A Case Study on Hershey’s ERP Implementation Failure: The Importance of Testing and Scheduling

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Last Updated on: October 16, 2025

When Hershey’s flipped the switch on its $112-million enterprise systems, the results were disastrous. Business and system failures brought operations to a standstill. Orders couldn’t be processed. Distribution channels collapsed. With Halloween and Christmas sales at stake, Hershey’s reported a 19% drop in quarterly profits and saw its stock price fall 8%. 

Why? Because of poor testing and flawed scheduling. 

This article unpacks the root causes of Hershey’s ERP implementation failure — and delivers two key lessons on how proper testing and strategic cutover planning can protect your business from the same fate. 

What caused Hershey’s ERP implementation failure? 

Hershey’s ERP failure stemmed from two critical missteps: cutting testing phases short and selecting an unrealistic cutover date. 

The story begins in 1996. Hershey’s set out on an ambitious mission to overhaul its fragmented IT environment and modernize operations. The company aimed to unify its technology stack by implementing three powerful systems: SAP’s R/3 ERP for enterprise resource planning, Manugistics for supply chain management, and Siebel for customer relationship management. 

This triple rollout promised significant gains in operational efficiency, forecasting, and order fulfillment. But from the outset, the project was strained by unrealistic expectations. Despite the recommended 48-month implementation timeline, management insisted on a 30-month schedule to ensure the systems were live before the looming Y2K deadline. 

Leadership was under intense pressure to show operational readiness. Shareholders expected digital transformation. Internal stakeholders demanded speed. What began as a strategic initiative became a race against the clock — and the quality of execution suffered. 

In order to meet the accelerated schedule, critical activities were abbreviated or skipped entirely — most notably, the systems testing phases. The company also chose to go live in July 1999, which happened to be right before the ramp-up for two of its most critical sales periods: Halloween and Christmas. This go-live window offered no room for error. 

When the systems went live, critical issues immediately surfaced. Orders weren’t flowing correctly. Despite having inventory in stock, the company couldn’t fulfill orders for its top-selling products, including Kisses and Jolly Ranchers. 

The fallout was swift and public. Hershey’s missed more than $100 million in orders. The company disappointed major retail partners, took a significant hit to quarterly profits, and saw its stock drop nearly 10%. 

Importantly, this wasn’t a failure of hindsight. The risks were foreseeable. A seasoned implementation team would never have signed off on this cutover timeline or compromised on testing. The failure was avoidable. 

What lessons can companies learn from Hershey’s ERP implementation failure? 

The Hershey’s case is a cautionary tale for executives and program leaders. Two core themes stand out: 

  • Testing is not a checkbox. It is a critical, risk-reduction tool. 
  • Scheduling must align with business realities, not arbitrary deadlines. 

Too often, organizations treat ERP testing as an afterthought — a task to confirm that things “mostly work.” But enterprise systems are incredibly complex. They involve integrated processes, massive data sets, and human behaviors that often don’t emerge until real-world use. 

Cutover timing is equally important. Selecting the wrong window can turn minor defects into major disruptions. In Hershey’s case, its busiest season became the stage for its biggest failure. 

Below, we examine each lesson in detail. 

Lesson 1: Why thorough ERP testing prevents costly failures  

Hershey’s downfall wasn’t about choosing the wrong software or using the wrong implementation method. The failure occurred because the company cut corners on testing. It prioritized speed over certainty. 

Without complete, structured testing, major defects remained hidden until go-live. Integration points failed. Data didn’t flow properly. Processes didn’t match how the business actually operated. 

At Pemeco, we advise clients to treat testing as a rigorous, multi-phase simulation of their future state. Our three-stage approach builds confidence and resilience: 

  1. Conference Room Pilot (CRP) 
    The initial phase tests core business scenarios, one department at a time. Here, users validate that the system configuration aligns with their functional needs. 
  2. Systems Integration Testing (SIT) 
    This second phase expands testing to include cross-departmental workflows, technical integrations, and role-based security. It involves both common and edge-case scenarios to assess how the system handles real data, cross-process and cross-system handoffs, and business rules. 
  3. User Acceptance Testing (UAT) 
    The final phase mimics full business operations. It tests every component — data, workflow, hardware, user training — under realistic conditions. This is the dress rehearsal before go-live. 

Each phase is iterative. Gaps are identified and corrected before progressing.  

