Levi Strauss & Co. announced Tuesday that it has entered into a five-year outsourcing arrangement with global business solutions provider, Wipro, as part of its global productivity initiative, and the move will result in the loss of 500 jobs.
As part of the agreement, Levi’s will outsource certain global business services within information technology, finance, human resources, customer service and consumer relations to Wipro.
“We’re on a mission to transform our company to deliver sustained, profitable growth. Through our efforts this year, we’ve made great strides toward bringing our cost structure more in line with our revenue base,” Harmit Singh, chief financial officer of LS&Co said. “We are making solid progress, and I expect that the actions announced today will help simplify how we operate, improve our productivity levels, increase our agility and further reduce costs.”
Levi’s initially announced its global productivity initiative in March this year, and once fully implemented, the program is projected to generate $175 to $200 million in net annualized cost savings.
The retailer will continue to reduce layers of management, increase spans of control and eliminate duplicitous roles as part of the productivity initiative and continued transformation of its cost base. Levi’s said additional savings in the future will come from streamlining its planning and go-to-market strategies, making its retail, supply chain and distribution network more efficient, and from continued persistent pursuit of more disciplined procurement practices.
Final plans for the cuts will vary by country, and Levi’s said it expects to incur $45 to $55 million in costs, mainly owed to severance benefits and retention packages.
Certain components of the outsourced services will begin in the first quarter of 2015, and Levi’s said it expects to pay Wipro roughly $143 million over the agreement’s initial 5-year term.