Nestls Continuous Improve

as a Business Strategy

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Table of Contents
Introduction.................................................................................................2
Background.................................................................................................2
Lean production...........................................................................................2
Improvement Approaches........................................................................4
a. Kaizen..............................................................................................4
b.

Just-in-Time...................................................................................5

Quality in Process........................................................................................5
a. Quality Farming..................................................................................6
b. Quality Design....................................................................................6
c. Quality of Manufacturing....................................................................6
d. Hazard Analysis and Critical Control Points........................................6
e. Consumer Use....................................................................................7
Eliminating Waste........................................................................................7
Muda.........................................................................................................8
Benefits Nestle Achieved through Lean Production.....................................8
a. Cost Benefits......................................................................................8
b. Social Benefits....................................................................................8
c. Employment Benefits.........................................................................9
d. Environmental Benefits.......................................................................9

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Conclusion...................................................................................................9
References.................................................................................................10

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Introduction
In todays world, manufacturing companies are focusing not only on
producing value added products and services, but also on sustainability
and efficiency in terms of cost, waste, environment, society etc. Nestle
has similar aims of improvement through which it desires to acquire
customer value and environment friendly production. Designing and
implementing sustainability projects and products help gain these
benefits.
Since its establishment, Nestle has earned name for its quality and safety
of its products. It also has been famous for being a responsible as well as
sustainable manufacturer. Nutrition, water and rural development are
three key areas in which Nestle is seeking to create value around the
world. This initiative is included in its famous Nestle in Society program
(Nestle, 2012a). One example of implementation of this initiate was seen
in the execution of Nestle Water Plant in Buxton.

Background
Among the many brands of nutrition and general health, Nestle is one of
the leading names which are famous for the production of a variety of
products. Nestle owns about 70 brands including many famous names
such as Kit Kat, Nescafe and Shreddies. Besides these food products, it
also owns water brands like Nestle Pure Life. As per a review by Mulier
(2011), Nestle owns 450 factories, around 328,000 employees and
operates in 86 countries. This makes it one of the biggest companies in
the world. In UK only, Nestle have above 8,000 workers and 23 operations,
15 of which are factories. Nestle exports products of a value almost 400
million (The Times 100, 2012).
Nestle company was started by Henri Nestle in 1867. Since then, Nestle
has not only been taking care of its business but also the environment and
society that affect a business. It has established sustainability with long
term growth perspective. Nestles dedication to this sustainability and
balance of socio-economic as well as environmental factors is evident
from all its operations. Nestle believes that to succeed as a business in
the long-term and create value for our shareholders, we must also create
value for society. We call this Creating Shared Value (CSV) (Nestl,
2012a).
Buchel and Zintel (2013) also note that Nestle has been delivering its
target of 6% to 5% of organic sales together with capital growth and EBPIT
for past decade and over.
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Lean production
In order to reduce the waste, lean production was developed in Japan. In
this approach, waste is evaluated with time, cost and quantity spent
during production process. If these elements are reduced the productivity
increases (Black, 2008). As an example, savings can be made in input of
resources if the defects in a product are identified and rectified. Other
than saving the resources and minimising the waste, such productions
help in environmental safety and save the time spent in production
process. Besides the other benefits, main aim of lean production is to
reduce the usage of resources during production of goods. Production
process typically involves space, labour, machinery, supplies, materials
and time etc. Lean production uses these resources more efficiently.
Nestle has introduced its lean production process by the name of Nestle
Continuous Excellence (NCE). This program started at Nestle in 2008. This
excellence program has helped Nestle in its success by increasing its
efficiency and by saving various resources throughout its value chain.
Nestle has saved 1.5 billion of CHF through NCE.
Nestle has coupled Nestles Continuous Excellence (NCE) programme with
Corporate Cultural Tool for Change. This combination is the main
component of its achievements in the recent years. Nestle expects its
annual savings of 1.5 billion to go above 2 billion in the coming year
through continuous implementation of NCE programme. This prediction
seems to come true as Nestle has spread this lean production process and
its value goals down to the supply chain and also to its broader groups
(Buchel and Zintel, 2013). It has drilled its corporate lean thinking in all of
its production units since 2005. This thinking involves zero waste
production aim with a focus on Total Performance Management (TPS)
(Ngwendu, 2010).
Every production unit at Nestle is bound to implement 3 foundation
procedures to reach TPM levels. After this, manufacturing procedures are
enhanced using TPM methods. These steps have been termed as One
Nestle Operating Model. This model is shown in Figure 1:
Figure 1: One Nestle Operating Model

