Operational Activities of Nestle - Essay Example

work Header Sheet 209898-21 OPER1027: Operations Mngt: Proc/Value Ch School/Level BU/UG work Report Assessment Weight 50.00% Tutor J Whiteley Submission Deadline 28/03/2014 Coursework is receipted on the understanding that it is the students own work and that it has not, in whole or part, been presented elsewhere for assessment. Where material has been used from other sources it has been properly acknowledged in accordance with the Universitys Regulations regarding Cheating and Plagiarism. 000746264    Tutors comments                                        Grade Awarded___________ For Office Use Only__________ Final Grade_________ Moderation required: yes/no Tutor______________________ Date _______________ Report on Operational Activities of Nestlé Table of Content Objectives of the Report……………………………………………………………..…………. 03 Introduction of the Company…………………………………………………………………... 03 Products Profile at Nestlé……………………………………………………………………….. 04 Value Chain at Nestlé…………………………………………………………………………... 04 Operations Management at Nestlé……………………………………………………………… 06 Supply Chain at Nestle………………………………………………………………………….. 09 Ethical Issues at Nestle…………………………………………………………………………. 09 Environmental Issues at Nestle…………………………………………………………………. 10 Conclusion……………………………………………………………………………………… 11 Reference List…………………………………………………………………………………... 13 Objectives of the Report: The main objectives of this report are given below: Focus on the operational activities conducted at the world famous beverage company Nestlé. Value chain analysis of Nestlé will be focused. A deep insight will be given to those operational activities which are the root cause of Nestlé’s success. This report aims to find out how Nestlé gives value to its potential customers. Report will conclude at the main finding of any ethical or environmental issue which may affect any of the operational activity. Introduction of the company: Nestlé is a multinational food and beverages company headquartered in Switzerland. It is the biggest food company in the world on the basis of its annual revenues. Nestlé Company was found in 1905. Up till now Nestlé has enjoyed nearly 115 years of enormous success in the market as one of the market leaders. After World War II Nestlé saw a boom period and since then it grew at a faster pace leaving behind all the competitors of the market. Nestlé is also listed on the Swiss Stock Exchange. It is also ranked at the number 1 position in the Fortune 500 companies in 2011. Nestlé is serving over 150 countries at this time with almost 461 factories or operations in 83 countries. With the help of these facts and figures we can imagine the huge network of Nestlé. The basic key factor behind the foundation of Nestlé Company was the research to find out the alternative for the infants whom mothers cannot feed. This was an intense social thinking and thus we can say that from its origin Nestlé Company is aimed to work for the people and not for gaining profits. Nestlé have taken many steps in the social concerns. They always try to satisfy their customer base not only with their products but also with the communication skills. Through this way they give value to the potential customers. Customer and supplier relationship management is an important tool to create a good company name. Nestlé has always differentiated itself as the company focusing on the people who are very much health and nutrition conscious (Raza 2013). As per recent information, Nestlé has announced to expand its research and development centre in Singapore. The primary focus of this R & D centre will be health and nutrition. The Nestlé team also says that the core aim of their company’s presence is to enhance the quality of people’s lives every day. This is also shown Products Profile at Nestlé: If we consider the world wide operations then there are almost 8000 brands which have been offered by Nestlé. As a result they have captured a huge market share and thus achieve success as compare to many other competitive firms. According to a news report Nestlé is such a biggest company in the food industry that its financial results can predict the whole market’s results (The New York Times 2013). All the product lines of Nestlé are always meant for their high quality. These may include dairy products, bottled water, infant food, chocolates, coffee and juices, quickly made food items, breakfast cereals, ice creams, beverages, sauces, frozen food items and even pet food also. Value chain at Nestlé: The value chain can be defined as the addition of value or points to the semi processed product at each and every step of the manufacturing process starting from the raw material to finished product. Value chain analysis can be done in order to check the strategic planning of the firm (Saha 2011). Look at a general value chain this may include activities like inbound logistics, operations, outbound logistics, marketing and sales and at the end there is after sale services. These can be shown in pictorial way i.e. (The Value Chain 2010). At Nestlé the inbound logistics means the purchase of raw material