Introduction
Background
Hershey Foods Corporation premiered in 1894 as Hershey Chocolate Company and later incorporated in 1927 in Pennsylvania, in the US. It ranks as the biggest producer of confectionery products such as chocolate in the United States. The firm has a human resource base of over 12, 000 employees (Hershey Co. 2011). Since its inception, the firm has attained considerable success due to effective implementation of various operational structures, strategies, and management practices. One source of the firm’s success relates to its effectiveness in branding. The firm has managed to develop a number of iconic brands, which have successfully penetrated the market. In the course of its operation, the firm intends to position itself as the undisputed market leader in the confectionary industry. In its quest to achieve its profit maximisation objective, Hershey Corporation has expanded its operations in more than 60 countries. In addition to market expansion, other factors that have contributed to the firm’s include its effectiveness in implementing various strategies such as research and development, financial management, social responsibility, and dealing with global issues (Hershey Co. 2011).
In a bid to achieve market leadership, Hershey Corporation’s management team implemented a low pricing strategy. This strategy aimed at assisting the firm to attain a competitive edge with regard to sales revenue, which required the firm to implement an efficient supply chain systems and logistics that were supported by an effective information technology (IT). During the 1990s, Hershey Corporation utilised a number of legacy systems. However, the systems were characterised by numerous challenges (Hershey Co. 2011). Consequently, the need to improve the systems by incorporating a new IT system was timely. The firm’s management team reached a consensus to initiate a project aimed at implementing new software. The project entailed the implementation of Enterprise Resource Planning software. The new software would enable Hershey Corporation to restructure its business processes. The ERP software enables an organisation to integrate various facets of its operations such as manufacturing, marketing, sales, and planning. Hershey outsourced the services of three firms to aid in the implementation of the ERP software. The firms selected included SAP AG’s R/3 Enterprise Resource Planning Suite, Manugistics, and Siebel Systems (Centre for Management Research 2008).
The outsourced firms had their respective roles. SAP assumed the responsibility of formulating modules for purchasing, warehousing, forecasting, material management, order processing, and finance. On the other hand, Manugistics carried the responsibility of providing transport management, scheduling, and production while Siebel would ensure effective tracking of the effectiveness of the promotion and pricing modules and ensuring customer relations (Centre for Management Research 2008).
Aim and scope
This report entails a case study of Hershey Corporation in its effort to implement the ERP software. The case entails identification, discussion, and justification of the standard criteria used in determining the failure of the ERP software implementation. The paper gives a conclusion and a set of recommendations on how Hershey Corporation should improve the implementation process in the event of re-running the ERP software implementation.
Discussion of standard criteria
The success or failure of projects is dependent on how the firms’ management teams implement their desired projects (Schwalble 2009). In addition, the success of projects is dependent on a number of factors such as project team, effective organisation, the ability to deal with the external environment, and incorporation of effective project management leadership. Additionally, other inevitable factors that should be in place in a bid to enhance the success of the project include user involvement, proper planning, setting realistic expectations, ensuring the competence of the staff members charged with the responsibility of implementing the project, and executive management support (Attarzadeh & Ow 2008). An effective criterion to determine the success of the project is necessary in order to evaluate major milestones in the implementation of the project.
Poor project implementation may result in project failure (Starinsky 2008). For a particular project to qualify as successful, it must deliver to a number of variables, which include quality, cost, and timely completion. Every project must deliver the expected benefits in addition to meeting the desired expectations in order to qualify as successful. However, the attainment of the desired success in a particular project has been a major challenge to most organisations. Most projects cost organisations substantial losses. Implementing the ERP software is a complex process, expensive, and time consuming. Additionally, the success of the ERP software requires commitment of all departments (Starinsky 2008).
In its effort to implement the new ERP software, Hershey Corporation incurred a cost of $112 million. According to the initial project plan, the ERP implementation process would take 4 years. However, Hershey Corporation compressed the intended completion time to 30 months. This element forms one of the reasons why the project failed (Centre for Management Research 2008). Considering the cost and time spent in implementing projects, it is paramount for firms to ensure that projects succeed. One of ways through which this objective is realisable is by designing a criterion to assess the success or failure of the projects (Khuranan 2007). Numerous cases of project successes and failures have been documented over the years. An example of criterion or standard that firms can incorporate in their effort to evaluate whether their IT projects have succeeded is evaluating the project’s technical standard criteria (Harrin 2012).
