Operational Decisions of Nestle Middle East Beverage Company - Case Study Example

Name: Tutor: Course: Date: Nestlé Middle East beverage company Nestlé Middle East started its operations in Lebanon in the early 1930’s but Nestlé Middle East was founded by Jebel Ali Free Zone, in 1997 in Dubai. It is the regional hub that serves a wider market in UAE. It fulfills the needs of the Levant, Iraq, Iran, and GCC markets. It operates 16 offices and 14 factories in the region (Alan 145). The company has invested over $400 million in the region. This investment has contributed to the creation of many job opportunities to the citizens of these countries. The first Nestlé imported its products from Vevey, Switzerland (Nestle Food Corporation & Nestlé Company 78). Its operations are expanding rapidly to other countries in Middle East due to high demand of their high quality beverage products. The company has boosted the technological advancement, enhancing manufacturing and processing capabilities, and improving national and regional economic development (Dirk et ai. 376). Some of its beverage products are NESCAFÉ® MY CUP® Strong Instant Coffee, NESCAFÉ® Cappuccino, NESCAFÉ® Café Mocha, NESCAFÉ® Café Latte, NESCAFÉ® RED MUG® Instant Coffee, NESCAFÉ® RED MUG® Instant Coffee, NESTLÉ FITNESS®, NESTLÉ PURE LIFE®, KIT KAT®, NESQUIK®, CHOCAPIC®, QUALITY STREET®, CHEERIOS®, NESTLÉ (COUNTRY) CORNFLAKES®, CERELAC®, MAGGI®, NESCAFÉ®, and NIDO® (Gil 345). These are some of the most popular beverage products of Nestlé Middle East company. Other products are bottled water, beverage creamers, breakfast cereals, culinary, confectionery, milks, and coffee (Hines 53). Overview of the retail presence of this company’s beverage products in the UAE The retail sector for the Nestlé Middle East company in UAE continue to boom and prosper in the region (Singapore International Chamber of Commerce 104). The Dubai Emirates projected top in the Gulf region total retail spending in 2009 because the market is expanding (McComas 13). The population in Dubai is a fraction of that in the neighbouring Saudi Arabia. The analyst in the industry say that the retail spending including food stuffs and beverages is growing at a high rate. It was estimated that the Emirates would hit $7.6 billion in 2009 and $12.3 billion by 2012. The Abu Dhabi is expected to yield and hit $1.9 billion and Saudi Arabia $6 billion. The comapnay has accepted the challenge because Dubai has the highest population and the management has vowed to deliver much mall footage in a short period. By last year (2010) 1.5 million square meters had added its stock from the existing 600 thousand meters square. It also expect 900 thousand meters square which is set to achieve 3 million threshold in the whole of UAE market (Simchi-Levi 45). The total GCC footage comprise of 17% and the market is expected to increase by 34% in Dubai in the next 5 years. The company has many stores run independently and the it has managed to retain and maintained more than 50% of the market (Gil 346). The stores have been established in all countries in the UAE in order to avail the beverages products of the company near to the customers. It has started offering other services to the customers such as after sale services, credit and delivering the products to their homes or residential areas (Nestle Food Corporation & Nestlé Company 79). The position the company is taking is facing stiff competition and threat from other major retailers who are opening smaller stores and target the same customers as the company. However, the company is establishing gated communities in the whole region of UAE for the customers not to travel long distances. This will be appropriate in the roads which are highly congested located near the city malls and hypermarkets (Alan 147). Current level of maturity of the Nestlé Middle East company supply chain of its beverage products Nestlé Middle East has started rolling out by expanding its operations to other countries in the world. It is distributing the beverage products to the entire UAE region through its distribution channels (Oxford Business Group 103). The integration of the SAP system with the warehouse management systems of Agility (Oman), GAC (Dubai), Intercol (Bahrain), ABA (Qatar), and Mohebi is one of the main features that makes the chain management reliable (McComas 15). The company wants to ensure beverage products reach all markets within the required time so that it can avoid shortages (Simchi-Levi 49). It is well known for its professionalism and and integration in project management. The packing specification has been enhanced by the Advanced Shipment Notice Import and the Nestlé SAP system which have reduced shoprtage of the beverage products in the market (Hines 55). Distribution of the products has been eased by Supply Network Solutions (SNS) which is the leading supply chain and distributor of the company (Singapore International Chamber of Commerce 107). Its supply chain is comprehensive even though, it is planning to expand to reach many countries globally instead of concentrating in UAE only. In a move to strengthen its supply chain, the company has set policies that will promote solution development, training, system integration, and supply chain consultating in order to improve its distribution (Alan 148). The company operates freight forwarding, retail, whole sale, distribution, and party logistics that has maintained continous supply of the beverage products in the market. SNS is the main supply chain distributor of the company’s products. It has spread its partnership of network chain to many continents and countries in the world. Such networks have been linked to North America, Asia, Africa, and Europe. It has set distribution and coordination offices in these regions where it has many customers. It has established a high customer culture that will supply the products to the company. The supply chain is organized and structured to meet the customer needs (Dirk et ai. 377). Five operational decisions that would enable the company to achieve the two objectives Operational decisions are short term decisions which are made in the company as opposed to the long term strategic decisions. The company