US-based Hershey Foods has reported a 19 per cent decline in third-quarter earnings, blaming the drop on snags in new customer service, warehousing and order fulfillment systems that went live in July.
"These problems resulted in lost sales and significantly increased freight and warehousing costs," said Kenneth Wolfe, Hershey's chairman and CEO.
Hershey is using systems from several suppliers, including SAP, according to industry analysts. Observers said the new products were supposed to be installed by March, which is the slowest season for Hershey's chocolate products. But unspecified delays pushed the launch date to July. "That was a problem because they're running into the high season," said Nomi Ghez, an analyst at Goldman, Sachs & Co.
Hershey executives last month warned that earnings would fall below expectations because problems with order-taking and distribution systems were delaying orders.
Officials said they hoped to have the problems fixed by this month. But Wolfe conceded the company hasn't met its goal of returning to normal customer service levels. "Strong demand for our products and warehouse capacity limitations, combined with the need to implement process changes, continue to result in extended order lead times and customer service difficulties," Wolfe said. The company now expects service levels to improve through the end of 1999.
Meanwhile, also in the US, Deloitte & Touche and PeopleSoft are being after allegedly bungling the installation of systems at retailer Gore-Tex.
In the suit, the companies claim the software Deloitte installed ran into difficulties and its consultants had to rely on PeopleSoft's customer service hotline to guide them through the installation. The suit was filed in the US Superior Court in Delaware.
Gore-tex allegedly paid $2.5 million - twice the original estimate for the software and has spent millions of its own dollars to repair the system.