What is the payback period on Hershey’s $250 million supply chain technology investment?

The Hershey Company (NYSE: HSY), a well-known confectionery and salty snack maker, used its 2026 Investor Day in late March 2026 to preview the benefits it expects from ongoing supply chain technology investments. Hershey’s chief supply chain officer, Jason Reiman, told investors that the company expects to increase productivity by $50 million and reduce inventory by $100 million over the next 2 years from its use of “decision intelligence” software that analyzes supply chain data and flags issues for operations managers in real time.

These gains are rooted in a $250 million supply chain and manufacturing project that Hershey began in 2024. That investment focused on digitizing processes, improving visibility, streamlining operations, and optimizing procurement and manufacturing.

When managers evaluate a large investment like Hershey’s $250 million supply chain project, one of the simplest tools they can use is the payback period. The payback period tells managers how long it will take for the cumulative cash savings from an investment to equal the original amount invested. The shorter the payback period, the sooner the company’s cash is back in its pocket.

If we use Hershey’s projected $150 million of combined cash benefits (the $50 million productivity gain plus the $100 million inventory reduction) spread evenly over the 2-year horizon the company cited, the projected cash benefit averages about $75 million per year. Applying the simple payback formula (initial investment divided by annual cash inflow) gives a rough payback of $250 million ÷ $75 million, or about 3.33 years.

This is a rough estimate, but it shows how a few published figures from an investor day can give managers (and students) a quick first read on whether an investment is attractive.

View a quick tutorial video about the payback period at this [link] and then answer the following questions.

Note to instructors: This post is assignable in Pearson’s MyLab and has questions that are auto-graded.

Discussion Questions

1. Hershey invested $250 million in its supply chain technology project and projects $50 million in productivity gains and $100 million in inventory reduction over the next 2 years. How would you use these projections to estimate the project’s payback period, and what assumptions are you making?
2. Why might the payback period be a useful first-pass screening tool for an investment like Hershey’s supply chain project?
3. What are the most important weaknesses of the payback period method when evaluating Hershey’s investment, and which of those weaknesses matters most in this case?
4. Beyond the $100 million inventory reduction and $50 million productivity gain, what other cash flow effects or qualitative factors should Hershey’s managers weigh when evaluating the $250 million technology investment?
5. Hershey’s chief supply chain officer indicated that productivity benefits should continue well past year 2. How does the prospect of ongoing benefits beyond the payback horizon affect your view of whether the payback period is an appropriate tool for evaluating this particular investment?