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OPERATIONS MANAGEMENT ASSIGNMENT COVER SHEET

Fatima Jinnah Women University

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Ayesha Mukhtar Hira Azad Marium Zahoor Saba Khan

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Tables of Contents
EXECUTIVE SUMMARY: ........................................................................................................... 3 INTRODUCTION TO NESTLE COMPANY: .............................................................................. 4 MEANING OF NESTLE: ........................................................................................................... 5 Mother Bird ................................................................................................................................. 5 NESTLE IN PAKISTAN:............................................................................................................... 5 VISION: .......................................................................................................................................... 5 MISSION STATEMENT: .............................................................................................................. 5 OBJECTIVES: ................................................................................................................................ 6 PROBLEM STATEMENT: ............................................................................................................ 6 SUSTAINABILITY IN NESTLE BUSINESS:.............................................................................. 6 ALTERNATIVES GENERATED: ................................................................................................ 6 SHORT TIME ALTERNATIVES:................................................................................................. 7 Value Stream Mapping: .............................................................................................................. 7 Nestle Continues Excellence: ...................................................................................................... 7 Kaizan: ........................................................................................................................................ 7 LONG TERM ALTERNATIVES: .............................................................................................. 8 Just in Time: ................................................................................................................................ 8 Lean Production in Nestle: ...................................................................................................... 8 Benefits of Lean Production: ................................................................................................... 8 Built in Quality: ........................................................................................................................... 9 Internal Process Stability:............................................................................................................ 9 Waste Hunting: ............................................................................................................................ 9 Nestle Waste Hunting: ............................................................................................................. 9 5S (Sort, Set Shine, Standardize, Sustain): ............................................................................... 10 Sort: ....................................................................................................................................... 10 Set in order: ........................................................................................................................... 10 Shine: ..................................................................................................................................... 10 Standardize: ........................................................................................................................... 10
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Sustain: .................................................................................................................................. 10 Time Based Management: ......................................................................................................... 10 EVALUATION OF ALTERNATIVES: ...................................................................................... 11 NESTLE STRATEGY: ................................................................................................................. 11 IMPLICATIONS & RECOMMENDATIONS: ........................................................................... 13 Selected Strategy: ...................................................................................................................... 13 CONCLUSION: .......................................................................................................................... 14

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EXECUTIVE SUMMARY:
The purpose of this report is to study and analyze assigned case study of Nestle in depth. Nestl is the worlds leading nutrition, health and wellness company. It manufactures more than 70 brands in the UK. Nestl is one of the UK and Irelands major exporters. Henri Nestl founded the company in 1867. Main purpose of study is to identify the key issues faced by them in factory while production and after investigation give them best alternative for its solution. We identified that the Nestle Water was facing a problem of inefficiency in the production process and shortage of time and resources. It wants to build a brand new high-tech combined plant and warehouse facility to bottle the two local waters. To solve their problem we study different techniques of lean production that are categories in two parts short term alternatives and long term alternatives. Short term alternatives include Value Stream Mapping, Nestle Continuous Excellence and kaizan. Long Term Alternatives were just in time, Built in Quality, Internal Process Stability, and 5S (Sort, Set Shine, Standardize, and Sustain), Time based management and Waste Hunting. After analyzing each alternative separately we reached at final decision that Nestle Water should adopt just in time lean production techniques that best meet to their problem solution. As JIT focuses on continuous improvement but only works as part of an overall lean strategy. It can improve the efficiency of processes. It can lead to a better return on investment through improving productivity. JIT also allows for fewer materials to be held at anyone point which can reduce working capital needs as less finance is needed for stock, leading to better financial performance. This can lead to better returns to stakeholders such as investors, as any finance invested is yielding a direct return. Selected strategy for Nestle is Just In Time (JIT) which can benefit a lot in terms of reduced storage costs, low loss of products are due to obsolescence and lower inventory holding costs.