Using technical performance criterion in assessing the success or failure of a particular IT project is critical especially during the 21st century. This assertion arises from the fact that IT forms one of the main sources of competitive advantage for firms (Morris & Pinto 2010). In their quest to enhance their competitive edge, most organisations are increasingly implementing different software. The objective of such projects is to improve firms’ operational efficiency. Additionally, it is also important for project managers to integrate key performance indicators, which should assist project managers and other stakeholders involved in evaluating the benefits gained. By assessing a project’s technical performance, firms’ management teams can determine whether their software implementation project was successful or not. Some of the aspects that should be taken into account include whether the project was completed in time, was within the set budget, and whether it contributed towards achievement of the firm’s strategic mission (Allinson 2012).
Hershey Corporation failed in its effort to implement the new ERP software. Initially, the firm appeared to be successful in implementing the project. However, the firm experienced a hitch with regard to order fulfilment, shipping, and processing. Hershey experienced a challenge with regard to receiving consignments that were necessary for the implementation of the software. The delay in receiving the consignment emanated from the fact that the firm relied on an old logistics systems.
In a bid to deal with the problem, the firm implemented a new ERP system to improve how the consignment was received. Despite the change, the firm continued to experience a challenge in receiving supplies. The new ERP software was not capable of achieving the desired deadline, which emanated from delays in the stipulated deadlines. The management team expected the new software to enhance the firm’s effectiveness in its supply chain. By implementing the new ERP software, Hershey Corporation intended that the new software would be operational by the spring of 1999 (Centre for Management Research 2008).
The new software product was expected to enhance the firm’s ability to supply to its customers. However, the firm was already experiencing the Y2K challenge. Consequently, it did not have the necessary buffer to enable allow the system to undergo a test. Additionally, Hershey Corporation had set an unrealistic period within which the ERP software would be operational. However, the firm was unable to meet the set deadlines, and thus some important operational management aspects such as warehouse and transportation shifted to the 3rd quarter. Ineffective implementation of the ERP software led to Hershey Corporation losing its supply chain effectiveness with 15 days.
Another reason that caused the ERP software implementation failure relates to the timing of the project initiation. Hershey Corporation undertook the software implementation during the peak period. Consequently, the firm did not have sufficient time to identify and rectify problems arising from poor project implementation. Analysts are of the opinion that ERP implementation is a complex process, which means that numerous glitches can occur (Centre for Management Research 2008). The firm’s management team made a major mistake by continuing with the implementation process during the peak season. If the firm had initiated the implementation process during the low season, it would have effectively identified and rectified possible lapses arising from the new software. Hershey Corporation’s management team failed in timing the best period to implement the software.
Hershey Corporation’s effort to implement the ERP software also faced the challenge of involving multiple vendors. The firm’s project failure also emanated from the fact that the firm adopted the big bang implementation method (Leon 2008). The method entailed implementing several modules simultaneously. Analysts are of the opinion that the project would have been a success if the involved parties rolled out each system successively. Adopting such a strategy would have provided the firm with an opportunity to evaluate integration issues. According to Centre for Management Research (2008), Hershey Corporation is a large institution. Therefore, it would have been wise for the firm’s management team to take precaution in implementing the IT project. This move would have played a critical role in ensuring that the project was successful.
Hershey had set a short time-frame within which it intended to implement the ERP software. The problem of time constrain experienced in the implementation of the ERP software heightened in the wake of adopting the big bang implementation method. As a result, it was difficult for the implementation team to test every component of the ERP (Centre for Management Research 2008).
Identification and justification of the technical standard criteria
Technical standard entails a requirement or norm regarding a particular technical system. In most cases, the technical standard entails a formal document that outlines standardised technical criteria, processes, methods, and practices that a firm should follow in implementing a particular IT system (US Government Printing Office 2003). Technical standards and criteria provide guidance and direction with regard to certain practices aimed at meeting the intended goal. Additionally, technical standards are paramount in ensuring that the design implemented lasts for a considerable period. In a bid to develop effective technical standards, it is paramount for organisations to collaborate with other stakeholders such as research institutions, universities, and other relevant private firms (Centre for Management Research 2008).
Hershey Corporation should have adopted technical standards in order to enhance the probability of the project succeeding. This observation emanates from the fact that technical criterion integrates other standards that can culminate in improvement of a project’s outcome. Some of the standards integrated relate to project specifications, test method, and standard practice. Standard specification outlines the necessary requirements in order to increase the chance of the project succeeding. Examples of such requirements include materials, components, and systems (Wiegers 2008). Standard specifications are paramount in ensuring that firms are successful in their procurement process for they aid in formalising the various technical aspects associated with procurement (Centre for Management Research 2008). One cause of failure in Hershey Corporation’s effort to implement the ERP software arose from poor procurement.
