The Hershey Chocolate Industry

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Table of Contents

History
Abandoned Products
Criticism
Reference List

The Hershey Chocolate factory is located in Hershey, Pennsylvania the home town of its founder Milton Hershey. Milton Hershey pioneered this company in 1894 as one of the outlets of his Lancaster Caramel factory and it has grown over the years to become one of the largest chocolate manufacturers in North America. Hershey Corporation’s 2012/2013 performance in the stock market is very impressive as indicated in the flow chart below;

*Flow chart 1; Hershey Corporation 2012/2013 stock market performance (The Street, 2013, p. 1).*

Milton Hershey also created other units like the Hershey entertainment and Resort Company, to which the trust of managing Hershey Park has been entrusted; a chocolate-tagged entertainment center, Hershey park stadium strategically designed to host gaming events and amusement assemblies.

History

Milton Hershey started a candy retail unit in Philadelphia soon after completing his apprenticeship to a confectioner in 1873 which was to fail 6 years later for he was yet a novice businessman, not losing hope, he still ventured into the processing of candy in New York which did not thrive according to his projection, and so he went back to Pennsylvania.

In Pennsylvania, Milton Hershey tried to incorporate fresh milk in producing caramels and to his amusement he noted the rise in sales, this triggered him to establish the Lancaster Caramel Company. Having acquired chocolate processing machines from the sale of the Caramel factory, he abandoned the production of caramels for the long term production of chocolate, citing the narrow future of caramels to be the main drawback.

He build a chocolate factory in his native town and he was accommodating to all the folks, thus he availed amusement units and leisure sports which made him very popular and saw the exponential growth of his chocolate factory. In 1896, Milton established a unit which enabled him to circumspectly refine the most ideal recipe for milk chocolate candies.

This paved the way for later modifications in which he was more interested with the conventional synthesis of candies than the quality of the milk. Early in the 20th century, Hershey unraveled a minute flat-bottomed conically shaped product which was later dubbed ‘Hershey kisses’. At first Hershey kisses were manually wrapped, but some twenty or so years later, the manual process was replaced with a more effective mechanized way of wrapping: this was made possible by the invention of wrapping machinery.

Yet still, even in the mechanized wrapping method, a minute paper ribbon has to be retained at the top of the product ‘Hershey Kisses’ to certify and authenticate that the product is genuine. Currently the statistics of production in the Hershey chocolate company stands at about eighty million Hershey Kiss units per day.

Apart from the Hershey Kiss other products include – but not limited to; Mr. Goodbar which has a substantial amount of peanuts, a mildly sweet dark chocolate, Hershey’s syrup not overlooking the crisp rice Krackel bar which was introduced soon before the second world war. (Selko, 2012, p. 1)

One of the great minds to have worked with Hershey was Harry B. Reese, he started at a very humble position as a dairyman in one of the Hershey Estates, but with time he rose along the ranks to work in Hershey’s Company. This notwithstanding, Reese later engineered a wide variety of candies whose sales – with Hershey’s logo, soared beyond his wildest expectations.

Having mastered the art of chocolate production and the intricate matters of advertisement, Reese established his own chocolate company in 1926 and by 1941 he was overly occupied in developing his own confectionery genius product, the so called peanut butter cup, whose sugar content was far much lower than that of any other factory at the time.

Unfortunately, Reese passed on in 1956 leaving the management of his enterprise to his 6 sons, but in 1963 Hershey chocolate company bought Reese’s company for an approximate value of $23.3 million at which time Reese’s revenue was about $14 million each year, this saw Hershey’s company expand tremendously to the esteemed status of being one of America’s chocolate iconic company.

As it is the manner of life, Hershey Chocolate Corporation has had its share of challenges, for instance, just towards 1940s there was the drive by CIO to restructure and re-organise factory workers which polarized the prevailing peaceful working environment and triggered labor unrests coupled with friction between the stakeholders.

Later on the American Federation of Labor streamlined the legal framework governing factory workers and employers and in its intervention it appointed John Shearer to herald the plight of workers in Hershey’s Chocolate Factory. (The Hershey Company, 2013, p. 1)

Just within the pre world war II period, William Murrie’s son Bruce settled an agreement with F. Mars, which would see them produce a hard sugar-coated candy which would later be tagged M&M’s, the deal gave F. Mar a upper hand because he would scoop 80% interest. Mars later acquired Bruce’s share which bequeathed him with a competitive advantage against Hershey’s Corporation.

