Kellogg’s, one of my favorite cereal manufacturer’s is fighting hanging consumer tastes, and declining sales by wringing costs out of their distribution supply chain. Changing from a more labor intensive direct store delivery model to a warehouse distribution model. The end result will be hundreds, if not thousands, of employees being laid off. Kris Charles, Kellogg’s go-to spokesperson said that “The new model will be transformational for Kellogg, reducing complexity and cost structure while driving growth and profitability for the company and its retail partners. While this is the right move for the company to achieve our long-term objectives, it was a difficult decision because of its impact on employees.”
Of course, employees with key support skills will probably see a lateral move. Charles also allowed that “We’ve been actively engaged in conversations with some of our biggest retail partners who have expressed strong interest in hiring these employees for high-demand roles once the transition is complete. As a result, we are optimistic that our employees will find similar employment once this transition is complete.”
To be noted, in many cases, the company’s customers often have better distribution facilities tailored to their exact locations and needs. In terms of logistics, control, and costs, Kellogg’s is smart to outsource those tasks which are better performed at lower costs by outside vendors. The very definition and raison d'etre for outsourcing.
Like most businesses that engage in any form of outsourcing, they are offering retention packages to key employees to assist in the transition and to provide business continuity.
I cannot help but wonder what is going through an executive’s mind as he weighs cost savings and their job against displaced employees. Probably something better left unsaid.