The initiative, which is part of the company's previously announced multi-year turnaround plan, includes the building of a state-of-the-art distribution center in the Midwest that will open in 2009. The facility will employ aproximately 500 people when fully operational and will have capacity to ship 50% of U.S. sales volume.
Avon also said that it will phase-out its current distribution branches in Newark, Delaware and Glenview, Illinois, with the closures expected to be completed by mid-2009 and mid-2010, respectively, with a combined loss of approximately 620 positions.
Avon said that it expects to invest approximately $150 million in capital expenditures relating to the new distribution center and for technology and equipment upgrades in other branches. The company plans to upgrade and modernize its Atlanta-based distribution center, and is evaluating options for investing in a new warehouse management system for the Pasadena site.
Once the initiative is fully implemented, the company expects to achieve annualized cost savings of approximately $35 million to $45 million, as well as incremental benefits to working capital and improved service to Avon Representatives. The cost savings are part of the company's previously announced multi-year restructuring plan.
Avon said that it is in the process of evaluating potential locations for its new distribution center in the Midwest, with a decision expected to be announced in 2007. The company said that it expects the new distribution center to feature advanced picking technology to improve productivity and order accuracy, in addition to automated systems that will streamline process and work flow.
Avon continues to project that the total cost to implement all of its restructuring initiatives will be in the range of $500 million and that the annualized restructuring savings will exceed $300 million when the plan is fully realized.