*Flow chart 2; Supply chain Transformation Program, Expenses by Category (2010) (Wikinvest, 2013. p. 1).*

Late 2007, there was an outcry that Hershey’s packaging of ‘Ice Breakers Pacs’ was similar to a certain illegal drug packaging, such complaints were highly welcomed by the Hershey Foundation and the relevant department did some modifications in the packaging of ‘Ice Breakers Pacs’.

In 2008, MSNBC raised yet another alarm over the manner of production of some of Hershey chocolate items, but the corporation was prompt in its response concerning the matter and cited the change to have been aimed at lowering the production cost without necessarily affecting the prevailing prices of the commodities, as highlighted in the flow chart above.

Abandoned Products

In 2006, one of Hershey chocolate factories was closed down for a time and quite a number of its products were abandoned owing to concerns about salmonella contamination which may have happened during the process of production.

In 1998, a substantial number of chocolate bars were abandoned for there were claims that they had a certain amount of almonds in them, but the specification of almonds were not posted among the ingredients.

Criticism

There are assertions that Hershey is weak when it comes to spelling its position about humane and ethical acquisition of cocoa, and so it may be stated that its scores are not pleasant considering the extent to which it advocates for fair trade.

Hershey Corporation is accused of using forced, trafficked and child labor in its acquisition of cocoa from West Africa, not being transparent when it comes to accounting for its sources of cocoa, in this respect therefore, little is known to the public about the extent of the investment done by Hershey Corporation towards ensuring a sustainable supply of cocoa in the catchment zones.

On this account the International Labor Rights Forum has challenged Hershey Corporation among others to abolish forced and child labor and thus merit 100% fair trade certification.

How to Apply Lean and Total Quality Management for Hershey’s Chocolate Factory

The strategy of lean and total quality management is basically a team-based approach aimed at ensuring a sustainable top quality service delivery by eliminating any destructors like non-value added practices or ‘waste’ from the perspective of the customer. Although this concept has been on the front line of industrial management for a long time, it is only recently that it has been tested in the supply chain and logistics management front.

The SCOR model of Lean quality management highlights the necessary steps which ought to be taken to ensure a successful outcome; these steps are Plan, Source, Make, Deliver and Return. This approach is most ideal in specifying lean opportunities in the supply chain, it is also applicable in identifying loop holes ‘waste’ in the entire production exercise and thus address such challenges closing the open gaps and eliminating the ‘wastes’.

The management of an iconic firm like Hershey chocolate factory is depended on several factors of production and consumption; the tenets of management comprise of: planning, organizing, leading, and controlling. All these tenets of management are subject to the prevailing internal, external, global, technological and ethical environment.

Plan – Sales and Operations Planning (S&OP) process is very crucial in strategizing on how much should be produced for the available market, for instance the state of the U.S economy must be born into consideration during the planning phase.

The number of consumers who may readily buy Hershey products this year may reduce significantly due to the heightening cost of such staple goods like eggs, milk and bread as compared to the total number of consumers last year. Of necessity therefore is the need for Hershey’s administration to have as more sensitive foresight than ever before. (Myerson, 2012, p. 1)

Organise – the organization process demands that all the strings of production and sales be pulled together for a coherent whole, as such all the resources are strategically synchronized towards the greater good of the entire Hershey Corporation. It basically entails sourcing for the raw products like cocoa through fair trade procurement channels, including also Vendor Managed Inventory or VMI and using the raw products in the manufacturing process.

Once the product has been made say chocolates, deliveries are made, in which case there is the need to keep the transport costs as low as possible. Hershey’s management has to certify the quality of imported raw materials and in case of any shipping mistakes, a return for the same is demanded. This makes the quality of the raw materials to take the central role in the production process.

Differentiation allows Hershey products to bear a unique quality of their own, a quality which is entirely different from that of Hershey’s competitors.

Lead – for the workers in Hershey to perform to their optimum, they need a visionary leadership which is always ready to motivate the workers. As such the workers need to be proud of their achievements and have a sense of ownership in the welfare of the Hershey Chocolate firm.

The workers need a constant reminder that they are indispensable, valuable and of great worth to Hershey Corporation and such should be celebrated in remunerating the workers handsomely, observing the legal framework of labor contracts, rewarding extra-ordinary achievements of the workers. Cost Leadership; a low-cost approach aimed at closing all the loop holes of production and optimizing on the returns

Control – the progress of Hershey Chocolate firm need to be evaluated continuously, proper monitory procedures and systems must be developed so that any areas which warrant some modifications may readily be attended to. In this manner therefore, the overall performance of the entire Company should always be kept in focus through an explicit filing system, so that, at a quick glance one can be able to review the prevailing market scenario.