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AOSI 2008 Caso E: Hershey
57400 – Paul Maia
Mapa conceptual do caso
Upstream Figure 1 – Hershey’s Supply Chain (Laudon. page 360) Downstream As illustrated the upstream portion of Hershey’s supply chain (Laudon. Suppliers (mostly raw material): o Output: Ingredients (raw material for Hershey’s products). the outputs (materials.doc 1. Orders to suppliers’ suppliers. food grade chemicals). information). Model Hershey´s Supply Chain. o Processing – transformation of raw materials into ingredients and extraction of ingredients. information). page 361) involves: Suppliers’ Suppliers: o Output – raw materials. DO NOT ADDRESS ANY INFORMATION SYSTEMS OR IT ASPECTS OR PROBLEMS!!! Suppliers’ Suppliers Suppliers Ingredient suppliers : Sugar Cocoa Sweeteners Nuts Raisins Specialty ingredients (flavors. Hershey Distributors Retailers Examples: Wal-Mart Customers Raw material extractors (e. Describe textually each of the components (boxes) used. o Inputs: 19-10-2008 21:55 2 . and the functional processing within each component. indicating clearly the inputs (materials. Examples: Great North Food Lowes Food Eby – Brown Co. colors. o Processing – extraction of raw materials.g. o Input – demand for a specific material (orders from Hershey’s suppliers).AOSI-2008-CASOE-57400. end-to-end. Sugarcane extractors). using a figure similar to Figure 9-2 of the Text.
Inbound Logistics Manages the transmission of ingredients and orders between Suppliers and Operations Operations Transforms Ingredients into products Orders Orders Demand for a specific ingredient (orders from Hershey’s). Analyzes customers. Hershey’s supply chain’s downstream portion (Laudon.AOSI-2008-CASOE-57400. o Orders for ingredients to its suppliers. page 361) involves: Distributors: o Outputs: Hershey’s products to retailers. o Advertising to its customers. o Customer information (as a result of market analysis – marketing). Orders for products to Hershey. Raw materials. Internal Supply Chain (figure 2). Inputs: o Ingredients form suppliers. o Demand for products (orders from distributors). 19-10-2008 21:55 3 . page 361) Finally. Sales and Marketing Sells and promotes products. Customer Information Advertising Ingredients Orders Ingredients Orders Products Outbound Logistics Manages the transmission of products between Operations and Distributors Product s Figure 2 – Hershey’s internal supply chain (Laudon.doc Hershey: Outputs: o Its products (its candy) to distributors. Processing – transformation of ingredients into final products.
page 96): 19-10-2008 21:55 4 .AOSI-2008-CASOE-57400. Contacts with customers. o Inputs – products from retailers. Products from retailers. Orders from customers.doc o Processing – distribution of products. 2. Orders from retailers. o Processing: o Inputs: Customers: o Outputs: Information to Hershey. List and analyze Hershey's problems prior to the decision to adopt an ERP. Products from Hershey. To better understand Hershey’s problems I will use Porter’s competitive forces model (Laudon. o Processing – make use of the product (eat the candy). Sells products. Product returns are infrequent in this industry. Clarify the NATURE of the problems! Use your previous knowledge about business analysis using the competitive forces and value chain models. o Inputs: Retailers: o Outputs: Products to customers. Orders to retailers.
Customers tend to prefer known brands and will only opt for new brands. Their rush for candies in the Halloween and Christmas generates most of Hershey’s logistics problems – because of the pushbased model (Laudon. A delay in supplier’s distribution may render Hershey incapable of producing its products.AOSI-2008-CASOE-57400. Mars).g. Hershey has a strong reputation and brand name. if the usual ones aren’t available. Customer’s buy whatever is available. Suppliers – average: Hershey is extremely selective with suppliers. another one will. Competitors – strong: Shelf space is intensely fought for. 19-10-2008 21:55 5 . but so do other competitors (e. because the options are vast . page 366). New Market Entrants – weak: Many strong companies already established. making entry difficult. If a customer wants to buy chocolate he’ll buy what’s available.doc Substitute products – strong: Enormous variety of candy. Figure 3 – Porter’s Competitive 5 Forces Model for Hershey Customers – strong: If one brand doesn’t fill the retailer’s shelves. Switching cost is low.
