AOSI 2008 Caso E: Hershey: Mapa Conceptual Do Caso

AOSI-2008-CASOE-57400.
doc
AOSI 2008
Caso E: Hershey
57400 – Paul Maia
Mapa conceptual do caso
19-10-2008 21:55 1
AOSI-2008-CASOE-57400.doc
1. Model Hershey´s Supply Chain, end-to-end, using a figure similar to

Figure 9-2 of the Text. Describe textually each of the components (boxes)
used, indicating clearly the inputs (materials, information), the outputs
(materials, information), and the functional processing within each
component. DO NOT ADDRESS ANY INFORMATION SYSTEMS OR
IT ASPECTS OR PROBLEMS!!!
Suppliers’ Distributors
Suppliers Hershey Retailers Customers
Suppliers
Ingredient Examples: Examples:

Raw material
extractors (e.g. suppliers [1]: Great North Food Wal-Mart
Sugarcane Sugar Lowes Food
extractors). Cocoa Eby – Brown Co.
Sweeteners
Nuts
Raisins
Specialty
ingredients
(flavors, colors,
food grade
chemicals).
Upstream Downstream
Figure 1 – Hershey’s Supply Chain
(Laudon, page 360)
As illustrated the upstream portion of Hershey’s supply chain (Laudon, page 361)
involves:
Suppliers’ Suppliers:
o Output – raw materials.
o Processing – extraction of raw materials.
o Input – demand for a specific material (orders from Hershey’s

suppliers).
Suppliers (mostly raw material):
o Output:
 Ingredients (raw material for Hershey’s products).
 Orders to suppliers’ suppliers.
o Processing – transformation of raw materials into ingredients and

extraction of ingredients.
o Inputs:
19-10-2008 21:55 2
 Demand for a specific ingredient (orders from Hershey’s).
 Raw materials.
Hershey:
Outputs:
o Its products (its candy) to distributors.
o Orders for ingredients to its suppliers.
o Advertising to its customers.
Processing – transformation of ingredients into final products.
Internal Supply Chain (figure 2).
Inputs:
o Ingredients form suppliers.
o Demand for products (orders from distributors).
o Customer information (as a result of market analysis – marketing).
Sales and Marketing Orders

Sells and promotes products.
Analyzes customers.
Inbound Operations Orders Customer
Logistics Transforms Information
Ingredients Manages the Ingredients
transmission Ingredients into products Advertising
of ingredients
Orders and orders Orders
between
Suppliers and Outbound Logistics
Operations Products Manages the transmission of
products between Operations and Product
Distributors s
Figure 2 – Hershey’s internal supply

chain (Laudon, page 361)
Finally, Hershey’s supply chain’s downstream portion (Laudon, page 361) involves:
Distributors:
o Outputs:
 Hershey’s products to retailers.
 Orders for products to Hershey.
19-10-2008 21:55 3
o Processing – distribution of products.
o Inputs:
 Orders from retailers.
 Products from Hershey.
Retailers:
o Outputs:
 Products to customers.
o Processing:
 Sells products.
 Contacts with customers.
o Inputs:
 Orders from customers.
 Products from retailers.
Customers:
o Outputs:
 Information to Hershey.
 Orders to retailers.
 Product returns are infrequent in this industry.
o Processing – make use of the product (eat the candy).
o Inputs – products from retailers.
2. List and analyze Hershey's problems prior to the decision to adopt an

ERP. Clarify the NATURE of the problems! Use your previous
knowledge about business analysis using the competitive forces and value
chain models.
To better understand Hershey’s problems I will use Porter’s competitive forces model
(Laudon, page 96):
19-10-2008 21:55 4
Substitute products –
strong:
Enormous variety of candy.
Customers – strong:
Competitors – strong:
If one brand doesn’t fill
Suppliers – average: Shelf space is intensely
the retailer’s shelves,
Hershey is extremely selective fought for. If a customer
another one will.
with suppliers, because the wants to buy chocolate
Switching cost is low.
options are vast [2]. he’ll buy what’s available.
Customer’s buy
A delay in supplier’s Hershey has a strong
reputation and brand whatever is available.
distribution may render
name, but so do other Their rush for candies in
Hershey incapable of
the Halloween and
producing its products. competitors (e.g. Mars).
Christmas generates
most of Hershey’s
logistics problems –
because of the push-
New Market Entrants – based model (Laudon,
weak: page 366).
Many strong companies
already established,
making entry difficult.
Customers tend to prefer
known brands and will
only opt for new brands,
if the usual ones aren’t
available.
Figure 3 – Porter’s Competitive 5

