Tag: hershey

OM in the News: The Shortage of Valentine’s Chocolate

Hershey says it lacks manufacturing capacity and labor to meet demand

Hershey said it is running low on Valentine’s Day candy this year, thanks to a shortage of labor and factory capacity. Many grocery shelves already are bare where heart-shaped chocolates should sit, and Hershey said it would likely stay that way leading up to the holiday.

Hershey said it has added production lines recently and hired more workers, but it hasn’t been enough to keep up with America’s appetite for its Reese’s chocolates, Jolly Ranchers candy and other treats. Hershey has sent salespeople to stores to help restock shelves and the inventory issues vary by retailer.

The candy aisle at the average store is currently out-of-stock of 20% of its items—compared to 12% out-of-stock for the whole store, reports The Wall Street Journal (Feb. 4, 2022). The whole industry is having supply challenges. Consumers also have been buying more sweets, increasing pressure on candy supplies. Many retailers are carrying fewer sizes and varieties of candy than they used to; some have received incomplete orders for Valentine’s Day despite booking farther in advance.

The B&R Stores chain is receiving under 60% of its candy orders. In the Midwest, Festival Foods stores have been ordering about 25% to 30% more candy supplies than usual in recent months and are still experiencing inventory issues. The broader food supply chain continues to have hiccups, as U.S. manufacturers and retailers grapple with labor shortages and employee absenteeism. Pet food, cereal and refrigerated dough are among many items in tight supply, and the candy supply remains tight ahead of Valentine’s Day and Easter.

Hershey and some competitors have cut back on advertising in recent months, to avoid boosting demand while they struggle to fill orders from retailers. The candy makers, along with other U.S. food makers, are also raising prices to offset some of the higher costs they face for raw ingredients, trucking, labor and packaging. That hasn’t dented demand yet.

Classroom discussion questions:

  1. In Supp. 7 of your Heizer/Render/Munson text, we discuss tactics for matching capacity to demand. Which apply in this situation?
  2. What is the long-term solution?

OM in the News: Where OM Data Analytics Meets Chocolate

Todd Ferris uses advanced analytics to find solution to problems like ways to route peanuts.

Todd Ferris is a principal data scientist for Hershey Chocolates. He can track a cocoa bean from harvest to chocolate bar on a store shelf.  Here are some excerpts from  The Wall Street Journal (March 29, 2019)  interview that you might use in class when you cover our new chapter, Module G,  Applying Analytics to Big Data in Operations Management:

Our team goes after complex problems across the supply chain. Can we see our products from sourcing a cocoa bean in Western Africa all the way to manufacturing, shipping and getting it to the customers? It’s very difficult to keep track of all that data. 

We are always fighting this bullwhip effect, the phenomenon of small changes at one end of the supply chain creating huge issues once you get back to manufacturing. If customer demand varies by 100 chocolate bars at retail, by the time that information gets back to us at manufacturing that signal may be 1,000 bars. This creates a lot of inefficiencies.

We use a programming language called R, a counterpart to Python. You’ll do your modeling inside one of those programs; we’ll use SQL to access, manipulate and filter data before we bring it into analytical tools.

You can do procurement, like forecasting the health of crops or their availability. I’ve worked on manpower analysis—how we shape our manpower in our manufacturing plants in the best manner possible. We just worked on the best way to route peanuts from our suppliers to our plants. On one side we are forecasting crops and on the other we’re at the store level trying to determine if we have too much inventory or too little. We try to predict what’s going to happen and then make sense of how we need to respond.

Classroom discussion questions:

  1. Describe the “bullwhip effect” and its importance in OM.
  2. How would you describe “data analytics” to an executive and explain its role?