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DETAILS OF PRODUCTION PROCESS1

Introduction

THE NESTLE STORY

Nestle S.A. the present Switzerland based international food


group, originally consisted of two companies and two products:
Henri Nestle and his baby food in Vevey, and the Anglo-Swiss
Condensed Milk company and its condensed Milk Company and
its condensed milk in Cham, both in Switzerland. In 1866 the
Page Brothers form the United States set up a new industry in
Cham, making condensed milk from a raw material that was
available in abundance in the region. In 1867 Henri Nestle a
chemist in Vevey, created a milk and cereal based food for
babies. The companies competed vigorously until 1905, when
they merged and became the starting point of the present food
group.

DYNAMIC EXPANSION

The history of Nestle include the development of many different


products as well as acquisitions, mergers and the purchasing of
shares in companies, mainly abroad, over the course of the tears,
this enabled it to broaden its range of products and diversify its
operations, while at the same time strengthening the economic
foundations of the company. Amongst the most important
acquisitions were Carnation in Los Angeles (milk products and pet
foods) and more recently Rowntree Mackintosh in York (chocolate
and confectionery), Buitoni in Perugia (pasa) as well as Perrier in
France (mineral water).

Nestle which does 98% of its business outside Switzerland, also


has interests in non-food sectors, in cosmetics (a large share
holding in L’Oreal) and ophthalmic products (acquisition of Alcon
laboratories Inc.) while continuing to give priority to food
products.

NESTLE TODAY

Nestle is now the world’s largest food company. It is present on


five continents, has an annual turnover 70 billion Swiss francs,
runs 522 factories in 81 countries, 200operating companies, 1
basic research center and 20 technological development group
and more than 231,000 employees the world over.
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The company owes its current status to the pioneering spirit


inherited from its founders which continues to inspire it, to its
constant search for new ways of satisfying man’s mutational
needs.

Wherever possible, it sets up factories locally, employees


personnel from the country concerned and relies on indigenous
raw materials. Its agricultural services provide assistance to
improve the quality and yield of the raw materials it uses. Much
attention is devoted to professional training and to the
integration of the company in its economics and social
environment.

Nestle Milkpak Ltd.

As a consequence of joint venture arrangement between Nestle


S.A. of Switzerland and Milkpak Ltd. In 1988, the existing
production facility of Milkpak in Sheikhupura became a part of
Nestle Milkpak.

The Milkpak Sheikhupura factory had commenced operations in


1981 as a producer of UHT milk. By 1988, it had expanded its
operation and was also producing butter, cream, Desi ghee – all
under the brand name of MILKPAK and juice drinks under the
brand name FROST.

Conscious of the large food market that Pakistan offered, Nestle


Milkpak drew up ambitious expansion plans. While re-organizing
and re-enforcing the production of existing brands, it lost no time
in giving shape to new production lines. The first to come was a
milk powder plant, which not only began producing NIDO in 1990
but was also critical to the production of several milk-based
products in the future. With the installation of the roller dryer in
1990, the first such product to come was CERELAC – an
internationally recognized brand on infant cereal, followed by
LACTOGEN 1 & 2 in 1991.

The year 1992 saw the introduction of tea whitener EVERYDAY


and milk powder in bulk packing named GLORIA. MILO and
NESLAC came under production in 1994 and MILO RTD, In 1995.
Local packing of coffee mixes under the name of NESCAFE 3 in 1
commenced the same year. In 1996, Nestle Milkpak Ltd. first
confectionery plant of POLO Mint was installed and the line of
NESTL’E PURE ORANGE JUICE was also added. Packaging of
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coffee under the brand name NESCAFE CLASSIC was undertaken


the same year. In 1997 NESTL’E WHEAT and two variants of POLO
viz. strawberry and Orange were introduced.

