Hershey’s continued investment in change to manage supply chain and keep up with growth
Hershey is a global name known for chocolate and dessert. The company was founded in 1909 and has since expanded into several other product lines. Let’s take a look at the strategic changes Hershey has made along the way to redefine and optimize supply chain management.
As the candy giant relies on impulsive shopping at checkout or high visibility displays, management intuitively embarked on a series of acquisitions to be able to offer a variety of candy options to its sweet customers. The next puzzle to solve then became managing a supply chain of products with such a variety. Thus, in 2017 alone Hershey invested over $150 million in SAP and ERP applications to optimize supply chain and support strategic partners with streamlined management and Fulfillment operations in real-time.
Fulfillment Control Strategy
Hershey believes the data in e-commerce has a significant impact on in-store purchase. Where online sales currently account for only 2%, Hershey expects e-commerce to increase to 5-7% over the next three years. Not much by any measure, however, the company believes that the information to be revealed by the underlying big data will improve the numbers as data is gathered from customers when they browse products through the website. Thus, storefront and online appearance has to match, particularly special seasonal packages and information listed in the website that to be planned and coordinated in advance, according to customer needs.
Product classification is also contingent on tje Fulfillment services offered at each store. As some allow in store pickup only and others deliver as well, each require a different transportation and price point model, the latter being the suggested retail price set in comparison to compete with other products. Price points are much higher for outlets that offer only home delivery options, compared to those with storefront pickup only. Hershey thus plans to raise the margin by increasing both the number of online transactions and the volume of each purchase while attracting new buyers, altogether.
Drop Ship Models
Drop Ship is a Fulfillment model where customers purchase from the store and the carrier delivers directly to the customer’s home. As the hot climate in the summer causes chocolate to melt, Hershey intuitively implemented the “worry-free summer shipping” campaign during the low chocolate season. Brick and mortar shops can now avoid storing chocolate altogether as Hershey stores the climate sensitive goods in a temperature regulated warehouse and transports straight to the front door step in temperature regulated carriers, for them. The campaign has allowed Hershey to increase summer sales even when transportation costs were on the rise. In hindsight, the cost-profit analysis reveals that the campaign has proven to be worthwhile indeed.
Nevertheless, the expansion of business and investment to increase efficiency is costly. Although it has been reported that Hershey will up price margins by 2.5% on selected product lines, Hershey executives are confident that continued investment in change to keep up with growth is the smart way to go.
Compiled by BLOG.SCGLogistics
References and pictures from supplychaindive.com, ecommercefuel.com, iveybusinessjournal.com, freepik.com