Nestle Supply Chain Management - Essay Example

Nestlé Supply Chain Management Table of Contents Introduction 3 Thesis ment 4 Concept of Supply Chain Management (SCM) 5 Benefits of SCM 5 SCM Strategies of Nestlé 6 Suppliers 7 Customers 8 Transportation 9 Information Systems 11 Inventory 12 Conclusion 14 Visio Diagram 16 Works Cited 17 Introduction Nestlé is regarded as one of the leading global organizations in providing nutrition, health as well as wellness products across the different nations of the world. The organization had been established in the year 1866 by Henri Nestlé and is now one of the leading food corporations in the global food processing industry. Nestlé incorporates a large number of products which can be segmented into different types such as baby food, dairy products, confectioneries, coffee, breakfast cereals, ice cream along with bottled water and pet food products. According to the present day context, the organization incorporates more than 320,000 employees worldwide in its different segments including manufacturing, marketing and financing as well as distribution channels. The organization possesses an effective supply chain management strategy which enables it to efficiently distribute its range of products to each individual customer across the globe (Nestlé, “About Us”). With regard to the business performance of Nestlé, it can be observed that the organization possesses significant competitive advantages which enable it to sustain its globally leading position in the food processing industry. Supreme products, strong brand portfolio along with unrivalled research and development competencies can be recognized as the major competitive advantages of Nestlé in the global nutrition food market (Nestlé , “Strategy - Nestlé Roadmap to Good Food, Good Life”). The aspect of Supply Chain Management (SCM) can be considered as an integrated approach which facilitates an organization to efficiently place its products to its final consumers. Moreover, the approach also ensures to manage products and their deliveries into different destinations across the world. In the context of present business scenario, it has been observed that the organizations consistently provide efforts in order to improve their business competence as well as effectiveness through reassessing their supply chain management strategies on a continuous basis (Zaheer, “Potential of Information System in Supply Chain Management”). From the perspective of supply chain management system of Nestlé, it has been observed that the organization practices an effective process through involving wide distribution channels around the different regions. Thesis Statement According to the modern business scenario, the organizations seek to evaluate advanced and effective strategies in order to achieve long-term sustainability within the marketplace. Moreover, the business organizations in the modern environment are highly focused on complying with modern approaches and systems to enhance their SCM activities which may enable them to achieve competitive advantages in the business market. Based on the capabilities and competences of SCM approach in the business performance, the report aims to clearly explain the SCM strategies of Nestlé including its global suppliers, suppliers-suppliers relationships, customers, customers-customers, transportation, information systems and the inventory of the organization in the global food processing industry. The relationship of Nestlé with its range of global suppliers will also be highlighted throughout the discussion of this paper. Moreover, the discussion of this paper will also focus on highlighting the SCM practices of Nestlé through clear illustrations and charts and other figures concerning the SCM operations of the organization in the global market. Concept of Supply Chain Management (SCM) The concept of SCM can be stated as an effective and essential approach which incorporates strategic and systematic coordination of the business activities along with involving various essential practices within the organization. The organizations in the present business world significantly focus on developing their SCM system for the purpose of sustaining and strengthening their long-term performance within the business market. The concept of SCM can further be stated as an extended approach that facilitates the organizations to efficiently accomplish their various functions including production to supply of goods to the final consumers. The model encompasses different channels such as logistics network, supply chain and other deliverable techniques in order to satisfy the ultimate consumers along with determining the consumers’ desires and needs concerning product features or delivery systems (Zaheer, “Potential of Information System in Supply Chain Management”). Benefits of SCM SCM approach provides numerous benefits to a firm in different ways. An effective practice of SCM can facilitate the organization to reduce the amount of inventory, lead time along with improving the timeliness of the deliveries of the organization’s final products. Moreover, an efficient SCM model within the organizational process can also enable the corporation to increase customer satisfaction level by delivering the right products at the right time in a desirable quality (Chartered Institute of Purchasing & Supply, “Supply Chain Management”). In addition, the SCM model is further stated as an essential element for an organization in terms of properly managing inventory system, material handling, transportation system and operations, warehouse management as well as inbound transportation facilities. The various departments in the SCM model also provide