Are You Ready for Integration?
"If you're not careful, the dream of information integration can turn into a nightmare."
THOMAS H. DAVENPORT7
The promise of many recent technology implementations is that of a unified front, a single data warehouse, information integrationall phrases to suggest that life will be a lot simpler through integration. In fact, at the heart of every enterprise resource planning system is the notion of integrating the various functions within an organization.
If integration comes with all the touted benefits, then where is the danger in integration? Integration comes at a cost. By costs, we don't just mean financial costs. In ERP implementations, these might be the costs of not having a certain kind of customization that we were used to. These might be the costs of having the business be dictated by the logic of an overarching integrated ERP system. These might be the costs of certain local systems not being able to talk to the centrally integrated system.
Industry analysts claim Hershey's experience with ERP is a classic example of the problems associated with integration of various packages.8 Hershey implemented a wide-ranging array of SAP AGs ERP modules simultaneously with companion packages. These included a planning and scheduling package developed by Manugistics as well as a pricing promotions package developed by Siebel Systems. The challenge was to integrate the three disparate systems seamlessly. That's no easy task, by any measure. The integrated system was implemented in July 1999, when retailers began ordering for back-to-school and Halloween sales. While Hershey's plants continued to churn out Kisses and candy bars, the inventories were piling up in the warehouses instead of on store shelves. Product inventories were up by 29% compared to previous year's levels due to order processing problems arising from the implementation of the new system. By mid-September the company said that the new system was causing delays in shipments and deliveries of incomplete orders. By November, Her-shey announced a 19% drop in third-quarter profits when CEO Kenneth Wolfe said that system fixes were taking longer than expected and requiring more extensive changes. Eventually, after a series of fixes to the ERP system as well as a revamped distribution facility, Hershey made sure that the problem did not recur the next year.