NESTLE COMPANY

Supply Chain Management Study Report

Fadel Ramadhia
29115700
























Master of Business Administration Program
School of Business and Management
Institut Teknologi Bandung
2017





 INTRODUCTION

Nestlé S.A. is a Swiss transnational food and drink company headquartered

in Vevey, Vaud, Switzerland. It has been the largest food company in the world,
measured by revenues and other metrics, for 2014, 2015, and 2016. It ranked No. 72
on the Fortune Global 500 in 2017 and No. 33 on the 2016 edition of the Forbes Global
2000 list of largest public companies.
Nestlé's products include baby food, medical food, bottled water, breakfast
cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet
foods, and snacks. Twenty-nine of Nestlé's brands have annual sales of
over CHF1 billion (about US$1.1 billion), including Nespresso, Nescafé, Kit
Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestlé has 447 factories,
operates in 194 countries, and employs around 339,000 people. It is one of the main
shareholders of L'Oreal, the world's largest cosmetics company.
Nestles start date back to 1866, when two split Swiss enterprise were found
that would later form the core of Nestle. In the subsequent decades, the two
challenging enterprise forcefully delayed their businesses throughout Europe and the
United States.
Nestle 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 Lactee
Henri Nestle, founded in 1866 by Henri Nestle. The company grows significantly during
the First World War and again following the Second World War, expanding its
contributions outside its early reduced milk and child 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.
Nestle's products include baby food, bottled water, breakfast cereals, coffee,
confectionery, dairy products, ice cream, pet foods and snacks. 29 of Nestle's brands
have annual sales of over 1 billion Swiss francs (about $ 1.1 billion), including
Nespresso, Nescafe, KitKat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestle
has around 450 factories, operates in 86 countries, and employs around 328,000
people. It is one of the main shareholders of L'Oreal, the world's largest cosmetics
company.
Nestle has a primary listing on the SIX Swiss Exchange and is a element of the
Swiss Market Index. It has a secondary listing on Euronext. In 2011, Nestle was listed
No. 1 in the Fortune Global 500 as the world's most gainful business with a market
capitalization of $ 200 billion, Nestle ranked No. 13 in the FT Global 2011.
As nutrition, health and wellness company, Nestle, is committed to the
improvement of value of life by helping community in which it operates to meet basic
and necessary human needs. The competitors are glaxosmith con, Britannia, rei agro,
kwality dairy, lakshmi energy, heritage foods etc. Over the years Nestle has used its
resources, skills and technology to help find solutions to the many socio-economic
challenges facing communities. Many of the communities are confront by challenges
such as poor cleanliness, lack of clean water, poverty, diseases, underfeeding, food
security and many others.
 Mission:
Positively influence the social environment in which we operate as responsible
corporate citizens, with due regard for those environmental standards and societal
aspirations which improve quality of life."

Vision:
To be a leading, competitive, Nutrition, Health and Wellness Company delivering
improved shareholder value by being a preferred corporate citizen, preferred
employer, preferred supplier selling preferred products.

ANALYSIS OF INVENTORY MANAGEMENT

An inventory system provides the organizational structure and the operating
policies for maintaining and controlling goods to be stocked. The system is responsible
for ordering and receipt of goods: timing the order placement and keeping track of
what has been ordered, how much, and from whom. Inventory management system
has two main concerns.
1. One relates to the level of customer service, and at the right goods, in sufficient
quantities, in the right place, and at the right time.
2. The other relates to the cost of ordering and carrying inventories.
As a hundred percent manufacturing company, Nestle limited places a great
importance in valuation and management of inventories.
Inventory is the stock of any item or resource used in an organization. An
inventory system is the set of policies and control that monitors levels of inventory and
determines what levels should be maintained, when stock should be replenished, and
how large orders should be.
As such, there is a broad and deep volume of literature in the management of
this asset in various situations the interaction of this asset with other asset and similar
issue. A complete and comprehensive discussion of the issues in inventory
management is beyond the scope of this report.

