Hershey's Biggest Treat: No Tricks

At Hershey Foods Corp., this Halloween marks a new era in enterprise resource planning. For the first time, the $4.6 billion company is able to track daily sales and shipments of Halloween classics such as Reese's Peanut Butter Cups, Mounds candy bars, Twizzlers, and Milk Duds using SAP business-warehouse apps.

The software is running on Hershey's newly upgraded ERP infrastructure, based on SAP R/3 4.6. "The tools are giving executive management and marketing people a much-improved view of how the season is going from a sales perspective compared to what they've ever had before," Hershey CIO George Davis says.

Hershey's experience with SAP in the Halloween home stretch is markedly different from three years ago. The rollout then of various SAP apps--an investment of $112 million--resulted in a major order-fulfillment fiasco for Hershey in the fall of 1999. The company later blamed a 19% drop in profits for the quarter on the problems, but has never spoken publicly about whether software quality, how the software was implemented, or a combination of the two were to blame.

Still, Hershey fixed the problems and stayed with SAP. Davis says the company is pleased with the newly upgraded system. "Everything's running very well," he says, calling the earlier mishap "ancient history." Davis, hired as Hershey's CIO in December 2000, led the upgrade of R/3 in July 2001. This time, the implementation underwent extensive testing. It was completed in May, just months before what Hershey calls its back-to-school/Halloween season.

By providing a daily view of open orders, the new business-warehouse apps let brand managers see if their forecasts are on target. Signs of a product not selling as planned can allow the company to move quickly on a promotion and eke out a profit on what might otherwise become wasted candy.

That's particularly important for special holiday products, since most consumers won't buy Reese's cups shaped like pumpkins in December. Previously, brand managers had to settle for a monthly report on sales, making it nearly impossible to respond quickly to changes.

Halloween is too important to candy makers to allow for sloppy market reaction. The National Confectioners Association forecasts that the industry will sell $2.0 billion of candy this Halloween, $210 million more than Easter, the second best-selling holiday for the industry. In time for next Halloween, Hershey plans to increase efforts in collaborative planning, forecasting, and replenishment, which entail combining retailer forecasts with its own.

But this week, while kids attend costume parties, adults nibble Halloween candy from bowls placed in workplace lobbies, and families everywhere prepare for a night of trick-or-treating, Davis' IT department is enjoying a brief respite.

The order crunch is over, and his department is focused on preventing IT, Web-site, and call-center snafus. The break will soon end, as orders pick up for popular winter-holiday items such as plastic candy canes filled with Hershey kisses. Says Davis: "This week everyone is talking about Halloween, but we're actually looking at Christmas."