Hershey Direct: Staging a Sweet Holiday

As with holiday gift shopping, the best way to ensure a happy holiday season for your catalog operation is to do as much as you can ahead of time—from planning and production to picking, packing ... and even loading the trucks.

For Hershey Direct, the catalog arm of Hershey’s Chocolate World, a division of Hershey Foods, the Christmas holiday is by far its busiest season, drawing a whopping 85 percent of the division’s sales activity. (The second and third busiest seasons are the spring catalog, which mails in time for Mother’s Day, followed by the Valentine’s Day catalog.)

Ramping up for the big rush is a huge undertaking that requires months of advance work and planning.

“To gear up for our busiest season, I begin operations planning for next year as soon as the season is over,” says Colleen Gill, operations and fulfillment manager, Hershey Direct, who oversees manufacturing, shipping, inventory and the call center.

Key to Hershey Direct’s success in handling this seasonal volume is that it manufactures and assembles product prior to peak season, according to Bill Kuipers, principal of Spaide, Kuipers & Co., Haskell, NJ, a consulting firm that works with Hershey Direct.

Another way Hershey Direct tries to ease the seasonal rushes a bit, says Gill, is by encouraging more early-holiday orders from its customers. “We’re always testing ideas, and we roll out with any that work for us,” Gill says.

For instance, last year’s holiday book, the 2000 Hershey’s Gifts catalog (pictured at right), offered shoppers a free gift box of Hershey’s Golden Almond Bars if they placed holiday orders by Nov. 15. Gill notes that while these strategies help somewhat, “People, by nature, tend to order close to the holiday or gift occasion, and our processes are built to support our customers.”

First Things First: Making the Product

Each year, to prepare for the upcoming holiday season, Hershey’s actually begins making items in the low-volume, off-season. “We produce as much of the non-personalized product ahead of time as we can,” Gill explains.

In addition to selling boxes, baskets and towers of some of its ready-made products, such as bars and Hershey’s kisses, the catalog company does a big business in moulded personalized cards, both for consumers and the business-to-business market. These present a different challenge because they cannot be done ahead of time.

Moreover, says Gill, “The personalizaton of our products requires some pretty specialized skills. And since the moulded cards, which are custom-made by hand, are a substantial portion of our business, our solution is to carefully select the right people for these jobs.”

Next Step: Hiring More Phone Reps

Due to the huge seasonal swings in its order volume, Hershey Direct has only a limited full-time call center staff, relying on temporary hires and outsourcing to make

up the difference at its busiest times—starting with the first holiday catalog drop on the Tuesday after Labor Day.

“We begin staffing-up the call center in September for our first Christmas catalog drop,” explains Gill. The number of reps increases 10-fold during the peak season. “Our big holiday catalog drops in October, so we need a lot of people on the phones by then.”

Gill says she doesn’t have much difficulty finding the right personnel. “We look for college students, retired individuals and people who are looking for flexible seasonal jobs. Plus, we are fortunate that people do come back to work with us during the holidays year after year, because we offer flexible scheduling.”

The Hershey Direct call center is not a 24/7 operation. However, Gill says, “We do have overflow help from an outsource provider during the months of September through April.” Arnold Logistics, located in central Pennsylvania, is the company’s outsource provider.

In addition, Gill says, to accommodate business growth, the company recently expanded its in-house call center from 25 to 60 seats. “But in the slowest season, the summer, we take it all the way down to eight seats,” she explains.

Whether they’re core reps, seasonal help or outsourced reps, Gill stresses the importance of training and product knowledge. “Our reps know our product line very well,” she says.

A growing e-commerce business adds yet another piece to the order-processing side of the operation. According to Gill, 20 percent of Hershey Direct’s current business is generated from its Web site and 80 percent from its catalog. How are those online orders handled? “At regular intervals, orders are sent from the Web site to be processed,” says Gill.

According to Gill, “The greatest obstacle right now in dealing with the Internet is that inventory on the Web is not integrated on a real-time basis, so we must monitor inventory levels closely.” A real-time Web site is in the company’s long-range plans, she says.

Final Stage: Delivery

Similar to the call center, the distribution center is a lean operation; the staff grows five-fold from off-season to the peak time, explains David DeWees, a distribution manager who has been with the company for 16 years. “The full-time staff is supplemented during peak season with flex employees numbering about 25 over two shifts.”

The distribution center ramps up quickly for the holiday season, holding a job fair in early September to hire the flex employees by Oct. 1, says DeWees. He adds, “Hershey Direct has developed a close working relationship with a temp agency that understands our business and can provide additional resources on short notice.”

The distribution center gets extremely busy in mid-October, when it begins staging orders by time of delivery and transit zone. Hershey uses a zone-picking system to fill trucks by geographic area. For example, orders going to Zone 2, which take one to two days at most to get there, would go on one truck, says DeWees.

UPS provides Hershey with the trailers in advance. “We have eight shipping doors for trucks to pull up to,” DeWees says. “We start with four trucks. Usually, we get 4,500 to 5,000 packages on a full trailer.”

Since Pennsylvania’s October weather still can be a bit warm, DeWees says: “We have to watch the weather closely. We keep the doors to the trailers open into the facility to help keep the temperature inside the trailers between 65 and 68 degrees.”

Another factor in the staging process, says Gill, is that, “Over the years many of our customers have consistently required delivery of their holiday gifts over a small range of dates. For these orders we code them in our system to allow operations to pre-pick and stage orders for delivery.”

Adds DeWees, “This process goes on from mid-October until the Friday after thanksgiving. That’s the last weekend we stage, because of the [increasing] daily order

volume from then on. Instead of ‘Black Friday,’ we call the Friday after Thanksgiving ‘Gold Friday’ because we usually receive a flood of orders on that day.”

In all, about 20 percent of the company’s holiday orders get staged in advance.

According to DeWees, his greatest challenge each holiday season is managing the employees working a multi-shift operation. “The operation grows to support the season from essentially a one-shift operation to a multi-shift and weekend schedule. We stage orders every night during that period, working two shifts. So it’s pretty intense during the five weeks leading up to Christmas,” DeWees says.

“We all work, myself included, seven days a week for five weeks straight,” he continues. “It’s very challenging, but our teamwork, two-deep leadership and commitment to the business ensure a successful season.”

What Hershey Direct Does Right

By Bill Kuipers

Following are a few of the things Hershey Direct does right, especially in light of its very high peak volume.

1. True strategic and tactical planning: This isn’t a company that just drifts along. Rather, every top and middle manager is focused on what the projections are, what the operating plan is, and how to deal with both the planned and unplanned issues. They have excellent communication between all groups (i.e., marketing, operations, inventory management) through brief daily status meetings and other frequent interaction with one another. There’s never a sense of panic or chaos, even at the busiest time—they just get it done.

Although they’re part of a large company, Hershey Direct acts more like an entrepreneurial company: focused, enthusiastic and with a sense of urgency.

2. It uses the low-volume off-season to prepare product and pre-pack almost all items in shipping boxes. This significantly streamlines the picking and shipping process, because it virtually eliminates the most time-consuming step of packing. All they need do is slap a label on the box. Multiple items going to the same address are bundled together.

3. It has a successful partnership with a third-party call center to handle overflow order calls during the peak season. Hershey Direct officials interact closely with the vendor to coordinate expectations and ensure that training on Hershey products and policy is sufficient.

Bill Kuipers is principal with Spaide, Kuipers & Co. He can be reached via e-mail at kuipers@spaidekuipers.com.