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INTRODUCTION TO NESTLE COMPANY:


Nestl was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in 1866 by brothers George Page and Charles Page, and Farine Lacte Henri Nestl, founded in 1866 by Henri Nestl. The company grew significantly during the First World War and again following the Second World War, expanding its offerings beyond its early condensed milk and infant formula products. The company has made a number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988, and Gerber in 2007. In 1867, at a time of high infant mortality, Henri Nestl developed a milk-based food for babies unable to feed from their mothers. Within five years, NESTL Milk was being sold around the world as a food for babies, old people and the infirm. Rapid development followed and Nestl soon diversified into other areas with the introduction of a condensed milk product, followed by a move into the growing chocolate industry. Henri Nestl endowed his company with the symbol derived from his name. His family coat of arms, the nest with a mother bird protecting her young, became the Company's logo and a symbol of the Company's care and attitude to life-long nutrition. The Nestl nest represents the nourishment, security and sense of family that are so essential to life. Nestl has a primary listing on the SIX Swiss Exchange and is a constituent of the Swiss Market Index. It has a secondary listing on Euronext. In 2011, Nestl was listed No. 1 in the Fortune Global 500 as the world's most profitable corporation. With a market capitalization of $233 billion, Nestl ranked No. 9 in the FT Global 500 2013. Nestl Company had started off from a single man's idea, and developed into a giant corporation. In 1866 Henri Nestl, a pharmacist, developed a milk food formula for infants who were unable to tolerate their mother milk (Nestle.com). His product became a success, and it created a dema. Nestle is the worlds largest food and beverage company and employs around 265,000 people worldwide. In 2006 Nestls sales, at $80billion, accounted for 1.5% of the total global food market. The company has a diverse range of product lines including Soluble Coffee, Infant Nutrition. The Nestl trade mark was first registered in New Zealand in Wellington in 1885. Our
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heritage brands include HIGHLANDER, MILO, MAGGI and NESCAF. Whilst Nestl is well known for its confectionery business, this represents only a small part of todays product portfolio.

MEANING OF NESTLE:
Henri Nestle endowed his company with the symbol derived from his name, his family coat of arms, the nest with a,

Mother Bird
Protecting her young, became the companys logo and a symbol of the company care and attitude to life-long nutrition. The Nestls nest represents the nourishment, security, and sense of family that are so essential to life.

NESTLE IN PAKISTAN:
Nestle head office in Pakistan is in Lahore. It also has its registered office in Lahore. Nestle has divided the whole Pakistan in three zones: Northern Zone Central Zone Southern Zone

It has eight (8) regional offices in Pakistan. These offices work under their respective zonal offices.

VISION:
At Nestle, we believe that research can help us to make better food, so that people live a better life.

MISSION STATEMENT:
Nestle is dedicating to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experience of anticipating consumers needs and creating solutions, Nestle contributes to your well-being and enhances your quality of life.

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OBJECTIVES:
Main objective of Nestle is to provide safe, tasty, convenient, and nutritious food to improve health and well-being of consumers of all ages all over the world. To meet the needs and desires of todays and tomorrows consumers, Nestle is strongly committed to Research & Development (R&D) to improve existing products and develop new foods with specific health benefits.

PROBLEM STATEMENT:
Nestl Waters UK (NWUK) decided to look for a new site and invest 35 million to build a brand new high-tech combined plant and warehouse facility to bottle the two local waters Buxton Natural Mineral Water and Nestl Pure Life spring water. The UK bottling factory at that time had no space to expand to meet demand. The site also had inefficiencies in the production process which meant time and resources were unable to be optimized. In response to these problems, our study proposes to investigate different techniques of lean production like just in time, kaizan Value Stream Mapping, Nestle Continuous Excellence Build in Quality and Internal Process Stability

SUSTAINABILITY IN NESTLE BUSINESS:


Sustainability is about the future of our society, for today's industries and businesses; it is also about commercial success. Business sustainability is often defined as managing by three main factors - a process by which companies manage their financial, social and environmental risks, obligations and opportunities. These three impacts are sometimes referred to as profits, people and nature. Sustainability by Nestle is, their production, products and their activation in the economy do not harm the economic, social and environmental factors. Moreover, they should and must participate in the growth of the factors to gain prosperity and sustainability of their business. This will indicate the future business growth and expansion of business.

