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Chapter 1 • Introduction to Enterprise Systems for Management 3

went for a complete discarding of the older mainframe legacy system used at Hershey and
replacing it with the following three new software applications at the same time:

•SAP/R3 enterprise application suite
•Manugistics (demand planning and transportation) Systems
•Siebel Systems (CRM and sales tools)

The complexity of integrating SAP with Manugistics software and Seibel software
was so overwhelming even with the help of an experienced consulting firm that this
integration was dropped. In addition, due to project delays and Y2K, the Hershey’s IT
department decided to go with a direct cut over strategy (Big-Bang implementation) instead
of a phased-in approach during their peak sales season right before Halloween.
Data entry in the new ERP system was another problem. SAP is very rigid software in
terms of how, when, and where the data must be entered into the system for inventory track-
ing and management. Hershey’s employees were not trained for this rigid data entry be-
cause their legacy system was flexible in terms of how the data were stored. This created a
major crisis when the new system was used during the Halloween season. Customer orders
were missed despite sufficient inventory on hand. System workarounds caused many
headaches for workers. Extra capacity in warehouse space was not recorded into the SAP
system, which caused communication failure between logistics and IT.
Finally, a lack of top management support and involvement also played a role in the
Enterprise 21 project. In addition to lacking a CIO at the top decision-making level,
Hershey’s management took a hands-off approach by not getting involved in the decision-
making process. For example, some managers recommended supplementing the major
consultants for this project, IBM Global Services, with another consulting firm that had
more experience with SAP–Manugistics. Top management stayed away from making any
decision in this area. In general, Hershey’s management did not understand the amount of
effort necessary for both the technical and organizational change issues for this project.
What do you think about Hershey’s ERP strategy? What lessons can be learned from
the Hershey experience?

PREVIEW
Hershey’s strategy shows the complexity of implementing ERP systems in organizations. In the
early days of ERP implementation, management generally did not understand the magnitude of the
issues an organization has to consider before, during, and after implementing ERP systems.
Although they are packaged software, ERP systems are very different from such conventional
packaged software as Microsoft Office and others. An ERP implementation goes beyond the techni-
cal issues of infrastructure and incompatibility of systems to management and people issues of
process change and change management that will be discussed throughout this book. Any manager
thinking about implementing or planning to implement ERP can take away two valuable lessons
from the Hershey case: (1) test the business processes and systems using a methodology designed to
simulate realistic operating scenarios and (2) pay close attention to ERP scheduling.
This initial failure in 1999 opened the eyes of Hershey’s management to the problems and
issues with implementing ERP software. Management stayed involved with the project from