Nestle-for-scm.docx

SUPPLY CHAIN MANAGEMENT

NESTLE FINAL TERM PROJECT SUBMITTED BY: WASIQ IFTHIKHAR (BBA02143042) HIRA AMIR

(BBA02143043)

SADDAN UL HAQ

(BBA02143046)

TAYYAB MUSHTAQ (BBA02143068) MEHRAN AHMAD

(BBA02143014)

Contents Introduction: ................................................................................................................................................. 2 Mission .......................................................................................................................................................... 3 Ambition ....................................................................................................................................................... 3 OPRATIONAL STRATEGIES OF NESTLE........................................................................................................... 3 MANUFACTURING STRATEGY: ...................................................................................................................... 3 LOGISTICS AND DISTRIBUTION: .................................................................................................................... 5 DISTRIBUTION STRATEGY:............................................................................................................................. 5 WAREHOUSING STRATEGY ........................................................................................................................... 6 SALE STRATEGY: ............................................................................................................................................ 7 CORPORATE STRATEGY ................................................................................................................................. 8 A day with NAVEED KHAN:............................................................................................................................ 9 Conclusion: .................................................................................................................................................. 10 Recommendations: ..................................................................................................................................... 10

Introduction: Nestlé was founded in 1866 by Henri Nestlé and is today the world's biggest food and beverage company. Sales at the end of 2005 were CHF 91 bn, with a net profit of CHF 8 bn. Nestlé employ around 250,000 people from more than 70 countries and have factories or operations in 2

almost every country in the world.The history of Nestlé began in Switzerland in 1867 when Henri Nestlé, the pharmacist,launched his product Farine Lactée Nestlé, a nutritious gruel for children. Henri used his sir name, which means ’little nest’, in both the company name and the logotype. The nest,which symbolizes security, family and nourishment, still plays a central role in Nestlé’s profile.Since it began over 130 years ago, Nestlé’s success with product innovations and business acquisitions has turned it into the largest Food Company in the world. As the years have passed, the Nestlé family has grown to include chocolates, soups, coffee,cereals, frozen products, yoghurts, mineral water and other food products. Beginning in the 70s, Nestlé has continued to expand its product portfolio to include pet foods, pharmaceutical products and cosmetics too.Today, Nestlé markets a great number of products, all with one thing in common: the high quality for which Nestlé has become renowned throughout the world

Mission To positively enhance the quality of life of people of Pakistan by all that we do through our people, our brands, products and our Creating Shared Value (CSV) initiatives.

Ambition To be the leading Nutrition, Health and Wellness Company in Pakistan.

OPRATIONAL STRATEGIES OF NESTLE As nestle is a worldwide company therefore its difficult to access the overall operations of nestle.For analyzing the operations of nestle we conducted an interview of operations manager of sheikhupura factory of nestle where the production of nestle juices is done. We divide the existing operations strategy of nestle into five parts as well. • Manufacturing strategy • Logistics strategy and distribution strategy • Warehousing strategy • Sales strategy • Corporate strategy

MANUFACTURING STRATEGY: In general terms, manufacturing strategy can be defined as the set of the co – coordinated objectives and action programmed that are applied to a firms manufacturing function and aimed at securing the medium and long term, sustainable advantage over that firm's competitors 3

Following are questions with their explanations related to manufacturing strategy are given below.  How the demand is generated? The demand it generated by forecast that gets its input from sales and marketing. The forecast is generated by their ERP system called the Globe, which is a form of SAP. As Pakistan has a hot climate especially in the June, July and August months, a seasonal trend is seen is the demand for juices. The ERP is a quite state of the art. It plans for forty-five days cycle. ERP: Is short for enterprise resource planning.Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources.  From where the raw material comes? Juices are made from concentrates. Some ingredients are imported and others are locally acquired.  How the orders are dispatched? The orders are manually dispatched, as the local supply chain partners don’t have SAP. EDI link is also not present as most of these vendors are not that well established. So once the ERP generates production plan the operational buyer does the ordering from the Factory. Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners  How much production is done per annum? The production of juices here is about 30,000 tons per annum.  What are performance indicators? The standard push strategy is employed after manufacturing with quite some inventory levels. Quality is considered to be the top priority and is considered as a performance measurement. Other performance indicators are down time, safety, orders lost and defects. There are always programmes being initiated for improvements in the Sheikhupura factory

 Reporting of production?

