The Hershey Co. announced Thursday a three-year supply chain transformation plan, aimed at saving between $170 million and $190 million annually by 2010 by consolidating manufacturing.
Under the plan, the company will increase manufacturing capacity utilization by reducing the number of production lines by more than one-third, outsourcing low value-added production and building a production facility in Monterrey, Mexico, to meet the expanding market.
As part of the plan, Hershey will cut about 1,500 jobs over the duration of the reorganization. When the plan is finished, manufacturing of 80 percent of the production volume will be in the U.S. and Canada.
“The changing marketplace presents both challenges and exciting opportunities for our company. In order for Hershey to remain competitive, we are implementing a comprehensive strategic agenda focused on increasing our North American marketplace leadership and developing a truly global footprint for Hershey's iconic brands,” said Richard H. Lenny, Chairman, President and CEO. "When completed, the transformation program will deliver a flexible, advantaged supply chain designed to meet a diverse range of consumer and customer needs while generating significant resources available to invest behind our strategic growth initiatives.”
The company said the supply chain program was developed following an extensive assessment of Hershey's manufacturing capabilities, future growth expectations, and the investment needed to achieve those expectations.
“We expect to make steady progress with the program over the next three years," said David J. West, Executive Vice President and COO. "The long-term benefits will include a significant, sustainable increase in investment behind Hershey's iconic brands and new product innovation, as well as targeted, profitable international expansion."
