Hershey uses S/4Hana ERP System
Recently, many companies have had a difficult time managing and planning their resources within their master schedule and master production schedule. The main contributor to this increased difficulty is the increased complication in supply chain management. The relationships between suppliers, production and logistics is becoming increasingly complex as production grows and becomes more widespread. This complexity within supply chain management has companies turning to operation in order to effectively plan and manage their resources. Enterprise resource planning systems is the technology that many companies are utilizing. Enterprise resource planning systems are large, integrated information systems that support many enterprise processes and data storage needs. These systems make managing and planning resources much simpler.
The Hershey Company has selected Accenture to put SAP’s S/4Hana enterprise resource sutem into place. Hershey believes they can cut costs and increase sales using this technology, the program will make manufacturing much more efficient. Hershey’s chief product supply and technology officer believes that this system will help them increase their competitive advantage, as well as develop a service that is centered around the wants and needs of the customer. This is increase in competitive advantage is apart of Hershey’s digital transformation initiative, where they plan to have their supply chain more technology centered. The Hershey Company selected Accenture specifically because it has sound knowledge of the industry and a proven track record of making resource management and planning far more efficient. Hershey was a previous user of another SAP enterprise resource planning system, the SAP R/3, which dates back to 1999. The move to upgrade their enterprise resource planning systems shows a continued interest in the quality management and planning of Hershey’s resources.
The S/4 Hana system is available on cloud, in memory and hybrid deployment models. This new system is considered SAP’s “most important release in 23 years”. The S/4Hana is intended to be much easier to use and administer than previous models. It will also be able to solve more complex supply chain problems and handle larger amounts of inventory data than previous models. SAP believes the S/4 Hana will take over the manufacturing industry with its more responsive, and real-time digital supply chain systems. The S/4Hana has a predictive master production schedule function that will create MRP simulations in order to create analysis and forecasts so that companies can adequately manage their capacity and their relationships with their suppliers. SAP and Accenture noticed that consumers increasingly expect shorter lead times, quick delivery and high flexibility when ordering products, they believe the new S/4 system will help companies deliver to those consumer expectations.
https://www.insidesap.com.au/accenture-sap-optimise-manufacturing-supply-chains-s4-hana/
https://www.computerweekly.com/news/252436205/Hersheys-outsources-SAP-roll-out-Accenture
Hershey’s decision to update the ERS shows the importance of continuous improvement across all aspects of operations management in order to stay successful. Even Hersey, which has been successful since it was founded over 120 years ago is still looking for ways to improve the business model. As Michael mentioned, the ERS will help Hershey manage and plan resources more effectively. Hershey’s need to manage resources better may come from an improvement it made a few years ago. In 2015 Hershey realized it was selling way too many products, which ultimately were hurting the brand because consumers were confused, and the variety made costs go up. So, Hershey decided to implement a lean system and cut down the number of products that were sold in stores. The process of doing so cost Hershey almost $200 million dollars, but also showed a 2.9% increase in net income. Now that Hershey has a different inventory mix, their new ERS will probably help them manage it so that they can keep the successful trend going. I wonder how long it will take for the employees at Hersey to learn the new system, or if it has enough similarities to the old system that there was not a huge learning curve.
https://marketrealist.com/2015/10/hersheys-steps-improve-suppliers-productivity-conscious-sourcing
After researching more about enterprise resource planning I actually stumbled upon an article discussing its history. In 1913, Ford Harris developed, what we have been studying, the EOQ, a paper-based manufacturing system for production scheduling. As technology increased new concepts were developed to handle and analyze more activities beyond just manufacturing, finance, customer relationship management, and resource data. This new category of business management became known as Enterprise Resource planning. Because the ERP has now moved to the cloud, businesses with on-premises systems are struggling to keep up. The future is digital and companies who make this switch will remain successful while those who do not will fall behind and eventually die out.
Nestle was one company to take on ERP implementation and although it had a rough start they are now seeing savings from their supply chain improvements, more specifically in demand forecasting. Although it comes at a high price, ERP implementation, when done correctly, holds valuable opportunities for the company at hand.
https://www.oracle.com/applications/erp/what-is-erp.html
http://www.uwosh.edu/faculty_staff/wresch/ERPNestle.htm
Hershey’s decision is great one to continue growing. It is important for all companies in today’s day and age to grow in a way that benefits them in the long run. It is projected already that this switch over (which appears to be happening rather easily), will save the company an incredible amount of money yearly as well (https://news.sap.com/welcome-to-a-world-of-enterprise-connectivity-in-chocolate-town/). Additionally, this new system makes things more efficient for the company as well, and by following in this market trend, they are able to increase their global foothold.
I would love to share a personal story of mine of when I worked at an importing/supply company over the summer between my sophomore and junior year where I assisted in helping set up a Enterprise resource planning system type software called Syspro. At Bedemco, the company I worked for, they had an old style of work that had been passed down by the three generations of owners. Efficiency in the company was okay, but they lacked organization, and this lack of organization led to a recall in one of their products that shut down the company for a couple of months. The Syspro software worker in two main ways. First it organize the employees by having every sale they made, be processed through the system so that Bedemco’s supply team knew exactly how much inventory they needed to restock. Secondly, it organized the inventory in a way that showed which products had the greatest demand, and what products were causing waste, which enhanced the efficiency of the entire supply process. With global completion being in modern day business, companies that aren’t efficient will not last, and Bedemco took a large leap in staying afloat by using the Syspro system. I have attached to Syspro website so that you can look at the features of the software yourself.
https://us.syspro.com/brochure/product/utm_source=bing&utm_medium=cpc&utm_campaign=SYSPRO%20Brand%20Terms%20-%20SYSPRO%20USA%20Site
I definitely get uneasy when we rely more heavily on technology, especially for something as complex and easily susceptible to errors as supply chains and inventory. Since Hershey has used a similar program in the past I have more faith that the company will succeed. I think the use of technology for tasks like these have more benefits than simply organizing a process flow. The article talks about how Hershey can identify new market opportunities and build value for investors, as well.
https://www.forbes.com/sites/sap/2016/09/29/hershey-uses-sap-s4hana-to-transform-its-way-of-business/#24ddea057f7b