either from farmers in case of food items or from a plastic factory in case of water bottles. The second level of value chain is operations which include all the processing which is done under the roof of Nestlé manufacturing plant. All the delivery procedures for the products are included in outbound logistics. Because of fierce competition in the beverage industry every firm have to focus on its marketing strategies and should use all the possible ways marketing channels to promote their products. After sale services are very important in many businesses but in case of Nestlé the company can have reusability of the product which is better option as a part of value chain. At Nestlé the value chains also means the research starting from the consumer needs and ends at the delivery of innovative but desired product to the end-user. The research actually predicts the market demands and trends. At each and every step of this food processing more focus is given to quality control and also health safety issues. Researchers do their work at every level i.e. consumer needs, nutrition development, quality and safety and at the end final consumption. Even in this technological era, Nestlé is also applying certain database management programs at different levels of the value chain or we can say its supply chain in order to get maximum efficiency regarding food processes. Nestlé brings together all of its global R&D resources and thus provide high quality food for the world wide consumers whether this quality is in terms of nutrition, health, wellness, taste or even packaging also. Nestlé’s R&D is also so much efficient and also collaborative for launching new products in the market as compare to many other competitive firms. Nestlé always try to comply with the logo ‘Good Food, Good Life’. The researchers at nestle say that different people have different meaning of good food therefore they always want to diversify their products and fulfilling all the customer’s demands. Therefore it’s now a challenge to fully analyze the market needs so that the company can perform at their best. Operation management at Nestle: Operational management can be defined as the management of all available resources while giving maximum output (Khan 2007). Thus a company’s operations may include each and every single activity which is done at any company. These may be related to planning, manufacturing, procurement, value chain, supply chain, product design, inventory management and total quality management issues. When talking about Nestlé, then research showed that there has been continuous improvement in Nestlé’s operational activities for many years (Lopez 2011). Some of these operational activities are described below: 1. Product design: Product design is very important for any company because it put its effect on the customer’s minds. Product should be designed in such a way that it attracts its customers. The packaging is very important at Nestlé because it aimed to prevent food wastage and also to maintain food quality. The main consideration is to optimize the weight and volume of the pack. The team managers at Nestlé always design packaging in such a way which helps to protect food because of its perishable nature and less shelf life. Recycling is another important issue in the packing material. In this regard Nestlé always gives importance to the research and development. They have the largest network of R & D as compare to many other companies (Mohammad 2012). The researchers at these departments are fully involved in analyzing the market current trends and consumer needs so that the production department can work accordingly. 2. Procurement: Procurement is actually a structured way of purchasing goods and services as raw material. The importance of procurement policy is vital because it helps to get desired raw material at reasonable cost. Procurement policy is designed very carefully because Nestlé always want to satisfy customers with good quality food and this good quality is only possible if the raw materials are good. Sourcing should contribute to the profitable development of the company. On the basis of these sourcing and procurement policies, Nestlé can differentiate with respect to food quality. At Nestlé most of the raw material is purchased from trade whereas some of it is bought directly from farmers. This direct procurement is only done in case of perishable products which have less shelf life. But it is also clear that Nestlé does not have any farming activity on its own like many other companies have (Nestlé Procurement Policy 2002). 3. Manufacturing: Manufacturing means the conversion of raw material into complete finished goods either with the help of machinery or human activity. The manufacturing process at any company is always aimed at taking minimum inputs and giving maximum outputs. Same is the case at Nestlé Company: the managers at manufacturing department are very much concerned about the raw materials which are going to be used. The high quality raw material is used in an effective way and the finished product is also reusable in certain products lines. 