Hershey Unveils Project Next Century To Enhance Supply Chain
The Hershey Company has unveiled Next Century, a new modernization program, as part of the company’s ongoing efforts to create an improved supply chain and competitive cost structure.
The Next Century capital investment includes a $200m to $225m plant expansion of the existing West Hershey facility and approximately $50m to $75m in distribution and administrative facilities located in Hershey, Pennsylvania.
The program grew out of the company’s previously announced supply chain assessment and was unanimously approved by the company’s board of directors.
As part of the project, production will transition from the company’s century-old facility at 19 East Chocolate Avenue in Hershey, Pennsylvania, to a planned expansion of the West Hershey facility, which was built in 1992.
Production from the 19 East Chocolate Avenue plant, as well as a portion of the workforce, will be relocated to the West Hershey facility. This change is expected to result in the reduction of approximately 500 to 600 jobs as investments in technology and automation result in enhanced efficiency in the new building, the company said.
The company added that in order to preserve the heritage of downtown Hershey, it will continue to occupy a significant portion of office space within the historic 19 East Chocolate Avenue facility, including consolidating several local headquarters offices into the vacated space.
The company estimates that the Next Century program will incur pre-tax charges and non-recurring project implementation costs of $140m to $170m over the next three years. This estimate includes $120m to $150m in pre-tax business realignment and impairment charges and approximately $20m in project implementation and start-up costs.
The cash portion of the total charge is estimated to be $95m to $110m, including project implementation and start-up costs. At the conclusion of the program in 2014, ongoing annual savings are expected to be approximately $60m to $80m.
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