ALTERNATIVES GENERATED:
After a complete analysis of nestle case study we found that Nestle Water UK wants to build brand new high-tech combined plant and warehouse facility to bottle the two local waters but it was facing different problems. The main problem which we identified is inefficiencies in the production process which meant time and resources were unable to be optimized. To solve these
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issues we generated different alternatives that are broken down into two different categories, short and long term alternatives. Short term alternatives describe changes to the changeover process that can be done in a very short time with a minimum investment and can have immediate results. On the other hand, long term alternatives describe more complex changes to the system that imply a major capital investment and because of its complexity take longer to implement.

SHORT TIME ALTERNATIVES:


1. Value Stream Mapping:
A procedure used in lean manufacturing where the process of disseminating materials and information is streamlined to bring a product or service to the customer by creating the most efficient system possible. A value stream map is especially useful for identifying potential waste spread over the course of a complex process, with an accurate definition of lead time serving as a crucial component. Lean training sessions helped employees to determine where the production process could be improved to reduce waste, for example, by combining or removing elements of the process. The outcome of the VSM at Nestl Waters can be used to plan the new bottling plant, ensuring the processes as efficient as possible.

2. Nestle Continues Excellence:


After touring Nestl operations around the world, Lopez developed his vision of the NCE model a single operating system for Nestl operations that built on the best practices already implemented internally around the world. He argued that having a common model for the entire organization was critical as it would (1) ensure the sustainability of the program independently of changes in management, (2) use one validated set of best practices, (3) eliminate duplication of effort and (4) enable sharing of learning on implementation.

3. Kaizan:
One of the most popular buzzwords in business today is the word kaizen. It is a Japanese word meaning incremental improvement. Kaizen was formalized by the Toyota Production System, which is now utilized throughout the United States as lean manufacturing. Kaizen focuses on eliminating waste, improvement productivity and achieving sustained continual improvement in targeted activities and processes of an organization. The term kaizen is often coupled with another
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word to create the phrase kaizen event. The kaizen event is the term given to a highly focused continuous improvement event consisting of a team working together for a brief time period to solve a business problem. Small improvement leads to big savings.

LONG TERM ALTERNATIVES:


1. Just in Time:
Just in time (JIT) is a production strategy that strives to improve a business' return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals between different points, which are involved in the process, which tell production when to make the next part. Signals are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality. Through JIT Nestl Waters can able to make the most efficient use of storage and time at the new factory and can make continues improvements by reducing in process inventory. Lean Production in Nestle: Just-in time is an important lean production technique because it reduces the waiting time, loading time and reduced the waiting by employees and do not sit idle. It improves the process and put more efficiency in the process. Materials arrive just in the time of need so it reduces the unnecessary loading of material and transportation cost and reduce the excess material wastage. Benefits of Lean Production: Lean production gives more efficiency and improved quality in the process. By reducing the cost it also benefits the social and environmental factors i.e. reduction in travelling reduces the environment toxic. By allocating task to specific activity, it is necessary to raise the plant and also increase the employment that also benefit socially and economically.

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2. Built in Quality:
Built in Quality is a strategy that minimizes the need for inspection "after the fact" and enables prompt problem solving. Be proactive and not reactive; it is much less costly and keeps customers and associates happier. Quality cannot be inspected into a product. In a low-product variability remanufacturing context, the tools of built-in-quality are used with a great deal of specificity and specialization to simplify and error-proof production processes. This lean methods increase process flow and efficiency through an emphasis on standardization, grounded in the economies of scale paradigm. It can be useful for Nestle.

3. Internal Process Stability:


Lean methods would be utilized to increase overall standardization and efficiency of production processes. In this context a low-variability lean design would utilize highly-specific standard work instructions and tightly coupled work cells with minimal resource buffers. Workplace layout, tool and material presentation would all be highly standard through utilization of point-of-use applications, kitting, and pull systems; with contingencies developed for the occasional process irregularity. In this context, visual management would be utilized in a highly mature way to not only identify irregularities, but to assist in preventing them.

