Page 26 -

2 Chapter 1 • Introduction to Enterprise Systems for Management

CASE 1.1
Opening Case
Hershey’s Enterprise 21 Project

Source: Based on article David F. Carr, “Hershey’s Sweet Victory,” December 16, 2002, issue of Baseline
Magazine.
Hershey Foods, Inc., completed an upgrade to their SAP/R3 enterprise software installation
on schedule in September 2002, and they did it below their projected budget. This was
considered a big achievement for a company that had experienced $150 million in lost sales
due to problems associated with its new ERP system just a few years earlier in 1999.
Hershey’s CIO, George Davis, wondered why things went so smoothly with the upgrade
compared with the original installation. Was it a technology problem? Or was it a people
and organization change problem?
Hershey began its ERP journey with the Enterprise 21 Project late in 1996 when
management approved the project in an effort to fix the Y2K problem and, at the same time,
upgrade Hershey’s IT environment to a twenty-first century system. This system was
supposed to be an integrated system that used the client–server architecture and an SAP/R3
application suite. This was a complete overhaul of existing legacy enterprise system involving
replacements of current Information Systems (IS) with packaged software solutions with the
following goals:
•Establish a single company-wide supply chain strategy across all divisions.
•Streamline entire business process by reengineering all the functional areas throughout
the company.
•Use new supply chain efficiencies to help increase gross margin.
•Maintain sales growth of at least 3–4 percent per year.
•Save $75–80 million by the end of 2002 through corporate restructuring and the
closing of older distribution sites.
•Replace existing legacy software due to Y2K date-related problems.
•Replace legacy mainframe IS with an enterprise client–server architecture.

The initial plan of implementation was for four years with a budget of $112 million.
Although Hershey’s management vision was excellent, they lacked the necessary people at
the top management level to make proper decisions on the implementation plan. Hershey
did not have any high-ranking IT executive before hiring George Davis sometime in early
2000. They had lower-level managers making decisions that were aligned to their func-
tional areas of business with no one at the top integrating these decisions to create a sys-
tem that would work for the whole business. They had lots of committees with little or no
oversight. As a result, Hershey’s confectionary manufacturing and distribution operations’
entire supply chain system ground to a halt in 1999, making it impossible to fulfil $100
million worth of orders.
The initial implementation was riddled with several problems from the beginning.
First, Hershey tried to implement too many changes too fast. The Enterprise 21 project