Newell Brands Inc.,
the company behind Yankee Candle, Sharpie markers and other consumer products, is spending more on capital investments to support its supply chain this year in the expectation that it will lower shipping costs and deliver other savings.
Atlanta-based Newell plans to spend roughly 20% more this year, or $350 million, on capital investments, with about $100 million going toward a project to consolidate its distribution centers and place them in more optimal locations across the country. The project is part of a multiyear effort launched in 2021 to improve its operations five years after a troubled merger weighed on its financial results. The investments will also help the company reduce transportation costs and shipping delays that increased over the past two years for Newell and many other companies due to issues ranging from port congestion to production delays.
Newell doesn’t break out its transportation costs on its financial statements but has said it expects inflationary pressures—including shipping and transportation—to account for about 9% of its cost of goods sold in 2022. That figure stood at $1.7 billion during the second quarter, down 6% from a year earlier. The company declined to provide specific estimates on expected cost savings from its investments.
Newell previously operated more than 20 distribution centers that relied on shipments from West Coast ports, which have suffered from backlogs throughout the pandemic, and where high-stakes labor negotiations are causing fears of additional delays for many companies. The company declined to share a specific number of distribution centers.
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Once Newell’s capital investments are complete, the company will operate seven distribution centers, including two new facilities in Pennsylvania and North Carolina along with five existing facilities, including two in California and one each in Missouri, Tennessee and Ohio. The company as a result of the investments will increase its reliance on East Coast ports, and will also reduce its shipping distances to customers in the eastern U.S.
“We’re reducing our transportation costs. We’re also diversifying our ocean freight,” said
Newell’s president and chief financial officer.
Over the past two years, companies across industries have taken steps to offset higher transportation costs by improving efficiency in their supply chains. Those efforts include adding or consolidating distribution centers with the goal of reducing the trucking distances to retail stores, said Josh Nelson, principal at
Hackett Group Inc.,
a business advisory firm.