The Hershey SAP Case: A Lesson in What Not to Do

A Risk That Turned Into a Nightmare

Implementing SAP can be a game-changer for a company—boosting efficiency and modernizing operations. But if done wrong, it can quickly become a disaster. One of the most infamous examples is Hershey’s 1999 ERP failure, where a rushed and poorly managed rollout of SAP R/3, combined with other systems, led to massive losses and serious reputational damage.

Today, this case is often used as a real-world example in business schools, project management courses, and digital transformation programs, showing exactly how bad things can get when major IT projects go off the rails.

The SAP Project at Hershey: Goals and Context

Back in 1996, Hershey Foods Corporation, famous for products like Kisses and Jolly Ranchers, decided it was time to upgrade its aging systems before the year 2000 (Y2K). The company chose a tech stack that included:

• SAP R/3 as its main ERP system
• Manugistics for supply chain management
• Siebel as the CRM platform

The goal was to create an integrated, modern system that could streamline operations. But what followed was far from smooth.

What Went Wrong: The Major Mistakes

1. Unrealistic timeline
   Hershey wanted the project done in just 30 months, even though most experts recommended at least 48 months. The go-live date was set for July 1999, right before Halloween—one of the busiest times of year for candy sales.
2. Not enough testing
   To meet the deadline, critical testing phases were skipped. As a result, bugs and system integration issues slipped through the cracks.
3. Poor employee training
   Many workers weren’t properly trained on how to use the new systems. This led to confusion, mistakes, and a drop in productivity when the company needed it most.
4. Data migration issues
   Moving data from the old systems wasn’t handled well. The result? Inconsistencies in inventory, orders, and reporting that crippled day-to-day operations.

The Immediate Fallout

Hershey couldn’t fulfill over $100 million in orders, even though it had plenty of inventory in stock.

• The company’s stock dropped 8%.
• Quarterly profits fell 19%.
• Trust from retailers and distributors took a major hit.

Lessons Learned and How Hershey Bounced Back

After the collapse, Hershey shifted gears and focused on recovery. Here’s what they did:

• Adjusted the timeline: They scrapped the rushed schedule and adopted a more realistic, phased approach.
• Invested in training: Employees got the hands-on training they needed to confidently use the system.
• Ran thorough tests: The company introduced a rigorous testing process—simulations, validations, and system checks—before going live again.
• Standardized processes: They documented workflows, introduced risk management, and developed contingency plans.
• Gradual recovery: It took time, but Hershey eventually stabilized operations and regained market trust.

Conclusion: Planning Is Everything

The Hershey SAP case is a powerful reminder that implementing an ERP system isn’t about speed—it’s about doing it right. Rushing through planning, skipping tests, and ignoring training can turn a smart investment into a full-blown crisis. Companies looking to launch similar projects would do well to study this case—and learn from Hershey’s hard-earned lessons.