1998 has been, by far, the most outstanding year for Nestle
Milkpak. As a result of the timely implementation of major
expansion plans, involving a substantial capital outlay, no less
than 17 products were launched during the year. Significantly,
the factory now houses three new flavors of POLO in addition to
two flavors of POLO, namely Blackcurrent and Strong Mint
brought the number of POLO variants to five. A new variant
Lemony was added to the range of popular FROST fruit drink
flavors and a new 1-liter packing of FROST was introduced. Three
flavored milk – Vanilla, Strawberry and Mango, under the brand
FRESH & FRUITY, came under production on the new Tetra Filling
Machine equipped with the modern “slim” format. MILO RTD and
UHT Cream were also shifted over to this new format. A flexible
confectionery line for the manufacture of a wide range of high
and low boiled sweets and toffees was commissioned, with
TOFFO and two variants of SOOTHERS – Menthol Eucalyptus and
Honey Lemon, being the maiden products. Nestle Milkpak also
contracted to supply dairy mixes to McDonald’s, for its popular
soft serves and milk shakes. And to top it all, the most prestigious
project, NESTLE PURE LIFE was also commissioned in December
1998. based on the latest water treatment and bottling
technology, this marked the entry of Nestle Milkpak in the
Pakistan water market.

In the past, Indus Fruit Products Ltd. has been co-processing fruit
pulping for Nestle Milkpak. In view of the growing needs of fruit
pulp for its products as well as for exports, Nestle Milkpak
entered into a 5-year lease agreement with the management
enables Nestle Milkpak to put in place its own systems to ensure
better product quality and capacity utilization. The new cold
sauces production line has been established at this plant.
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ESTABLISHMENT OF NESTLE MILKPAK, KABIRWALA


FACTORY
In 1986 Milkpak Ltd. acquired the services of Kabirwala Dairy Ltd.
For co packing of UHT milk under the brand name MILKPAK.
Nestle Milkpak acquired KDL in 1990 as a subsidiary and began
installation on a MAGGI NOODLES plant in 1991. this production
line became operational in 1992 with two flavors: Chicken and
Masala. This second milk powder plant was commissioned in
September 1996. the plant produces NIDO, GLORIA and skim milk
powder. The UHT line was discontinued in June 1996 and the
same year witnessed the launching of the MAGGI YAKHNI line
with 3 flavors: Chicken, Masala and Chatpata.

With the merger of this factory with Nestle Milkpak in April 1997,
Kabirwala Factory, as it is now called, is a fully owned unit of
Nestle Milkpak Ltd.

In February 1999 the newly installed evaporator came on stream


in Kabirwala Factory, doubling the output of the spray dryer.
Alongside, the warehouse capacity at Kabirwala to handle the
increased volumes of finished products was proportionately
increased. 1999 also saw the installation of a pouch-filling
machine, making Kabirwala Factory independent from
Sheikhupura for the filling of full cream milk powder.
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CORPORATE STRUCTURE

Head Office

The registered and corporate office of Nestle Milkpak Ltd. is in


Lahore.

308 – Upper Mall Lahore

PABX: 5757082-95

Fax: 5711820

Factories

There are two factories of Nestle Milkpak Ltd. For dairy products.

Sheikhupura:

29th km, Lahore - Sheikhupura Road,

Sheikhupura, Punjab, Pakistan.

Kabirwala:

Khanewal – Kabirwala Road, Kabirwala

District Khanewal, Punjab, Pakistan.

There are two plants for Mineral Water situated in:

Islamabad :

Karachi:

REGIONAL OFFICES

Company has ten regional sales offices in following cities of


Pakistan:
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• Karachi

• Hyderabad

• Sukkhar

• Lahore

• Multan

• Faisalabad

• Gujanwala

• Quetta

• Islamabad

• Peshawar

MILK COLLECTION CENTERS

The core raw material of Nestle Milkpak is milk. Over the last
thirteen years the company prime concern has been to improve
the quality and volume of milk for UHT processing and for other
milk base products. So the company has twenty-five milk
collection centers in Pakistan.
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DIVISIONS OF NESTLE MILKPAK LTD.