Critics have pointed to Hershey’s “big bang” rollout as a contributing factor. But the implementation approach is secondary to whether the business and systems were truly ready. Had Hershey’s tested thoroughly, it could have discovered and resolved critical issues well before cutover. 

We’ve seen similar scenarios play out in manufacturing firms, logistics providers, and even public sector clients — where testing is viewed as a formality, rather than a strategic safeguard. The cost of that mindset is often measured in millions. 

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Lesson 2: Why ERP implementation timing can make or break your project 

Project scheduling is a strategic decision with real business consequences. ERP cutovers are not simply IT events — they disrupt how the company operates, fulfills orders, manages inventory, and serves customers. 

Hershey’s made two critical scheduling mistakes: 

  1. They compressed a complex program into an unrealistic 30-month timeline. This left insufficient time for quality assurance, training, and change management. 
  2. They scheduled go-live during their busiest season. This magnified every issue. With systems barely stabilized and staff still learning, the company faced peak demand with its lowest readiness. 

Even in well-run ERP implementations, companies can expect some temporary performance drops. There’s a learning curve. Processes change. Systems behave differently. 

The key is to schedule cutover when the business can absorb those shocks. At Pemeco, we advise clients to go live during slower periods, reduce order volumes temporarily, and ramp up gradually. We build cutover plans that include rollback contingencies, issue triage protocols, and extra support for frontline users. 

We’ve helped mid-market and enterprise manufacturers in the U.S., Canada, and EMEA recover struggling ERP projects — often due to the same scheduling gaps that hurt Hershey’s. This story, unfortunately, is not unique. 

How can companies avoid ERP project failure? 

Hershey’s failure is still widely studied because it underscores a fundamental truth: successful ERP is about discipline, not just technology. 

The lessons are clear: 

  • Don’t rush. Compressed schedules create unnecessary risk. 
  • Test deeply and methodically. Surface and resolve issues early. 
  • Choose your cutover window wisely. Give your business room to adjust. 

Pemeco’s Milestone Deliverables methodology has been used to guide successful ERP projects across 40+ countries. It provides the structure, quality gates, and strategic alignment needed to get ERP right the first time. 

Our team works side-by-side with executive sponsors, program leads, and functional owners to build governance structures that prioritize quality, mitigate risks, and ensure ERP outcomes deliver lasting value. 

As Jonathan Gross, Managing Director at Pemeco, puts it: “Every ERP project will test your organization’s discipline. The right system is just the beginning — success is built on execution, timing, and governance.”  

👉 Learn more about our ERP Implementation Services 
👉 Learn why ERP Governance is the #1 success factor and read: Creating a High-Performing ERP Steering CommitteeL

FAQ: Hershey’s ERP Failure & ERP Implementation Strategy 

Poor scheduling and skipped testing. The company rushed implementation to meet a Y2K deadline, cut key testing phases, and went live during peak sales season.

Without it, configuration and integration issues may go undetected until go-live. Testing simulates real-world use and mitigates failure risks. 

Schedule during a slow business season. Avoid peak sales periods to reduce risk and give users time to adapt to new processes and systems.

Three-stage testing: 

  • Conference Room Pilot 
  • Systems Integration Testing (SIT) 
  • User Acceptance Testing (UAT)

👉 Explore our ERP Implementation Process 

With 800+ successful projects, Pemeco applies its Milestone Deliverables  methodology to ensure structure, discipline, and success. 

👉 Learn more about our methodology

About the Author

Jonathan Gross is Managing Director at Pemeco Consulting and a licensed attorney. He specializes in ERP strategy, system selection, implementation governance, and contract negotiation, helping clients align enterprise technology with business goals. With 15 years of deep experience advising private equity firms, global manufacturers, and public sector organizations, Jonathan bridges legal, operational, and technical domains. He regularly publishes and speaks on ERP modernization, offering practical insights to help organizations de-risk complex transformation initiatives and drive measurable business value.

About Pemeco Consulting

Pemeco Consulting helps organizations succeed where most ERP projects fail. With a 100% success rate across 800+ projects, Pemeco guides clients through ERP strategy, selection, implementation, and transformation. Its globally recognized Milestone Deliverables methodology brings structure and clarity to complex programs. Independent and vendor-neutral, Pemeco serves private equity firms, manufacturers, and public sector clients. From strategy to execution, Pemeco delivers the insight, tools, and leadership needed to achieve ERP success—on time and in scope. 
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