INSTRUCTIONS:

(1)Submit your responses to the four questions in a typed Word document in the Blackboard drop box

(2)Deadline for submission is SUNDAY OCTOBER 10th before MIDNIGHT EASTERN! NO LATE SUBMISSIONS allowed!

Good luck!

Question 1 – 15 points

The Custom Bike Company has set up a weighted scoring matrix for evaluation ofpotential projects. Below are five projects under consideration.

  1. Using the scoring matrix below, which project would you rate highest? Lowest?
  1. If the weight for “Strong Sponsor” is changed from 2.0 to 5.0, will the project selection change? What are the three highest weighted project scores with this new weight?

c.Why is it important that the weights mirror critical strategic factors? Provide a response in 75-100 words

Criteria / Strong
Sponsor / Supports
business
strategy / Urgency / 10% of sales from
new products / Competition / Fill
market
gap / Weighted
Total
Part a / Weighted
Total
Part b
Weight / 2.00 / 7.00 / 4.00 / 3.00 / 1.00 / 3.00
Project 1 / 9 / 5 / 2 / 0 / 2 / 5
Project 2 / 3 / 7 / 2 / 0 / 5 / 1
Project 3 / 6 / 8 / 2 / 3 / 6 / 8
Project 4 / 1 / 0 / 5 / 10 / 6 / 9
Project 5 / 3 / 10 / 10 / 1 / 8 / 0

Question 2 –20 Points

Review the description of Michael Eisner’s gong show approach in Box 3.3 of the textbook. In your own words, describe what you think might be the advantages and disadvantages of this approach? In what kinds of organizations would it be most appropriately used? Why do you think so?

Provide your response in 200 – 250 words

Question 3: 30 points

Your family (you, your spouse, and five-year-old child) are planning a trip to Walt Disney in Orlando, Florida. Representatives from upper management (your spouse and child) have specified that the trip will entail travel to Orlando, a four-night stay, and three days spent in Disney World itself. You and your spouse have allocated about $5,000 from your annual budget for this project.

  1. Develop a Work Breakdown Structure (WBS) for this project using one of the formats described in the textbook – top-down outline, bottom-up aggregation or mind mapping. You should have at least 15 work packages at the lowest level
  2. Select three of the deliverables included in your WBS and, for each, list three key performance indicators

Question 4 – 35 points

Read the article, E. Nelson and E. Ramstad, “Trick or Treat: Hershey’s Biggest Dud Has Turned Out to Be Its New Computer System” The Wall Street Journal, October 29, 1999, p. A1. Based on your reading of the article, as well as your own creative ideas, describe a negative outcome risk for each of the risk sources presented in Exhibit 6.1. For each of these risks, describe actions you could take to prevent it or prepare for it, and describe how you would monitor the situation so that you were assured of being aware of the risk if it did occur.

Provide your constructed response in 500 – 700 words.

Exhibit 6.1 of Textbook: Sources of Uncertainty

The content of the article is also provided below.

Hershey's Biggest Dud Is Its New Computer System

By

Emily Nelson and

Evan Ramstad Staff Reporters of The Wall Street Journal

Updated Oct. 29, 1999 12:01 a.m. ET

Just a few days before the biggest candy binge of the year, the Great North Foods warehouse in Alpena, Mich., displayed empty shelves where there should have been Hershey's bars. Reese's Peanut Butter Cups were missing, too. So were Rolos.

The trouble: An order for 20,000 pounds of candy that the regional distributor had placed with Hershey Foods Corp.in mid-September hadn't arrived. Great North earlier this week had to stiff 100 of the 700 stores it supplies on candy orders it couldn't fill. Only Thursday did a Hershey shipment show up at Great North -- the first in five weeks -- and the distributor still didn't know if Hershey had sent enough to meet its needs.

"No one seems to believe it's Hershey that's having the problem," says Bruce Steinke, Great North's candy buyer.

Spot Shortages

For the nation's largest candy maker, with revenue of $4.44 billion last year, this could turn out to be a very scary Halloween. New technology that came on line in July has gummed up its ordering-and-distribution system, leaving many stores nationwide reporting spot shortages of Kisses, Kit Kats, Twizzlers and other stalwarts of the trick-or-treating season.

