Kellogg’s Laid off Hundreds of Employees in May
World-famous breakfast cereal company, Kellogg Company (NYSE:K), has shut down five distribution centers and laid off hundreds of employees this month.
The Michigan-based company is in the midst of a massive distribution overhaul as it changes its distribution strategy to reduce costs and increase profitability.
Kellogg’s management had announced earlier this year that it will be closing up to 39 of its distribution centers across the country in an effort to cut down on shipping-related costs. The closures are expected to cause about 1,200 layoffs at its distribution centers countrywide.
The latest closure is happening in the city of Cincinnati in Ohio, where the company is shuttering its distribution center and permanently laying off 250 of its employees.
Earlier in the month, the company shut down two other distribution centers in the cities of Greensboro and Charlotte. The two closures caused nearly 500 layoffs within the state of North Carolina (233 layoffs at Charlotte and 250 layoffs in Greensboro).
In the same month of May, two more distribution centers were shut down in the northeastern state of Pennsylvania. One distribution center was closed in Pittsburgh, cutting the jobs of 211 employees, while the other was closed in Montgomery County, killing 292 jobs.
The change in the distribution strategy follows as management notices shifting delivery trends within the retail industry.
The company is now moving away from its older direct store delivery (DSD) model to a new delivery model whereby products will be shipped directly to its retailers.
CEO John Bryant says that communication between Kellogg’s and its retail customers has become more efficient, allowing the company to bypass distribution centers.
Under the older DSD model, Kellogg’s used to first ship manufactured goods to its distribution centers, and from there, ship them to retailers. The new model will cut down the costs of operating Kellogg Company-owned distribution centers.
Previously, Kellogg’s had been conducting 75% of its business through its distribution centers. The company’s transition from the old DSD model to the new delivery model is expected to be completed by the end of this fiscal year’s fourth quarter.
“Kellogg’s to Close Montgomery County Facility, Cutting Nearly 300 Jobs,” NBC Philadelphia, May 30, 2017.
“Kellogg Co. to lay off nearly 500 workers in Charlotte, Greensboro this summer,” Business Journal, May 30, 2017.
“Kellogg’s Announces Ohio Layoffs,” U.S. News, May 31, 2017.