Supply Chain Management of Nestle

SUPPLY CHAIN MANAGEMENT

OF NESTLE

PRESENTED BY:

ARPANA(20013) PRIYANKA(20019)

NISHA(20038) PRIYANK(20021) FARJENDRA(20017)

RANKING• Fortune 500: Nestle is ranked 48th company

• Best Global BrandsNescafe Is placed at 26th rankNestle Foods is placed at 58th rank

ABOUT NESTLE• Nescafe was developed in 1930 and it

became a main beverage for the American serving in Europe and Asia

• Total sales increased by $125 million from1938 to 1945.

• It expand it’s product line outside food market and acquire Loreal the cosmetic company in1974. Presently it holds 26.4% share in the company.

MISSION• Nestle is dedicated to providing the

best foods to people throughout their day, throughout their lives, throughout the world.

• With our unique experience of

anticipating consumers needs and creating solutions. Nestle contributes to your well being and enhances your quality of life.

VISION

• To be the leading food and beverage company in the world providing customers with healthy food at affordable prices.

PRODUCT LINE

• Coffee• Water And Other products• Ice-cream• Chocolates• Dairy Products• Infant nutrition

PURCHASING ISSUES

• The purchasing objectives of Nestlé are to produce and market food products that satisfy customers and consumer expectations, and to provide good quality food and value for money.

• The key raw materials purchased by Nestlé are: milk, coffee, and cocoa. These, as well as fruit, vegetables, cereals, potatoes are partly sourced directly from farmers

NESTLÉ’S PRINCIPLES OF PURCHASING

Purchasing Roles:

• Two primary purchasing roles that encompass strategic and operational activities are used in Nestlé:1. Strategic Buyers perform strategic activities such as market research or analysis, supplier profiling and selection, negotiation, contract management, in collaboration with other professionals (e.g. engineers for machinery; logistics for transport; marketing for media).

• Strategic Buyers can remain within their functional area, as long as there is a line of responsibility to the relevant Head of Purchasing. This will ensure that they are informed of and contribute to purchasing strategies, training, budgets, etc.

• Operational Buyers perform operational activities such as sending purchase orders, call-off against catalogue, etc. These activities may be performed by members of any organizational unit requiring goods or services.

LEGAL REQUIREMENTS FOR

PURCHASING• Written Agreement

• Quality Conformity

• Dispute Resolution Clauses

SUPPLIERS• The Nestlé Supplier Code establishes non-negotiable

minimum standards

• They ask their suppliers, their employees, agents and subcontractors to respect and to adhere to at all times when conducting business.

• The Nestlé Supplier Code helps to implement commitment. To ensure both responsible sourcing and supplier relationships that deliver a competitive advantage.

SUPPLIER SELECTION

• In compliance with Nestlé’s Corporate Business Principles,• Nestlé select suppliers based on the following criteria: – Ability to offer a competitive

value proposition;

• Reputation, financial situation and record with Nestlé;

• Ownership, management structure and competence;

• Innovation, service level and transparency;

• Already approved or subject to formal approval prior to first delivery;

• Minimum corporate social responsibility standards;

• Ability and willingness to work with their preferred tools, processes and solution providers;

• Sustainable business practices

PROCUREMENT• As one of the world's largest food raw material buyers,

Nestle spends around 60bn (US$71.5bn) a year on central procurement, of which 22bn is spent on ingredients and 8bn is spent on packaging. With such an immense commodities-related spend, it is all too clear that the swings of the commodities markets could have a grave impact on Nestle's bottom line.

• The group is working to minimise the impact that high prices and volatility have on Nestle's profitability by streamlining procurement and manufacturing.

CPFR OF NESTLE

• CPFR Analyst - Wal-Mart• The successful applicant will be responsible for

managing ongoing Collaborative Planning Forecasting and Replenishment (CPFR) processes between Nestlé and key account(s) (eg Wal-Mart) in order to ensure accurate forecasting, optimized replenishment and superior retail in-stock and inventory levels.

MAJOR RESPONSIBILITIES

• Using CPFR process & replenishment strategies, maintains the Key account(s) target in stock rates, and weeks of supply.

• · Communicates recommendations’ regarding the resolution of issues to the relevant internal or external party and reaches agreement on the appropriate corrective action 

• · Order Processing – create and process co-managed orders.

• Develop external customer relationships and focus on the customers agenda. 