effective assistance for the business operations by rendering services related to customer service performance, order processing as well as forecasting SCM budget which enable the organization to enhance its performance and quality of service within the market (Zigiaris, “Supply Chain Management”). SCM Strategies of Nestlé From the perspective of Nestlé, the organization incorporates a varied assortment of products that range from internationally iconic brands to offerings meeting local tastes and preferences. The products of the organization are considerably unmatched and are highly focused on meeting consumers’ desires and preferences. The SCM system of Nestlé plays a crucial role for the organization in terms of identifying the desires of the customers and producing the right products for them. The SCM system possessed by Nestlé is highly focused on delivering values concerning manufacturing and delivery of products. The SCM strategy of Nestlé consists of certain significant approaches which are directly linked with managing products and services along with information collected from its major suppliers, production units, wholesalers, retailers and most importantly its ultimate customers. The concept of SCM often involves critical facets especially for the food processing industry, as the raw materials can frequently become spoiled if they are not processed within a specific period of time (Rosenthal, “Nestle is Quick to Adopt EProcurement”). Suppliers In keeping with the global performance of Nestlé in the food processing industry, the organization can be identified as one of the major food processing corporations in terms of building strong relationship with the principle raw material suppliers from different locations across the world. The principle suppliers of the organization are significantly the farmers who supply raw materials for the organization (Peerless Media LLC., “Supply Chain Management Review”). In the context of preserving effective relationship with the suppliers, the Sustainable Agricultural Initiatives at Nestlé (SAIN) is one of the major examples, which represents a major initiative taken by the organization to strengthen the productivity capabilities of the farmers. SAIN involves a wide range of activities such as water management and irrigation related supports to the farmers who provide varied raw materials including milk, cocoa and coffee to Nestlé. Moreover, the organization also conducts partnership programs with the local communities which facilitate the firm to avail adequate and quality based raw material for producing its range of food products. For instance, it has been witnessed that Nestlé had successfully conducted partnership programs with the farmers in India and Greece which enabled the organization to minimize possible risks concerning production (Nestlé, “Supply Chain Initiatives”). Customers Ultimate buying customers of the products and/or services play a major role for the organization in terms efficiently practicing its SCM activities. The customers of the organization are the major players who are directly involved with the organization’s offerings. Customers in the SCM approach are significantly considered as a major element which enables the organization to accomplish its business objectives. Customers are among the key players both in terms of quantifying as well as communicating the value of the overall SCM process. Moreover, the organization must need to evaluate the tastes and the preferences of the targeted customers which can facilitate it to achieve competitive advantages within the business market. Hence, customers are the core element for the organization which may also enable it to establish long-run sustainability within the competitive market (Peerless Media LLC., “Supply Chain Management Review”). A SCM system of Nestlé involves various stages both in directly and indirectly fulfilling customer desires or satisfying them through rendering right products at the right time. From the perspective of a wider concept of SCM approach of the organization, the model also consists of additional functions that are highly focused on accomplishing the requests of the customers. The model significantly brings a systematic method which is designed to clearly manage and understand various functions that are required to execute the flow of products or services in order to serve the ultimate consumers. This systematic method in the SCM strategy of Nestlé provides the framework through which the organization is able to attain significant advantages to keep its customers satisfied in the long-run. With this concern, an effective SCM model requires simultaneous developments both in customer service level along with the internal operational efficiencies of the organization’s SCM system (Willey, “Basic Concept of Supply Chain Management”). Moreover, an effective SCM model of an organization enhances the level of customer service operations of the organization through monitoring the satisfaction level of the customers with the organizational offerings. With this concern, Nestlé possesses efficient SCM process in its each distribution centre to monitor the customer service operations which facilitates the organization to satisfy its ultimate customer base (Zaheer, “Potential of Information System in Supply Chain Management”). Transportation The aspect of transportation in the SCM model significantly refers to bringing or delivering goods such as raw materials or finished products amid the various facilities within the process. The transportation operation is also a major component of an organization which directly involves the production performances as well as delivery capabilities of finished