistics system to cater
large number of seasonal requirement
• Decided to switch over to the ERP system by April 1999
 The software from Manugistics was to provide for transport
management, production, forecasting and scheduling.
 The software from Siebel was to support Hershey in managing
customer relations and in tracking the effectiveness of the
company's marketing
 Replace existing mainframe based legacy systems by SAP R3 –
Accenture.

12. Implementation Plan:-
April 1999
ERP system went live
Jan 1997
Replaced 5000 desktop computers
Installed new TCP/IP network
hardware
Jan 1996-Roll out of the plan
Tackle Y2K issue by
Jan 2000
Replace Mainframe
with SAP R/3
Advanced final date to
April 1999

13. Expected Benefits:-
• Fine-tune deliveries to suppliers.
• Upgrade and standardize companies business processes.
• Efficient customer driven processes capable of managing changing
customer needs.
• Reduce order cycle times and boost inventory accuracy.
• Reduce inventory costs.
• Better execution of business strategy of emphasizing core mass
market candy business.

14. Actual Scenario :-
• Unable to deliver $100 million worth of Kisses and Jolly Ranchers for
Halloween in 1999.
• Stock price down 35%
• Earnings drop 18%
• Order fulfillment time doubled to 12 days!
• Lost prominent shelf space for the season!!!
• Several consignments were shipped behind schedule, and even among
those, several deliveries were incomplete.

15. What WentWrong?
Squeezed Deadlines
Wrong Timing
Big-Bang Approach

16. • Squeezed deadlines:
– Project originally scheduled for 4 years
– Company forced the implementation to 30 months
• Wrong timing:
– The company went live at their busiest time
– Released the solution just before the Halloween
• Big-Bang Approach:
– To quicken the implementation process, Hershey opted for Big Bang
implementation.
– Simultaneously implemented a customer-relations package and a
logistics package even without testing some of the modules
– Increased the overall complexity and employee learning curve
• Orders from many retailers and distributors could not be filled,
even though Hershey's had the finished product stocked in its
warehouses.
What went wrong?

17. LESSON LEARNED :-
Paying close attention to scheduling, careful timing
and planning of the project are important
Major enterprise applications (CRM, Logistics, etc.)
should be implemented one at a time
Top management should keep a close watch and
work for a common goal
Take right implementation strategy

18. Hewlett Packard’s Disaster :-
• The epic tale of HP's centralization of its disparate North American
ERP systems onto one SAP system proves that one can never be too
pessimistic when it comes to ERP project management.
• The project eventually cost HP $160 million in order backlogs and
lost revenue—more than five times the project's estimated cost.
• While it is not uncommon for small disasters or issues to occur
during the rollout of a new ERP system, total ERP implementation
failure can occur when too many of these little issues occur all at
once.
• Gilles Bouchard, CIO of HP's global operations said: "We had a
series of small problems, none of which individually would have
been too much to handle. But together they created the perfect
storm."

19. Reason of Failures :-
•Failure could largely be attributed to an accumulation of
problems.
•As they attempted to transition a region into a simplified
group of ERP applications, they found that
communication between both teams and software broke
down.
•As multiple silos worked individually and legacy
software systems lost data in the transition, increased
demand put entirely too much pressure on the whole
ordeal.

20. Outcome of failures :-
• Lessons to be learned from Hewlett-Packard’s disastrous
attempt at an implementation of multiple enterprise systems
across their many offices.
• In any ERP project, you need to plan for problems, and plan
for the fact that system failures can interact and make the
others even more impactful on your implementation.
• Bouchard noted that HP should have a “contingency plan for
four, five or six weeks”, indicating that the company was
clearly not prepared to deal with such a build up of problems
along with increased demand for their products in that time
frame- make sure you learn from the company’s mistake.

21. GeneralSolutions
 Justify Enterprise-wide Projects.
 Both the Software & Business Processes should FIT together.
 Identify And Implement Strategies For Reskilling The Existing It Workforce
And Acquire External Expertise Through Vendors And Consultants When
Needed.
 Project management team should have both Business Knowledge And
Technology Knowledge.
 Make A Commitment To Training.
 Manage Change Through Leadership, Effective Communications And The
Role Of A Champion.

22. ThankYou