Production Division Marketing Division Milk Collection Division


Quality Assurance. Depet Customer Relation Department Agricultural Services
Department
Brand Wise Production Distribution Department
Departments Logistic Department
Research & Development

HR Division Finance Division


Personnel Department Treasury Department

Products
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Year Product Name


1981 UHT Milk
1983 Butter

1986 Milk Pak Cream

Desi Ghee

Frost Juice

Milk Pak UHT Milk

1990 Nido

Cerelac

1991 Nestum

Lectogen

1992 Everyday Tea Whitener

Gloria

Maggis Noodles

1994 Milo

Neslac

1995 Millo RTD

Nescafe 3 in 1

1996 Every day UHT Milk

Nestle Orange Juice


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Nestea

Polo

Nescafe Classic

Maggi Yakhni

1997 Nestle Wheat

1998 Toffo

Soothers

Nestle Pure Life

1999 Maggi Sauces

Fruit Drops

Butter Skotch

2001 Nescafe Creamy Flavors


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Role of Nestle Milkpak Ltd. in Industry

Nestle Milkpak Ltd. is the market leader in food and beverage


industry. They are producing high quality well known brands.
There no is such competitor that can compete Nestle Milkpak Ltd.
in its total product mix. There are a few local competitors of the
company in different product item. These competitors are:

Rafhan:

Rafhan is competing Nestle in infant and follow up cereals.

Shezan and Bambino:

Shezan and Bambino are competing Nestle Milkpak’s local


brand “Frost”.

CDL and Adar-e-kisan:

These two competitors are competing in milk and milk


powder products.

In spite of this competition, Nestle Milkpak Ltd. is enjoying about


70-75% market share in Pakistan.
Selected Products

In order to satisfy the prime objective of this report, we have


selected following to product lines of Nestle Milkpak Ltd.
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1. Condensed Milk

Mission

“Wherever you live, only Nestle can provide the best and most
relevant food and beverage products to meet your needs
throughout your day, throughout your life. The Nestle Network
icon will take you on the journey of discovery through our world
of food.”
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OBJECTIVES OF NESTLE MILKPAK LTD.

Nestle Milkpak believes in following objectives:

The major objective of the company is to sell high quality,


innovative and superior products which satisfy needs and wants
of consumers.

Nestle not maximize profit through high market share but use
maximize customer’s satisfaction. Nestle earn profit through
satisfaction of consumer.

The health of consumer and employees is at primary priorities. To


ensure consumer’s health, Nestle provide quality products and
for employee health. Nestle provide the pollution free
environment and provide the medical facilities.

Nestle establish policies, programs and practices to conduct


operation in an environmentally sound manner.

Nestle operate to achieve highest standard of ethical conduct,


which acquire company’s activities and relationship world-wide in
each business sector.

Nestle aim to deal only with reputable suppliers who willing to


apply Nestle Quality Standard.

Nestle has been committed to environmentally sound business


practices throughout the world.
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CORPORATE STRATEGY

Corporate strategy defines the direction of the organization over


the long term and determines the goals that must be achieved
for the firm to be successful.

EXTERNAL ENVIRONMENT

The top management of Nestle MilkPak continuously carries on


environmental scanning and within the environmental trends.
Opportunities & opportunities they carry on required adjustments
in their organization to remain variable and to survice in the face
of competition.

CORE COMPETENCIES

Nestle Milk Pak has the following core competencies.

WORK FORCE

Nestle Milk Pak has a small work force as their most of the
operations are automated. They have a very skillful and trained
workforce.

FACILITIES

The NM’s facilities i.e. offices stores and plants are very well
located and have the requisite capabilities, which is a big
competitive advantage for them.

SYSTEM AND TECHNOLOGY

NM is an organization which heavily depends upon new systems


and technologies to excel in the market. The organization is well
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equipped with new developed systems and technologies


especially n their operations.

COMPETITIVE PRIORITIES

Following are the competitive priorities of NM.

i. Consistent quality

ii. Development speed

iii. Volume flexibility

QUALITY

Quality is the cone competitive priority of NM. They take quality


in two ways. High performance design and consistent quality.

CONSISTENT QUALITY

NM pays special attention for maintaining consistent quality.


They have special sort of equipments and process which
facilitates in maintaining a consistent quality. So the each and
every unit of its product equally satisfies its customers.

DEVELOPMENT SPEED

As for as develop speed is concerned NM is the industry leader


not only in Pakistan but all over the world. They have a team of
very innovative people which consistently focus on the
development of new products and to improve the already existing
products.

