Supply Chain Management of Nestle 2022, Study Guides, Projects, Research of Supply Management

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Table of Contents

EXECUTIVE SUMMARY

This report's analysis of Nestle's global supply chain management aims to provide readers with the broadest, most comprehensive understanding possible. There are five primary sections to our report. The first part introduces the profile of Nestle company. The supply chain strategy for Nestle is presented in the second section. Nestle's supply chain design is presented in the third section. The supply chain management at Nestle is covered in the following section. Our suggestions for the Nestle company's worldwide supply chain are described in the concluding section. The report also includes appendices and a list of references at the end.

I. Company Profile

Nestle SA (Nestle) is a manufacturer and marketer of food products and beverages. As the largest food company in the world in virtually any way that can be measured, Nestle is the food processing industry's undisputed leader. Some main competitors of Nestle are Mondelez, Mars, PepsiCo, and Danone,… About Mondelez, a major Nestle competitor, Mondelez was established in 2012 and has its headquarters in Illinois. It is a leading snack manufacturer in Illinois. The business produces a wide range of goods, including chocolate, beverages, cookies, and confectionery. Their enterprise is global in scope, and they command a significant market share. Next, Mars is a well-known food company and a top confectionary product manufacturer. The company's headquarters are in the United States, where it was established in 1911. The different key khas cakes produced by this company include Twix, Mars bars, M&Ms, Snickers, and Skittles. Additionally, Uncle Ben makes spaghetti sauce, and pet food under the Whiskas, Pedigree, and Nutro brands, as well as rice and pasta. In addition, PepsiCo was founded in 1898 and is a well-known food and beverage processing firm. The business's global headquarters are in New York, USA. The company manufactures and sells a variety of items, including beverages, snacks, and foods made from cereal. The brand is well-known throughout the world and is especially well- liked among young people. The company has a world-class supply chain network, and as a result, its products are widely available. The company's key selling point is its affiliation

with numerous sporting and musical events, which raises the value of the brand. Another competitor of Nestle is Danone. Danone is a French food processing company founded in 1919 and headquartered in Barcelona, Spain. Baby food, coffee, dairy goods, breakfast cereals, confections, bottled water, ice cream, and dietary supplements are just a few of the many products that the company produces. All age groups are catered for by their products. Their goods assist customers in leading healthier lives. They also work to safeguard the environment and conserve resources. Next, key customers of Nestle. Age, gender, income, and educational attainment are used by Nestle to categorize its customer base. Nestle will cater to each of its customer segments specifically with each of its products. Nestle never distributes the same product to customers of varying ages. For instance, it provides coffee for adults and milo for children. Nestlé produces both high-end and low-end goods, depending on the market. About products, Nestle produces coffee, dairy products, cereals, ready-to-eat foods and baby food, to implement and take care of nutritional health, care for pets, and cakes confectionery and pharmaceuticals, and so on. Nestle currently has more than 2000 brands ranging from iconic global brands to beloved local brands and is present in 191 countries worldwide. Nestlé's main brands include Nescafe, Kit Kat, Milkybar, Milo, NaturNes, Nestle Cerelac, Cheerios, Nestlé Fitness, Nesquik, Perrier, S.Pellegrino, Nestlé Waters, Nestea, Maggi, Nestlé Health Science, THOMY, Purina. Nestlé operates nearly 500 factories in 86 countries worldwide, employs more than 280,000 people, and markets 8,500 brands with 30,000 products. Nestle constantly researches and produces products that not only taste delicious but also offer healthy nutritional solutions for all ages and subjects.

II. Nestle Supply Chain Strategy

1. Lean and Agile Strategy As one of the leading enterprises in the manufacturing industry, improving productivity and quality is always the top concern of managers at Nestle. For long-term survival and

The customer is the last block in every supply chain. Nestle has to cope with a rapidly evolving consumer market. The company finds it more challenging than ever to attract a consumer base with changing expectations. The Nestle team realized that they needed to adopt lean and agile methods to market research in order to accelerate product creation and gain an advantage over rivals. Nestle collaborated with the GutCheck team, which integrated agile research approaches to Nestlé's sprints, team structure, and timeline. This strategy would always have the customer in mind while enabling flexibility, collaboration, reflection, and improvement, shorter time to market. After working with the GutCheck for seven months, Nestle now recognizes how applying agile approaches to both product creation and market research can let them obtain the key insight necessary to:

• Take a lead instead of being laggards
• Keep abreast of consumer preferences
• Confident that consumers would respond to new offerings 2. Quality Management (TQM) Quality and Safety are Nestle's top priorities. The CEO of Nestle believes that quality is a critical keystone and a differentiator that helps Nestle successfully position its brand in the global market. Nestle's products carry the message of "quality and trust", this positioning is clearly affirmed to customers in the market. The priority for quality is applied by the company to the entire process from packaging to production, maintaining quality with special standards assists the company to achieve its full potential, to gain reliability and confidence in customers. Nestle applies a global farm-to-fork quality management system to guarantee food safety, comply with food standards and create core values for customers. The company's quality management system is certified in accordance with regulatory requirements, laws, and ISO standards. Nestle has a long history of cooperation with farmers in rural areas, ensuring ongoing access to high-quality raw materials, and continuously improving the quality of products shipped to potential customers. In addition, the company's cooperation

with rural areas also enables farmers to increase their income, improving the quality of society and life. TQM is used to constantly enrich the quality of an organization's products and operations. The products are developed according to the requirements of consumers, satisfying food safety requirements. The product manufacturing process is applied Good Manufacturing Practices (GMP) including operations, administration, worker training, and equipment handling. All actions of the company are aimed at ensuring and improving quality:

• Establish trust by providing goods and services that are in line with consumer preferences and expectations.
• Respect all internal and external criteria for food safety, regulation, and quality.
• Develop a road to Net Zero, and make improving quality a group-wide goal.

III. Nestle Supply Chain Design

1. Supply Chain Network

Figure 1. Nestle’s Supply Chain Network (Source: Southpole.com)

straws on all products. Nestlé instant drink. This packaging project has helped Nestlé reduce an average of 700 tons of plastic used in production each year. Nestlé's global vision is that none of Nestlé's packaging, including plastic packaging, should be landfilled or become waste. Nestle's goal is to be 100% recyclable or reusable by 2025. The created product will be stored and distributed around the world. Supply and sell products to in-store shoppers. Finally, Nestle consumers can enjoy environmentally friendly products wherever they are.

**2. Network Organization

3. Location, Number** a. Location Location-based insights are in many cases used to determine worker efficiency as well as the efficiency of Nestle's supply chain. Location can notify the company if workers

are in their designated work area, arrival time, number of hours worked at the work site, and distance in terms of location b. Number Figure 2. Number of employees at Nestle 2012- 2021 (Source: Stastic.com) The number of employees working for Nestle in 2021 is 276,000 compared to 273, the previous year. In 2019, Nestle had 291,000 employees working for the company, this number decreased to 273,000 in 2020. Nestle had 308,000 people in 2018 compared with 323,000 in 2017. In 2017, the number of employees working for Nestle fell to 323, from 328,000 in 2016.

4. IT Design of Nestle (RFID, EDI) Information technologies (ITs) play a vital role in improving information sharing and collaboration in a supply chain (SC) (Simchi-Levi et al., 2003). The rapid development of IT allows companies to receive fast, accurate, reliable information, giving them a

b. Objectives Although there are countless varieties of products produced in modern society, there are only two fundamental decisions that must be made when managing inventory: when to order inventory replenishment and how much should be ordered. Inventory management aims to lessen the issue of whether it is more lucrative to do tasks quickly but at a higher cost or slowly but more cheaply. Optimal inventory control is one such strategy, as it reduces the overall costs of production, storage, and inventory shortages over a certain amount of time (up to and including infinite) (Ziukov, Serhii, 2015). Inventory management's main objective is to provide managers with information about how many products to order again when to order again, and how frequently to order, as well as the proper safety stock levels, to reduce stockouts (Obgo, 2011). In other words, an inventory management system aims to achieve both operational and financial objectives. Operations-wise, it tries to guarantee that stocks are consistently available in adequate quantities and are not over- or under-stocked. It seeks to reduce working capital as much as feasible from a financial standpoint. The following is a list of some of the clear objectives of an inventory management system. One of the primary goals of an inventory management system is to ensure the correct fulfillment of orders_._ If you do not know exactly how much of a given item you have on hand, you cannot fulfill a received order, and if that item is out of stock, you cannot complete the order. You should have the necessary products on hand when you need them in order to fulfill orders. Let's imagine you receive an order for 1000 units of a certain product, but when you check out, you discover that there are only 600 units available. If you decide to create new ones, it will take additional time and you won't be able to complete the order. To avoid this, an inventory management system should be used and team members should know the inventory situation. The second objective is to ensure that there is an adequate supply of any given commodity at any given time. The timing and amount of material you need to order for manufacturing to stay up with demand will be communicated to you via effective inventory management. Items must be stockpiled in advance to fulfill demand, whether they are raw materials or completed goods. One technique to make sure that inventory is prepared to