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The in charge of production in General manager production, who is based in Head office at Lahore. Reporting to him is the Plant manager who is in charge of the manufacturing activities of the plant.  Production Process: The process of juice manufacturing is quite simple. The concentrate is imported, this is then rehydrated, pasteurised, packed and taken to warehouse for incubation period. This is all an automated process and at no time does the juice come in contact with air or any outside germs.  How the demand for new product is access? Manufacturing department is also a party to new product development. There is a special team that consist of marketing, product development and manufacturing that decides on new products and their development. They assess the demand of the new products through surveys and information sharing within group companies. Another very important element in the new product development is the competition and their recent development.

LOGISTICS AND DISTRIBUTION:  Logistics strategy: “The process of controlling the flow of materials,storage,in process inventory,finished good and their relevant information” Nestle has contracts with a number of service providers. The company strategy for logistics is quite simple. It’s outsourced all logistics activities. Nestle does not own any trucks for the transportation of the products. They have outsourced logistics to four major transporters who provide trucks on a daily basis.  How the transportation of product is done? Four transporters have a total of 120 trucks that are owned by them and are dedicated for the transportation of nestle products. These trucks account for about half of the daily shipments. The rest of the half is still hired from transporters market. The truck hiring is not the responsibility of Nestle. Trucks are hired by the transporters from the truck market and supplied on daily basis. The transporters are paid on 'per trip' basis according to mileage. Who reports for the transportation? The Group Transport Manager who reports directly to the Supply Chain Manager heads the transportation department. The standard truckloads and loading patterns for all products are defined by Nestle and strictly followed all transporters.

DISTRIBUTION STRATEGY: The distribution strategy of nestle is standard Distribution strategy for virtually all multinational FMCG in Pakistan. They outsource their distribution to a single distributor in an area

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 In how many days deliveries are done from warehouses? As deliveries from warehouse come after one week  How the cities are distributed for the distribution of product? Nestle has a very well defined distribution strategy. The man in charge of distribution is National Sales Manager (NSM). The country is divided into three zones a zone manager is responsible for distribution in each zone. They are reply to the NSM directly. The three distribution zones are; 

North



Central



South

These three regions are further divided into 15 sales regions and each of these regions has a local distribution. These are the name of all major cities of Pakistan. Quetta ,Quetta coastal belt, Karachi east ,Karachi west , Hyderabad , Sukkur ,Multan, Sahiwal , Lahore, Gujranwala , Jehlum ,Islamabad ,Islamabad outstations , Peshawar ,Peshawar outstations  Who is responsible for regional distributor? There is a regional manager responsible for distribution in each of these regions they are delegated the task of observing the distributor. These managers are also responsible for setting the sales targets for their distribution centres. The manager set the target by keeping the past sales, market trends and demand forecast in mind. The entire process of distribution from the distributors warehouse to the market is outsourced. Total distribution is being done through distributors. 

Total number of distributors in Pakistan is 90



Total distribution points in the country are170

WAREHOUSING STRATEGY All activities related to Material Handling for Finished Goods to the point of sale assets are covered under Warehousing Operations in one set-up. As in all operations the same procedure is followed in all company Warehouses.  How many warehouses are in Pakistan? Nestle has five warehouses in Pakistan. These warehouses are located at strategic positions that help nestle with its storage and logistics operation.

Following are five Warehouses of Nestle in Pakistan 1. Warehouse Centre Sheikhupura 6

2. Warehouse Centre Kabirwala 3. Warehouse Centre Lahore 4. Warehouse Centre Islamabad 5. Warehouse Centre Karachi

 For inventory management which software is used? The warehouse management system being used is SAP (system application product for data processing). It not only properly utilizes the warehousing capabilities but also helps coordinate with other Operation

 Distribution Centre Sheikhupura : This warehouse is located within the boundary wall of nestle factory in Sheikhupura. Its very close to Lahore which is where the head office of Nestle Pakistan is located. Being twenty-nine kilometres from Lahore makes this even more important as Lahore is the second largest city of Pakistan located right at the border with India. The total area of Warehouse centre at Sheikhupura is 199,218 square feet In this warehouse, the standard operation is that 

Inbound activities continue three shifts 7 days a week.