VOLUME FLEXIBILITY

Volume flexibility is one of the competitive priority of NM. When


the availability of Milk is high in winter season they increase their
production as the milk cannot be stored for longer period of time.
In season when there is shortage of milk their production rates
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dropped. So they can adjust their volume of production according


to their requirements.

FLOW STRATEGY

Flow strategy is one of the primary element of operations


strategy. Based on competitive priorities a flow strategy is
selected. It specifies has the operations system to be organized
and handled. For different set of products different flow strategies
can be implemented.

LINE FLOW STRATEGY

NM has adopted the line flow strategy here the system is


organized around the product. In this strategy all products follow
linear pattern in facility. NM has high volume production with
highly automated facility and huge capital investment is there
and the standardized products they produce. So they follow the
line strategy.

STRATEGIES BASED ON FLOW

Following are the flow based strategies adopted by NM.

MAKE TO STOCK STRATEGY

NM follows the make to stock strategy. They have high volume


production and the demand for their products can be forecasted
quite well, there exist repetition of work and a consistent quality
is maintained old these priorities lead to make to stock strategy.

STANDARDIZED SERVICE STRATEGY

The products which are provided by NM are standardized.


Therefore the standardized service strategy also exist in NM Ltd.
They have standardized and consistent quality products.
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PRODUCTION PROCESS

Milk Collection & Reception Storing Standardization De-Creaming

Spray Drying Pasteurization


Cooling Evaporation

Packing
DETAILS OF PRODUCTION PROCESS17

PRODUCTION PROCESS

MILK COLLECTION

Milk collection system of Nestle Milk Pak is excellent. According to


this system milk is collected from area of about 72,000 km .

Village Milk centers 2273

Sub centers 583

Main Centers 23

On milk centers price of milk is paid according to percentage of


fats. If the quality of fat is less than required (6%) than price will
be paid accordingly. At milk collection centers, gerber test is
performed for determination of fat. In milk collection centers
temperature of milk is kept at 4 oC. Nestle purchase milk directly
few frames, there is no middle man.

Collection Areas are in all over Punjab Nestle Milk Pak divide the
areas in following Categories:

A. Sahiwal, Burewala, Okara etc.

B. Pindi Bhattian, Chaniot, Sarghoda

C. Kabir Wala, Mian Channu, Shorkot, Kahane wal, Kachah


Khu

D. Bahawalpur , Bahawalnagar, Chistian, Ahmadpur

There are Area collection managers, Milk collection Co


coordinators and Milk Collection Supervisors in each Area for
collection of specific amount of Milk in specific time.

RECEPTION

From milk collection centers milk is collected and delivered to


factory daily seal of tankers are properly decided. Receiving
capacity of milk is 60,000 liters. At reception following tests are
performed before storing milk to assure the quality of milk.

1- Alcohol precipitation test


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2- Clot an boiling

3- Fat (5.8% - 6%)

4- SNF (Solid non fat) (8.5-8.9)

5- PH test (6.8 – 6.9)

6- Adulteration test (only on doubt)

Up to reception temp of milk is about 8-10 o


C, there is no
rejection on temperature basis.

Trollers are not preferred to stay more than 1.75 Hrs. in factory
so that they can in time collect milk for next day.

STORING OF MILK

Milk is stored in storage tanks called Silos. The capacity to store


milk is 596 tons.

There are 5 Silos of100 tons each,

2 Silos of 10 tons each,

1 Silo of 70 tons.

Milk can be stored for 36 Hours in Silos.

STANDARDIZATION

All the animals have different composition of fats in their milk in


different seasons. Standardize milk according to the recipe milk is
given temperature of 72 oC for 15 seconds to reduce bacterias in
milk, this process in called thermization life of milk is increased
by this process and in standardization composition of fats and
SNF are standardized.

DECREAMING

In this process dirt particles, SNF and cream is separated, milk is


given temp of 60 oC and 60,000 rpm in de-creamer. So that dirt
particles cream can be separated. Cream is send to butter
section. Dirt is drained after 30 seconds milk is send for further
processes.
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PASTEURIZATION

In This Process milk is heated at 92 oC for 5 seconds to remove


remaining bacterias.