meet client demand is supply tracking. Additionally, it allows you the chance to influence demand based on product supply. Inventory control is the third objective. Having an inventory management system is vital for achieving the goal of inventory control. To keep things running more efficiently, you need a thorough inventory record. This approach will assist you in maintaining inventory control so that you don't overstock or understock. Overstocking is just as dangerous as understocking in terms of creating scarcity and hurting the ordering process. Overstocking can be detrimental, especially if you are working with perishable commodities. The inventory control system will also shield you from a variety of misunderstandings, such as placing multiple orders or maintaining the incorrect amount of stock. Cost reduction is one of the main objectives of effective inventory management. A business must work to reduce the quantity of unneeded capital if it wants to stay solvent. Businesses strive to minimize investment while keeping material costs under control to reduce production expenses. In the event that you have unsold inventory, your company will incur unneeded debt. Therefore, preventing financial losses due to inventory is one of the key objectives of inventory management. Use things while they're still in working order. Ordering, shipping, and discharging charges are the three main categories of expenses connected to inventory management. Buy requests, purchase orders, invoicing, labor, shipping, and processing charges are all included in the cost of ordering. Costs associated with warehousing, rent, inventory insurance, storage, internal transportation, and other comparable costs associated with the storage and internal transit of items are included in the transportation costs. Losses resulting from excess inventory, a shortage of inventory, and losses from a larger percentage of returned sales are the main causes of out-of-stock costs. All three types of inventory management costs can be decreased with the aid of an inventory management system. Additionally, inventory management aims to prevent loss or waste. When addressing diverse losses, inventory management is quite helpful. Loss and waste are normal when there is no effective tracking mechanism in place. Theft is a risk category that can result in loss. Theft can become a persistent issue for organizations if the warehouse is

Second, the work-in-progress inventory. It refers to items that are in progress and not yet completed. In addition, it also includes items that are partially completed but are not yet final products. It is products that are processed from raw materials but not finished products. The inventory of work-in-progress exceeding the minimum level will create favorable conditions for the production process of the enterprise. For Nestle, the main products are nutritional products, food and drinks with a shelf life not too long, so the inventory of unfinished products is not too large. Whatever they put into production, they stop producing once it's done if there's no abnormality. Unpacked inventory can be considered WIP inventory. For example, unpackaged condensed milk or powdered milk can be considered WIP inventory and they come in large boxes. In addition, unpacked cocoa powder, coffee powder, butter, cheese, etc. are also considered WIP inventory and are stored in large storage tanks. They are then packaged through an automated system at the factory. Third, finished goods inventory. It is defined as products that are finished and ready to be placed on the market for sale to consumers (Pandey, 2002). Stocking finished goods inventory is essential for immediate service delivery and smooth marketing operations. In addition, it also helps to stabilize production. Nestle has a large warehouse to store its finished products. As for materials management , Nestlé has a separate department in the factory that is responsible for sourcing and procuring raw materials and managing the supply of materials. The operations manager is in charge of Nestle, which makes use of a centralized system for managing its materials. The Responsible Sourcing Standards are always followed by Nestle's Sustainable Sourcing team while producing raw materials, packaging items, and providing services (Nestle, 2022). Nestle expects all of its agents, subcontractors, and suppliers to observe and uphold this fundamental standard at all times when doing business with Nestle. These requirements act as remedies for issues with the environment and society, and Nestlé is raising its requirements (Nestle, 2022). Controlling input materials is a constant concern for Nestle because they view keeping them on hand as a significant waste. On the basis of the JIT principle, Nestle specialists are now tackling this issue. They only permit the corporation to prepare

sufficient materials each weekend to prepare the input materials for the following production cycle (nscl.vn., n.d.). Nestle uses the FIFO approach in addition. FIFO stands for First in, First Out, and is an uncomplicated approach of inventory valuation based on the presumption that commodities made or purchased first will be sold first. This implies that older merchandise is theoretically supplied to the consumer before fresh inventory (Kristina Lopienski, 2021). Companies may find it easier to control the import and export of raw materials from the warehouse by using the FIFO method with the use of computers so that there is no inventory problem that results in materials expiring (Anita C Sembiring et al 2019). ❖ Inventory control of Nestle Nestle employs a computerized Continuous Evaluation system for inventory control (SupriyaBoruah, 2021). It enables Nestle to continuously monitor and manage its inventory using data that is kept in its computer system. Nestle further regulates its inventory by dispatching warehouse personnel to personally inspect the state of the materials at the warehouse. An inventory control system is a technological tool that can help you track and manage your products as they move through the supply chain. With the use of this technology, purchasing, shipping, receiving, warehousing, and returns will all be integrated into a single system and managed. (BigCommerce (2020) (2020) The best inventory management software streamlines numerous manual procedures. When and when you need it, it will give you an accurate view of your inventory. To maintain a healthy amount of inventory, place new orders. The manager can check the detailed quantity of inventory at any moment thanks to the inventory control database system. By effectively managing inventory, the manager can reduce the possibility of loss and damage. Additionally, Nestle uses the JIT approach , which enables the business to prepare just enough input materials for the subsequent production cycle, to ensure a low inventory ratio and optimal management (nscl.vn., n.d.). As it gives the business accurate and up-to- date inventory information, Nestle also utilizes a perpetual inventory system to keep inventory records (Anon, PhDessay, 2017). Nestle will therefore have better inventory control, making it simpler to manage proper inventory levels, compare physical inventory, and identify inventory shortfalls. Nestle constructed a new storage area next to the