Lack of integration with retailers which it more difficult to obtain customer information. makes it difficult to obtain accurate information about the whole firm. Human Resources: inexistent ERP and ERM (Laudon. page 366). due to lack of data sharing with customers. Optimizing logistics is crucial to achieve Operational Excellence (Laudon. Lack of customer demand information may lead to excessive inventory. makes it difficult to obtain accurate information about employees. page 362). Candy industry was a Low IT industry starting to increase its investment in IT. Procurement: difficult due to inexistent B2B e-Commerce (Laudon. which results in a pushbased model. Lack of integration along the supply chain. page 8).g. Suppliers’ Suppliers Suppliers Hershey Distributors Customers SCM: Inexistent. CRM: Inexistent. page 410). Operations: production is based on inaccurate demand forecasts. which increases information asymmetry. page 105): Administration and Management: inexistent centralized information application (e. due to the bullwhip effect (Laudon. Service: no information Outbound Logistics: logistics problems. Figure 4 – Value chain model for Hershey From these analyses one may conclude that Hershey’s problems are: The need to fill retailers’ shelves to keep up with competitors (or customers will switch). page 371). page 395) towards suppliers.doc To better understand the situation its best to complement this with a value chain model  (Laudon. reducing price and cost transparency and increasing search costs (Laudon. ERP). due to lack of data sharing with suppliers (because of inexistent SCM. Technology: Low IT firm – within a Low IT industry. This is currently done with a push-based model (Laudon. 19-10-2008 21:55 6 . Sales and Marketing: lack of information due to inexistent CRM system.AOSI-2008-CASOE-57400. Inbound Logistics: logistics problems. resulting in extreme logistics costs. due to inexistent SCM. Old IT needs to be fixed or replaced due to Y2K problems.
Keep retailers’ shelves always full of Hershey’s products avoiding customers to switch to other brands.AOSI-2008-CASOE-57400. This would contribute to: Diminish the response time to customer orders. Inexistent normalized information about the whole firm to support decision making. page 360): o Automates many business processes allowing for extremely efficient order processing (Laudon. The need to process enormous amounts of orders. they will opt for a competing brand. 3. because IT accelerates competition . If customers wish to buy candy and can’t find a Hershey’s product. o Centralizes the firm’s data allowing the Hershey to analyze it. The demand is irregular throughout the year reaching its peek on Halloween and Christmas. Therefore it is critical to succeed in this time of the year. Reduce the necessary inventory space and therefore the total cost of each product. Manugistics’ SCM would allow to (Laudon. 19-10-2008 21:55 7 . Difficult to control and select suppliers increasing the ingredients costs. and make better decisions. page 13). Low profits generated by each product demand an enormous amount of sales – characteristic of economies of scale  – and lowering the total cost of each product.doc Firms within this industry will have to keep up their IT investments for survival (Laudon. Difficulty in knowing customers and targeting them. take conclusions (e. How would the adoption of the proposed IT/IS “solutions” contribute to solve the problems addressed above? If well implemented Enterprise 21 would solve these problems because: SAP’s ERP (Laudon. page 368): o Match supply to demand and speed product time to market: Solving the irregular demand for candy.g. This involves distributing enormous amounts of products with great efficiency. page 360). forecasting demand – crucial to satisfying clients).