Outbound activities continue three shifts 6 days a week.



Inventory calculation is carried on daily basis for certain SKU’s(stock keeping unit) and at weekend all SKU’s inventory is carried and reconciled.

SALE STRATEGY:  Strategy: 7

Compared to the other players in the beverages market Nestle places immense importance on the company’s sales force. They are a focus of heavy investments and training plans. The management is of the belief that if the sales force performance is extraordinary it will reflect directly on the sales of the company. This is what pushes them to spend so heavily on the training of representative before they ever enter the Sales field. Sales force: The division of a business that's responsible for selling products or services . Evaluating your current sales force is an important step in the process of deciding whether and how to grow your sales team  What are sales promotional strategies? The sales promotions are quite rapid they plan them effectively as well. For example in the winter months when the consumption of juices drops they offer retailers incentives on purchase. In a country like Pakistan your local shopkeeper has a lot of influence on your daily purchase What is the sales management structure?

The sales management structure is Zone managers of the three zones designated to their particular area responsible for the area sales and potential.

lead by the National manager sales. Reporting to him are North, south and Central. Then area sales executives are and are reporting to their zone managers. They are also managing supervisors and sales force to their maximum

CORPORATE STRATEGY Is the direction an organization takes with the objective of achieving business success in the long term.  What is the nestle corporate strategy? 8

Nestle corporate strategy like most Multi Nationals in Pakistan is quite mature. They have a state of the art ERP SAP that helps in all operations from ordering of raw material to production, forecast, Warehousing, Logistics and Sales. It’s a very well integrated software that keeps the management well aware of all progresses and plays a vital part in their over all business strategy.  Who are the targeted customer of nestle? The clients that nestle targets are upper middle class. With the economic development this particular class is growing in number and that also reflects in their revenues. The current strategy of nestle as we see it is to produce unique products in accordance to changing consumer preferences. The products produced will be of superior quality commanding premium prices, which will be in accordance to company’s superior image  What’s the management style of the organization? The management style is supportive and participative whereby managers are more approachable and provide constant consulting with subordinates encouraging their suggestions and carefully considering their ideas when making decision  How corporate goals are set? Managers of Nestle also set challenging goals, expecting subordinates to perform at their highest level also convey a high degree of confidence in subordinates. The long-term goal for Nestle is to gain a long-term profitability and a well-built corporate image. For this purpose they implement a proper training and compensation program.  Overall nestle strategy? Nestle rests its strategy implementation on four pillars; Innovation/Renovation, Operational Efficiency, Communication and Sales & Distribution.

A day with NAVEED KHAN:

Naveed Khan, after graduating from UET Lahore with a degree in Chemical Engineering, joined Nestlé Pakistan in Sheikhupura factory as team leader, Under Naveed’s leadership Technical division demonstrated improvement and progress in 9

all dimensions specifically Safety, Health & Environment, Quality, Productivity, Cost saving initiatives and people development. he became the Factory Manager Sheikhupura , Pakistan for a period of 4 years Conclusion: Nestle rests its strategy implementation on four pillars; Innovation/Renovation, Operational Efficiency, Communication and Sales and Distribution. This is done for a sustainable growth rate. Nestlé’s current overall positioning is to be a Health and Wellness Company rather than just a food company. This is because it wants to promote a healthy lifestyle rather than just food. To achieve this objective they are aligning all its products according to their nutritional values. This is achieved by having a nutritional compass at the back of every product package, which tells the consumer how much nutritional value the product holds.

Recommendations: The way forward is to spend on technology. Modern techniques in logistics could be used to reduce logistics cost considerably. Virtually all companies outsource logistics. If nestle establishes a better system of logistics using modern management techniques like Cross-docking, RFID and GIS system it could save a lot of operations cost and that would reflect on their profits. This would also improve their availability and lost orders.

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