IT woes contribute to Hershey sales, profits decline

Hershey Foods Corp. is continuing to feel some pain from its mid-1999 rollout of a new enterprise resource planning and order-fulfillment system.
The Hershey, Pa.-based candy maker this week reported 11% declines in both sales and profits for the fourth quarter of last year. The company blamed lingering problems in processing orders through the new system for the results, which Hershey had warned about in late December.
Kenneth Wolfe, Hershey's chairman CEO, said in a statement that the order-processing problems hurt demand during the Christmas selling season as expected new orders from retailers failed to materialize.
The delivery problems first came to light last fall, when Hershey reported a 19% drop in its third-quarter profits.
The new $112 million system, which was installed last July, is based on SAP AG's R/3 applications and supporting software from Manugistics Group Inc. in Rockville, Md., and Siebel Systems Inc. in San Mateo, Calif.
Wolfe said changes to the system and increased end-user experience with new ways of processing orders have reduced delivery times from the 12-day cycle Hershey had to institute last fall. But the company has "not yet fully returned to historical customer service levels," he added.
Hershey reported a $98 million profit for the fourth quarter of 1999, down from the year-earlier total of $110 million. Sales dropped from $1.24 billion in the fourth quarter of 1998 to $1.11 billion.