Software, Data and Visibility

In July 1999 the Hershey Foods Corporation switched on much of a new set of systems for taking orders, planning production and shipping chocolate. The programme, which combined SAP's R/3 enterprise resource planning (ERP) software, Manugistics demand and supply planning and Siebel customer-relationship software, was reported to have cost about $112 million. It replaced legacy systems that were not safe for the year 2000, and the Y2K deadline had compressed the timetable; the cut-over was scheduled for the months in which retailers' Halloween orders were shipped, the company's busiest season. Several modules and three vendors' systems went live at once.

Orders entered the new system but did not flow correctly to warehouses and shipping. Hershey had much of the product in stock but could not find, allocate or ship it reliably, and deliveries to retailers were late or incomplete (reported). Retailers that did not receive Halloween candy filled the space with competitors'. Roughly $100 million of orders could not be filled in the Halloween and early holiday season (reported). In September 1999 the chief executive, Kenneth Wolfe, told analysts that the company was having problems with its new order-taking and distribution systems, and Hershey warned that third-quarter sales and earnings would fall short. Fourth-quarter sales were reported at about $1.11 billion against about $1.24 billion a year earlier. The physical supply chain worked. The data supply chain did not.

By 2000 the systems were working, and Hershey stayed with SAP; when it moved to SAP S/4HANA in the week of 1 April 2024, its customers bought ahead of the cut-over, which added about 3.4 points to first-quarter sales growth and was disclosed with those results, and the run-down of that retailer inventory took about 11 points off second-quarter sales (company). The episode became the standard teaching case of ERP risk, alongside Nike's problems with i2 planning software in 2000–01, Target's Canadian expansion of 2013–15, whose new systems were loaded with inaccurate product data, and Lidl's abandonment in July 2018 of an SAP-based merchandise system it had begun in 2011, after reported spending of about €500 million. This chapter explains the layers of supply-chain software, why the most important systems are the hardest to change, and why data and visibility are now part of the service a supply chain sells.