Forces Model for Hershey
19-10-2008 21:55 5
To better understand the situation its best to complement this with a value chain model
[3] (Laudon, page 105):
Administration and Management: inexistent centralized information application (e.g. ERP), makes it
difficult to obtain accurate information about the whole firm.
Human Resources: inexistent ERP and ERM (Laudon, page 371), makes it difficult to obtain accurate
information about employees.
Technology: Low IT firm – within a Low IT industry.
Procurement: difficult due to inexistent B2B e-Commerce (Laudon, page 410), which increases
information asymmetry, reducing price and cost transparency and increasing search costs (Laudon, page
395) towards suppliers.
Inbound Operations: Sales and Marketing: Service: no Outbound Logistics:
Logistics: production is lack of information information logistics problems,
logistics based on due to inexistent CRM due to lack of data
problems, due to inaccurate system. sharing with
lack of data demand customers.
sharing with forecasts,
suppliers (because due to
of inexistent inexistent
SCM. SCM.
Suppliers’ Suppliers Hershey Distributors Customers

Suppliers
SCM: Inexistent. Lack of CRM: Inexistent. Lack of

integration along the supply integration with retailers which
chain, which results in a push- it more difficult to obtain
based model. customer information.
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). This is currently done with a push-based model (Laudon, page
366), resulting in extreme logistics costs. Optimizing logistics is crucial to
achieve Operational Excellence (Laudon, page 8).
Lack of customer demand information may lead to excessive inventory, due to

the bullwhip effect (Laudon, page 362).
Old IT needs to be fixed or replaced due to Y2K problems.
Candy industry was a Low IT industry starting to increase its investment in IT.
19-10-2008 21:55 6
Firms within this industry will have to keep up their IT investments for survival
(Laudon, page 13), because IT accelerates competition [4].
Low profits generated by each product demand an enormous amount of sales –

characteristic of economies of scale [5] – and lowering the total cost of each
product. This involves distributing enormous amounts of products with great
efficiency.
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.
The need to process enormous amounts of orders.
If customers wish to buy candy and can’t find a Hershey’s product, they will
opt for a competing brand.
Inexistent normalized information about the whole firm to support decision

making.
Difficulty in knowing customers and targeting them.
Difficult to control and select suppliers increasing the ingredients costs.
3. 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 360):
o Automates many business processes allowing for extremely efficient

order processing (Laudon, page 360). This would contribute to:
 Diminish the response time to customer orders.
 Keep retailers’ shelves always full of Hershey’s products

avoiding customers to switch to other brands.
 Reduce the necessary inventory space and therefore the total

cost of each product.
o Centralizes the firm’s data allowing the Hershey to analyze it, take
conclusions (e.g. forecasting demand – crucial to satisfying clients), and
make better decisions.
Manugistics’ SCM would allow to (Laudon, page 368):
o Match supply to demand and speed product time to market:
 Solving the irregular demand for candy.
19-10-2008 21:55 7
 Keeping retailers supplied.
 Reducing customer churn rate (Laudon, page 375).
 Increasing sales.
 Allowing a shift from the push-based model to the pull based

model (Laudon, page 366).
 Reducing the bull whip effect.
 Optimizing logistics.
o Reduce inventory – reducing the total cost of each product – helping

achieve Operational Excellence.
Siebel’s CRM would allow for greater marketing and customer knowledge
(Laudon, page 375):
o Reducing churn rate.
o Increasing sales.
It would solve the Y2K problems because it was a new software product.
Bar codes at production plants allowed better tracking of Hershey’s products

and supplies. This was crucial to implement the Enterprise 21 and fed the SCM,
ERP and CRM systems with the necessary data.
It would allow Hershey to survive because of keeping up with the IT

investments occurring within the candy industry [4].
Notice, not all problems are solved. Procurement related problems (supplier selection)
won’t be solved with Manugistics’ SCM system. To solve these problems B2B e-
Commerce would be a possible solution (see figure 4). This would make suppliers a
weak force, because, in case of a delay, Hershey could easily switch from one supplier
to another giving Hershey greater bargaining power.
4. What management, organization, 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, reveals

poor risk management, especially with:
 A system that involved changes in the way the firm processed

orders – a crucial task for Hershey.
19-10-2008 21:55 8
 The decision of using the direct cutover strategy, which implied

insufficient testing, employee training and business process
analysis. Once again, risky in such a complex system that
transversally integrates various business processes and IS (SAP,
Siebel and Manugistics systems), allowing for many details to
remain overlooked [6]. An innovative business process should
be tested in one location. Then embedded in the enterprise
application and propagated to the rest of the firm [4].
Organization (Laudon, page 17):
o Inadequate strategy for organizational change [7]. This is necessary

when making technological changes, because of the resistance they
generate (Laudon, page 88) and the fact that IS are sociotechnical
(Laudon, page 27) systems that involve an organizational component
(Laudon, page 17):
 Lack of employee education – a powerful method to reduce

resistance to change, because it satisfies employees drive to
comprehend. It also avoids the demotivation that other methods
for dealing with resistance to change do (e.g. coercion that
conflicts with the drive to defend) [8].
 Lack of employee training with the new business processes and

