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Introduction
Hershey Company is a US food company which was incorporated in 1894 and based in Hershey, Pennsylvania. The company specializes in production, distribution, sale and marketing of various confectionaries including chocolate, snacks, beverage enhancers, and other refreshments (Bilbrey, 2011).
The company enjoys a good market share in the United States and internationally. Its distribution channels include food brokers, sales representatives, wholesalers, and grocery stores, vending companies, departmental stores and convenient stores.
The initial company’s strategy was production and sale of cheap, high quality products. This has been the company’s reputation for decades and has been its distinguishing factor. The founders of the company believed in quality products as a sales strategy instead of advertising.
Hershey Company has grown to become a global market leader in confectionaries. Unlike many of its competitors, who have diversified to other products, Hershey Company has decided to concentrate and specialize in chocolate. This has enabled the company to create a specific strategy; focus on the significance of flow of materials for their products and generation of high profits.
Many of Hershey competitors, like Cadbury and ConAgra, concentrate on wide product portfolios. The companies have diversified their production but have a weak return on assets. On the contrary, Hershey Company has a strong return on assets; this implies that its assets have a better potential and produces higher revenues than its competitors (Alfonso, 2011).
Hershey has appreciated the significance of downstream material process flow as an international supply chain. The initial location of its factories was close to local ports. This made it convenient for the company to buy and transport raw materials from overseas farmers and distributors (Bilbrey, 2011).
Goods, services, and operations management
Hershey ensures that it has products on-hand to ensure that it meets the demand of its clients. The company ensures that the volume of sales is high because the profit margin for its products is low. In order to cope with these requirements, the company continues to develop its supply chain management.
The company also continues to develop its flow of materials to realize high profits. The integral part of the new supply chain design is 111,480M2 distribution centre, near the organization’s head office. This centre was predicted to handle over 713 million kilos of products annually (Bilbrey, 2011).
Hershey’s product distribution network includes the sales and marketing department that helps the company to maintain high sales throughout the year. The product distribution network provides superior services to the customers. The distribution network works closely with customers to ensure deliveries are timely and reasonable.
The network is coupled with an effective transport from the production lines to distribution centers. Common carriers are used to deliver products from distribution centers to customer’s locations (Reiman, 2006).
Hershey changes the quantity weights and subsequent prices of goods as necessary to accommodate the changes in market. The company changes the prices to sustain its competitive environment and its profitability. Change in prices and quantities maintain the consumer values.
The company increases the prices to counterbalance the input costs, changes in raw materials, and increase in fuel prices. Other factors include changes in the price of raw materials, transport, employee benefits and other utilities. The company deigns a time lag between the change of price and the effective date of the changed prices (Alfonso, 2011).
Forecasting and demand planning style
Hershey has a tactical forecasting and demand and planning style. The data that is used for planning is accurate and timely. The accountability for managing forecasting and demand planning is left to employees in close contact with customers. The company’s style is advanced; Hershey has made the process to be integrated and comprises of a wide range of information. The forecast is made timely and in short and timely schedules (Reiman, 2006).
The process is strategic; the company has brought together sales forecasting and demand forecasting. The company focuses on accuracy of the information. The style is innovative; Hershey has a two-way sales forecasting and demand planning procedure. The employees involved are well equipped to plan and manage the process.
Accurate focusing of demand allows Hershey to reduce the requirements for emergency plans and associated costs. Hershey experiences efficient operations, improved customer connections and decreased money tied in inventories (Hockley & Ali, 2008).
Hershey has a monthly plan for balancing supply and demand by ensuring there is a cross-functional relationship of operations. The company has set the platform for sales and operations planning. The company aligns its expectations across the entire operations in the organization. Hershey settles its operation plans with financial plans to ensure it satisfies the demands of the company in a financially feasible manner.
The company’s marketing strategy is a strong brand, superior quality and product innovation. Hershey devotes significant resources to development and marketing of new products. The company has initiated several advertising promotional strategies for clients. The company’s sales are particularly high in the last three months of the year; this is the holiday season.
Value chains management
Hershey noticed the need for a more manageable design in value chains. In the current chain, products are obtained from producers and shifted to a more central place where customer purchases are managed and satisfied.
The first step to restructuring movement of materials was to carefully evaluate the client demands information obtained. Hershey started with their biggest clients like Target and Wal-Mart. The organization checked out carefully the historical information and objectives in areas such as distribution time, quantity, and how the items should be distributed.
This procedure also included a more fully developed incorporation into client personalized software. Since chocolate has a periodic need based on vacations, huge purchase amounts during the year had to be included and expected. This data was essential to understand what the client required and then how best to create their new distribution structure (Bilbrey, 2011).
To achieve the anticipated profits, the company determines the true costs of products. By applying good analysis, the company is able to evaluate the costs associated with business; this maintains the company’s competitive advantage and profit margins. Hershey concentrates on pricing its products and evaluating the costs associated with raw materials and labor (Bilbrey, 2011).
