ERP IMPLEMENTATIONS OF CADBURY AND HERSHEY COMPANY

A Case Study
Presented to
the Faculty of the College of Accountancy
University of La Salette, Inc.
Santiago City, Isabela

In Partial Fulfilment
of the Requirements for the Subject
Updates in Accounting Information System 2

Apostol, Alyssa Princess Joy N.

Castro, Daren Joy M.
Dolorico, Lyka L.
Guzman, Ma. Christine C.
Magno, Jiemiah Mae D.

April 2022
Introduction
Today, our world is endeavoring for modernization, which leads to
competition. However, the true mark of an entity is the ability to stabilize what they
have structured. The right measure of competitive durability is the strategy for
developing long-lasting and cost-effective cost-cutting technologies. As a result, no
matter how big or small your company is right now, there should be something
efficient holding the fort. A system, specifically an ERP, is required to maintain a
long-term market position. Businesses can use an ERP approach to determine
waste, remove inefficiencies, maintain relationships with customers, and enable
decision support tools. A comprehensive planning and tracking tool, such as ERP, is
required to maintain and align each of these complex processes across an entire
organization.

Company Background
Cadbury is a British multinational confectionery company owned by Mondelez
International. It is the world's second-largest confectionery brand, after Wrigley’s.
John Cadbury established the company in Birmingham, United Kingdom, in 1824.
Cadbury discovered that Kraft had adopted SAP ERP 6.0 (System Analysis and
Program Development) and had become one of the largest global ERP
implementations in recent years.
Cadbury began operations in India in 1948 by importing chocolates,
employing approximately 140,000 people, and operating in over 70 countries. After
60 years in business, it now has five company-owned manufacturing facilities in
Thane, Induri (Pune), Malanpur (Gwalior), Bangalore, and Baddi (Himachal
Pradesh), as well as four sales offices (New Delhi, Mumbai, Kolkota, and Bangalore)
(Chennai). The corporate headquarters are in Mumbai. Cadbury India currently
operates in four categories, namely Chocolate Confectionery, Milk Food Drinks,
Candy, and Gum are all part of Chocolate Confectionery category.
ERP Implementation
The ERP initiative was to bring about complete integration of the major
processes in the business. The major processes are the procurement system,
finance system, Human Resources, and other departments. These were functioning
in a completely decentralized manner. The finance department was the only one
common to all. ERP served as an integrating system and a solution for their then
existing decentralized model. The implementation methodology adopted by Cadbury
happened in 1995 and they went ahead using a big bang approach. They did the
implementation company-wise. Cadbury had one major expectation from ERP i.e. to
help the management work better than before with the existing systems in place. In
order to carry out the ERP implementation, Cadbury’s had to align with an external
vendor. For ERP partnership with Siemens and for infrastructure management
partnership with IBM. They went for a function-based big bang approach in India and
then implemented the whole module all across the company in a span of 1 year so it
can be said a big bang as a whole. It was completely top management-driven.
Cadbury has a proper MIS now. Data is entered only once. The entire system gets
updated. One can see the consolidated data from anywhere and make decisions.
From manual entries, it has become a totally system-driven data entry now. Cadbury
has tried to combine all these phases into a single-phase and implemented the BIG
BANG method to implement its ERP Practices.
Challenges
Cadbury has taken a £12m hit on its profits after IT problems caused too
many chocolate bars to be produced. Cadburys was left with warehouses full of
chocolate bars at the start of the year after the rollout of a new SAP-based enterprise
resource planning (ERP) system led to an excess of chocolate bars building up at
the end of 2005. The new SAP ERP system is part of a project called Probe.
Cadbury is hoping for £500m efficiency savings. Cadburys is offering a unique
experiment to increase their employee’s pay packet by offering a month’s salary and
a hundred thousand chocolate bars free to choose what brand they want because
they have to get rid of the chocolate somehow.
Cadbury faced significant challenges in meeting its production and distribution
requirements, which were accelerating its operational costs, necessitating a
complete overhaul of the existing processes. Cadbury was expanding rapidly and
couldn't keep up with the existing systems. Following problem research and analysis,
an ERP implementation decision was made. The implementation phase necessitated
constant changes in the planning phase. During the implementation, the
management collaborated closely with the ERP vendors, which included consulting
and remote access to a variety of project management activities. Despite the lengthy
implementation period, it provided an integrated real-time view of the core business.
ERP increased efficiency and guided the leader through all of the issues that
arose as a result of the fast-paced growth. The implementation of ERP introduced a
new warehouse management system as well as structure to branch offices and
depots. While implementing the ERP systems, the company built it on the company's
previous strengths, ensuring its competitiveness. The initial implementation took
time, but subsequent applications took less time and cost, and there is a significant
benefit to saving money during the implementation phase. The reaction of the
competition is irrelevant in this case because the change was not advertised to the
market. This is an internal process of restructuring, and it was a welcome change in
a company that desperately needed it. The company has also included a robust
regular feedback system to monitor the changes and ensure that they are carried out
as planned. Because the entire implementation is cross-functional, it is critical that
there is a significant increase in efficiency. The ERP vendor was also chosen from
among the best-in-class vendors, which aided in streamlining the process and
avoiding any potential hiccups during the initial implementation phase.
The system has also been made available to the vendors. They have a portal
called vendor connect where they can see the movement of their inventory and plan
accordingly. As a result, the restructuring occurs not only internally but also across
the supplier, which adds to the benefits accrued. It was thought to be a low-cost,
high-result implementation, which highlights the success and benefits.
 Ø SAP had helped Cadbury when the company was looking for a solution to
internal challenges stemming from its 16 different locations and 26 depots.
Ø A recent ERP implementation allowed Cadbury to address all concerns,
increase efficiency, and guide the company's rapid expansion as it grew at a
breakneck pace and couldn't keep up with the old systems. The old systems
were too slow due to new inefficiencies further down the supply chain, so the
ERP system took care of all concerns, increased efficiency, and guided the
company's development.
Ø By bringing all locations to the same page and using the best practices,
Cadbury streamlined processes across 16 locations and increased efficiency.
Ø This led to a rise in work-in-progress and the organization benefitting from a
more integrated approach. The ERP implemented a new warehouse
management system and structure for branch offices and depots. The 13
manufacturing operations were operating as silos.
Ø In order to maintain and expand its competitive advantage, the company has
built its ERP systems on its previous strengths.
Ø In the beginning, implementation took time and expense, but subsequent
implementations were much better, and cost savings were already evident
while the implementation was still going on
Ø This organization has more transparency, even though the authorities have a
say in the matter. This guarantees that everyone has the same
understanding of the situation and that proper integration takes place.
Ø In addition to automating 70% of its processes, it has yet to eliminate them. *
Because of this, the company has developed a well-functioning MIS
(Material Information System). The implementation process is led from the
top.
Ø A division of labor was made into two categories: low complexity and high
complexity. The work could be personalized and computerized. The
organization did not seek to reduce its workforce by hiring Human Resource
professionals.
Ø The firm went from a fully manual process to an integrated one. Finance
entries, materials receipts, and inventory updates are all recorded. After the
data was updated, it was made available to the entire firm
Ø The production function, for instance, is able to access end-of-shift data. The
depot's inventory levels are reflected for completed goods at all of the
depot's portals.