and technology issues do you think explain the failure of the Enterprise 21 project? The issues that explain the failure are: Management (Laudon. page 18): o The decision of launching the system in a high sales season. Reducing customer churn rate (Laudon. This was crucial to implement the Enterprise 21 and fed the SCM. especially with: A system that involved changes in the way the firm processed orders – a crucial task for Hershey. in case of a delay. Siebel’s CRM would allow for greater marketing and customer knowledge (Laudon. page 375). o Reduce inventory – reducing the total cost of each product – helping achieve Operational Excellence. because. page 366). Procurement related problems (supplier selection) won’t be solved with Manugistics’ SCM system. o Increasing sales. Reducing the bull whip effect. It would allow Hershey to survive because of keeping up with the IT investments occurring within the candy industry . Allowing a shift from the push-based model to the pull based model (Laudon. 19-10-2008 21:55 8 . ERP and CRM systems with the necessary data. Optimizing logistics. not all problems are solved. To solve these problems B2B eCommerce would be a possible solution (see figure 4). page 375): o Reducing churn rate. organization. Bar codes at production plants allowed better tracking of Hershey’s products and supplies. What management.AOSI-2008-CASOE-57400. reveals poor risk management. Hershey could easily switch from one supplier to another giving Hershey greater bargaining power.doc Keeping retailers supplied. Notice. This would make suppliers a weak force. 4. It would solve the Y2K problems because it was a new software product. Increasing sales.
risky in such a complex system that transversally integrates various business processes and IS (SAP.AOSI-2008-CASOE-57400. Organization (Laudon. because of the resistance they generate (Laudon. page 17): Lack of employee education – a powerful method to reduce resistance to change.asp.doc The decision of using the direct cutover strategy. Technology (Laudon. This is truly a problem because once employees were better trained the order processing problems were reduced. o Inadequate business process transformations. allowing for many details to remain overlooked . This is necessary when making technological changes.  Suppliers – Who is Eligible? . This is crucial in the implementation of Enterprise Applications (Laudon. 376).thehersheycompany.thehersheycompany.asp. consulted in: 18th 19-10-2008 21:55 9 . which implied insufficient testing. o Complex task of integrating three different systems from three different vendors. http://www.com/business/suppliers_what. 372. Not only within the firm but with the firms along Hershey’s supply chain (SCM systems demand this). page 27) systems that involve an organizational component (Laudon. This could have been avoided by doing the adequate business process transformations (explained above).com/business/suppliers_who. Referências  Suppliers – What we buy. by Hershey. page 19): o Application changes (customization) to adapt the application to the firm’s business processes. page 359. page 359). because it satisfies employees drive to comprehend. coercion that conflicts with the drive to defend) . An innovative business process should be tested in one location. page 17): o Inadequate strategy for organizational change . consulted in: 18th October 2008. employee training and business process analysis. http://www. Once again.g. Lack of employee training with the new business processes and IS. page 88) and the fact that IS are sociotechnical (Laudon. which deteriorates its performance (Laudon. Siebel and Manugistics systems). This is also a method for dealing with resistance to change. It also avoids the demotivation that other methods for dealing with resistance to change do (e. by Hershey. Then embedded in the enterprise application and propagated to the rest of the firm .
Schlesinger. Palavras: 1450 19-10-2008 21:55 10 .  Investing in the IT That Makes a Competitive Difference.  Employee Motivation A Powerful New Model.wikipedia.org/wiki/Economies_of_scale. by Andrew McAfee and Erik Brynjolfsson. by Wikipedia. HBR. HBR.com/blogs/erp-roi/erps-big-bang-theory-11954.wikipedia. by John P. by Wikipedia. by Nitin Nohria. Boris Groysberg. HBR.  In Search of Business Value & ROI: Achieving IT Benefits Realization. Kotter and Leonard A.  Economy of scale. consulted in: 18th October 2008.  Value Chain. and Linda-Eling Lee.toolbox. consulted in: 19th October 2008.  Choosing Strategies for Change. July-August 2008. http://en. http://en.AOSI-2008-CASOE-57400. consulted in: 18th October 2008. by Eric Kimberling.org/wiki/Value_chain.doc October 2008. July-August 2008. http://it. July-August 2008.
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