Milk powder process activities

After pasterization milk to treated for canveersion into powder,


following activities are performed to milk:

Evaporation

(a) Low heat treatment

Milk is heated at high pressure of 889 milli bar so that it start


boiling at about 70 oC .

(b) 4-effect falling film

Milk is evaporated in 4 effect system. Milk is evaporated about


56%, 62%, 67% and 75% after 1st 2nd 3rd and 4th effect
respectively. After 3rd effect Homogenansization is done which
uneven composition of fats and SNF is homogenized

Spray drying

In this process there are 5 lateral high pressure nozels which


exert high pressure on milk after that there which exert high
pressure on milk after that there are about 50% water and 50%
solids are remained in milk. After this step about 320 oC hot air is
thrown on milk, it is very quick process in which powder settle in
base and moisture evaporate in forms of vapors.

Central lecithination:

Lecithinate is sprayed on powder so that it is converted into


highly dissolvable powder. That way Nestle Milk Pak say “ Nido is
instant Milk” (easily dissolvable in hot ad cold water).

Drying

After all these procuress still powder has 5.5 % moisture in it,
Powder is dried through x- Egran System to reduce moisture level
up to 3.1%
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Cooling

After drying there is a cooling process, in which powder is cooled


before storing.

Storing of powder

Powder is stored in bins there are 40 bins , with capacity of


--------each.

Packing

Milk is packed in different packing according to the weight


required, form tote tilting station from bins.

Capacity

Capacity is the maximum rate of out put for a facility. The


operations manager must provide the capacity to meet current
and future demands; otherwise the organization will miss the
opportunities for growth & profits.

Nestle Milk Pak, Kabir Wala has installed new evaporate, doubling
the Sout put of spray dryer in 1999. Along said the were house
capacity at Kabir Wala to handle increased volumes of finished
products was proportionately increased. They also installed
pouch filling machine, making Kabir Wala factory independent
from Sheikhu Pura for filling of full cream Milk powder.

Capacity for receiving milk is 60,000 Liter/Hours.

Milk is stored in storage tanks called Silos. The capacity to store


milk is 596 tons.

There are 5 Silos of100 tons each,

2 Silos of 10 tons each,

1 Silo of 70 tons.

Milk can be stored maximum for 36 Hours in Silos.

Capacity planning is duty of top management and it is long term.


In flush season when milk is abundantly available they utilize
capacity 100% as cleaning time is just 4 hours daily and 20 hours
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of working. Installed capacity is NIDO plant is 560 tons, it


produces 4 tons / Hours & in 20 working hrs it can produce 80
tons per day. In summer when availability of milk is lower they
have their annual shut down (June). They have training session
for employees and vacations in that time. There are certain
standards for labor utilization. Efficiency of employees is
calculated daily.

LOCATION

Facility location is the process of determining a geographic site


for a firm’s operations.

Nestle Pack has located one of its factories at Kabirwala.

REASONS FOR SELECTING THIS LOCATION

PROXIMITY TO SUPPLIERS AND RESOURCES

This factory has been located in this area because here the
supply of milk is more than the requirement of the local area.
This factory location is immensely surrounded by Argicultrual
farms, villages and small towns. The people o f thess areas have
their own

Animals and the feudals of the region have their own live stock
farms. So there is abundant milk available.

Furthermore, by locating one factor y at Sheikhupura and the


other at Kabirwala the Nestl MilkPak can cover the geographic
area of milk collection very well, especially the area of whole
Punjab.

REPUTATION OF THE LOCATION

Placing of the factory at Kabirwala is also advantageous in this


way that at the current place there was actually the factory in the
name of Kabirwala Dairies Ltd. (KDL). So the place has the
reputation of having a milk factory. The suppliers of milk are
already oriented with this location.

PROXIMITY TO NATIONAL HIGHWAY


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Kabirwala factory is quite closer to National Highways so the


transportation of Raw Material and Finished Goods is also easier.

In the end we can say that the most important and critical factor
for locating the facility at this place is the availability of the milk
in this area.