SOURCING• Sourcing has to contribute to the sustainable and

profitable development of our company by providing the base for quality differentiation of finished products (customer / consumer satisfaction) and by assisting operating companies to be a competitive producer.

• This requires a supply of raw materials at specified quality, in the quantities and at the timing needed, and at the lowest possible system costs.

STRATEGIC SOURCING

• The strategies employed in sourcing depend on the proprietary characteristics of the raw materials and on the requirements of the factories.

• Most of the raw materials are bought through the trade, but part are bought directly from farmers.

• This direct procurement is more common for perishable products (e.g. milk), and where the company has specific needs. Nestlé does not own any commercial farming activities

SUPPLY CHAIN

SUPPLY CHAIN STRATEGIES

• Market Saturation Driven-Focuses on generating high profit margins through strong brands and forceful marketing and distribution. This is the strategy of successful A-brand suppliers likeNestle.

• Operationally Agile:Configures assets and operations to react fast to emerging consumer trends along lines of product category or geographic region. Both assortment and shelve presentation are systematically adapted to actual local sales, and replenishment is executed using computer assisted ordering.

• Freshness Oriented:Concentrates on earning a premium by providing the consumer with product that is fresher than competitor's offering. For instance, a leading fresh food supplier considers cold chain critical to success since temperature is the dominant factor in shelf life.

• Consumer Customizer:Uses mass customization to build and maintain close relationships with end consumers through direct sales

• Value for Money Focused:This strategy puts a priority on "low price, best-value" for the customer, but it focuses less on brand than on dedicated service.

• Logistics Optimizer:Emphasizes a balance of supply chain efficiency and effectiveness.

However, only collaboration between multiple trading partners will yield a synchronized supply chain. This often maximizes end consumer value proposition and ultimately value to each trading partner.

EFFECTS OF SUPPLY CHAIN

INTEGRATION ON MANUFACTURER

EFFECTS OF SUPPLY CHAIN INTEGRATION ON RETAILERS

TQM IN NESTLE• TQM capitalizes on the involvement of management,

workforce, suppliers, and even customers, in order to meet or exceed customer expectations.

• Quality in business, engineering and manufacturing has a pragmatic interpretation as the non-inferiority or superiority of something.

• Quality is a perceptual, conditional and some what subjective attribute and may be understood differently by different people. Consumers may focus on the specification quality of a product/service, or how it compares to competitors in the marketplace

QUALITY MANAGEMENT

• Superior quality is a competitive advantage and a joint effort by all parties in the value chain is needed. Suppliers are therefore considered an important link in this chain.

• To achieve Nestlé’s objective of offering consumers high quality nutritional products, Nestle expect suppliers to guarantee the quality of the material/goods they supply or the service they provide. Whenever possible, Nestlé’s goal is to be able to rely on their suppliers’ competence and ability to implement jointly defined “Quality Management” and “Supplier Quality Assurance (SQA)” programmes.

QUALITY ASSURANCE DEPARTMENT

• The duties of the quality department are to:

• 1)Develop, with input from all personal, the core values, vision statement, mission statement, and quality policy statement

• .2)Develop the strategic long term plan with goals and the annual quality improvement program with objectives.

• 3)Determine and continually monitor the cost of the poor quality.

• 4)Continually determine those projects that improve the process, particularly those that affect external and internal customer satisfaction

PACKAGING• Packaging serves a major role in Nestle daily lives.

• It protects food products from spoilage and ensures safety from manufacture through storage, distribution and consumption.

• Packaging may also provide tamper-evidence features. It communicates information, including nutritional information and serving instructions, and provides the convenience demanded by today’s consumers.

• Nestlé is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products.

PDSA Cycle:

• Nestle strongly rely on PDSA cycle for solving several of its problems. A PDSA cycle is a system for continuously improving environmental management systems.

• Following this cycle, Nestle will Plan (set environmental policies and targets for itself and create a plan to achieve them), Do (put the plan into practice), Study (check the results and make corrections) and Act(make revisions and improvements for the next step in the cycle).

SUSTAINING COMPETITIVE ADVANTAGE

• Modifying Positional Advantage in International Markets

• The Growing Integration of Markets• Building Market Presence and Position• Strategic Flexibility• Speed of Resource Deployment

ERP IMPLEMENTATION

• In June 2000, Nestle SA signed a much-publicized contract with SAP – and threw in an additional $80 million for consulting and maintenance – to install an ERP system for its global enterprise.

• The Switzerland-based consumer goods giant intends to use the SAP system to help centralize a conglomerate that owns 200 operating companies and subsidiaries in 80 countries including India.

