Global Operations Management at Nestle - Case Study Example

The Analysis of Global Operations Management of Nestle Operations management is an aspect in business which is concerned with making sure that business operations are as efficient as they possibly can. Operations management ensures that the production of goods and services is carried out in a cost effective manner to meet all the requirements of customers. In other words, operations management is the business practice concerned with managing the processes which convert inputs into outputs (Gunasekaran, Forker and Kobu, 2000). Nestlé, which was founded by Henri Nestle in 1866, is the world’s biggest packaged consumer goods company in the world. With its main headquarters in Vevey, Switzerland, the company has hundreds of branches all over the world. It has around 283,000 employees in 86 countries. It has 6,000 brands of a wide range of products such as coffee, chocolate products, infant foods, ice cream, confectionary, pet food, seasonings, bottled water, healthcare nutrition products as well as frozen and refrigerated foods. Nestlé’s objective is to “consolidate and strengthen its leading position at the cutting edge of innovation in the food area in order to meet the needs and desires of customers” (Vijaya, 2005). Due to the immense size of the company, in terms of market share and market presence, the issue of operations management is very important to the company. Its global success is dependent on how well operations are carried out to ensure that resources are well utilized and customers are pleased with the company’s products (Schwarz, 2002). Since Nestle deals with different suppliers in different locations, supply chain management is perhaps the most important aspect of operations management for the global company. Supply chain management Supply chain management is an important aspect is creating high quality products in the most cost effective way for the benefit of both the organization and the customer. Supply chain management is concerned with the oversight of information, materials and finances used in the production of goods and services, right from the supplier, manufacturer, wholesaler, and retailer to the consumer. The process of supply chain management involves the coordination of and integration of this flow within and among companies. Assuming that the required products are available when needed then the ultimate goal of proper supply chain management is the reduction of inventory (Mentzer, 2001). Supply chain management can be divided into three main types of flows: product flow, information flow and financial flow. Product flow involves the movement of goods all the way from the supplier to the consumer. This flow also includes any service needs or customer returns. Information flow in the other hand is the transmission of orders and updating of delivery status. Lastly, financial flow is concerned with payment schedules, credit terms, ownership arrangements and consignment details (Gunasekaran, Forker and Kobu, 2000). As a way of improving operational performance, Nestle has been at the forefront of developing linkages with customers and suppliers (Rungtusanatham, Salvador, Forza and Choi, 2003). The company has a supply chain mission which is to consolidate and optimize resources and processes in a cost-effective and efficient manner. The mission also involves developing and managing effective and simplified supply networks in order to achieve high level services. Managers at the company know that the satisfaction or dissatisfaction of their customers is based on how the supply chain performance. The company appreciates supply chain management as a pedestal for profit margin and a means of attaining sustainable competitive advantage. According to Nestle, Supply chain management is a two way type of management which takes into account the flow of goods, services as well as information from suppliers, manufacturers, distributors and wholesalers, store and eventually to the end user. The company has a firm supply chain management criterion which it applies to all of its global branches to counter the ease of spoilage and to maximize profits. Nestle follows a unique supply chain management model that has enabled it to track its productivity over the years. The company feels responsible for ensuring that everything flows smoothly in its entire supply chain. However, the company does not deal with every aspect of the supply chain; instead, it outsources most of its operations (Rungtusanatham, Salvador, Forza and Choi, 2003). This makes it easy for the company to carry out other operations. Nestlé’s supply chain management is based on the idea that for a company to remain profitable and relevant, it has to have the right products, at the right place, at the right price and at the right time. When the supply the company’s global supply chain works as a single unit, then it is able to achieve profitability and a competitive advantage. To enhance the efficiency of its supply chain management, the company has segmented its market geographically and demographically (Vijaya, 2005). Geographic segmentation is based on the fact that the company operates in five different continents, all of which have different needs. The company has divided its market according to the geographic location of suppliers and number of end consumers (Rungtusanatham, Salvador, Forza and Choi, 2003). For instance, the company has a high market presence in Pakistan and China. In Pakistan the production of milk and tea and other raw materials is very high while there is a large market for Nestlé’s products in China. Demographic segmentation is based on the age, income and population of target markets. The company’s supply chain management is focused more on areas whose populations also consist of the company’s key target markets and suppliers. Dividing the supply chain management of the company into different segments eases distribution. Improving operations performance To improve its operations performance, Nestle has undertaken a number of measures that are geared towards enhancing its supply management capabilities. The company quality management is a joint effort. In the company’s daily operations, quality standards are not only enforced at the production units, but also in the marketing, distribution, sales and purchasing levels. The quality units found in different levels of the organization normally provide guardianship, support, audit systems as well as quality awareness. These