SUPPLY CHAIN MANAGEMENT

Supply Chain |Management seeks to synchronize a firms fun


ctions and those of its suppliers to match the flow of materials ,
services and information with customer demand. A basic purpose
of supply Chain management is to control inventory by managing
the flows of materials.

TYPES OF INVENTORIES

Following types of inventories are kept by Nestle Milkpak


Kabirwala:

RAW MATERIALS

Raw Material inventory of Nestle MilkPak consists of milk. Their


Raw Material is kept in Silos. Silos are the big tanks, which are
used to store the milk. Inventories of their raw materials cannot
be maintained in bulk quality and for a longer period of time.

The factory can store the milk up to 596000 liters. They have five
silos for storing the milk all have different capacities. The milk
can remain there for the period of 36 hours without loosing
quality.

WORK IN PROCESS INVENTORIES

Work in process inventories are not to huge. Whatever they put


into production they stop production after its completion if there
is no unusual break down.

The unpacked goods inventory can be considered as the WIP


inventory. The condensed milk is stored in Bins. Bins are the big
boxes in which the milk powder is stored before packing it.
DETAILS OF PRODUCTION PROCESS23

Then through an automatic plant the milk is packed. The butter is


stored in huge tubs. From where that is packed through the
automatic.

FINISHED GOODS INVENTORY

Inventories of packaging material can also be included in WIP


inventories. The packing material is purchase externally. The
supplier of packing material is packages private limited Pakistan.

Nestle Milk Pak maintains huge amounts of F.G. inventories.


There is a huge warehouse within the factory. In the warehouse
they store the finished goods.

Especially when the availability of milk is high then the L.M. is


produced and stock in this warehouse and the same is released
when the Milk availability is lesser and the production is also low.

Normally it’s the FG inventory the NM has RM & WIP inventories


not that huge.

MATERIALS MANAGEMENT

There is a separate department in the factory which is


responsible for purchasing the materials and managers its
supply.

There is a centralized system of material management. The


whole operations of which are looked after by the operations
managers. There is also a stores officer which also looks after the
materials management.

SUPPLIER RELATIONS

The nature of relations maintained with suppliers can affect the


quality, timeliness and price of a firm’s products and senior.
There are two types of supplier relation competitive orientation.

COOPERATIVE ORIENTATION.

Nm’S SUPPLIERS RELATIONS

NM follows the cooperative orientation. They have very friendly


and cooperative relations with their supplier’s one hand and
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there are the suppliers of Milk and on the other hand the
suppliers of packing NM have cooperative relations with both of
its suppliers.

RELATION WITH MILK SUPPLIERS

NM has very cooperative relations with its milk suppliers. NM’s


people themselves look after the animals of the former who
provide them milk and give them useful tips.

NM provides various facilities to its milk suppliers. NM also


provides or facility to its suppliers. It also provides them
consultancy facilities consultations s provided for improving the
milk quality looking after the health of the animals.

PROGRESSIVE FARMERS

The progressive farmers are the farmers having lots of animals


and supply milk to NM. These are farmers which wish to further
grow. NM provides them loans for improving their farms and for
the purchase of animals. NM provides medical facilities to the
animals. The NM provides loans to these farmers for expanding
their farms. So that the milk requirements of NM can be filled. In
turn the supplier of milk also cooperate with NM

PACKAGING MATERIAL SUPPLIERS

The packaging material is supplied to NM by the packages (Pvt)


Ltd. Pak NM have very cooperative orientation with packages and
they cooperate a lot with NM for maintaining high quality of final
product.

Sole sourcing P is the only supplier who provides are the packing
material. So NM use sole sourcing.

So NM has very cooperative orientation with its suppliers.

INVENTORY CONTROL SYSTEMS

For controlling inventory the NM use Continuous Review

Continuous Review
DETAILS OF PRODUCTION PROCESS25

NM use continuous review system. They have the whole


computerized system. How much stock is in the stone room how
much stock has been further put into warehouse and how much
stock has been drawn from the stores? In this way they keep a
continuous control over their inventory. The stores officer not only
maintains records but also makes visits at the warehouses to see
the actual situation of materials. The officer can review the
inventory at any time. Operations manager and the auditing
people also check the inventory and its records so that the risks
of loss or manipulation may be minimized.

