Uncovering Hershey’s $250M Supply Chain Improvement

Hershey, the famous chocolate and snack company, is making a big move to improve its operations by investing $250 million in its “Advancing Agility and Automation” (AAA) initiative.

This plan, set to run until 2026, is designed to boost the company’s supply chain efficiency and speed up its manufacturing processes, all while using cutting-edge technology. CEO Michele Buck believes this will create more flexibility and efficiency.

The Driving Force Behind Hershey’s Big Investment

In February 2024, Hershey announced its ambitious AAA initiative at the Consumer Analyst Group of New York (CAGNY) event.

Hershey’s CEO Michele Buck emphasized that this $250 million investment aims to modernize their processes using advanced technology to integrate and automate various aspects of the business. This approach will optimize procurement, streamline manufacturing, and increase visibility across their supply chain.

According to Steve Voskuil, Hershey’s Chief Financial Officer, this initiative will help the company realize its long-term visions.

He said that previous goals like enhanced supply chain visibility and better automation are now within reach, thanks to the steps Hershey has already taken to integrate business processes using new technologies.

Unified Technology Brings Hershey’s Brands Together

Before launching the AAA initiative, Hershey had already spent $1 billion upgrading its supply chain. This included building a new chocolate production facility, adding new production lines, and enhancing existing ones.

Additionally, Hershey has acquired snack brands since 2017, including Amplify Snack Brands, Pirate Brands, Dot’s Pretzels, and Pretzels Inc.

However, these brands initially operated separately, creating visibility issues within the company. To resolve this, Hershey decided to unify all its new business units under a single technology platform called SAP’s S/4 system, an enterprise resource planning (ERP) software.

This integration was a crucial step to improve communication and eliminate redundancies. By centralizing operations, Hershey now manages 95% of its global transactions under one system.

This provides a clearer view of the supply chain, improving efficiency across the board.

The Role of Technology in Hershey’s Transformation

With the launch of the AAA initiative, Hershey’s supply chain has been given a technological boost. Hershey’s decision to appoint its first-ever Chief Technology Officer (CTO), Deepak Bhatia, in 2023 underscores the importance of this move.

Bhatia, who spent 12 years optimizing Amazon’s supply chain, now brings his deep expertise to Hershey. Michele Buck praised his experience, particularly his understanding of technology and supply chain management, as essential to advancing Hershey’s AAA initiative.

Thanks to technological advancements, Hershey’s system allows for better procurement and inventory management visibility.

For example, Hershey can now better predict the demand for popular products like Reese’s, which helps the company procure the right amount of ingredients such as peanut butter and cocoa.

This reduces the risk of both over-ordering and under-ordering supplies, which can lead to waste or missed sales opportunities.

How Visibility Unlocks New Efficiencies

Hershey’s newly enhanced visibility into its operations has resulted in several critical improvements in managing inventory and production.

Using real-time data, plant managers can make more informed decisions about when to perform maintenance or clean production lines, ensuring minimal downtime. These insights also help the company identify the best times to replace parts or service equipment before breakdowns occur.

Smaller production runs with quick changeover times are also becoming possible, which is important in today’s fast-moving consumer environment.

Hershey can quickly test new products, gather consumer feedback, and adjust before launching a full-scale production. This agility helps Hershey keep pace with changing market trends while minimizing risks.

According to Jim Salera, an equity research analyst at Stephens, this technology-driven approach allows Hershey to synchronize demand from its retail partners with supply chain operations.

This alignment reduces food waste and helps avoid costly shelf gaps, ensuring that products reach consumers on time.

The Long-Term Payoff of Hershey’s $250 Million Upgrade

Hershey expects its $250 million investment in the AAA initiative to pay off handsomely by 2026. The company forecasts annual savings of $300 million, with 30% of that savings coming from improvements in supply chain productivity. In 2024 alone, Hershey expects to save $100 million, with $10 million attributed to supply chain optimizations.

Even with these impressive savings, Hershey knows that staying competitive in today’s fast-paced market requires continuous investment in technology and innovation.

By upgrading its manufacturing processes and keeping up with the latest advancements in resource planning software, Hershey plans to maintain its edge in the snack and candy industry.

Looking Forward A Smarter, More Agile Hershey

Hershey’s Advancing Agility and Automation initiative is a major step forward, providing better visibility, efficiency, and flexibility across its operations.

By leveraging technology, Hershey can improve everything from procurement to manufacturing, ensuring it remains competitive in the global snack and confectionery market.

As consumer trends continue to evolve rapidly, Hershey’s investments in technology will enable it to innovate faster, reduce waste, and deliver its products more efficiently to stores and consumers.

With the AAA initiative slated for completion in 2026, Hershey is on track to become a more agile and efficient company—ready to meet the challenges of the future head-on.

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