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Source: Ngwendu (2010, p. 9)

Vice President of Nestles Global Operations, Jose Lopez described Nestles

Continuous Excellence program as the strategic design to performance
improvement. According to him, NCE is also the new mindset of Nestle
people. This makes it a driver of their behaviour towards improvement
and excellence. This programme is based to involve all of the employees
towards better performance and change of mindset. Lopez said that NCE
is the power of the company which is helping Nestle to succeed at every
level. (Buchel and Zintel, 2013)

Improvement Approaches
a. Kaizen
This is another approach after lean production introduced by Japan. Kaizen
is based on the concept of continuous progress. In this way, it supports
the idea of lean production. Kaizen involves ever person who is a part of
the production process. It gives responsibility of improvement to all these
people. In this way, enhancing capacity and efficiency does not remain to
be a one-time process. Kaizen approach strongly agrees that every
improvement should be taken in to consideration, be it large or small. The
reason is that even small developments can help in saving the resources.
While starting up a new production plant, Nestle Waters used Value
Stream Mapping (VSM) technique to access the most efficient location to
build the factory (Kunset, 2008). Through Value Stream Mapping, the
materials and resources required for producing a product and delivering it
to the customer can be forecast (Keyte and Locher 2004). During the set
up of new plant, Nestle gave lean training sessions to its employees of
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that site. This helped them in deciding the right process of production
which could help in reducing waste. They made use of VSM method to
know which process is more effective. The analysis of VSM technique
helped in designing the set up of this new bottling plant. It was used in
keeping the process of production as efficient as possible. The site
decided for this plant was called Waterswallows which was an
undeveloped Greenfield area (Nestle, 2013). This was chosen on the basis
of Nestles unexciting commitment to sustainability and environmental
health.
Keeping this site in example, Nestle Waters consulted the local community
as well though an involvement plan to know that this plant did not work
against the development plans of the locals. In order to keep the carbon
emissions low, Nestle has an advantage of usable transport links of this
site. These links are always required in building a new plant as well as for
coming ins of the supplies and going outs of the production on day to day
basis.
Moreover, this new site has larger space capacity. It can help Nestle
Waters to increase its production according to the demand. This is also the
first site where Nestle could combine its offices, warehouses as well as
production units due to larger available space. This was not possible on
the old site. Keeping all these operations at one site helps in saving time
and transportation cost required to move stocks from one site to another
(Nestle, 2012c).
b. Just-in-Time
Another approach to lean production introduced by Japan is Just-in-Time.
As the name suggest, this approach is focused on the time. JIT is based on
the concept of the time spent in a production. According to this approach,
production cost can increase if it has to spend time on storing and
retrieving the materials. While retrieving the materials from storage,
employees waste their time in waiting and sometimes the productions get
delayed.
By employing JIT approach, companies can ensure that required quantity
of materials is available readily. Also, the transportation is also ready to
take the ready products out to the market without storage (Cheng and
Podolsky, 1996). Although this approach focuses on improvement of the
production procedure but it does not serve as complete procedure. It is
taken as a part of the whole process of lean production. It assists in
increasing the efficiency and productivity which brings about better profit
rate. Just-in-Time approach to lean production helps the stockholders and
investors in saving their money in investment and having greater direct
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return on it. JIT assists in this saving while managing to hold less material
in storage which reduces the capital finances spend on stock.
At the new production factory of Nestle Waters which was described in the
preceding approach, JIT approach was adopted to help it utilise the
storage and time in best possible way. As discussed before, Nestle Waters
previous site does not hold enough capacity for storage. It resulted in
bearing the time cost of outsourced warehouse and transportation to and
from the warehouse and vehicles. It also required storage of extra
materials on the site to be used during weekends when outsourced
warehouses were not approachable. This meant using factory space for
storage and wasting time in waiting for vehicles to arrive. At the new site,
these problems are relatively non-existent. It has enough space to store
all the materials on site (The Times 100, 2012). Thus, this strategy helped
Nestle in controlling the stock. The time required for the moving the raw
materials has been reduced. It has helped ensure that materials and
waste reach the right place at the right time.
Nestle Waters has also established good relationship with suppliers of
materials as well as distributors of its products in order to make best use
of its time and improve efficiency through JIT. Nestle ensures that
suppliers provide quality materials on time and distributors receive the
ready product just when it is ready. Although, such efficiency was possible
through long term, tedious planning only but it has resulted in benefits
worth it (The Times 100, 2012).