IS. This is truly a problem because once employees were better
trained the order processing problems were reduced. This is also
a method for dealing with resistance to change.
o Inadequate business process transformations. Not only within the firm

but with the firms along Hershey’s supply chain (SCM systems demand
this). This is crucial in the implementation of Enterprise Applications
(Laudon, page 359, 372, 376).
Technology (Laudon, page 19):
o Application changes (customization) to adapt the application to the

firm’s business processes, which deteriorates its performance (Laudon,
page 359). This could have been avoided by doing the adequate
business process transformations (explained above).
o Complex task of integrating three different systems from three different

vendors.
Referências
[1] Suppliers – What we buy, by Hershey,
http://www.thehersheycompany.com/business/suppliers_what.asp, consulted in: 18th
October 2008.
[2] Suppliers – Who is Eligible? , by Hershey,

http://www.thehersheycompany.com/business/suppliers_who.asp, consulted in: 18th
19-10-2008 21:55 9
October 2008.
[3] Value Chain, by Wikipedia, http://en.wikipedia.org/wiki/Value_chain, consulted in:

18th October 2008.
[4] Investing in the IT That Makes a Competitive Difference, by Andrew McAfee and
Erik Brynjolfsson, HBR, July-August 2008.
[5] Economy of scale, by Wikipedia, http://en.wikipedia.org/wiki/Economies_of_scale,

consulted in: 18th October 2008.
[6] In Search of Business Value & ROI: Achieving IT Benefits Realization, by Eric
Kimberling, http://it.toolbox.com/blogs/erp-roi/erps-big-bang-theory-11954, consulted
in: 19th October 2008.
[7] Choosing Strategies for Change, by John P. Kotter and Leonard A. Schlesinger,
HBR, July-August 2008.
[8] Employee Motivation A Powerful New Model, by Nitin Nohria, Boris Groysberg,
and Linda-Eling Lee, HBR, July-August 2008.
Palavras: 1450
19-10-2008 21:55 10

AOSI 2008 Caso E: Hershey: Mapa Conceptual Do Caso

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

AOSI 2008 Caso E: Hershey: Mapa Conceptual Do Caso

Hochgeladen von

Copyright:

Verfügbare Formate

AOSI-2008-CASOE-57400.

Mapa conceptual do caso

1. Model Hershey´s Supply Chain, end-to-end, using a figure similar to

Ingredient Examples: Examples:

o Output – raw materials.

o Processing – extraction of raw materials.

o Input – demand for a specific material (orders from Hershey’s

Suppliers (mostly raw material):

 Ingredients (raw material for Hershey’s products).

 Orders to suppliers’ suppliers.

o Processing – transformation of raw materials into ingredients and

 Demand for a specific ingredient (orders from Hershey’s).

o Its products (its candy) to distributors.

o Orders for ingredients to its suppliers.

o Advertising to its customers.

Processing – transformation of ingredients into final products.

Internal Supply Chain (figure 2).

o Ingredients form suppliers.

o Demand for products (orders from distributors).

o Customer information (as a result of market analysis – marketing).

Sales and Marketing Orders

Figure 2 – Hershey’s internal supply

 Hershey’s products to retailers.

 Orders for products to Hershey.

o Processing – distribution of products.

 Orders from retailers.

 Products from Hershey.

 Contacts with customers.

 Orders from customers.

 Products from retailers.

 Product returns are infrequent in this industry.

o Processing – make use of the product (eat the candy).

o Inputs – products from retailers.

2. List and analyze Hershey's problems prior to the decision to adopt an

Figure 3 – Porter’s Competitive 5

Technology: Low IT firm – within a Low IT industry.

Suppliers’ Suppliers Hershey Distributors Customers

SCM: Inexistent. Lack of CRM: Inexistent. Lack of

Figure 4 – Value chain model for

Lack of customer demand information may lead to excessive inventory, due to

Old IT needs to be fixed or replaced due to Y2K problems.

Low profits generated by each product demand an enormous amount of sales –

The need to process enormous amounts of orders.

Inexistent normalized information about the whole firm to support decision

Difficulty in knowing customers and targeting them.

Difficult to control and select suppliers increasing the ingredients costs.

3. How would the adoption of the proposed IT/IS “solutions” contribute

SAP’s ERP (Laudon, page 360):

o Automates many business processes allowing for extremely efficient

 Diminish the response time to customer orders.

 Keep retailers’ shelves always full of Hershey’s products

 Reduce the necessary inventory space and therefore the total

Manugistics’ SCM would allow to (Laudon, page 368):

o Match supply to demand and speed product time to market:

 Solving the irregular demand for candy.

 Keeping retailers supplied.

 Reducing customer churn rate (Laudon, page 375).

 Allowing a shift from the push-based model to the pull based

 Reducing the bull whip effect.

o Reduce inventory – reducing the total cost of each product – helping

o Reducing churn rate.

Bar codes at production plants allowed better tracking of Hershey’s products