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Enterprise resource planning systems are invaluable tools for consolidating and managing many critical, albeit disparate business processes. But as the Hershey Co. learned, some processes are just too difficult for an ERP system to manage, and are better suited for outsourcing.
The global candy company learned the hard way that non-traditional approaches to complex warehousing weren't something its ERP could handle. To deal with the tremendous build-up of inventory that occurred each year around the holiday rush, Hershey would store candy inventory anywhere it could find capacity. The extra storage included rented warehouse space and sometimes even spares rooms within the factory itself.
Because these rooms weren't recorded as storage points in the system, the ERP system didn't have visibility into these ad hoc storage areas. While the old methodology worked in a more manual system, it didn't meet the discipline required when using an ERP system.
Managing warehouse and logistics operations in-house cost Hershey $150m in lost sales and damaging customer relations. Outsourcing these operations might have saved its holiday season.
Source: Industry Week
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