4. Waste Hunting:
The aim of lean Production is to reduce the quantity of resources used. Lean production should mean less use of labor, materials, space and time. Muda is the Japanese term used for waste. Muda is broken down into the seven areas that make up the mnemonic TIMWOOD. Lean production makes it possible to eliminate waste by reducing defects so that products are 'right first time' and are of a quality that meets. Nestl Waters then can carry out a waste hunting exercise of the old factory looking at the seven areas of Muda. This exercise established that where the waste is present. Through exercising waste hunting Nestle can reduce the excess material used in the process, waiting or delays in different ways i.e. raw material, packaging and finish goods. Nestle Waste Hunting: Nestle used the waste hunting exercise to reduce the excess material used in the process, waiting or delays in different ways i.e. raw material, packaging and finish goods. They reduce the process
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of labeling on bottles at different departments and merge that printing process in a single department. This reduced the cost of printing and on defective bottles. Through this, it also reduced the cost loading in trucks. And allocate the unique tasks in specific activity.

5. 5S (Sort, Set Shine, Standardize, Sustain):


5S is a Japanese approach to housekeeping in the factory. It is a method of organizing, cleaning, developing and sustaining a productive work environment. 5S stands for Sort: This is about getting rid of the clutter in the factory. Only items such as necessary tools should be in the factory environment. All other items, such as excess inventory should be removed. Set in Order: The work area should be organized so that it is easy to find what is needed. Shine: This is to do with keeping the work area clean. Make it shine. Standardize: Once the most effective cleaning and sorting methods have been established, they should be used as standards for the whole factory. Sustain: Mechanisms should be implemented to ensure that the standards achieved are recognized by everyone.

6. Time Based Management:


Time Based Management involves reducing the amount of time businesses take to carry out certain task such as launching new products or cutting lead times in production. Time-based management is a feature of lean production because it involves eliminating a type of waste, i.e. time. Time in business is a valuable resource. Productivity can be improved if tasks are carried out more quickly. Time-based management has a many effects on business. So Nestle Water can take benefit from following advantages:

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It improves cash flow since money is not tied up in stocks. The system reduces waste, obstacle and damaged stock. The cost of stockholders is reduced significantly. The motivation of workers is improved; they are given more responsibility and encouraged to team work.

EVALUATION OF ALTERNATIVES:
After generating the list of alternatives, seen in the above section, the setback in the changeover process can be synthesized into two main problems inefficiency in the production process and shortage of time and resources. Having this in mind, the alternatives were narrowed down to attack the core of these two problems. The following sections explain the problems in a more detailed way and give a solution using the proposed alternatives. After short term alternatives have been put in place for a more consistent and efficient changeover process and the system has reached a plateau, long term alternatives can be place on top of the already placed short term alternatives and reach new efficiency and productivity heights. Long and short term alternatives can work in conjunction to create a better work environment, a better work flow and a more efficient changeover process. The difference between long term alternatives and short term alternatives is that long term alternatives are more complex, take a considerable investment and in most of the cases installation as well as training are needed.