operations are monitored by specific quality departments within the organization. Nestle provides an organizational Quality System which everybody from the supplier, manufacturer, wholesaler and retailer has to adhere to (Vijaya, 2005). Research and development is another key area of the company’s operations performance. Nestlé has a research and development department whose aim is to look for ways through which the company can improve its operational performance in order to satisfy the customer and at the same time maximize on its profits. The use of the visual factory principle has also ensured that Nestle improves its operations performance (Vijaya, 2005). Though it is a global company with manufacturing plants all over the world, using this principle does enable the company to keep in touch with what is going on in all its levels of operations. The company’s acquisition criteria are formulated in a way that enhances operational efficiency and management. When merging with or acquiring other companies, Nestle has to ensure that there are no conflicting aspects that might affect its operations. All the companies that merge with or those that are purchased by Nestle have to share the company’s vision, mission, goals and objectives. This makes transitions easier and operations performance much more efficient. The company also pays a lot of attention to value added growth and strong brands in the market place (Gunasekaran, Forker and Kobu, 2000). Improving global supply chain performance In an effort to improve its global supply management, Nestle has for the last few years engaged in high level operations management using the eMarket mechanism. This means that the company has intergrated online supply chain management in order to ensure that its products reach the consumer in good shape, and in good time. Control of the supply chain using online mechanism has enabled the company to create a niche for itself on the eMarketplace (Vijaya, 2005). This means that its sales have gone up since it has gained more customers from the online market. Integrating technology into its supply chain management has also enabled the company to be more efficient in terms of delivery. Nestle has also been involved in the integration of other associates who are committed to business management and are business fit. Getting suppliers who have a certain level of know-how regarding big business management has enabled the company to efficiently monitor its supply chain management (Rungtusanatham, Salvador, Forza and Choi, 2003). There is also a clear communication system between Nestle and companies in its supply chain. This helps is ensuring that operations at the all levels of the supply chain are not compromised in any way. Operations in global business strategy Any business that has a global presence has to have high efficiency levels in its operations. Global business strategies are those business strategies that global companies normally use in their everyday operations in different parts of the world where they are based. Nestle’s global business strategy is geared towards the attainment of the company’s ultimate goal which is to maximize its profits while making sure that the customer is fully satisfied. In order to achieve this end goal, Nestle has put in place a firm operations management strategy, which is followed in all its braches (Schwarz, 2002). Nestle has engaged in product diversification and differentiation in an attempt to ensure that it realizes all its objectives. This diversification and differentiation is essential to counter the rising competition that company faces. To ensure that the operations in global business strategy are as efficient as possible, Nestle standardized all its products (Gunasekaran, Forker and Kobu, 2000). This means that you cannot find different variations of the company’s products in different parts of the world where the company is operational. Pushing the limits of global operations performance Nestle, being a global company, has to diversify its operations performance in order to meet its organizational goals and achieve customer satisfaction. In this day and age when the economic environment only favors the innovative companies, Nestle has to look for ways and means to produce goods and services that will keep it at the top of the market. There are no limits to global operations performance and if enough effort is put, Nestlé can achieve much more than it has ever done. One of the ways of pushing the limits of global operations performance is by improving its current operations. It is true that Nestlé’s operations management models are among the best there are today. However, the company needs to improve from its current situation and to do so, it must focus on improving its baseline operations. Since Nestle has operations the world over, there is a need to ensure that its operations performance management is well simplified, streamlined and standardized. This will ensure that there is there is a free flowing supply chain. If there are any product flows that are not efficient or other activities that do not add any value to the company, then they must be eliminated (Gunasekaran, Forker and Kobu, 2000). If and when Nestle improves its current operations management, there is a high likelihood that over complications will be avoided at the distribution centers. Nestlé can also achieve maximum operations performance by tracking its productivity. It must mot leave anything to chance in its entire supply chain management. The company must ensure that it has firm productivity tracking mechanisms in all its departments. To make productivity tracking easier, the company can encourage time recording and production visibility at the individual level (Mentzer, 2001). This simplifies labor management, which leads to efficiency and profitability for the company. Although there are many ways of tracking productivity, nestle should only make use of those that will give it maximum returns, for instance, there are several productivity software programs that have been created for this kind of tracking. Nestle has already used the Globe Program to help in operations management in some Asian countries. It can use the same or other forms of productivity tracking mechanisms to ensure that things are running smoothly in all its braches worldwide. The advantage of tracking productivity is that it enables the managers know how employees are performing or not performing (Gunasekaran, Forker and Kobu, 2000). The information from this