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Supply Chain ManagementConcept

The term Supply Chain Management was revealed in the late 1980s, and
then it was exposed to all in 1990s. Before that time Supply Chain
Management was used as different terms like- logistics and operations
management in the business fields. Earlier, supply chain management was
considered just like a concept. Implementation of this concept was very
difficult as there were some necessary components in the total chain to
connect with each other. The focal part of the barrier to full supply chain
management was the cost of communication and coordination among the
many independent suppliers in each supply chain. An entire supply chain
covers the area from the creation of raw materials to the delivery of the
finished consumer goods. So, many supply chains are involved in the entire
supply chain of a product up to the ultimate delivery stage. This is why; it
was difficult to link up actively all the supply chain points. But day by day
companies are being interested to implement the supply chain concept in
their business for three environmental changes.
First, development of the communication technology has made easier the
process to communicate between members of the supply chain.
Second, new management models have been developed that are being used
by the supply chain members to simplify the coordination of tasks.
Third, for the development of highly trained work-force, it has become easier
to assume the responsibility, make decisions quickly and take required
actions to coordinate the supply chain.
These three changes are encouraging the companies to take the challenges
in the competitive market through the utilization of supply chain
management concept.

A supply chain is defined as a system of suppliers, manufacturers,
distributors, retailers and customers where material, financial and

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information flows connect participants in both directions. In every

organization, the supply chain consists of a multitude of functions that deal
with receiving and fulfilling the consumer's requests. These functions
include, but are not limited to, new product development, marketing,
operations, distribution, finance, and customer service.
A supply chain is a network of facilities and distribution options that performs
the functions of procurement of materials, transformation of these materials
into intermediate and finished products, and the distribution of these finished
products to customers. In other words, the interconnected set of linkages
between suppliers of materials and services that spans the transformation of
raw materials into products and services and delivers them to a firms
customers is known as supply chains. An important part of this process is
provision of the information needed for planning and managing the supply
chain. An essential task is to co-ordinate process linkages.

Supply Chain Management

Supply chain management is the combination of art and science that goes
into improving the way a company finds:

The raw components it needs to make a product or service

Manufactures that product or service and delivers it to customers

The most basic supply chain consists of the following parties:


Producers or manufacturers are the organizations who are responsible for

making a product. This includes the companies that are producers of raw
materials and companies that areproducers of finished goods. Producers of
finished goods use the raw materials and subassemblies made by other
producers to create their products.

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Company Overview: Nestle

Bangladesh Ltd.
In 1867 when Henri Nestle, the pharmacist, launched his product Farine
Lacte Nestle, a nutritious gruel for children then the history of Nestle began
in Switzerland. Henri used his surname, which means little nest, in both the
company name and the logotype. The nest, which symbolizes security,
family and nourishment, still plays a central role in Nestls profile.
Nestl is the world's largest food and nutrition company. Founded and
headquartered in Veney, Switzerland, Nestl originated in a 1905 merger of
the Anglo-Swiss Milk Company, established in 1867 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, eventually expanding its offerings beyond
its early condensed milk and infant formula products. Today, the company
operates in 86 countries around the world, and employs over 280,000

Good food, Good life

Corporate mission:
At Nestle, we believe that research can help us make better food so that
people live a better life. As consumers continue to make choices regarding
foods and beverages they consume, Nestle helps provide selections for all
individual taste and lifestyle preferences.

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Research is a key part of our heritage at Nestle and an essential element of

our future. We know there is still much to discover about health, wellness
and the role of food in our lives, and we continue to search for answers to
bring consumers Good Food for Good Life.

Corporate Vision:
Nestle has an aim to meet the various needs of the consumer every day by
marketing and selling food of a consistently high quality.

Nestle in Bangladesh:
Nestle Bangladesh was established in 1992 and started its first commercial
production in Bangladesh in 1994. First, it was a subsidiary of Trancom Ltd
which is a renowned industry in our country. In 1998, Nestle was separated
from Transcom Ltd and emerged as an individual entity. On that time Nestle
S.A. took over the remaining 40% share from local partner when Nestle
Bangladesh became a fully owned subsidiary of Nestle S.A. Nestle
Bangladesh's vision is to be recognized as the most successful food and
drink Company in Bangladesh, generating sustainable, profitable growth and
continuously improving results to the benefit of shareholders and employees.

