Avon to Restructure U.S. Distribution Operations

Avon Products, Inc. (New York) released some details on how managers plan to restructure its U.S. distribution operations. Part of the company's multi-year turnaround plan, the initiative includes building a new state-of-the-art distribution center in the Midwest that will open some time in 2009. The facility will employ approximately 500 people when fully operational and will have capacity to ship 50% of U.S. sales volume. The facility will feature advanced picking technology to improve productivity and order accuracy, in addition to automated systems that will streamline process and work flow.

The company expects to invest approximately $150 million in capital expenditures relating to the new distribution center and for technology and equipment upgrades in other facilities. Those plans include modernizing its Atlanta-based distribution center, and possibly investing in a new warehouse management system for its Pasadena location.

As part of this effort, Avon executives announced that the company will close its distribution centers in Newark, Del., and Glenview, Ill., by mid-2009 and mid-2010, respectively. Avon expects to record $20 million in charges relating to the restructuring of its U.S. distribution network in the fourth quarter 2006 for employee-related costs and additional expenses of $65 million over the next several years, including transition costs and accelerated depreciation on equipment. Once fully implemented, the company expects to achieve annual cost savings of approximately $35 million to $45 million.

"Our decision to restructure U.S. distribution will deliver a step-change in technology support for operations and also will enable a significant improvement in service to our U.S. Representatives," said Elizabeth Smith, executive v.p. and president, North America."The decision to phase-out our branches in Newark and Glenview was a difficult one, and the lengthy transition timelines will help support our hard-working and dedicated Associates as they plan the next phase of their careers."

Company executives are currently evaluating potential locations for the new Midwest distribution center and expect to make a decision later this year.

Source: Avon Products Corp.

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