Hi, I’m
Priyanka Sunil- A final year MBA student from Amrita School Of Business
majoring in Operations and Marketing. Welcome to my progressive learning
space for Logistics and Supply Chain Management.
This
is my final blog in this space. I dedicate this one to the love of my life; CHOCOLATES!!!
I
don’t trust people who say they don’t like chocolate. I love them. In fact, I
can eat, sleep, and breathe chocolates. Today I’ll take you through the story
of a century-old chocolate factory Hershey and their constant efforts to better
their supply chain.
In its brown-and-silver wrapper, Hershey's Milk Chocolate was
perhaps the best-known American candy bar of the 20th century. The company
makes and distributes products similar to Hershey's, Reese's, Hershey's Kisses,
Kit Kat, Twizzlers and Ice Breakers, and recently Hershey's Bliss chocolates,
which are iconic brands.
(Photo: The Hershey Company)
Supply Chain Sustainability
Hershey
is committed to the responsible procurement of the ingredients and raw
materials it buys. It has implemented programs and strategies to contribute
directly to sustainability and livelihoods of the communities in which it
relies on to provide the ingredients for its goods, while taking the required
measures to protect human rights and the people and habitats behind the
ingredients that make the famous products of Hershey. Hershey released its
first Human Rights Policy early in 2019. Today, Hershey makes is mandatory to
include human rights training into the new employee orientation process for all
global procurement professionals. Additionally, Hershey is well on-track to
meet several 2020 responsible sourcing commitments and has already achieved its
goals to source 100% certified and, 100% RSPO-certified mass balance palm oil,
and 100% third-party certified sustainable virgin fiber pulp and paper products
in the U.S. and Canada
Supplier Diversity
Along
with other suppliers, Hershey seeks the opportunities for qualified minority,
women, veteran, LGBT, disadvantaged, and disabled owned companies to compete on an equal basis as primary
suppliers in order to strengthen the base of world-class suppliers. To find certified diverse suppliers they use
ConnXus database
Certified Ingredients-Cocoa Certification
and Palm oil certification
Hershey
is committed to sourcing 100 percent certified and sustainable cocoa for
all chocolate products around the world.
Traceability
to the Plantation Level
The
Hershey Company is committed to increasing traceability and reliability in the
supply chain of cocoa and is aggressively collaborating to this end with its
manufacturers, as well as producers and customer governments.
How Hershey's supply chain is adjusting to changing demographics
and population shifts
The 21st century saw the emergence of many crucial
demographic changes that would have significant impacts on both the demand and
supply dynamics of supply chain management. Hershey found that significant
increases in global demand over the next 15 to 20 years would come from urban
middle-class customers in developing markets. A typical trend of the supply
chain of the global confectionery industry is to satisfy the bulk of demand
from a manufacturing facility based in the same area. Hershey Company's history
of opening manufacturing facilities in Johor, Malaysia, as a real-world example
of how businesses can use demographic knowledge to influence important supply
chain decisions. In order to determine which location will be better, the the organization used a decision system with weighted factors for consideration
such as continuity of supply and various cost dimensions, including operational
and logistic costs.
Hershey’s supply chain redesign
In early 2007, a three-year supply chain restructuring
initiative was launched at Hershey, pairing an increase in manufacturing
capability with a sharp decrease in the number of production lines. The move
led go 1500 people losing their jobs. Around the same time, Hershey outsourced
the production of certain low-value products and established a new production
plant in Monterrey, Mexico. The initiative finished with about $185 million in
annual savings. Three years later, the Hershey Company announced project Next
Century as part of the company's ongoing efforts to create an advantaged supply
chain and competitive cost structure. The Next Century capital invested in
plant expansion of the existing West Hershey in distribution and administrative
facilities located in Hershey, Pa. As part of the project, production was
shifted from the company's century-old facility at 19 East Chocolate
Avenue in Hershey, Pa., to a planned expansion of the West Hershey facility,
which was built in 1992. Total capital expenditures were pegged at between
$250m and $300m, with annual savings projected at between $65m and $80m at the
program’s conclusion in 2014.
The company has spent $800 million in increasing its
processing capabilities over the last five years and has made attempts to
introduce the 2.0. supply chain. Through growing automation in its distribution
centers and introducing late-stage differentiation, it has also concentrated on
making its distribution activities more agile.
"Smart
complexity" is a key part of the supply chain 2.0 vision. How do we balance
the complexity that arises when meeting customer versus efficiency? How do we
make sure it does not slow down the manufacturing network and slow down the
supply chain.?
To an extent, the
company addresses this issue is by evaluating the profitability of each
stock-keeping unit (SKU). This has helped them to increase
efficiency for itself and productivity for its retail partners.
Hershey then went on
exploring the beginning of the process: supply-chain design and analytics.
Hershey approached LLamasoft Inc., a supply-chain design software provider. They helped Hershey make supply-chain design an
internal capability. Hershey executives were made to involve and understand the
full impact of major strategic decisions. The effort gave the company a
high-level view of operations’ Also this helped it to detect any possible
conflict between internal disciplines. LLamasoft has this Data Guru application
that consolidates and transforms data from various sources into what can be used
in a single supply-chain model. It identifies opportunities for future cost
avoidance or cut – a major part of Hershey’s previous supply-chain overhaul
initiatives. They report compound growth of 6.8 percent in net sales, and 21.4
percent in net income, between 2009 and 2013 due to this investment in
technology
Fulfillment
Hershey takes a holistic perspective on digital and in-person
purchases. They believe that in-store purchases can be driven by a strong
e-commerce presence. Working with retail partners, Hershey also found that
shoppers demand that each retailer's in-store assortment and digital assortment
be similar. If only shipping is offered, the average price point goes up since
retailers and vendors like Hershey prefer a higher price point. But if
buy-online, pickup-in-store (BOPIS) is offered, lower price points may be
available To run it all, they are increasing trips online, driving larger
basket sizes, while maintaining margin profile.
Drop-Shipping
Hershey has been able to advertise "worry-free summer
shipping" and brighten up the gloomy spots of the calendar by delivering
chilled drop shipping straight to the customer
References
https://www.scl.gatech.edu/education/professional-education
https://www.thehersheycompany.com/en_us/sustainability.html
https://www.thehersheycompany.com/en_us/sustainability/shared-business/responsible-sourcing.html
https://www.supplychaindive.com/news/hershey-retail-ecommerce/540959/
https://theferrarigroup.com/more-evidence-of-supply-chains-value-the-hershey-company/
No comments:
Post a Comment