DISTRIBUTION SYSTEM

• Distribution system of Nestlé is one of major source of competitive edge over its existing rivals.

• Distribution of products from the factory to the customer involves transport and storage.

• Nestlé has its own distribution networks equipped with all necessary transportation facilities. They transport their products at major regional sales offices, which are situated at different cities of India.

• These sales offices (distribution centers) have their own vans with sales people who sell and transport goods to the small retailers.

CONT…

• Manufacturer• Carriage and Forwarder Agent• Distributor• Wholesaler• Retailer• End Customer

LOGISTICS• logistics objective as providing maximum customer

service at the least cost.• logistics system can both maximize customer service and minimize distribution costs. Maximum customer service implies rapid delivery, large inventories, flexible assortments, liberal returns policies, and other services—all of which raise distribution costs.

• In contrast, minimum distribution costs imply slower delivery, smaller inventories, and larger shipping lots—which represent a lower level of overall customer service.

Major Logistics Functions

• Order Processing• Warehousing• Inventory• Transportation

INTEGRATED LOGISTICS

• Cross-Functional Teamwork Inside the Company

• Building Channel Partnership• Third party logistics

CRM IN NESTLE• At Nestlé, Nestle committed to offering consumers high-

quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment.

• Nestle also believe in maintaining regular contact with Nestle consumers. This applies both to how nestle present Nestle products and to how Nestle address Nestle consumers' questions and concerns.

• Nestle has a relationship panel with a tag line “TALK TO NESTLE”

PERFORMANCE MEASUREMENT

PERFORMANCE EVALUATION

Two criteria are of equal importance:– • The measurement of the efficiency of suppliers

• The evaluation of the effectiveness of Purchasing.

BENCHMARKING

The concept of benchmarking should: – Be seen as a continuous process of evaluation;–

• Ensure that results are quantifiable and actionable• Be supported by a direct management commitment

BEST PRACTICES

• Purchasing practices must be modified,  improved or adapted, so as to produce the internal changes that will result in increased efficiency and effectiveness.

• By following or copying best practices available and working with suppliers, Purchasing can pro-actively seek change and realize the desired breakthrough

• EFFICIENCIES

• Efficiencies are also the execution of specific programs implemented through benchmarking. For example the use of ,e-Requisitioning (Catalogues), e-Supply Chain and are commended in order to bring economic benefits and efficiency.

• EFFECTIVENESS• Purchasing effectiveness is measured by the function’s

ability to “do it right first time” and achieving maximum value within the parameters of the total cost of ownership concept.

• COST SAVING INTIATIVES

• A cross-functional approach and continuous improvement in areas such as quality, service, logistics, etc, must generate cost saving initiatives where purchasing contribution will be defined, targeted and monitored.

FUTURE OF SCM• THE GREENING OF SUPPLY CHAIN• The Nestlé Environmental Management System (NEMS) Is

Management an essential corporate management tool that consolidates all organizational and technical measures taken by the Group to achieve environmentally sound business practices.

• The NEMS objectives include the following:• To ensure the continuous improvement of Nestlé’s

environmental performance, for example through the conservation of natural Nestle and the minimization of waste.

• Intranet PurchasingThe Purchasing Intranet is a Nestle e-based communication tool used internally within the Nestlé purchasing community to share information about market prices, supplier information, organisations, send information, templates and best practices. It is regularly updated and continually evolves to meet the needs of Nestlé.

• E-ProcurementNestlé promotes the use of electronic tools to optimize the value chain to Nestle costs, create efficiencies, drive Product availability and enhance customer.

  • To achieve compatibility with international voluntary standards on environmental management systems, such as ISO 14001 and the European Union Eco-Management and Audit Scheme.

•To build mutual trust with consumers, governmental authorities and business partners. The Nestlé Environmental Management System is being implemented throughout Nestlé’s entire operation.

CONCLUSIONS• Nestle’s supply chain is an integral part of its approach to the markets it

serves. • The supply chain needs to respond to market requirements and do so in

a way that supports the Nestle’s business strategy.

• The business strategy of Nestle starts with the needs of the customers that the Nestle serves.

• Depending on the needs of its customers, Nestle’s supply chain must deliver the appropriate mix of responsiveness and efficiency.

• Nestle whose supply chain allows it to more efficiently meet the needs of its customers.

• It will gain market share at the expense of other companies in that

market and also will be more profitable.