Nestlé started installing an RFID-enhanced automated pallet labeling system in February 2005 because it thinks UHF RFID (radio frequency identification) tags can save a lot of money in the supply chain and make it possible to trace pallets of goods efficiently. Nestlé can tag all of its pallets with a single type of tag thanks to the automated pallet labeling system's integration with the Flag Tag function. Inventory is automatically followed by RFID tags throughout the supply chain. Additionally, automatic data collecting by RFID is far more useful than current barcode-based solutions. In contrast, to manually scan individual barcodes, tags can have the information automatically accessible with a fixed, portable, or handheld reader. The tags can be tracked through paint and non-metallic packaging because radio waves are used to interpret the transponder. This is a quicker method that enables many labels to be tracked simultaneously, simplifying Nestle's inventory management. In addition, Nestle collaborates with Alibaba's Cainiao Network. For the purpose of streamlining its Chinese e-commerce supply chain, Nestle has joined up with Alibaba's Cainiao Network. The two collaborated to create a brand-new, all-inclusive inventory solution that combines Nestle's warehouse from several platforms on Alibaba into a single, analytics-driven warehouse. Nestle has revised its distribution tactics in China, opening the way for the "One Inventory" inventory management system they created with Cainiao. Nestle has reduced the number of its distributors in China and transferred all of the stock from Tmall Supermarket and Tmall Marketplace to Cainiao warehouses located throughout China. Based on consumer and sales statistics from users of the Alibaba platform, Cainiao advises Nestle on efficient product placement, proposing which warehouses should stock the products that local customers are most likely to purchase. Additionally, Cainiao offers Nestle inventory projections and real-time supply deficiency alerts, such as when a channel's stock may need to be refilled when an ad campaign draws near.

2. Logistics Management To monitor and manage its inventory in real time, Nestle has partnered with DHL Supply Chain - an online product shipping solution. The logistics facility is also equipped with eight docks and lifting platforms, as well as round-the-clock surveillance cameras, to ensure the best possible operational efficiency.

In order to reduce delivery time and make it more convenient for customers to use, Nestle has developed a suitable distribution center, expected to be completed in 2020, which will feature advanced robotics and sorting systems along with with modern automation technology co-developed with Swisslog Logistics Automation. The website's digital ecosystem will integrate predictive data and machine intelligence to provide one of the most advanced distribution management hubs in the world, giving consumers faster, more efficient access to their products. more fruitful. more effective on KITKAT, MAGGI, NESCAFÉ and other favorite Nestlé brands.

3. Transportation System Nestlé is committed to reducing impact to the environment of our transportation and distribution operations wherever possible, seeking to cut our own CO2 emissions and promote sustainable production. In order to reduce and optimize the number of kilometers that the trucks have to travel. Nestle has:

• Removed 415,000 km of truck traffic each year from the roads through improved vehicle utilization and increased cooperation with customers, suppliers and competitors.
• By maximizing the number of pallets per load and the number of products per pallet
• we have increased the truck load to an average gross tonnage of 23 tons, which reduces the number of vehicles on the road.
• The careful modification of our distribution center network has reduced the distance traveled to deliver our products by 6%.
• The devices installed on all of our trucks promote complete combustion of the fuel, resulting in a 3% to 5% improvement in efficiency.
• 18% of mileage was cut by getting mineral water directly from Buxton. A typical bottle of Buxton mineral water now only travels 125 miles to reach our customers. 4. Lean Production Lean focuses on reducing the waste of resources used in the production process. Therefore, the goal of Lean is to optimize the use of materials, equipment, human resources, space and time. At Nestlé, this approach is called Nestlé Continuity Excellence