In mid-July, Hershey flipped the switch on a $112 million computer system that was supposed to automate and modernize everything from taking candy orders to putting pallets on trucks. Two months later, the company announced that something was wrong. Now, an additional six weeks later -- and with Halloween looming -- it's still working out the kinks and says it hopes to have everything running smoothly by early December. Some customers and industry analysts, however, think that based on what they've seen, the problems could persist through Christmas -- and maybe even Valentine's Day and Easter.

Hershey Net Income Dropped 19% in 3rd Quarter; Order Snafus Linger (Oct. 26)

Hershey to Miss Earnings Estimates, Expecting $150 Million Loss in Sales (Sept. 14)

Already, rivals are benefiting without making much effort. Mars Inc., based in McLean, Va., says sales are up. Nestle USA, the U.S. unit of Swiss food giant Nestle SA, says it, too, has received an unusual spurt of late requests for Halloween treats. "Orders don't typically come in this late," says Patricia Bowles, spokeswoman for the company's candy division in Glendale, Calif. Both companies say they haven't offered any special promotions to boost sales.

The Mars Option

Randall King, candy buyer for Lowes Foods, a chain of 81 supermarkets based in Winston-Salem, N.C., says the delivery delays prompted him to tell stores last month to stop reordering regular Hershey candies. His suggestion: Go with Mars brands.

Hershey says it lost about one-tenth of a percentage point of its still-dominant market share in the four weeks ended Sept. 12. But retailers predict a greater drop for October. And shelf space may be hard to win back, since a typical candy eater is loyal more to type of candy -- chocolate, say, or lollipops -- than to a particular brand.

"If you don't have my toothpaste, I'm walking out" of the store, says Ron Coppel, vice president of business development at Eby-Brown Co., a Naperville, Ill., candy distributor. "But for a chocolate bar, I'll pick another one." Customers are "not likely to walk out of the store because there wasn't a Hershey's bar. They'll pick another candy bar."

Hershey has taken steps to stay in touch with its largest customers and keep them flush with sweets. Kmart Corp. says it has received 98% of its Halloween orders placed with the company -- some of that sent by air freight, rather than the typical and much less costly trucks. Wal-Mart Stores Inc.,the nation's largest retailer, won't disclose the impact of Hershey's problems on its own inventories, but says it is talking daily with the confectioner. It also has ordered more than usual from Nestle and Mars for backup.

Information, Please

And John Moser, candy-category manager for Dallas-based 7-Eleven Inc., says a Hershey sales representative is calling him weekly, instead of monthly as usual, to ask what 7-Eleven has received because, among other things, Hershey itself can't tell what the chain has received.

Mr. Moser says that this summer, after 7-Eleven started receiving incomplete lots of everyday items like Hershey's bars, he advised stores to expand their displays of other candies. "If we ran out of Kit Kat or another Hershey item, we might expand facings of Snickers," he says. "We typically used the next-best-selling item."

Hershey officials declined requests to be interviewed for this article. But some details of the computer glitches have come out as Hershey has spoken in recent weeks with customers and analysts. The company told analysts in a conference call earlier this week that relations with customers are "strained."

Perhaps most galling for Hershey is that it has plenty of candy on hand to fill all its orders. It just can't move some of the candy from warehouse to customer.

Hershey embarked on its computer project in 1996, partly to satisfy retailers who are demanding increasingly that suppliers fine-tune deliveries so that they can keep inventories -- and thus costs -- down. The company also faced year-2000 problems with its old computer system.

The project called for 5,000 personal computers, as well as network hubs and servers and several different vendors. Under the new system, software from Siebel Systems Inc., San Mateo, Calif., Manugistics Group Inc.,Rockville, Md., and SAP AG, Walldorf, Germany, is used by Hershey's 1,200-person sales force and other departments for handling every step in the process, from original placement of an order to final delivery. It also runs the company's fundamental accounting and touches nearly every operation; tracking raw ingredients; scheduling production; measuring the effectiveness of promotional campaigns; setting prices; and even deciding how products ought to be stacked inside trucks. International Business Machines Corp.was hired to pull it all together.

Big-Bang Approach

Despite the complexity of the system, Hershey decided to go on line with a huge piece of it all at once -- a so-called big bang that computer experts say is rare and dangerous. Initially, the confectioner planned to start up in April, a slow period. But development and testing weren't complete, and the date was pushed to July, when Halloween orders begin to come in. Retailers say, and Hershey confirms, that the problem is in getting customer orders into the system and transmitting the details of those orders to warehouses for fulfillment.