tracking can be used to plan for staffing purposes to ensure that operations are running as smoothly as possible. Every company, whether it is big or small, needs to operate using goals and objectives. To maximize o its operational management, Nestle can enhance the use of its engineered standards to measure the performance of individuals in different operational levels. Engineered standards are normally thought to be the best way to get accurate and relevant goals for every player or associate of a large, multinational company such as Nestlé (Gunasekaran, Forker and Kobu, 2000). This is due to the fact that these engineered standards normally take into consideration the variables of multiple productions. Engineered standards are also better for setting single facility wide performance goals as opposed to the use of unit per hour goals which might be too many in a single operational area. Nestle is an employer of more than 280,000 people in all of its operational facilities worldwide. Keeping the morale of such a huge workforce is tricky, especially in the area of operations management. The company can make use of unique performance incentive strategies to keep the morale of its workforce high. There are many ways to reward performance. They range from money-related incentives to pay-for-performance related programs. The company should enhance its reward and pay for performance strategies so that they motivate the workforce to perform better (Gunasekaran, Forker and Kobu, 2000). This will ensure that the company maintains high productivity at all times, at a low cost of labor and increased benefits for the employees. In other words, well developed performance incentives present a win-win situation for everybody involved in the company’s operations. By pushing the limits of its global operations performance, Nestle can fully realize its goals and objectives. This means that the company will enjoy reduced labor costs since operations management will lead to increased productivity. There will also be an increased visibility of the performance of associated businesses. This will enable the company to manage its resources better. Apart from that, nestle will also be able to increase its facility thouroughput, which will go a long way in extending its production capacity. In maintaining a high level of performance management, the company will also to retain its workforce as well as associates. Excellent performance management gives rise to increased morale among employees and better management skills (Vijaya, 2005). This translates to efficiency and higher productivity. All this will eventually enable the company to reach high service levels which will help it maintain its competitive advantage over other companies. Conclusion For a company to achieve its goals and objectives, it must ensure that its performance management is perfect. Nestle has been a top profit making company that is well known for its excellent performance management models. Nestle has been able to stay afloat as the world’s leading consumer packaged food manufacturer due to its well managed supply chain. Supply chain management that involves the oversight of the flow of goods from the supplier to the manufacturer, to the wholesaler, to the retailer and finally to the end-consumer, is a major aspect of business at the company. Nestle follows a unique supply chain management model that has enabled it to track its productivity over the years. The company feels responsible for ensuring that everything flows smoothly in its entire supply chain. However, the company does not deal with every aspect of the supply chain; instead, it outsources most of its operations. This makes it easy for the company to carry out other operations. However, managers at Nestle have realized that simply outsourcing supply chain operations is not enough. There are many technological advancements that the company has integrated into its business operations including techniques to help in operational management at all levels including in supply chain management. With the emergence of the eMarketplace, the company has sought to ways to ensure that supply chain management can be done online. Due to the changing social and economic times, Nestlé’s future goals should involve the utilization of high end supply chain management methods that will ensure that it remains at competitive in all its market areas. Focusing on the implementation of robust supply chain management strategies is a good way to improve operations performance and management. The sky is the limit in maintaining a well developed company like Nestle. Productivity tracking, operations improvement as well as the use of incentive programs and engineered standards are among some of the tools that Nestlé can make use of in its operations management. The company is a market leader in the packaged consumer products industry because of the seriousness with which it approaches its operations performance and management. It has a wide network of supply chains, but it has over the years been able to track the performance in each of these chains. Its operations have integrated some of the latest technologies, a move which has enabled the company t0o make huge strides in its performance. As the world continues to become ever more competitive, and at other times economically unstable, Nestle has to keep innovating ways through which it can enhance operational performance in its global branches. This way, it will maintain its position as a market leader in terms of profitability and market share for a long time to come. References Gunasekaran, A., Forker, L. and Kobu, B. (2000). Improving operations performance in a small company: a case study. International Journal of Operations and Production Management, Vol. 20, Issue 3, pp.316 – 336 Mentzer, J.T. (2001). Supply Chain Management. London: Sage Rungtusanatham, M., Salvador, F., Forza, C. and Choi, T.Y. (2003). Supply chain linkages and operational performance: A resource-based-view perspective. International journal of Operations and Production Management, Vol. 23, Issue 9, pp. 1084 – 1099 (Rungtusanatham, Salvador, Forza and Choi, 2003) Schwarz, F. (2002). Nestle: The secrets of food, trust and globalization. Toronto: Key Porter Books. Vijaya, C. (2005). Operations and Project Management Case Study: Nestle Streamlining Operations. Retrieved Nov. 26, 2010, from: http://www.ibscdc.org/Case_Studies/Operations%20and%20Project%20Management/Operations%20and%20Project%20Management/OPM0021C.htm Read More