Factors That Make the Success of the Supply Chain - Case Study Example

Nestle Case Study Analysis Introduction Nestle deals with nutrition and health. It is a multinational corporation that has factories located in around 83 countries. The company operations involve conversion of raw materials into finished goods. The raw materials are acquired from primary sectors. Some of the brands the company produces include Nescafe, Smarties, Kit Kats, and Go Cats among others. Some of those brands contain cocoa that is acquired from the formers of cocoa around the globe. Nestle is a principal contributor of knowledge to these farmers, advising them on profitability while reducing instances of child labor and developing a smooth flow of supply of cocoa for their products. This paper outlines ways through which nestle creates shared value within the supply chain relating to the cocoa production. It also outlines the importance of applying corporate social responsibility principle in a business activity. The paper also outlines some of the key players in Nestle Cocoa supply chain and the factors that drive the Nestle supply chain. Finally, paper discusses the ways Nestle creates value and the challenges that come with that process. The Nestle Cocoa Plan Nestle has implemented this through creating greater values for the societies. This includes improvements of water, nutrition and rural development. The supply chain activity that is specified includes transforming the raw materials and other natural resources into finished goods consumed by the end consumers. The processes involved are linked to consumers, human rights and labor practices, employees, suppliers and customers and the environment. The consumers are the larger group that consumes the products manufactured by Nestle. Every stage in the supply chain process adds value to the end product (Nestle Case Study). The major key players in this supply chain are farmers, cooperatives, processors or manufacturers, retailers and consumers. The cocoa farmers are tasked with the job of growing the crops that produce cocoa. The cooperatives represent the institutions that manage the sale of the crops by the farmers. They act like unions of farmers who form them to control the market for the crops. Nestle fall under the stage of manufacturers or processors. These are tasked with the production of products which are the end products from the raw materials. Nestle for instance manufactures chocolate and their equivalent from these raw materials. The retailers represent those channels that receive orders from nestle. These channels distribute the products to the end users or rather the consumers. The consumers, who are the last players in the supply chain represents the individuals who purchase the end products (Nestle Case Study). The chart above represents the process of activities that are involved in the supply chain of the Cocoa plan. In order to coordinate the raw materials that Nestle uses to manufacture the end products, it has to coordinate the way farmers are handled in terms of the market and wages (Nestle Case Study). Factors Driving the Cocoa Supply Chain Shared value that is created by Nestle is based on a number of factors that majorly can be categorized under the corporate social responsibility. Nestle carries out its business based on the international laws and codes that define the conduct and the company business principles, as well as, compliance to environment sustainability regulations. The company, however, under the creating shared platform came up with other factors that would drive the supply chain. The principles that are set by international organizations such as the United Nations help in guiding the company in its value creation in the supply chain through its approach in the corporate social responsibility. An example of this according to the Nestle case study is the principles that incorporate the UN Global Principles. This relates to the Human rights, labor, corruption and environment (Nestle Case Study). The company, for instance, has helped the farmers to eliminate child labor through advising them on other ways of running their farms without losing profitability. The company believes that Water is a significant necessity when it comes to quality production of food. Nestle has hence supported this through helping in developing infrastructure dealing with distribution and availability of water. Rural development is a main boost in the future operations of Nestle. The company believes that rural development ensures overall well being of rural communities who make up a large percentage of workers and farmers and at a larger extent the suppliers. The company also believes in the nutrition as the main framework of god health. The company also is ranked the leading nutrition business company (Nestle Case Study). Creation of Value Creation of shared value implies benefit shared by both suppliers and the manufactures, as well s the final consumers. The raw materials of Nestle are sourced from farms belonging to farmers in rural areas in main parts of the world. The quality and the quantity of the raw material that nestle acquires from these countries are highly impacted by the level of infrastructure investment. Nestle, therefore, offers training to the farmers in an effort to encourage production and protect the flow of supply chain. This also helps in ensuring quality of the raw materials and in improving the standards of living for the farmers (Nestle Case Study). The company launched Cocoa Plan in Africa to help the cocoa farmers in running of the profitable farms. The initiative also aims in helping the farmers to respect the environment and to make their lives and their children's better. The company also aims at ensuring supply of cocoa that is sustainable and of high quality. This pertains to the company's long term goals. The company has also identified some of the major areas that it wishes to improve as part of the cocoa initiative. This includes training the farmers. The farmers will be made aware about ways in which they will manage their farms without necessarily involving children to cater for the labor costs (Nestle Case Study). The company also focuses on buying directly from the cooperatives at a higher premium than what is normally the case. The cooperatives buy the crops from farmers hence a higher premium increases the revenue the farmers get. The company also has focused on working with programmes relating to the certification, for instance Fairtrade. The implementation of the tree action plans under the cocoa plan initiative is anticipated to create value for farmers and their families in general. Through this plan, the company gains from receiving supplies of high quality and maintaining sustainability. The community gains from the continued support they receive in terms of training and improving the standards of living (Nestle Case Study). The research and development centre that Nestle set in Africa has helped the farmers to develop higher quality seedlings. This has improved the sustainability of income of the farmers as a result of growing more. The centre develops disease tolerant cocoa plants and, therefore, has reduced the cost of losing plantlets. The company has also invested in training the farmers to help them to develop techniques of managing crops and pests and reducing child labor. The company is in partnerships with foundations like the World Cocoa foundation in order to build schools. This is done to limit the rate at which child labor is practiced. Finally, the company through its partnerships with the certification companies ensures that the crops are certified before being manufactured into end products. The high quality of coffee beans has revoked Nestle to pay premiums on the beans. This has helped to secure the communities future growth through increasing the level of income of the growers or farmers (Nestle Case Study). Challenges Few challenges have been faced in the implementation of the cocoa plan. The company has been sourcing the cocoa beans from one country that is Cote d’lvoire. As a result, the quantity of supplies acquired from the company has gone down for the last period. The quality has also declined. The decline in both the quality and quantity can be attributed to farmers in that country. It has been observed that an average cocoa farmer is of age 55 years or above. The consequence of old age is reduced production, hence decline in the quantity and quality. The decline can also be attributed to the migration of the younger people from the rural to the cities in search of work. The skilled labor required to produce quality crops is then reduced. The challenge is raising a new generation of farmers relating to the cocoa plants and improving the living standard of the existing labor (Nestle Case Study). Conclusion This paper has summarized the case study of Nestle Company on its shared value. This includes analyzing the key players that make the supply chain a success. The paper has also outlined the factors that make the success of that supply chain. This includes the key items that the company is focusing to accomplish. These are water, rural development, nutrition, sustainability. The paper has outlined some of the various ways in which Nestle is creating value through the introduction of the cocoa plan. This is through sustaining the corporate responsibility and training the farmers as well as increasing their revenue through buying from them in premiums. Finally, the paper has discussed the major challenge that is facing Nestle in implementation of the Cocoa plan. Work Cited Nestle. “Creating shared value in the supply chain.” The times 100, business case studies, 2011. Web. Retrieved from http//: businesscasestudies.co.uk./creating-shared-value-in-the-supply-chain. Read More