DISTRIBUTION

Distribution is the management of the flow of materials from


manufacturer to customer and from ware house to retailers.
Involving the storage and transportation of goods.

PLACEMENT OF FINISHED GOODS INVENTORY

The fundamentals decision is where to stock an inventory of


finished goods there can be two alternates.

i. Forward Placement

ii. Backward placement.

FORWARD PLACEMENT

In forward placement finished goods are stored closer to


customer .NM use forward placement as they use to keep the
stock of finished goods in their regional offices and distribution
centers. From the distribution centers the goods are further sent
to the retailers.

BACKWARD PLACEMENT

In backward placement finished goods are stored at the


manufacturing plant where they keep goods stocked. So in this
way they use backward placement also. So for inventory
placement NM uses a mix of forward placement and backward
placement in order to provide goods to the market on time.
DETAILS OF PRODUCTION PROCESS26

DISTRIBUTION STRATEGIES OF NESTLE MILK PAK LTD.


Distribution plays important role in success and failure of any
organization. The organization may fail, if its distribution
networks are not efficient and unable to provide the necessary
items at required place and at reasonable time.
Distribution system of Nestle is one of major source of
competitive edge over its existing rivals. Nestle has its own
distribution networks equipped with all necessary transportation
facilities. They transport their products at major ten regional
sales offices, which are situated at different cities of Pakistan.
These sales office (distribution centers) have their own vans with
sales people who sell and transport goods to the small retailers.
In general Nestle followed following sequence for distribution of
its products.

Company Distribution Center Retailers Customers

This figure indicates Nestle never sell directly is ultimate


customers but follow above sequence.

In general, Nestle has following two distribution strategies:

Selective distribution strategy

Extensive distribution strategy


For some products, Nestle adopt “selective strategy” in which
firm distribute its products on few selective retail outlets while for
some products, Nestle people go for “extensive strategy” in
which they distribute their goods on all possible retail outlets.
SELECTION OF TRANSPORTATION MODE

For transportation of goods to the regional offices NM has it own


vans and other vehicles. For further distribution to retailer the
distributor of each area uses its own vehicles.

For the milk collection the NM has their own tankers, which are
made of special material to maintain the quality of milk.

FORE CASTING
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Fore cast is a prediction of future events used for planning


purposes.

Forecasts are needed to aid in determining what presences are


needed, scheduling existing resources and acquiring additional
resources. Accurate for casts allow schedules to use machine
capacity efficiently, reduce productions times and cut inventories.
Forecasts are needed to anticipate changes in prices or costs or
prepare for new laws or regulations, competitors, resource
shortage or technologies.

Forecasting methods may be based on mathematical models


using historical data available, qualitative methods drawing on
managerial experience or a combination of both.

Nestle Milk Pak forecast the demand of products on annually


basis with mutual understanding between planning and selling
departments on the basis of historical data and sales forecast
estimates. They conduct monthly meetings and fine tune the
forecast on monthly basis. As in summer when availability of milk
is scarce and demand is high, they have stock in winter to meet
this demand. They produce more in peak season (Jan, Feb, and
March) to meet the demand of lean seasons (June, July, August).

AGGREGATE PLANNING

Aggregate plan is a statement of production rates, work force


levels, and inventory holdings based on customer requirements
and capacity limitations.

PRODUCTION PLAN

A manufacturing firm aggregate plan is called as the production


plan which generally focuses on inventory holdings and
production rates.

NM has its production plan which is generally developed by the


planning department.
DETAILS OF PRODUCTION PROCESS28

AGGREGATION

NM aggregate their plan on the basis of total milk collection, total


milk requirements, total production etc.

TIME

The planning horizons of NM are of two types one is the long term
planning horizon which covers the period of ten years. The other
is the shorter planning horizon normally or one year.

LONG TERM PLANNING HORIZON

In long term planning horizon NM plans for about ten years. They
plan how much production capacity to be achieved. How much
production rates will be required what will be the customer
demand how will they collect the milk. From where they will
collect the milk. How many number of animals would be there is
a particular area and from there how much milk we will be
collecting. They got all the information and plan for a longer
period of time.