But no one is taking responsibility. Kevin McKay, chief executive officer and president of SAP's U.S. unit, says the system itself isn't at fault. "If it was a system issue, I'd point directly to a system issue," he says. Mr. McKay says he is in touch with Hershey executives almost daily, and he points out that the companies successfully installed an SAP system in Hershey's Canadian operation last year, though that operation is a tiny fraction of the size of the U.S. operation. IBM spokesman Brian Doyle says the company continues to help Hershey address "its business challenges," adding that "the business process transformation under way at Hershey is an enormously complex undertaking."

Siebel executives say that Hershey officials told them the problem wasn't with their software. "It may have turned out with the big bang kind of installation, they were maxed out there," says Paul Wahl, Siebel's president.

Candy as Core

The bitter irony for Hershey is that the computer system was part of a broader overhaul intended to sharpen the company's focus on its core mass-market candy business. In early 1996, Hershey sold its Planters nut and Life Savers operations in Canada and its Beech-Nut cough-drop business, as well as stakes in a German praline maker and an Italian candy and grocery firm. In January this year, it sold its pasta business to New World Pasta LLC for $450 million.

In the meantime, it picked up Leaf North America, the maker of Good & Plenty, Heath, Jolly Rancher, Milk Duds, Payday and Whoppers, for about $450 million. While Hershey eliminated about half of Leaf's products, the purchase still boosted its number of specific product offerings by 30%.

Hershey also has been adding variations -- king-size, bite-size and such -- to its existing products, and has introduced ReeseSticks and reduced-fat Sweet Escapes. It also has created different wrappings and packages for different holidays. Altogether, Hershey estimates it makes 3,300 different candy products.

The proliferation of candies seemed to be working. Hershey sales in recent years have grown faster than the overall industry's, though total candy sales have slowed this year. Hershey was counting on 4% to 6% sales growth this year, but for the first nine months, they fell 2% from a year earlier to $2.84 billion, excluding the pasta business. The computer problems alone clipped sales by about $100 million during the period, the company told analysts.

Hershey had built up eight days of inventory as a cushion against any temporary troubles with the new computer system, but that wasn't enough. By early August, the company was 15 days behind in meeting orders.

In early September, the company told customers to order Halloween candy by Sept. 27. Orders for delivery in October were delayed. And customers placing new orders were told the turnaround time was at least 12 days, more than twice as long as usual. Hershey executives said earlier this week that the 12-day lead time is still in force and that it still can't fill complete orders.

Some retailers and food distributors say Hershey sent them a letter in July saying shipments might be delayed because of computer problems. McLane Co., a food distributor to convenience stores, said it began receiving incomplete shipments in August. "It wasn't any particular item. It was across the board," says Martha Kahler, director of trade relations at the Temple, Texas, unit of Wal-Mart.

Candy companies record about 40% of their annual sales between October and December. Halloween is the single biggest candy-consuming holiday, accounting for about $1.8 billion in sales, followed by Christmas, with $1.45 billion, according to the National Confectioners Association and the Chocolate Manufacturers Association, both based in McLean, Va.

Hershey told analysts that it is looking at a number of fixes, but all of them will have to be tested before they can be used. Meanwhile, the company's stock price has been hammered. In New York Stock Exchange composite trading Thursday, the stock closed at $50.25 a share, up from its 52-week low of $47.50, but well below its price of around $74 a year ago.

Fortuitous Easter

Hershey executives have said they are hopeful sales will rebound in the fourth quarter. The company will get a small break from the 2000 holiday schedule: Easter is later than usual, which means chocolate eggs and the like will be shipped in January and February rather than in December. Indeed, Lowes Foods last Friday placed a Valentine's Day order.

Still, analysts think the company will have to offer retailers special promotions or discounts to win them back. Customers are likely to demand billing changes or shipment changes or other perks because "when retailers smell weakness in a manufacturer, they go for blood," says Andrew Lazar, an analyst with Lehman Brothers in New York.

Mr. Steinke of Great North in Michigan is a little more sanguine than that. He says he received a visit last Friday from his Hershey sales representative and his regional manager. "They understand the problem," he says. They told him they hope the situation improves toward the end of November, "but they wouldn't guarantee anything."

—Don Clark contributed to this article.

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