On the other hand, incorporating test method ensures that managers follow a standard procedure in testing the outcome of a particular phase of a project (Perry 2007). Adopting the test method provides project managers with an opportunity to assess the effectiveness of the project under implementation in meeting the predetermined goals. Therefore, implementing the test method provides project managers with an opportunity to assess the extent of success. In a bid to utilise the test method optimally, it is paramount for project managers to formulate an effective test method. Standard practice ensures that definite practices are in place during the implementation process, which is achievable by outlining the instruction that the project implementation team should adhere to in the course of executing certain functions.
Analysis of the case based on the criteria
Project managers within Hershey Corporation had not adopted standard specification for the ERP software implementation. Additionally, the firm outsourced the service of three firms to assist in the implementation of the ERP software. Failure to standardise the specifications for implementing the ERP software contributed towards failure of the ERP software due to lack of integration. In the course of implementing the ERP software, Hershey Corporation project managers did not have an opportunity of testing the outcome of each phase of the implementation process given that the firm adopted the big bang implementation method (Centre for Management Research 2008). Consequently, the ERP software experienced integration challenges, which hindered its operational efficiency.
The decision to adopt the big bang implementation method hindered the effectiveness of implementing the ERP software for the firm did not have sufficient time to test the operation of the new ERP software. Consequently, Hershey Corporation experienced problems in undertaking various operational activities such as order management and fulfilment (Centre for Management Research 2008). Failure to conduct sufficient tests hindered the firm’s ability to undertake other supply chain activities such as fulfilling the distributors and retailers’ demand. Consequently, the firm experienced a significant decline in its sales revenue by 12 per cent in its 3rd quarter of 1999 after implementing the software.
Hershey Corporation should have stipulated a comprehensive set of instructions for the ERP software implementation team to follow. This move would have improved the software integration process. Hershey Corporation had not outlined a standard practice in the ERP implementation process as evidenced by the fact that the firm adopted the big bang implementation process.
Conclusion
Considering the changes in the business environment, it is paramount for Hershey Corporation to be effective in its operational processes such as marketing, purchases, and supply chain. Consequently, the implementation of diverse operational technologies is critical. The analysis above illustrates that implementing IT projects such as the ERP software is a complex process. Therefore, it is paramount for firms intending to implement new operational software to take caution lest they fail terribly. Effective implementation of the ERP software would increase the probability of Hershey Corporation attaining its market leadership goals given that the software would increase the effectiveness with which the firm executes its operational processes.
Implementing new software projects such as the ERP software is a complex and costly undertaking. Therefore, organisations should ensure that they have the necessary resources and capability. The resources and capabilities required relate to financial resources and human capital to increase the probability of completing the project within the stipulated timeframe and cost. Adopting effective criteria to test the success of the project is also critical for the criteria aid in identifying whether the project is on course. The involved team notes any form of deviations in time and thus implements corrective measures. Incorporating effective success criteria will improve the quality of the project results.
Recommendations
In a bid to improve the probability of success if the project were to be re-run in the future, it is paramount for Hershey Corporation’s management team to consider the following aspects:
- The firm should conduct a comprehensive market research in order to identify the most appropriate ERP software to implement.
- A sufficient timeframe to implement the ERP software should be set to safeguard the project manager from implementing the software hurriedly. The involved parties should implement the software successively to provide the project implementation team with an opportunity to test every phase implemented.
- The firm should oversee the integration of two main inputs, viz. include project documentation and software development process. Project documentation will ensure that the project sticks to the set plan, scope, objectives, and attains the desired output. On the other hand, the software development process should outline the standards and procedures that the project manager should follow in the implementation process.
- The firm should adopt technical standard criteria in the course of implementing the project to increase the probability of the implementation process succeeding. Adopting technical standard criteria will ensure that effective specifications, test method, and standard practice are in place during the implementation process. This move will significantly reduce the probability of the project failing.
- In addition to the project manager, Hershey Corporation should appoint a test manager. The test manager should assume the responsibility of testing the project’s scope, appointing a test team, and defining the project’s deliverables and testing process. The manager should also evaluate the results achieved after every phase of implementation.
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