NESTLE STRATEGY:
Nestls objectives are to recognized as the world leader in Nutrition, Health, and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry. They believe that leadership is not just about size, it is also about their behavior. They recognize trust is earned only over a long periods of time by consistently delivering on their promises. These objectives and behavior are encapsulated in the simple phrase Good Food, Good Life, that sums up their corporate ambition. The Nestle roadmap is intended to create alignment for their people behind a cohesive set of strategic priorities that will accelerate the achievement of their objectives. These objectives demand from their people a blend of long term inspiration needed to build for the future and short-term entrepreneurial actions, delivering the necessary level of performance. They are seeking to achieve leadership and earn that trust by satisfying the expectations of consumers,
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whose daily choices drive the performance of shareholders, of the communities in which they operate and of society as a whole. They believe that it is only possible to create long term sustainable value for their shareholders of their behaviors, strategies, and operations are also creating value for the communities where they operate for their businesses and for their consumers, and they call this Creating Shared Value. They are now investing for the future to ensure the financial and environmental sustainability of their actions and operations in capacity, technology, capabilities, in people, in Brands, in R & D. their aims to meet todays needs without compromising the ability of the future generations to meet their needs, and to do so in a way which will ensure profitable growth year after year and a high level of returns for their shareholders and society at a large over the long-term. Nestle describes itself as a food, nutrition, health, and wellness company. They believe their strengthening their leadership in this market is the key element of their corporate strategy. This market is characterized as one in which the consumers primary motivation for a purchase is the claims made by the product based on nutritional content. In order to reinforce their competitive advantage, Nestle created Nutrition as an autonomous global business unit within the organization, and charge it with the operational and profit and loss responsibility for the claim- based business performance by offering consumers trusted, science based Nutrition products and services. The Corporate Wellness Unit was designed to integrated nutritional value-added in their food and beverage industries. This unit will drive the nutrition, health, and wellness organization across all their food and beverage businesses. It encompasses a major communication effort, both internally and externally, and strives to closely align Nestls scientific and R & D expertise with consumer benefits. This unit is responsible for coordinating horizontal, cross-business project that address current customer concerns as well as anticipating future consumer trends. Nestle business level strategy is integrated cost leadership or differentiation with wide range of products and low cost operators. Nestle strategic leadership is to force the business to become more efficient, to create a regional manufacturing network, integrate the companys business on a global scale and to reduce marketing expenditures by exploiting the synergies between brands. Their strategy to develop R & D network by improving existing products and creating tomorrows nourishments, two third of companys R & D activities are dedicated to renovating existing products, the remaining third is reserved for radical product innovations, improve on operational level and a number of organizational changes.
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IMPLICATIONS & RECOMMENDATIONS:


Selected Strategy:
According to the analysis we did, Nestle only have few problems otherwise company is doing its best in the industry so far. They have attained the highest market share for their brands. The problems they are facing are distribution channels, bootblack of mixer, and strategies used to achieve its long-term objectives. Given the enormous potential benefits of applying the Just in Time (JIT) principles, the finding that the majority of SMEs in the manufacturing sectors are not applying JIT inventory management is quite disturbing. SMEs in the manufacturing sector, particularly in the food sector, can benefit a lot in terms of reduced storage costs, low loss of products are due to obsolescence and lower inventory holding costs. Furthermore, the results of the study found a statistically significant positive relation between the application of JIT inventory management philosophy and improved quality and flexibility. Such a positive influence can be of great benefit to the food sector, given the challenges of operating in the 21st century economy which is bombarded by ever-changing customers needs and increasing levels of competition from both existing and new innovative businesses. Surviving in the 21st century business economy requires flexibility, innovations, and finding approaches to prove the best customer value at competitively lower cost. Applying the JIT inventory management principles can be a step forward surviving the harsh realities of the modern business economy. Emanating from the challenges in applying the JIT principles, there is a need to build strong supply networks between the SMEs and their suppliers. It is therefore recommended that SMEs in the manufacturing sector should be taught the principles of JIT inventory management and the best ways of applying the principles. Nestls problems can be eliminated by strategically thinking and implementing strategies which can be effective in terms of both profit and growth. Solutions to these problems that they should adopt Just In Time Strategy in order to go for joint ventures with their distributors cut short their own tensions and make others to their jobs. So, if they go with Just in Time (JIT) strategy, they might be able to have more market share and demand for the product can be increased and more market can be stringed. They can increase throughout the mixer by having an added mixing plant.
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CONCLUSION:
For a company that will turn one hundred in a decade, Nestle has almost tried all of the strategies there can be. Nestle company has expanded internationally, helped countries economies grow, be environmentally conscious and create joint ventures with other companies in which enhanced Nestls and these companies performance positively. The theory based framework and models might be very useful but the application in practice might be achieved very hard. It will also depend on the execution skills of the companies and the organizational culture. Nestle company is an international company which came to the stage it is today by gaining superior competitive advantage over its rivals. The focus product differentiation strategy has been very successful although it may not work for other firms. The company is able to create and deliver value not only by offering distinguished products but also gaining effectiveness and efficiency by reengineering its business process. By doing all recommendations and follow all these steps of adapting JIT strategy, Nestle will do better in the future than its competitors and might be trend setter in some criteria and also gain its above average returns to their company.

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