need to have operational decisions in order to achieve its two main objectives. These objectives are to make zero stock-outs of its beverage products and on-time delivery of orders for its beverage products in its retail in all markets (McComas 16). Some of the operational decisions are manufacturing and processing plan decision, logististic decision, suppliers decision, sales and marketing decision, and distribution decision. To ensure there is no problem of zero stock-outs a situation where the demand cannot be fulfilled, the company has to make a manufacturing and processing decision. This is where the company ensure raw material are readily available and to expand its company to manufacture and process more products to avoid shortages in some market areas (Gil 347). Distribution decision is important because it will ensure the beverage products reach the customers in the market within the shortest time and in a reliable manner. It will reduce delays if the distribution channels are wide spread and reliable (Oxford Business Group 104). The company should construct more chain and retail stores in all the markets identified to keep their stocks in plenty. This will reduce delays in the supply of the products to the customers in all markets in the UAE. Distribution is essential in the company because failure to supply the products in the market, the competitors will take advantage to avail theirs in time; hence, the company looses customers (Hines 56). Sales and marketing decision is essential because it will ensure the products of the company are known by the potential customers in all markets in time. This is important when launching new product in the market. It will help the company identify the potential customers and markets so that it can supply the products. This will ensure all markets and customers are served with adequate products and in good time without shortages. Sales and marketing will help the firm to know the quantity of the products required. This will help the production manager to estimate what is required in the market and at certain periods. The market will be satisfied at all times because of proper planning (Alan 149). Logistics and suppliers decisions are essential operational decisions that have helped the company avoid shortages and delay in supply of products in the market. The company will achieve the two objectives if it pays the suppliers in time and build large ware houses and stores to store raw materials. This will help reduce shortages in future in case there is shortage in supply of the raw materials. Suppliers determines the time products reach the customers because if they do not supply the raw materials in time, processing and distribution will delay. Proper logistics should done to avoid shortages and delay arrival of the products in the market (Oxford Business Group 105). Different information required to make each of the five operational decisions The information required to make processing and manufacturing decision is gotten from the manufacturing manager from the organization. The information required is the volume of the products the plant can process or manaufacture to serve the whole market. The information is collected using interview or questionnaires method, whichever is appropriate. The information is analyzed and the management is advised on whether to expand the plant or not (Gil 349). The information required for the distribution and supplier decision is whether it is reliable or not on its operations. The information is collected from the customers in the market through questionnaires and holdind regular meetings with them. If the information collected shows that the distribution is not reliable, the company management is advised to improve on its diustributiuon channels (Dirk et ai. 378). The supplier information is collected through questionnaires administered to the chain and warehouse manager and suppliers themselves because they have information on the supplies of the company. If the suppliers are not consistent, then the firm can change the suppliers or the suppliers can explain the reasons, which make them unreliable (Segal-Horn & Faulkner 65). Sales and marketing information is collected using questionnaires or interviews with the sales and marketing manager (Dirk et ai. 379). The information required is whether the methods used to create awareness of the products to the customers are efficient or not (Segal-Horn & Faulkner 67). The information is analayzed to find out whether the media or packaging of the products is not attractive and appealing to the customers. The logistics information is collected from the logistics and operations manager so that he can explain the chain and distribution management. The information is then analyzed and interpreted for the appropriate action to be taken (McComas 17). Works cited Alan, Branch. Global Supply Chain Management and International Logistics. New York: Taylor & Francis, 2008: 145-149 retrieved on 10th April 2010 from Dirk Morschett, Hanna Schramm-Klein, Joachim Zentes. Strategic international management: text and cases. Dublin: Gabler Verlag, 2009:376-379 retrieved on 10th April 2010 from Gil Feiler. The Middle East in the new millennium: economic development & business law, New York: BRILL, 2000: 345-349 Hines, T. Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier. 2004: 53-56 McComas Maggie, Geoffrey Fookes, George Taucher, Frank Falkner, Richard Worsnop, & Nestlé Company. The dilemma of third world nutrition: Nestlé and the role of infant formula : a report. Michigan: Nestlé S.A., 1985: 13-17 Nestle Food Corporation & Nestlé Company. Nestle Toll House Recipe Collection. New York: Random House Value Publishing, 1987: 78-79 Oxford Business Group. The Report: Malaysia. New York: Oxford Business Group, 2008: 103- 105 Simchi-Levi D.,Kaminsky P.& Simchi-levi E. Designing and Managing the Supply Chain. Mcgraw Hill, 2007: (3) 45-49 Segal-Horn Susan & Faulkner David. Understanding Global Strategy. New York: Cengage Learning EMEA, 2010: 65-67 retrieved on 10th April 2010 from Singapore International Chamber of Commerce. Economic bulletin - Singapore International Chamber of Commerce. Michigan: University of Michigan, 2010: 104-107. Read More