4. Capacity planning: Capacity planning is an important activity for the company. It refers to the process of making plans for the production capacity needed by any organization. For an effective productivity schedule a firm must need to do planning so that everything should be managed. Nestlé deals with many of the capacity plans so that there should be back up plans in case of any contingency (Capacity Planning and Control: Nestle 2008). Therefore capacity planning can also be named as demand management. Demand management is all about forecast of the market demand. 5. Quality management: Whenever we hear the word Nestlé the first word which comes to the mind is quality product. This is the power of branding that people have strong perception regarding Nestlé’s products. Nestlé’s quality management is the platform which is globally used to guarantee food quality thus complying products with the quality standards and thus satisfy the customer. In order to check the quality standards proper auditing and verification is done with each and every single item. Quality assurance is very much needed for the quality management process at any firm. In this regard Nestlé seems to do a promise with its valued customers and as a result it always provides high quality products. This standard quality is maintained by Nestlé at all the manufacturing plants provided all the customers all over the world. Supply Chain at the Nestle: The Nestlé team is aimed to supply the desired product to the customers no matter where they are residing across the world. In order to fulfill this feature they have a strong supply chain network. The integration of farms to the consumers is basically the effect of a strong supply chain. At Nestlé the supply chain managers always strive to make sure that the demanded product is delivered at right time, right cost and in a right quantity. Nestlé has its own transportation system in order to facilitate the logistics. Nestlé always manages its relationships with the suppliers and the customers on good terms. The managers at Nestlé also focus on maintaining long-term relationship with suppliers as they want to get good quality raw material for processing. These long-term relations are actually beneficial for Nestlé and for suppliers as well. This two sided relationship benefit both parties as Nestlé gets its desired products and the suppliers get advices regarding efficient production thus saving their costs. If we talk about the customers then here Nestlé themselves have to maintain the customer base because the customers have a variety of options available in the market to switch. So to take care of the demands of the customer is one of the basic motives of the Nestlé managers. Ethical Issues at Nestle: The multinational businesses and the ethical issues are two parallel issues. Due to awareness of people, it is now responsibility of every organization to maintain its CSR thus creating a good image in the minds of the customers. Like many other companies Nestlé also have to consider social issues also along with their major operations. Though the foundation of Nestlé is also on a social issue of infant feeding but still in some situation an organization might struck in a controversy. The research studies showed that Nestlé is always among the top companies with respect to their corporate social responsibilities. Nestlé always believes that for a successful business there should always be value creation not only towards shareholders but also for the society. This is termed as the shared value creation. For shared value creation there is a need of high level commitment towards responsibilities and Nestlé is very much concerned about its commitments. But still there are some controversies regarding marketing strategies of Nestlé. Critics argue that Nestlé promote their infant baby food as the substitute for mother feed. They also said that Nestlé provides free sample of baby infant milk to some hospitals which is not at all ethical. Despite all these controversies Nestlé Company is still the best and the safest nutrition providing company. And this claim can be for any of the Nestlé product either it’s a simple water or even a baby infant milk. Environmental Issues at Nestle: Now the world is facing the biggest problem of environmental pollution. This pollution is getting hazardous for the mankind. People are very much concerned about environment protection. Due to this level of awareness the multinational companies are trying their level best to adopt such kind of policies which can help them to save the environment. Nestlé is one of those companies who have changed their operational activities according to the environment saving strategies. Environmental sustainability is always the main focus for the Nestlé Company. At all the levels of food processing it has been focused that natural resources are utilized efficiently and effectively. Nestlé always strive to use renewable resources. Similarly water management is among the biggest concerns for Nestlé. But the research showed that despite all their best efforts still the executives face certain controversies