Hershey’s ability to generate high profitability compared to its competitors is directly associated with supply chains and performance in production of its products. Margin gains counterbalance the high costs of labor and raw materials. Hershey’s inventory and accounts payable continue to decrease and therefore, the net trading capital continues to reduce. Hershey expects to continue maintaining low inventories. Hershey’s business model is based on seasons; pre-holiday and holiday seasons are accompanied by huge volumes of orders.
Measurement of performance in operations
Hershey Company introduced an improved performance management system in 2009. This system is used by the company to measure its annual operations performance. Hershey measures the performance of all its employees. The system is designed to support engagement and accountability of employees. Employees are appreciated and rewarded for their maintaining the corporate vales of the company (Bilbrey, 2011).
Hershey Company collects data periodically and prepares reports regarding individual, departmental and organizational performance. Information used to measure performance includes production process data, organizational strategies, and employees’ performance. The collected information is analyzed against the set standards and corporate strategies.
The capability of Hershey to prevail is determined by its performance. The investments and operation parameters are analyzed to determine if they reach the desired targets. Hershey applies a statistical model to measure the performance of its operations.
Employees are assessed on their ability to meet the company’s goals. Performance assessments are carried out and the employees are rewarded for their individual contributions to success of the company. Individual development plans are included in the performance management plans to enable workers to identify their professional and individual goals. Surveys are conducted occasionally to assess the performance of the employees, individually and professionally.
From the beginning, Hershey has appreciated the significance of downstream material process flow as an international supply chain. The initial location of its factories was close to local ports. This made it convenient for the company to buy and transport raw materials from overseas farmers and distributors. Raw materials imported from outside the US included cocoa beans and sugar. However, milk was supplied by local farmers and distributors (Bilbrey, 2011).
Operation strategy
Hershey’s operation strategy is having a profound understanding of the needs of the company’s customers and stakeholders. The company ensures that the stakeholders develop a desire to work with the company and understand all the operations. Good understanding between the company and the stakeholders creates a good environment for business.
Good understanding between the company and the consumers makes it easier to understand the consumer’s needs and change in preferences. Hershey’s efforts to understand and improve the social and environmental performance of operations are in line with the company’s corporate strategy; the company’s consideration of stakeholder’s interests ensures its long term profitability (Bilbrey, 2011).
The major operational strategies for Hershey Company include creating a sustainable and a competitive business model. The company continues to emphasize on cost profile management to avail margin structure and resources for business investment. The company drives inexorable emphasis on conventional and profitable development in the US by ongoing investment in Hershey’s brands and capabilities.
The company delivers consumer driven and economically feasible innovations. Product innovations are created in consultation with stakeholders and consumer’s preferences. This improves the company’s position in the major development areas in confectionary industry.
The key growth areas emphasized by the company include a strong and competitive global position in sugar confections, and production of healthy products. The company aims at improving its market presence in Mexico, Canada, China and other available international markets.
The company seeks to have a more aggressive approach to acquisition and mergers in the US and globally. The company continues to provide a superior value propositions to its employees; the company focuses on training, talent retention and motivations (Alfonso, 2011).
Inventories management
Hershey Company has a department of inventory management where finished products inventories are managed and controlled. Inventories are managed in relation to marketing of products across all stock keeping. The department analyzes the sudden alteration in available inventory in an appropriate manner. The bases of changes are found and appropriate actions are taken. The department identifies the items to sustain the surge strategy and provides its feedback to all stakeholders (Bilbrey, 2011).
Inventory management monitors the changing items to ensure a proficient physical and systematic flow of products and in the system. The inventory management ensures its accessibility and supportability issues are availed to all suitable areas. The inventory management accommodates periodic builds properly by using system settings and disengages settings when the period is over.
The company has overcome the challenge of rising prices of raw materials including milk, sugar and cocoa. Hershey’s global supply chain transformation program which commenced in 2007 has helped the company to increase in productivity and to improve in performance. The objective of the program was to extensively augment production capacity utilization. This was achieved by reducing the total number of production lines (Hockley & Ali, 2008).
A flexible production operation was constructed in Mexico; the facility is improving production. Hershey has closed some of its facilities and is focusing on the few improving the supply chain efficiency. The company has invested in inventory optimization tools; this has enabled Hersey to achieve inventory reduction in procurement and product distribution. Closing of some facilities has enabled the company to concentrate on the existing facilities; this has enabled the company to perform well in productivity within the supply chain.
References
Alfonso, H. (2011). The Hershey Company. United Sates Securities and Exchange Commission. Web.
Bilbrey, J. (2011). Corporate Social Responsibility Progress Report. Retrieved from The Hershey Company. Web.
Hockley, H., & Ali, A. (2008). Hershey Foods: Sweet Results with SAP Demand Planning. Web.
Reiman, J. (2006). Sales and Operations Planning at The Hershey Company. Logistics Quarterly Magazine. Web.
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