Download - Hershey Chocolate Factory
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Hershey Chocolate Factory Final Production and Operations Management
Project
Seong-Hun AHN, Yoon Ju HWANG, Byung-Im KIM, So Jeong Yoo
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• Pennsylvania Plant built in 1992• Makes milk chocolate in the tradi-
tional fashion of Hershey• Old video old strategies• Limited amount of information
Outline of Hershey Chocolate Factory
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Index
1. Problems from Video2. Additional research: ERP 3. Solutions 4. Additional suggestion
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1.Problems from Video2. Additional research: ERP 3. Solutions 4. Additional suggestion
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• Milk: one of the most fundamental supply chain
• Sugar: essential for sweetening the main product, chocolate
Supply chain of Milk and Sugar
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• Milk is carried through pipes that are located outside of the milk receiving building
• Milk leaves the receiving building flows through the pipes to choco-
late processing are
Inefficiency Layout (1)
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• Too much unnecessary movements of products within the lab
• Machines located inefficiently – loss in time and costs
Inefficiency Layout (2)
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• Repetitive stages of alignment and misalignment
• Useless transfers of final product around the plant
Inefficiency Layout (3)
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Unnecessary labor input• People measuring the temperature of the milk
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Unnecessary labor input
Is the temperature informa-tion reliable?
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Unnecessary labor input
Is the product clean and safe?
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1. Problems from Video2.Additional research:
ERP 3. Solutions 4. Additional suggestion
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• Invested 10million on SAP R/3 program• Error in ordering and shipping process be-fore the 1999 Halloween• Inventories 20% increased, 19% decrease in profit as a result of sales reduction
Hershey’s failure
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ERP
Back
Of -fice
Shop
Front
Of -fice
Manufacture
• Scheduling function• Forecasting sales/ demand function• Accounting function
• Build Database • Unify the boundaries among functions, busi-ness units, regions, process lines • Information distribu-tion among processes
So what is ERP?
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So what is ERP? Account-ing &
Financial Informa-
tion
Human ResourceManage-
ment
Supply Chain
Con-sumer
Informa-tion
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• Increase in average profit rates by 29%
• Improve the launching of products on time by 95%, inventory reduction by 10~40%
• Cost Reduction by 5~10%
• Reduce unnecessary labors in assemble line by 25~40%
• Reduce overtime work by 50%
Benefits of Usage
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• Adopted hasty method-ology
• Confusion of managers
• Reduction in process time and costs
• Decrease in defects by improving working environment
Up-grade
Hershey’s Lesson
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1. Problems from Video2. Additional research: ERP 3.Solutions 4. Additional suggestion
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SolutionWhat is primary directing point for Hershey’s?
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Details in process
1. Layout : Rearrange equipments effec-tively
2. Additional automation
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Layout : More effective arrange-mentExample 1) : Milk truck and pipe-
lineExample 2) : Milk balancing tank
and dryerExample 3) : Process before
packaging
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Additional automationAutomated process to reduce errors
or cost from human
Safer
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Solution for ERP
Elite human resource : Get more reliable workers who
can treat equipments and process
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Elite human resourceHow to get more trained worker
who can control the process and automated equipments?
1. Training
2. Outsourcing
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1. Problems from Video2. Additional research: ERP 3. Solutions 4.Additional suggestion
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Suggestion - Forecasting de-mand
Product trait : Milk Chocolate 1) Short retention period 2) the demand boom in specific pe-
riods
Exact demand forecasting is most important to Hershey’s!
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Suggestion - Forecasting de-mand
To get cost reduction, making ex-act forecasting demand model must be preceded.
Collecting historical data is es-sential.
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Suggestion - Forecasting de-mandDemand is very fluctuating and
seasonal
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Forecasting demand : additional operationSharing demand / producing in-
formation From supplier to sale department
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Cost balance Cost up VS Cost down Cost UP Cost DOWN
Information sharing cost for managing quality of material
Cost cutting from Inventory man-aging
Cost from additional auto-mated process
Benefit from additional automated process
Training / outsourcing cost for advanced worker
Benefit from achieving lean sys-tem
Benefit from effective layout
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Expectations Managing quality
Managing inventory : lean sys-tem
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Any Q & A??
Thanks for watch-ing!!