products to the ultimate destinations. Transportation is one of the major elements in the SCM model which facilitates the organization to efficiently perform the transfers of raw materials or completed goods. In the context of transportation in the SCM model, the choice of transport mode is an apparent practice which facilitates effective exchange between efficiency and responsiveness (Willey, “Basic Concept of Supply Chain Management”). The organizations in the present day context are highly focused on building efficient transportation facilities which may enable to minimize the costs of the products. In general, the transportation cost of an organization often involves one third of overall operating costs of supply chain (Willey, “Basic Concept of Supply Chain Management”). Therefore, the decision of transportation mode is an imperative factor for the organizations such as Nestle in terms of conveying raw materials or finished goods to the ultimate locations. The SCM strategy of Nestlé involves efficient transportation facility which enables the organization to efficiently perform its manufacturing and distribution processes. The organization possesses an effective distribution network which ensures to deliver more than 100,000 tonnes of food products daily from its range of distribution centers across the different regions of the world. According to the SCM strategy of the Nestlé, it can be observed that the organization significantly aims to enhance its distribution capabilities through engaging different modes of transportation channels. A majority of the distribution processes of the organization are conducted through roadways which is more convenient to deliver food products to short and medium distances. The distribution process of the organization often executes its own vehicles for both short and medium distances, which is more convenient to quickly deliver food products to the ultimate destinations (Nestlé, “Transport and Distribution”). In order to enhance the transportation facilities of the organization, Nestlé involves a large number of heavy vehicles to distribute its range of products to its different distribution centers. Therefore, the organization also considers effective optimization of its vehicles which ensures to lower Greenhouse Gas (GHG) emission at a significant level. According to the organization’s environmental consciousness, it has been observed that Nestlé incorporates an efficient strategy by engaging new engines and aerodynamic truck equipments for its long and medium distance deliveries. Moreover, the organization also executes eco-driving training, electric engine and alternative fuel facilities for its vehicles which ensure to produce lesser emission in the environment (Nestlé, “Nestlé Creating Shared Value Report”). Information Systems Information in the SCM strategy can be stated as a major supporting element through which the organizations can make decisions for their overall SCM processes. It plays a role of connector among a range of activities within the SCM operations. An accurate and complete information system within the SCM process is beneficial for an organization to maximize its profit level by a significant extent. In general, information is utilized essentially for two major purposes, firstly for effectively coordinating regular activities of the key functional drivers of SCM such as inventory, production, transportation and location. Secondly, information also plays a major role in the SCM process to forecast and to plan effective strategies in order to efficiently meet the future demands (Willey, “Basic Concept of Supply Chain Management”). Moreover, the flow of information is quite essential for an organization which significantly involves obtaining orders and updating distribution or delivering options. The organizations in the modern business environment tend to strengthen their information flow in order to recognize and mitigate the demands of the consumers. This strategy of enhancing information systems in the SCM can be effective for an organization to obtain competitive advantages within the emerging markets. Furthermore, a well-built information system of an organization plays an imperative role for it to increase its business operations through identifying consumer desires and attaining significant advantages within the market. According to the SCM strategy of Nestlé, the organization is highly focused on maintaining adequate information systems within its range of manufacturing units, suppliers, wholesalers, distributors, selling stores and finally the end users of the organization. The purpose of SCM strategy of Nestlé is to effectively deliver desired products to the consumers at affordable prices and at the specific time (Nestlé, “Nestlé Creating Shared Value Report”). In addition, it is also important for the organization to efficiently manage the process through forecasting market demands, controlling inventory, empowering distribution networks such as suppliers, distributors, stores and consumers and obtaining feedbacks from each link of the overall SCM process. With this concern, the SCM strategy of Nestlé considerably involves superior information systems which enable to manage its SCM process by estimating the demands of the offered food products thus aiding to control the inventory of the organization. Moreover, the SCM information systems of Nestlé also facilitate the organization to effectively organize its distribution networks such as suppliers, distributors, wholesalers as well as retailers across the different regions (Nestlé, “Nestlé Creating Shared Value Report”). Inventory Inventory of an organization extends throughout the overall supply chain