SHORTER PLANNING HORIZON

In shorter planning horizon they plan usually for one year and
then further decompose that in seasonal plan. How much to
produce in a year. How much milk to be collected in one year
what is the deficiency or surplus. How much inventories we will
be holding. This yearly plan is further divided into four quarters.
Targets are set for each quarter and the efforts are made to
achieve the targets.

QUALITY

Quality has no proper definition its vary from person to person. In


general sense quality may be defined as meeting or exceeding
the expectations of customers.

In general business’s success depends on the accuracy of its


perception of customer’s expectations and its ability to bridge the
gaps between those expectations and operating abilities. Good
quality can also pay off in high profits. High quality products and
services can be priced higher then comparable low quality once.
And yields a greater return for the same sales dollars. Poor
DETAILS OF PRODUCTION PROCESS29

quality erodes firm’s ability to compete in market place and


increase the costs of producing the product or service.

Nestle Milk Pak has quality as its top competitive priorities along
with availability of its products all over.

In quality they want to achieve consistent quality and even to


improve it continuously. In this regard the stress on customer
satisfaction, continuous improvement and employee
involvement.

There is strict quality control by computerized system in control


room, quality of product are assured at each stage.

Customer satisfaction

Nestle take their customer on top of its hierarchical chart. Its top
priority is to satisfy the customer. They design the product in
such a way that they confirm their speciation, fit for use and give
support to the company image.

Employee involvement

Nestle milk pak involves their employees in making decisions and


changing in organization. They have idea boxes in factories and
offices, employees are encourages to give ideas about
improvement.

They conduct weekly meetings and discuss the ideas; good ideas
are rewarded to motivate employee’s involvement. There are
formal training sessions for employees to train them and enhance
their capabilities. Employees are given rewards and incentives to
involve them more in organization.

Continuous improvement

Nestle Milk Pak try to improve the quality of products


continuously they conduct continuous improvement meetings to
improvement the quality. They train the employees for improving
quality tools, build team work, employee involvement and
develop sense of operator ownership.

Improving quality through TQM


DETAILS OF PRODUCTION PROCESS30

Programs for employee involvement and continuous


improvement are aimed at improving quality in general sense.
However, TQM often focuses on benchmarking, product and
process design.

BENCHMARKING

Benchmarking is a continuous systematic procedure that


measures a firm’s product and process against industry leaders.
As NESTLE is industry leader in food products, each factory has
its benchmark to improve quality. Nestle Milk Pak Kabirwala
takes Nestle Tambula factory Australia as bench mark, which is
the best Nestle factory in all over the world. Nestle Milk Pak
Kabirwala is at 2nd number.

PRODUCT & PROCESS DESIGN

Nestle Milk Pak design the produce according to the customer’s


satisfaction and process is designed in such a way to maintain
purity and nutrition’s of the products.

QUALITY CERTIFICATION

Nestle Milk Pak has its own quality standard certification which
has much higher standards as compared to ISO, called Nestle
Quality Standards. Nestle Milk Pak Kabirwala is approved by
Nestle Quality Standards.

In which quality is maintained right from the purchase of raw


material to the distribution of the products to the ultimate
consumers.

Quality of Materials

Quality of Process

Distribution

Continuous improvement

Customer satisfaction

Employee involvement
DETAILS OF PRODUCTION PROCESS31

DETAILS OF PRODUCTION PROCESS

Milk Collection

Milk Collection system of Industry is excellent. According to this


system the companies’ trucks reach 140000 milkmen and collect
milk daily. The milkmen provide milk on contract basis. Prices of
milk vary in case of self-collection and contract basis. On milk
center price of milks is paid at Rs. 5.80 per liter at 6% Fats. If
the quality of fat is less than required 6% then price will be paid
less proportionately.

Percentage of FAT in Various Kinds of Milk.

Buffalo 6% Fat

Cow 3.5%

Goat 3%

Sheep 6%

Human 3.5%

At milk collection centers, Gerber Test in done for the


determination of Fat. Companies are bounded to maintain 3.5%
Fats under pure Food Laws. It is legal requirement throughout
the world.