Ø A new stock accounting system has been implemented that ensures product
freshness.

No shortcuts were taken to squeeze into an unachievable timeframe in order

to expedite the implementation process. The implementation process was quick, but
not rushed. Realistic timelines and stages were established, and no shortcuts were
taken to automate the process.

An effective, regular feedback system was constructed to keep the system on

track and verify that its goals were being met.

CONCLUSION

Business resource tracking is possible via ERP systems such as tracking

cash flow, raw materials, production capacity, the status of business commitments,
and purchase orders. An ERP system ensures a constant flow of information
between all business functions and enables the company to communicate with
external stakeholders. As part of their effort to reduce expenses, Cadbury worked
with vendors; platforms such as Zillancer provide ERP solutions in a much smoother
manner. It provides options from various ERP software providers such as SAP,
Oracle, Microsoft Dynamics, ZOHO, and Epicor based on the needs of the company.
They not only execute the whole project but also plan its profitable structure.
Zillancer, for example, is a platform that onboards expert freelancers who work
remotely for clients, thus bringing a new phase in ERP.

Company Background
Hershey's is North America's largest chocolate manufacturer. Its headquarters
are in Hershey, Pennsylvania, which also serves as the location of Hershey's
Chocolate World. Mr. Milton S. Hershey founded the chocolate industry in 1876. The
Hershey Company was founded in 1894. Hershey's products are sold in
approximately sixty countries around the world. Hershey's sales are approximately
80% chocolate and 20% non-chocolate. Mars, Nestle, Russel Stover, Palmer, and
Nabisco are among Hershey's competitors.
In late 1996, Hershey's management gave its approval to a project called
Enterprise21. Hershey chose SAP R/3 ERP software, Manugistics SCM software,
Seibel's CRM software, and IBM Global Service to manage integration between
these three systems. The total cost of the project was $10 million USD. The project's
recommended implementation time was four years. Hershey demanded 2.5 years.
Hershey chose the Big Bang Approach over the phased approach.
Hershey’s ERP
In late 1996, Hershey's management approved a project called Enterprise 21,
which aimed to modernize the company's hardware and software. Hershey chose to
replace the systems rather than spend a large amount of money fixing data-related
issues in the legacy system. Based on the environment, Enterprise21 will upgrade
and standardize the hardware shift to client and server from the existing mainframe.
By April 1999, Hersey's information system division hoped to be using the ERP
system. Hershey was hoping that the new ERP software would aid in the
reorganization of its business processes. Hershey chose SAP AG's R/3 ERP suite
for this purpose, along with Legacy systems, which are computer systems or
application programs that have existed for a long time and have been modified
several times, and servers, which are computers or processors used for managing
file servers, print servers, and network servers. Clients are PCs or workstations that
users use to run the application.
Some modules, such as SAP financial, materials management, purchasing,
and warehousing, had been implemented by January 1999. Other modules, such as
SAP's critical order processing and billing systems module, Siebel's pricing and
promotions package, and Manugistics' planning and scheduling modules, were
behind schedule. Though Hershey intended to implement the new systems in April
1999, during a slow season for confectionery sales, these modules were not added
until July 1999 – three months later than planned. Hershey was under pressure at
the time and was unable to extend the implementation schedule due to the looming
Y2K problem. That was the point at which retailer orders for Halloween began to
pour in.
Hershey then decided to implement ERP in a Big Bang fashion. The software
was to be implemented all at once in this approach, as opposed to the phased
approach of implementing one module at a time, testing it, and then moving on to the
next module. A company could use the phased approach to find and fix bugs before
moving on to the next phase. Hershey, on the other hand, believed that the Big Bang
approach would allow it to meet all of its Halloween orders.
Order fulfillment, processing, and shipping issues began to emerge; Hershey
would be unable to meet its committed delivery date. Several Hershey's distributors