which ranges from raw materials to finished goods and other materials that are associated with the organizational processes. According to the present market scenario, it can be stated that a proper control of inventory is an essential practice for an organization due to the increasing fluctuation of the consumer demands. With this concern, at times maintaining a large amount of inventory significantly creates a major burden for the organization and its SCM system as well. Therefore, the organizations tend to follow three major decisional techniques concerning inventory control. These include safety inventory, cycle inventory as well as seasonal inventory (Dear 41). From the perspective of inventory control system of Nestlé, the organization considerably focuses on the flow of its production materials. In the context of inventory control system of the organization, Nestlé upholds an effective managing process of its inventories. The raw material inventory of Nestle entails milk which is used in its most number of products. Therefore, the inventory control system of the organization possesses safety control system which facilitates the organization to produce its range of nutritious products. The organization executes separate material management department in its various manufacturing plants which directly deals with managing inventories within the production unit. According to the present day context, Nestlé operates more than 500 production units in above 80 countries and it also has different warehousing facilities in each production unit in which the raw materials are stored. Each food manufacturing unit of the organization possesses the capability of storing more than 500,000 litres of milk to produce its range of nutritious food products. The inventory control system of Nestlé chiefly involves two major types of inventory process systems such as Work-In-Process Inventories (WIP) and Finished Goods Inventories. The unpacked or unloaded products can be defined as the WIP inventories that are to be reassessed before packaging. The WIP in the inventory management plays a crucial role for Nestlé which also ensures to maintain superior quality of its varied food products. The finished goods inventories include the finished products which are stored in its warehouses and delivered as per the demands of the products in the market (Scribd Inc, “Details of Production Process”). Conclusion The SCM approach encompasses major elements through which an organization can run its business more efficiently. The increasing competitiveness of the global organizations has made the SCM process more complicated and effective through which a firm can obtain competitive advantages. Moreover, an effective SCM approach can also facilitate the organization to effectively manage its different processes ranging from raw material processing to delivering products to the ultimate users. Principally, the SCM approach considerably involves five major key areas such as production, inventory, location, transportation as well as information through which the ultimate performance of an organization within the marketplace can be distinctively ascertained. According to the above discussion, it can be observed that Nestlé upholds a superior SCM system which ensures to efficiently accomplish each objective of providing quality based food products in different geographical locations. The company operates more than 500 manufacturing units worldwide and it also possesses different SCM systems for each production unit which enables the organization to sustain its leading position in the global food processing industry. The production departments of the organization are located in different locations which facilitate to produce nutritious food products according to the tastes and the preferences of the local consumers. The operations in the production units also encompass the capacity of the plant, quality of the products along with workload balance that facilitate Nestlé to be more competitive in the food processing industry. In addition, it has also been observed from the aforementioned discussion that Nestlé upholds superior inventory management system which is designed to efficiently create a balance between the production capacity of the firm and the market demands. On the other hand, the transportation facility and the superior information system of the organization are also imperative factors which enable the overall SCM process to be more efficient, consequently increasing the organizational performance. Visio Diagram Figure: Visio Diagram of Nestlé Supply Chain Management Works Cited Chartered Institute of Purchasing & Supply. Supply Chain Management. n.d. Web. 07 Feb. 2013. Dear, Anthony. D. Inventory Management Demystified. Great Britain: T. J. Press (Padstow) Ltd., 1990. Print. Nestle. About Us, 2012. Web. 07 Feb. 2013. Nestle. Strategy - Nestlé Roadmap to Good Food, Good Life. 2012. Web. 07 Feb. 2013. Nestlé. Supply Chain Initiatives. 2012. Web. 07 Feb. 2013. Nestlé. Transport and Distribution. 2012. Web. 07 Feb. 2013. Nestlé. Nestlé Creating Shared Value Report. 2011. Web. 07 Feb. 2013. Peerless Media LLC. Supply Chain Management Review. 2012. Web. 07 Feb. 2013. Rosenthal, Beth Ellyn. Nestle is Quick to Adopt EProcurement. Outsourcing Center, 2001. Web. 07 Feb. 2013. Scribd Inc. Details of Production Process. n.d. Web. 07 Feb. 2013. Willey. Basic Concept of Supply Chain Management. n.d. Web. 07 Feb. 2013. Zaheer, Asma. “Potential of Information System in Supply Chain Management.” Global Journal of Enterprise Information System 2.2 (2010): 49-57. Print. Zigiaris, Sotiris. Supply Chain Management. Supply Chain Management Today, 2000. Web. 07 Feb. 2013. Read More