Striving to address competitive pressure, management at many companies is challenged to reduce business complexity and cost while simultaneously maintaining quality and improving on-time delivery. The answer for many companies is a combination of plant closures, relocations and consolidations.
For example, as part of a multibillion-dollar effort to remake an old and inefficient network of factories, warehouses and offices into a new network that delivers goods to stores more quickly, consumer products giant Procter & Gamble has consolidated hundreds of offices and warehouses across North America into eight facilities and set up six so-called mixing centers, where computer algorithms work with robots and humans to load trucks with the optimal mix of products to ship to retailers, a recent Morningstar article reports. Once complete, P&G said its new supply chain will enable 80 percent of the U.S. production to reach stores within 24 hours.
Started in 2012, the project has become more critical amid the faster pace of retail in the e-commerce era and as big retailers such as Walmart increasingly demand that suppliers deliver shipments on time, Morningstar notes. It has also become a key factor in P&G’s long-term efforts to cut costs amid slow sales.
P&G recently announced, as part of the strategy, it will close its dish soap factory in Kansas City, Kan., and cut hundreds of jobs at its Iowa City, Iowa, facility which makes hair products and body wash. Roughly 280 people will lose jobs in Kansas City, however about 200 of the Kansas City jobs will be relocated to West Virginia, while workers in Cincinnati will take on additional duties created by the Iowa job cuts, Kansas City Business Journal reports.
The moves are expected to be finalized by 2020. Recognizing the impact on employees, Procter & Gamble officials said it will negotiate with labor unions to help employees find other roles in the company or elsewhere.
“Decisions like this are never easy, but we are communicating this decision more than two years in advance to help our employees plan for the future,” P&G said in a statement. “We are committed to supporting P&G people through the transition in a manner consistent with our values and principles.”
P&G broke ground on its Tabler Station, W.Va., plant in 2015, and the first building was slated to be operational in January. The plant initially will produce Bounce dryer sheets and then expand to other products, including Pantene and Head & Shoulders shampoos, and Olay Body Wash, The [Martinsburg, W.Va.] Journal reports.
“The new site is being master-planned to be a large, multi-category facility much larger than the Kansas City plant, with strategic suppliers co-located on site, closer to three mega-distribution centers and presenting significant scale opportunities to develop solutions for channels and customers across categories that would not be feasible/cost effective for smaller sites,” according to a P&G spokesperson, The Journal reports.
P&G’s news follows Harley-Davidson announcing it will cease operations at its Kansas City plant by early 2019, and consolidate the Kansas City operations into its manufacturing plant in York, Pa. About 800 workers will lose their jobs in Kansas City but the shift will add about 450 jobs in Pennsylvania.
The announcement came as Harley-Davidson reported its fourth quarter and year-end financial results failed to meet expectations. The motorcycle manufacturer said its worldwide retail motorcycle sales were down 6.7 percent in 2017 when compared to the previous year. The drop was more pronounced in this country, with U.S. sales down 8.5 percent, compared with a 3.9 percent drop overseas.
“The decision to consolidate our final assembly plants was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment,” Harley-Davidson CEO Matt Levatich said, the Kansas City Star reports. “We are constantly evaluating capacity and our current U.S. capacity exceeds U.S. demand.”
What are your thoughts on plant closures and consolidations? Is your company—or any key suppliers—going through similar restructuring?