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OM in the News: The Return of the Twinkie

May 5, 2015

twinkies2 Debt, pension costs and mismanagement shuttered the iconic Hostess (maker of Twinkies, Ding Dongs, Ho-Hos, and CupCakes) in 2012, writes Forbes (May 4, 2015). It was a cultural moment across the U.S., offering proof of the dire state of American manufacturing. After over a decade of failing health that saw 2 bankruptcies and 5 CEOs, Hostess finally died after the baker’s union pulled the plug with a nationwide strike. The 150 year old firm left behind 36 factories, 5,600 delivery routes and 19,000 jobs, creating something of a national mourning. (Many thought Hostess got what it deserved. Its products–preservative-packed calorie bombs–flew in the face of food trends.) But while you wouldn’t find Twinkies on Whole Foods’ shelves, Hostess had millions of nostalgic fans.

Now, with a new billionaire cake boss, a new factory has arisen in Emporia, Kansas. Tight rows of Twinkies march along the $20 million Auto Bake system with the precision of soldiers in a parade. Yellow robotic arms, which look like they should be welding Teslas, stack snacks with hypnotic rhythm. This 500-person plant produces more than 1 million Twinkies a day, 400 million a year. That’s 80% of Hostess’ total output–output that under the old regime required 14 plants and 9,000 employees.

The recipe was threefold. First, $110 million went to modernizing the remaining factories–everything from automation to improving air flow in the bakeries. Next came a $25 million SAP software system to manage inventory and logistics. But most important was the millions spent at chemistry labs to tweak the recipe formula that would prevent staleness and discoloration. The singular goal: make the Twinkie warehouse-friendly. It’s shelf life was more than doubled, to 65 days. Delivery costs dropped to 16% from 36% of revenue, and Hostess’ retail reach expanded greatly.

In July, 2013–less than 4 months after the new owners took over operations–the Twinkie was back. During the Today show, Al Roker, riding shotgun in a Hostess truck, tossed Twinkies to screaming fans. Fans flocked to stores. Demand was so high that large retailers waived the slotting fees they usually charge brands for shelf space.

Classroom discussion questions:

1. Why did Hostess succeed after its previous failures?

2. List all the OM factors involved in this transformation.

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