ANALYSIS OF SUPPLY CHAIN NETWORK

From a supply chain modelling perspective, it is a complex project since it

included an analysis of in-bound and outbound flows, transport costs, road links and
inventory issues and to top it off, risk and service factors created by any new network
proposed were also to be considered. So various analyses were carried out such as
the cost-benefit analysis of keeping export and seasonal confectionery streams in the
same facility and quality assurance involved in keeping the confectionery items in ideal
temperature and humidity. An assessment model was created taking all these
analyses into consideration and 16 different scenarios were developed.

Based on the results of analysis, a twin site model with centralization in Bardon
site was developed. Scunthorpe site was closed and risk management strategy was
developed for Bardon-centralized twin site model. This has reduced the overall cost of
distribution and enabled the company to combine its business streams and product
supply chains to create far greater flexibility.
Nestle now has a much more robust logistics operation enabling it to deliver
more frequent and low-volume drops to retailers and other players in the supply chain
network. Additionally, the design of Brandon site was given a lot of emphasis by
implementing strict fire protection, security and communications infrastructure since
unexpected failures in the main site can potentially disrupt various key components of
a supply chain network such as product availability, response time, time to market,
order visibility, transportation etc. which ultimately ruins customer experience which is
the single most important factor of success for any business.

ANALYSIS OF THE VALUE OF INFORMATION AND APPLICATION OF IT

Nestlé is strengthening its leadership in research and development by enlarging

its global Product Technology Centre for confectionery, based in the United Kingdom.
New confectionery products are developed and existing ones are reformulated at the
centre in the city of York, but it doesn’t end there.Nestlé Product Technology Centres
have two roles. The first is to develop breakthrough technologies; building blocks that
are the basis of new product development. New textures and flavours are created as
well as improved nutritional profiles.
The second is to deploy these technologies to the company’s operations. They
can be used in Nestlé’s factories around the world to ensure its confectionery products
are being produced in the safest and most effective way, while meeting the constantly
changing needs of consumers. Young talent is recruited and trained at the centre in
York before being assigned to Nestlé's operations or its research and development
centres. At the centre, ideas for new products are developed and tested right through
from processing raw ingredients such as cocoa, to manufacturing, to packaging.
Teams of technologists, scientists, engineers, food chemists, confectioners,
nutritionists and packaging specialists work to develop new chocolate products, as
well as fruit and wafer-based confectionery products. They also work on different
coatings and chocolate ingredients for ice cream products.

ANALYSIS OF SUPPLY CHAIN INTEGRATION

The organization has remarkable production facilities in the country and they
have also enjoyed the healthy market share for last few decades. One of the reasons
of the success of the organization is their vendor management and the intelligent
distribution system. Their distribution network makes sure that every product is
distributed in the required areas at the required time and the demand and supply does
not have any gap.
Their distribution setup is synced with their production system therefore they do
not have to manage the inventory of the product for the longer period of time. This
strategy has saved the organization on financial side moreover they have been able
to provide the product to the market at demand.
 The second side of their supply chain management is their vendor
management, they have applied the just in time management concept in their raw
material procurement and vendors are very well synced with the procurement and
procurement is synced with the production and other support departments. This just
in time management has also saved the organization the inventory management cost
of the raw material and they are able to maintain a very low level of the inventory. Their
vendor are also required to make sure that their raw material reaches to the
organization on time.
The organization can design a procurement network that is integrated with the
various departments of the organization. And the procurement department can have
information technology based application that are also integrated with the systems of
the vendors and are automated. By using this system organization have the concept
of just in time management applied in full spirit and the vendors will also be aware of
the production schedules of the organization and they will be able to plan their delivery
and their own production planning according

CONCLUSION AND SUGGESTIONS

The organization is having impressive supply chain management however they

need to concentrate on two dimensions. One solution being the concentration on
making the vendors partners of the organization. Second solution being increasing the
use of information technology tools to manage their vendor relationships.