Factory Location:
Their factory is situated at Sreepur, 55 km north of Dhaka; the factory
produces instant noodles, cereals and repacks milks, soups, beverages and
infant nutrition products. Today Nestle Bangladesh Ltd. is a strongly
positioned organization. The Company is continuously growing through its
policy of constant innovation and concentrating on corecompetencies and
commitment to high quality, with the aim of providing the best quality food
tothe people of Bangladesh.

Product profile of Nestle in Bangladesh:

Nestle already have about 8000 brands all over the world. However, in
Bangladesh Nestle also have a large number of products for Childs and
adults. Nestle actually produce nutrition, prepared food, dairy product,
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chocolate etc. They always very much concern about the standard quality of
their product.
Some of the products are produced locally like Cerelac
Maggi Noodles etc.

Some products are locally reprocessed like Nescafe

Maggi Soup.

Other products of Nestle which are available in Bangladesh are mainly

imported like

Foxs Fruit
Coffee Mate
Corn Flakes etc

About Nescafe:
Nescafe is one of the world's top-selling brands of instant coffee, made by
Nestle. The name is a combination of the words "Nestle" and "coffee". The
beginning of NESCAFE can be traced all the way back to 1930. Nestls
powdered coffee product was introduced in Switzerland on April 1, 1938 after
being developed for seven years by Max Morgenthaler and team.

Nescafe is one of the appealing products of Nestle in Bangladesh. It is no

more new in our country. People have become familiarized with this product
and it has been turning to be very popular among youngsters now a days.

Products of Nescafe in Bangladesh:

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There are three types of products of Nescafe which are available in

Bangladesh. Such as

Nescafe Classic Jar

Nescafe Classic Sachet

Nescafe 3 in 1 Coffee Mix

Nescafe has two types of supply chain. These are following Primary supply chain management
Secondary supply chain management

Primary Supply Chain

There are certain steps which are followed to produce Nescafe. They are as
For Nescafe products, Nestle Bangladesh collects raw material from Nestle
Nestle Bangladesh import Coffee bulk where, each container contains 25 kg
of grinded coffee as raw material. They also import finished Nescafe products
like Nescafe Classic Jar and Nescafe 200 gm pillow pouch directly from Nestle
Malaysia. The main reason of collecting from Malaysia is that cost is
relatively low and taste preference of Malaysian people is more or less
similar to our countries people in case of coffee consumption.
Supply chain department of Nestle Bangladesh conduct MGR (Monthly Gap
Review) meeting where they decide how much raw material or finished
Nescafe products should they import from Nestle Malaysia.
There are two main types of commercially grown coffee such as:

Arabica and


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Arabica beans account for around 70% of total coffee production, Robusta
make up the rest. Nescafe products which are available in Bangladesh are
made from both Arabica and Robusta.
Arabica is considered to be the best quality coffee beans it have lighter and
aromatic flavor
Robusta: Have a bitter flavor




h (Import

Figure: Primary supply chain processes of Nescafe

Nestle do not compromise with quality for this reason, only the best quality coffee
beans are used to produce the Nescafe products. For Nescafe products Coffee
beans are collected by Nestle Malaysia. They take coffee beans from different
country but majority comes from Brazil, Thailand. They take coffee beans from
different suppliers sequentially so that the supplier cannot create monopoly market
of coffee beans but they do not compromise with quality. Nestle always help their
suppliers and farmers by providing Education and training facilities. These things
help them to produce the good quality coffee beans because educational program
and training give the idea about cultivation techniques, coffee beans sorting etc.
Nestle do have agronomist to conduct these educational and training programs.
Use of fertilizer and chemical is always harmful for the environment for the
environment. For this reason Nestle always encourage their farmers to use
compost of coffee husks. When the farmers or the suppliers of the coffee beans
give the guarantee about the quality of the beans then Nestle is ready to pay more
to their suppliers. Nestle always try to buy the coffee beans directly from the
farmers that means they try to avoid middlemen.

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Collection of Coffee beans:

Collection of coffee beans involves the following steps:

Normally coffee is grown in small evergreen trees. Cultivation of coffee trees
is very much labor intensive. Young coffee trees demand constant care from
farmers like regular watering, fertilizing weed control and right amount of
shaded sunlight. It takes up to 5 years for a coffee tree to begin producing
good fruit. A good coffee tree can give fruits up to 15 years but if properly
maintained it can be extended to 40 years.

Picking the beans:

Once the coffee trees begin to produce fruit, it takes about 6 to 8 months (for
Arabica Coffee) and 11 months (for Robusta Coffee) for the fruit to ripen in to
red coffee Cherries. These fruits are picked manually from the trees. Nestle
always instruct their suppliers to collect only the ripe, red cherries for
maintaining the best quality.