Quality in Process
Nestle ensures quality in all of its processes by focusing its operations
according to the quality policy of the company. According to this policy,
Nestle is committed to gain the trust of its customers by providing the
product as per their needs and expectations. It also strives for different
requirements of food safety and quality at all levels; internal and external
by making quality an objective of everyone at Nestle. (Nestle Quality
Policy, n.d.)
By following these guidelines, Nestle has developed a platform in the form
of its quality management system through which it ensures safety and
quality standards of the food. It has increased the value for customers. As
recorded by official Nestle records (2014), this internal system of quality
management at Nestle is being audited by external and independent
bodies in order to guarantee that the compliance of the company to
quality standards, ISO regulations and food safety laws.
Given below are the quality characteristics of the company:
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a. Quality Farming
The first step in production of any food is a farm. Nestle has started its
quality management system from these farms. By working in collaboration
with farmers of the rural areas, the company ensures that he quality of
the materials produced in these farms is as per the approved standards.
Moreover, it also makes environmental sustainability possible at the
farms. In addition to helping Nestle in acquiring best quality material
supplies, this system also assists the farmers to earn better by supplying
quality materials. Consequently, the rural community gets benefitted as a
whole while keeping in view the environmental friendly farming.

b. Quality Design
After a look into the quality of farming, next step is planning and design a
product. Nestle takes care of the quality at this level. Research n
Development department at Nestle works to the concept of Quality by
Design in order to introduce products keeping in view customer needs,
food safety and production laws.

c. Quality of Manufacturing
Good Manufacturing Practice (GMP) is internationally approved standards
of manufacturing products. After designing the quality product, Nestle
imply GMP during manufacturing process to ensure that the product is
produced as designed while sustaining the quality standards. This includes
quality oriented SOPs, trained employees, machinery and material usage.

d. Hazard Analysis and Critical Control Points

Similar to GMP, Hazard Analysis and Critical Control Point system is
internationally acclaimed system of maintaining food safety. Nestles
HACCP system are developed on quality goals and are verified as per
international ISO standards. Through this system, Nestle attempts to
minimise the hazards by identifying and controlling them. This system
starts at production of food from raw material and covers the process till
the distribution and consumption of the ready product.

e. Consumer Use
At the end of the procedure, Nestle tries to reduce safety issues when the
product comes in the use of its consumers by giving them safety
information.

Eliminating Waste
Companies try to add value to their products. Value is the particular
feature of the product due to which customers purchase it. But, added
values are those practices which help make product even better so that
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customers pay more for it. Added value products can be developed by
improving the design of a product. It can also be enhanced by reducing
the wastes that a particular product produces which gives a dual benefit
by minimising the production cost as well.
Waste is typically referred to as any process which costs during production
but does not affect value positively. Japanese use term Muda to refer to
this waste (Emiliani et al. 2007). Nestle uses its waste eliminating efforts
to reduce Muda by breaking it down in to 7 separate portions. These
portions/areas are termed as Timwood (The Times 100, 2012)
Factor
Transport
Inventory

Impact/Waste
Transportation of material
costs time and energy
Excess stock costs storage

Motion

Travelling people
excessively

Waiting times

Cost of Employees and

customers time
Repetition costs time

Overprocessing
Overproduction
Defects

Stock storage costs

Removing defects causes
time and material

Measures
Minimising the weight to
save energy and time
Moving goods to customer
outlets to avoid storage
Performance management
through efficient project
planning
Timelines designed
properly
Eliminating repetitive steps
in process
Use of ERP to keep track of
stock requirements
Designing product carefully
using computer
Source: The Times 100 (2012)

Nestle arranged an overview of the Muda for its employees by Kaizen

Institute after which it hunted down all the wastes at old factory according
to TIMWOOD areas. By this activity, waste was found in production,
inbound and outbound products. Under these areas, key points of finding
waste were excess handling, time spent and defects (Nestle, 2002). Other
areas which needed improvement included bottles and its caps and
damage to finished bottles. But, most importantly identified area was
water management. Nestle identified that reducing water usage to even
lesser would enhance the environment friendliness of the production
(Nestle, 2002).

