This paper analyzes the failure of Hershey's Enterprise 21 project, an SAP-based ERP implementation launched in the late 1990s to modernize the company's operations and resolve Y2K concerns. The paper outlines the project's goals — including hardware standardization, improved data sharing, and competitive advantage — before identifying the key internal and external risks that contributed to its collapse. Central among these risks was a compressed timeline of 39 months instead of the planned 48, insufficient employee training, and inadequate risk assessment. The paper contrasts Hershey's approach with Leapfrog's successful ERP rollout, drawing lessons about expert consultation, realistic scheduling, and change management.
Hershey is one of the most well-known producers of chocolate and candy in the world. The company's origins trace back to Hershey, Pennsylvania, where it was founded in 1894. A little more than a century later, in 1998, it recorded $4.4 billion in sales across approximately 3,300 candy products in various sizes and shapes. Seasonal sales are significant for the company's profits, with Halloween and Christmas alone accounting for roughly 40% of annual candy sales — making these periods crucial to Hershey's bottom line. Other important seasonal windows include Valentine's Day and Easter.
One of the main challenges Hershey faced as it entered the 21st century was the modernization of its information technology operations. Because of the nature of its products and sales cycles, the company had not historically invested large amounts of funding in this area. At the turn of the century, it therefore launched a project known as Enterprise 21, which was intended to provide the company with a better business solution and greater competitive advantage.
The overriding catalyst for Enterprise 21 was the need to address Year 2000 (Y2K) problems. At the heart of the new implementation was the judgment that it would be less costly and troublesome to replace existing systems than to fix the problems embedded within them. The immediate goals of the project were to upgrade and standardize hardware, transitioning from a mainframe-based network to a client-server environment. The ultimate goal was to increase the company's competitive edge by improving the efficiency of its data-sharing capabilities.
In short, it was believed that Enterprise 21 would result in better execution of Hershey's business strategy — specifically its focus on its core mass-market candy business. The centerpiece of the plan was a switch to a new SAP system designed to improve not only operational efficiency but also competitive positioning.
One of the most significant risks that went unrecognized was the full impact of the compressed deadline. Instead of the originally planned 48 months, the company had only 39 months to complete the project. This eliminated nine months of training and implementation time that proved impossible to recover. This critical constraint does not appear to have been adequately accounted for by project managers when approving the revised schedule.
"Lost shelf space and damaged supplier relationships"
"$112 million investment and inadequate employee training"
"Leapfrog's successful ERP rollout as a counterexample"
Hershey could have saved a large amount of money, along with its reputation, by implementing the advice of experts and maintaining a more reasonable timeline. The Enterprise 21 case illustrates that even well-resourced companies can suffer serious operational and reputational harm when risk assessment is inadequate and implementation schedules are driven by urgency rather than feasibility.
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