Preparing the beans:

The coffee beans are dried and prepared for roasting. There are two ways of
preparing coffee beans
1. Dry method
2. Wet method

Processing of the selected beans begin immediately after the fruit is

harvested. In case of dry method, freshly picked red coffee cherries are
spread across mats and left in the sun for drying. Drying usually takes 2 to 3
weeks, after which the cherries are put into special hullers to release them
from their dried shell. In case of wet method, a pulping machine is used to
break the outer pulp away from the cherries. The beans are then washed in

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large tanks to remove any remaining pulp. These wet beans are either
machine dried, or laid out in the sun before being placed in a huller

Coffee Beans selection:

In this stage coffee beans have no smell or taste. These beans have
greenish shade therefore these beans are known as Green Beans. The
quality of the beans depends on many things like- the type of plant, soil,
climate and care taken in handling beans after they are picked etc. Nescafe
always collect coffee beans which are of good quality. They do not accept
immature beans, broken beans and insect damaged beans. All these steps
are done by the suppliers but according to the requirement of Nestle. After
doing all these steps suppliers pack coffee beans to send it in the factory.
Nestle do not use any kind of preservative for this reason air tight container
is used. Nestle Malaysia use water transportation to take coffee beans to the
factory of Malaysia for further processing.

Raw material processing:

For processing the raw materials following steps are followed:

This stage is very much important for the production of Nescafe. Nestle have
experts to closely monitor the blending process. It helps them to maintain
quality and consistent taste over the years.

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Roasting is very important to have desired aroma out of green beans. Green
beans are roasted within 180 C - 240 C for 3 to 12 minutes. Different
degrees of roasting are used to deliver different types of coffee. When the
desired color and aroma is achieved, the beans are quickly removed from the
heat and left to cool.

Grinding helps to extract flavor out of coffee beans. Like other processing
part grinding is also very important because taste of coffee depends on

Evaporation and spray drying process:

It is the last and final stage before the coffee beans are packaged in different
containers. Evaporation and spray drying process involves drying out extra
moisture from the grinded coffee beans.
All these steps are done by the Factory of Nestle Malaysia. In all the steps
they use automatic machines. When all these processing are completed then
they send it to Nestle Bangladesh for further processing and packaging.
Nestle Bangladesh also use water transportation.

Packaging and reprocessing:

Jar with
Coffee Beans
from Malaysia

Factory in

(sugar, label,
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Figure: Packaging and Reprocessing of Nescafe

Packaging protects food products from spoilage and keeps them safe all the
way from manufacturing stage right through to storage, distribution and
consumption. Nescafe is packaged in such a way so that, it is attractive and
convenient both for transportation and use. Nescafe jars which are available
in Bangladesh are packaged by Nestle Malaysia. These jars are not made by
Nestle itself. They have the suppliers for jars who design the jars, levels
according to the requirement of Nestle. They use temperature resistant glass
which helps to protect the coffee from moisture and oxygen. As Nescafe do
not use any preservative for their coffee, so air tight foil of the jar plays a
vital role for keeping the coffee fresh for long time. Nescafe jars are imported
by Nestle Bangladesh from Nestle Malaysia. For jars only one was packaging
activity is conducted here in Bangladesh that is labeling. Nestle Bangladesh
only change the label of the jars in the factory of Sreepur. But the Sachet and
Nescafe 3 in 1 is packaged in Bangladesh. For sachet and Nescafe 3 in 1 raw
material such as coffee, Coffee mate are imported from Malaysia and they
use local sugar [United Sugar Mills Ltd, Abdul Monem Sugar Refinery (Igloo
sugar)].In the factory of Sreepur they mix coffee, coffee mate, sugar to
produce Nescafe 3 in 1. Nestle have started this production from November,
2009. They have the local supplier of packaging material for these products.
For example Anmon Packages Ltd. In total they have 15 local supplier of
packaging material. These suppliers always design the packaging material
like- label, sachet etc according to the demand of Nestle Bangladesh. Nestle
use food grade plastic for packaging Nescafe 3 in 1 and Sachet. Nestle
always help these suppliers by giving them proper training. They also share
resources with packaging suppliers.