Muda
After indentifying the wastes along TIMWOOD areas at the old site, Nestle
started designing its new factory as per lean production planning to
reduce this waste. It planned to reduce Muda in all the affected areas
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through efficiently using the production line and creating a compact work
area. This helped in cutting down water wastage and defects occurrence.
It also improved in its onsite warehouses, safety procedures, pallet
storage and recycling procedure (The Times 100, 2012).
Nestle also focused on creating a more friendly impact on environment
while planning this new site. Some steps taken in this regard were glass
frontage for natural light for employees, lightweight bottles with 25%
reduced plastic, improved urban drainage system, excellent construction,
and sustainable building design having higher BREEAM rating. (Nestle,
2013)

Benefits Nestle Achieved through Lean Production

Above discussed lean production techniques used by Nestle Waters has
brought benefits to the company in improving its efficiency and quality.
Some of these benefits are discussed below:

a. Cost Benefits
Nestle reduced the cost of its operations by identifying the areas where
the time and materials were most used. It added value to its products by
reducing waste created during production line. By constructing on site
warehouses, it saved the expenses of outsources warehouses and
transportation. Furthermore, by introducing improved bottles using 25%
less plastic, it reduced the cost of production of these bottles. Likewise,
Nestle reduced its costs by identifying and removing the defects and by
introducing computer equipped designing and planning. It also
implemented plans of quick delivery to the distributors in order to reduce
the storage cost of ready goods.

b. Social Benefits
Nestle has shared many of its benefits with the societies in which it
operates. The Waterswallows Site of Buxton, as already discussed, was
implemented after getting a careful consideration from locals. It has a
butterfly planting system. In this system, Nestle planted wild flowers with
the help of Derbyshire Wildlife Trust and the local Butterfly Conservation
Group. These were intended to bring back the local butterflies. (Nestle,
2011).
It has also worked on various other projects in collaboration with local
communities. One of these is WET with is an educational institute
program. Through this school, teachers and children are given information
on waters vitality in their lives. (Canadian Packaging 2011)

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c. Employment Benefits
Construction of the new Nestle site created employment opportunities
within and outside company. Nestle hired majority of its human resource
and materials from within 50 mile radius of its new site. It reduced the
cost of transportation of materials and enhanced the local economy (The
Times 100, 2012). After the construction finished, Nestle provided on site
job opportunities to a number of graduates and apprentices. At its old site,
Nestle hired temporary or contractual workers. But, at this new site, it
employed full time staff majorly from locals.

d. Environmental Benefits
Beyond all other areas, Nestle Waters focuses on environmental concerns
the most. As discussed before, it introduced a sustainable urban and
improved drainage system at its new factory site. Furthermore, it
designed a creative heat recovery system for waste management.
Through this system, Nestle utilised the waste heat produced during
bottling to heat up offices and warehouses. It also defined the boundaries
of the site in classic and local manner to keep up with the neighbourhood
and the standards of sustainable construction. (Nestle, 2012c)

Conclusion
Nestle has invested 35 million in setting up its new factor discussed in
this document. This is because of its commitment to society, environment
and sustainability. This site was planned in a way to maximise the
efficiency and reducing the wastes that affect costs, environment and
community negatively.
During the designing, Nestle used lean production techniques. It inspected
the old site to find out the possible areas of improvement in term of waste
management. New site was planned on the analysis of this inspection.
This benefitted the company financially.
Meanwhile, Nestle focused on the benefits of the society also. It
incorporated careful environmental and societal considerations in its
construction design and use of technology. It used local materials and
local human resources to support the community. It also gave focus to the
on-site environment to improve employee health.
After all this planning and vigilant execution, Nestles new site is Europes
one of the sustainable and innovative construction with lesser
environmental hazard and negative effect to the company.

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