who had ordered the products were unable to deliver them to retailers on time, and
thus lost market credibility. Product inventory began to accumulate, and by the end
of September 2000, inventories were 25% higher than the previous year's
inventories.
Hershey's stock price dropped by 8% in a single day after the company
announced in the market that it was experiencing problems as a result of
malfunctioning newly installed computer systems. The failure of Hershey's to
implement the ERP software on time cost the company $150 million in sales. In its
1999 annual report, the company reported a 19% drop in profits and a 12% drop in
sales for the third quarter of 1999.
Reasons of Failure
● Over-squeezing implementation schedules
● Big Bang Approach instead of Phased Approach
● Mistake of sacrificing systems testing for the sake of expediency
● Cutover Activities and Go-Live were scheduled in Hershey’s busiest business
periods.
● Lack of experience in implementing software solutions
The First Lesson
An ERP implementation project should not be pushed to meet an
unreasonable deadline. Squeezing implementation timelines is a proven way to
overlook crucial issues. Testing phases serve as safety nets that should never be
breached.
The Second Lesson
Never schedule cutovers during peak seasons. Even under the best-case
scenario, firms can expect steep learning curves and operational performance
declines. The company provides itself more free time to iron out system issues by
arranging the cutover during weak business periods. It also offers staff more time to
understand new company processes and technologies. In many cases, it is even
preferable to reduce orders during and around the cutover period. This strategy aims
to reduce exposure to damages caused by potentially unnoticed errors and
less-than-perfectly-trained users.
BOUNCING BACK
After the debacle, Hershey worked to stabilize SAP and other systems.
George Davis of Computer Sciences Corporation was appointed as the company's
CIO. A comprehensive software testing program was created under his leadership.
Hershey declared in September-October 2000 that the majority of the initial problems
with the ERP systems had been resolved. In the year 2000, Hershey was able to
satisfy Easter orders. The next peak season, Halloween-Christmas, too went off
without a hitch. Hershey was back on track by the year 2000, with sales approaching
$4.2 billion.
Hershey redesigned the process and began working with SAP R/3 4.6, which
was part of SAP's mysap.com solutions, in July 2001. The system was successfully
installed in 11 months, ahead of schedule, and at a cost that was 20% less than the
budget estimates. Hershey also started utilizing SAP for marketing analysis and
brand management, order management, and other purposes. Within 60 days of
implementation, the company declared significant improvements to processes such
as invoice verification, credit processing, and so on. Hershey was evaluating the
effectiveness of sales and marketing activities by utilizing SAP's business analytic
tools. Hershey ensured that previous failures were not repeated by properly testing
the program before installing it and giving adequate employee training. Hershey, for
example, performed a dry run of pallet loading and distribution by placing bar codes
on empty pallets. Hershey's success in its second cycle of ERP adoption was
attributed to "excellent program management and executive leadership, rigorous
planning, and an extensive testing and training strategy," according to Joe Zakutney,
Director, SAP Upgrade Program.
Hershey's distribution system, which included multiple regional warehouses,
some of which were controlled by third parties, was one of the primary causes of the
problems with Hershey's first major ERP. To address this issue, Hershey created a
1.2 million sq. ft. distribution center to align its distribution function with the new ERP
system. Hershey was able to reduce order cycle times in half with the new
distribution center. Hershey closed numerous warehouses after establishing this new
facility.
 Hershey personnel are considerably more comfortable and able to execute at
a better level of performance in mid-2001, with the ERP systems functioning
smoothly and more than 18 months of experience utilizing the system. We've
entered a continuous improvement cycle and are starting to see the benefits of the
new system's power.
References:
Chaudhary A.(2020)., Cadbury ERP Implementation. Himachal Pradesh University.
Computer Science and Engineering (CSE). Retrieved on April 1. 2022 from
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