Secondary supply chain

These are the process of Nescafe in their secondary supply chain

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and finished
from Nestle

h Machine
Factory) in

Factory in

(Factory &

78 Distributorsin
Five Regions
(Own transport)


A set of intermediaries are involved in the process of making Nescafe

available. After receiving raw materials and finished Nescafe products from
Nestle Malaysia in the sea port, Nestle Bangladesh stores those raw
materials and finished products in BMTF (Bangladesh Machine Tools Factory)
in Gazipur. BMTF is owned by Bangladesh Army. From BMTF, raw materials
and finished goods are transported to the factory in Sreepur. When all the
packaging and reprocessing activity is done then finished products are stored
in the ware house of Factory and BMTF. There are three transport agencies
which help Nestle to carry raw materials and finished Nescafe products.

Three transport agencies are:

1. Sonarbangla
3. Shuvo.

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Finally, finished Nescafe products are received by the distributors. But in this
case, distributors use their own transport to carry Nescafe products. For the
distribution Nestle has divided Bangladesh in five regions.
They are

Dhaka North
Dhaka South

Nestle have 78 distributors for distributing Nescafe along with other products
of Nestle. These distributors also distribute other products of Nestle. Through
this strong distribution network they are making the products available.

Effectiveness of Supply Chain

Management of Nescafe:
After analyzing all the processes of Supply Chain Management of Nescafe we
have identified that their supply chain management is very much effective.
The reasons behind our perception are as follows:

Collection of raw material:

Nescafe is collecting raw materials from the suppliers who can guarantee
about quality. Nescafe is always conscious about the quality thats why they
are encouraging the suppliers not to use more fertilizer and insecticides.
These things are helping Nescafe to deliver quality products.
Processing of raw material:

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In case of processing the coffee beans Nescafe is very much careful about
quality. They are not using any kind of preservatives which ensures better
Their packaging is not only attractive but also helps to keep the coffee fresh
for long time. Nescafe is also helping their packaging suppliers to improve
the packaging quality.
With their strong distribution network they are making Nescafe available all
over the country. They can reach any corner of the country with their
distribution network but others like
Mac coffee may not be able to do so.

Process view of supply chain of

There are two different ways to view the process performed in a supply chain
(Supply Chain Management).
1. Cycle view
2. Push/Pull view
Based on those two views, Nescafe explains the process of supply chain.
Those are below.
1. Cycle view
There are four cycles followed by Nescafe.
a) Customer order cycle
b) Replenishment cycle
c) Manufacturer cycle
d) Procurement cycle

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Customer order




Each supply occurs at the interface between two successive stages of the
When the customer of Nescafe buys products from, it is customer order
cycle. When the retailers replenish its products (that are already sold) from
distributors it is replenishment cycle. When distributors brings product from
manufacturer, it is manufacturing cycle. When manufacturer like Nestle
collects raw materials from supplier it is procurement cycle.
2. Push/Pull process and Boundary
Pull process

Customer order


Push Process




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Nestle usually use push process for Nescafe. At first the raw materials of any
particular product go to the Nestls factory. ThenNestle produce the product
& send the product to their distributors. The products are inventoried over
the distributors ware house. Whenever the products from retailer finished,
thenthe products completely replenished from the warehouse of distributors.
At the end the products are exhibited in the retailers store and the products
are purchased by the customer. All the promotional activities are taken by
the manufacturer with the help of distributors and retailers about the

After reviewing all the things I would like to make the following
recommendations to Nestle Bangladesh Ltd:

Coffee for rural areas of Bangladesh:

For the product Nescafe Nestle Bangladesh limited can target the huge rural
population of Bangladesh. Because they have a very strong distribution
network and they also have different product categories of Nescafe. They
can introduce the Sachet of 0.9gm to the rural population.

Establishment of Coffee processing plant and Packaging materials

Nestle basically import Coffee bulk and other finished products of Nescafe
from Nestle Malaysia. They also rely on the outside suppliers for packaging
materials. But I think that, they can establish their coffee processing plant
and packaging materials industry in Bangladesh because of cheap labor
price in Bangladesh and Nestle Bangladesh ltd also get good support from
the parent company

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Nescafe, which is a popular brand of Nestle, has become very popular among
the mass population of our country over the times. They are successful
because of strong distribution network, through which they are making
Nescafe available in most part of our country. Good product quality, taste
and availability of different sizes of Nescafe products are other important
factors which helped them to cover almost the whole market share in case of
coffee consumption.

Bibliography and References:






Chopra , Sunil , 2013, Supply Chain Management,3rd edition, Prentice Hall, India.

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