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SUPPLY CHAIN

MANAGEMENT IN
NESTLE

BY SOHINI
MUKHERJEE
PGDM-19
INTRODUCTION
Nestle is one of the largest food companies in the world. The
product of Nestle mainly includes the cereals, baby food, coffee,
tea as well as ice cream and pet foods. The company was
formed in the year 1905 by the merger of the Anglo-Swiss Milk
Company. The company grew considerably during the World
War 1st. One of the biggest competitor of the company is the
Anglo-Swiss Condensed Milk Company that is already a leading
manufacturer in Europe. As a result, in order to compete with
this company, Nestle launched a condensed milk product of its
own (Phillips, 2014).
The key flows in Supply
Chain
The product flow is something that starts from the raw
materials to the product to the consumer. The product flow is
very effective in the case of Nestle. The reason is that Nestle
ensures the highest level of quality and safety before the
products reaches the customers. The ensuring of the quality and
the safety takes place millions times a day. The company
ensures the highest possible standards along the supply chain
that starts from the raw materials via packaging, distribution to
the consumer. The products of Nestle are checked on the
product line and as a result, the customers feel safe with the
product, which increases the demand. In order to meet the
strict standards, the local, and the international regulation, the
products are checked on the line of production.

The money flow indicates the flow of funds from the customers
to the manufacturers and from the manufacturer to the
supplier. The company Nestle mainly faces three important
organization related challenges that includes the maximization
of profits, conserving cash flow as well as the creation of the
shareholder value. The cash flows from the consumers to the
manufacturer as the products are mostly sold in the retail shops
.
Supply Chain and
Procurement
Supply chain professionals at Nestlé play a critical role in
ensuring the quality of products that reach customers and
consumers. To achieve this, Nestle collaborates with the
commercial teams to develop the demand forecast, and also
with suppliers around the world to ensure responsibly sourced
materials. In alignment with operations, they balance inventory
levels to establish the right supply of their products. Once
produced, supply chain is responsible for safely storing and
transporting the products to meet our customers’ and
consumers’ needs in-full and on-time. It is an aligned, agile, and
adaptable organization that is committed to delivering results,
not only within supply chain, but also in support of overall
business priorities.
Supply chain professionals can take many different paths in
building a rewarding career at Nestlé. Whether someone joins
in Demand and supply planning, Procurement, Physical logistics
or Customer service, he or she’ll help them gain a real
competitive edge by bringing them closer to their customers
and making sure that the products are available at the right time
in the best condition.
Procurement
As strategic partner of the business, the procurement team
helps the company achieve sustainable growth. Procurement
professionals at Nestlé, ensure responsibly-sourced supply and
create value. Located in hubs in Switzerland, Panama and
Malaysia, the division provides a range of services, including the
management of procurement for specific raw materials,
packaging, indirect materials and other services. The hubs also
support markets with managing local spend.
Key features of Nestle’s
successful supply chain
management
 Sound relationship between logistics management and
supply chain management:- Nestle logistics management
has been effective over time due to its concentration on the
three basics of logistics including inventory management,
network design, and transportation. The company in
question ensures adequate control of warehouses,
manufacturing plants, and stores. The supply chain
management team monitors every movement of goods to
various places of the world in order to control surplus and
shortage of goods (Master 2013). In terms of supply chain
management, the company practices effective inventory
planning, adequate transportation, proper packaging, and
warehousing. Nestle Company transports products through
air transport, roads, rails, and waterways. The company
transports nearly 140,000 tons of its products per year from
1600 warehouses that it has across the world (Nestle 2018).
When necessary, Nestle makes effective replenishment
decisions to promote its sustainability irrespective of a few
distributions that go wrong. The company also monitors its
inventory level via e-data interchange, which is a special
technology which enables to monitor the size of inventory
and distribution activities from different warehouses and
other sources.
Continued..
 Significantly, large organizations such as Nestle hardly store
items in warehouses for a long period since that would pose
a risk or either breakage or damage of the goods while they
stay in the warehouse. Given that Nestle deals in food
products and beverages, it would not store items in the
warehouse for a relatively long time. Therefore, logistics also
involves enabling the good condition of goods before they
are dispatched to various areas . The safety of goods while
they are in the warehouse is key to mitigate risk and enable
timely supply since some clients are bound to make orders
at any given time. An effective supply chain and logistics
management may ensure that goods are stored in the
warehouse within an appropriate time. Nestle warehousing
and packaging activities clearly describe the relationship
between supply and logistics management.

 Assessing the significance of Effective Logistics


Management:- Logistics facilitates easy control and planning
of the supply of particular goods from a point of production
to a point of consumption in the most convenient way that
ensures customer satisfaction. Nestle Company distributes
its products from various points of production to points of
consumption. Nestle focuses on distributing its products to
restaurants, supermarkets, small business owners, and other
retailers. Availability of such goods enables a business unit
to reach all categories of consumers who buy the product
and can give feedbacks.
Key features……

 Effective Enterprise Resource Planning:-ERP is


an innovation program that integrates various organizational
information systems to manage information effectively and
promote efficiency in business process. Supply chain
management and logistics is one of the managerial roles
where ERP can be applicable and helpful. Nestle has
implemented various enterprise systems in an attempt to
improve its level of efficiency. For a period of 5 years, Nestle
implemented SAP R/3 that served about 6,000 users at a
time (Nestle 2018). Later on, Nestle started another ERP
project for Y2K that began in 1998. Thereafter, the
employees had an additional obligation to learn new skills
and adopt to the new technology that the company
implemented to ensure customer satisfaction and beat its
competitors. The cost of ERP for Nestle at the time was
about $280 million, which was relatively expensive (Master
2013). However, the company, through its managers,
believed that the ERP that they were to implement was
worthwhile and would pay back in the near future. Updating
of ERP is an organizational culture of Nestle since it is
oriented toward growing further, promoting customer
satisfaction, and maximizing profits per given time.
Key Features…
 Reduction of Logistics Cost:-Cost reduction is an
indirect objective of an effective businesses that looks
forward to maximize profits. Effective managers identify
appropriate departments or areas where they can
minimize cost and still promote efficiency . Supply and
logistics is one area where managers may consider in
reducing costs using numerous prudent ways that would
promote customer satisfaction and enable the
accomplishment of organizational objectives. More
specifically, the notable ways in which logistics cost
reduction may take place include shipment
consolidations, avoiding excess labor, vessel
maintenance, application of latest technologies and
implementation of prudent decision making. First,
shipment consolidation means joining various lighter or
smaller goods into one carrier to save space and funds.
For example, Nestle Company has vehicles of different
sizes that help in transporting a given amount of goods
depending on the quantity; this saves space and reduces
cost . Secondly, organizations should consider hiring
adequate labor rather than excess labor that may lead to
more spending. Moreover, the maintenance of the
transportation vessel is key to avoid regular breakdowns
and repairs that would be costly . Using technologies in
the storage and transportation of goods is key since it
maximizes efficiency by reducing the possible loss or
pilferage of stock.
CONCLUSION
In conclusion, supply chain and logistics management has a
direct influence on the success of an organization. Nestle
Company’s success over many years is also as a result of an
effective management of supply and logistics. ERP is an essential
subject that also determines the achievement of organizational
goals and success of various organizational departments.