Underwear and knitwear marketer Hanesbrands Inc today (27 June) instigated its latest wave of cost-cutting measures which will see the closure of nine plants in four countries employing around 5,000 workers.

The closures will affect employees in Canada, the Dominican Republic, Mexico, the United States and Puerto Rico, with an additional 350 management and administrative positions being axed in the US.

Hanesbrands said it is adding 3,000 jobs at other plants by moving production to lower-cost operations in Central America and Asia.

Most of the changes should be completed by the end of the year the company said in a statement, adding that restructuring and related charges are likely to be around $42m.

In total, the Winston-Salem, North Carolina-based company expects restructuring charges of $250m in the three years following its spinoff as an independent company from Sara Lee Corp in September 2006.

"This streamlining is part of our larger cost-reduction and process-standardisation strategies to increase competitiveness and become a more effective organisation," said chief executive officer Richard A Noll.

"Taking these actions will better position us to achieve our long-term growth goals and financial objectives and help us in our efforts to offset independent company costs and selected investments we are making in our business."

Hanesbrands has 50,000 employees in 24 countries producing brands including Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra.

Its long-term annual growth goals are 1-3% for sales, 6-8% for operating profit and double-digit gains for earnings per share based on its performance in 2007.

However, the company's first quarter profits fell 83.9% to US$12m in the three months ended 31 March. At the time it blamed large increases in restructuring costs for the fall. The business also continues to deal with a large amount of long-term debt, which was down only a fraction, to $2.475bn from $2.484bn as of 30 December 2006.

The company's global supply chain strategy is to move production and operations to lower-cost countries, operating fewer and bigger facilities and aligning production flow for maximum flexibility.

Today's moves are intended to concentrate bra sewing and manufacturing at lower-cost operations in Central America and Asia, and create a lower-cost sewing network for knit products in Central America.

In the long-term, Hanesbrands expects to balance its supply chain between the western hemisphere and Asia.

Since being spun off by consumer goods giant Sara Lee last year for $2.4bn, Hanesbrands has taken drastic steps to strengthen its global supply chain. It has closed 13 manufacturing facilities in the Dominican Republic, Mexico, Puerto Rico, and the US, with the loss of more than 4,600 jobs.
 
These cost-cutting initiatives across the global supply chain are all seen as key to the company's future growth.

Significantly, the company has also been on the acquisition trail and, with 92% of its sales currently in the US, is keen to expand its business internationally.

In October 2006 it bought its first Asian sewing plant near Bangkok in Thailand, where around 1,600 workers make bras. This facility is seen an important building block for Hanesbrands' Asian supply chain base. Not only is it the company's first move to own production capacity in Asia, but it will also help in the ongoing effort to drive costs out of its supply chain.

By Leonie Barrie.