regarding water management. Critics argue that Nestlé play with the term ‘Pure Water’ in third world countries. One case is about bottled water in South Africa. There are already very scarce water resources and Nestlé gets ownership of them in order to provide bottled water to the people. Now people have to buy their normal drinking water (Fritz 2013). The management at Nestlé claims that we tend to manufacture foods which are not only healthier but also good for environment also (Conzelmann 2013). Nestlé have always tried it’s best to face such kind of social, ethical and environmental challenges. Nestlé has adopted an environmental conservation policy. According to this policy they have focused four main areas which include: water resources, agricultural raw materials, manufacturing and processing of the raw material and the last one is packaging. The company is liable to their responsibility of environment saving within these main four activities which are also the core operations at Nestlé. All of these operational activities are highly related to the environment. The company’s should use all of the natural resources efficiently and effectively so that they can be used by the coming generations also. Conclusion: In order to better perform in the market a firm must know about its competitive position in the industry. This market analysis will give strength to the company for future developmental plans and also help to devise strategies to compete in a better way. Nestlé is a world famous company and the main constituent for its success recipe is its high quality food items. The word Nestlé means a perfect hygienic product for the customer which can be used without any hazard. In other words we can say that the core competency of Nestlé is its quality and brand name. Nestlé is covering a huge part of the beverages industry thus leaving behind all the other competitive firms. Nestlé not only creates value by delivering differentiated products but also by efficiently reengineering its processes. ‘Good Food, Good Life’ the tagline of Nestlé Company shows its mission to provide the best and nutritious choices to the valued and potential customers in a wide range. Nestlé manages its competitive position due to its extensive network covering major portion of the market worldwide. Nestlé managers always focused their relationships with the local suppliers. This might be another reason of the success of the company. But all the authors agreed on a point that the biggest contributor of the Nestlé’s success and huge profits is its brand name famous for high quality products. Nestlé has positioned its products in an excellent way so that customers become loyal to the brand Nestlé. People are more aware as ever before therefore such type of companies has to take care of many issues in order to maintain a good image in the market. Now consumers are not only involved in purchase rather they are also interested in fair usage policy, animal welfare, child labor policy, green marketing, social corporate responsibility and environmental issues like pollution and recycling etc. Therefore Nestlé should adopt such policies which are concerned about ethical and environmental issues also. Despite all controversies Nestlé is always gear up towards continuous improvements and that is the biggest achievement for any company’s operation that it have the flexibility to change as per the market environment. Reference List: ‘Capacity Planning and Control: Nestle’ 2008, viewed 21st Feb, 2014 http://www.123helpme.com/capacity-planning-and-control-nestle-view.asp?id=164052 Conzelmann, C 2013, ‘Insight: Improving our product’s performance along the value chain’, viewed 21st Feb, 2014 http://www.nestle.com/media/newsandfeatures/insight-improving-products-environmental-performance Fritz 2013, ‘The Case of Nestle – A Role Model for Global Players’ viewed 21st Feb 2014 http://www.facing-finance.org/en/2013/09/the-case-of-nestle-a-role-model-for-global-players-2/ Khan, S, A 2007, ‘Operational Strategies of Nestlé Beverages in Pakistan’, The University of Nottingham, The School Business Studies. Lopez, J 2011, ‘Creating Competitive Gaps through Manufacturing’, Nestlé Investor Seminar. Mohammad, A 2012, ‘Competitive Advantage and Value Chain Nestle’ viewed 21st Feb, 2014 http://alfimohammad.wordpress.com/2012/11/22/caompetitive-advantage-and-value-chain-nestle/ ‘Nestlé Posts rise in profits, and warns of falling sales’ 2013, The New York Times. Business Day, viewed 20th Feb, 2014 http://www.nytimes.com/2013/08/09/business/nestle-reports-a-profit-but-warns-of-slowing-sales.html?_r=0 ‘Nestlé Procurement Policy, for agricultural raw materials’ 2002, CT-AGR. Raza, A 2013, ‘Nestlé History’ viewed on 20th Feb, 2014 http://www.scribd.com/doc/22763724/Nestle-history Saha, A 2011, ‘Mapping of Porter’s value chain activities into business functional units’, viewed 21st Feb, 2014 http://www.managementexchange.com/hack/mapping-porter%E2%80%99s-value-chain-activities-business-functional-units ‘The Value Chain’ 2010, Strategic Management Viewed 1st Mar, 2014 http://www.quickmba.com/strategy/value-chain/ Read More