Introduction

The rapidly increasing global competition over the past decade has led to the emergence of new
scenarios for most of the industrial sectors. The industries are now associated with rapid
technological changes and product variety proliferation in order to remain competitive. The
competitiveness of a company is mostly dependent on its ability to perform well in dimensions
such as cost, quality, delivery, dependability and speed, innovation and flexibility to adapt itself
to variations in demand.
Aiming at improving organizational performance through the effective use of production
capability and technology, operations strategy such as total quality management (TQM), quality
function deployment (QFD), six sigma, business process re-engineering (BPR), just in time
(JIT), benchmarking, performance measurement and many others are commonly used. The
concept of quality has evolved from mere specifications, controls, inspections, systems, and
methods for regulatory compliance to a harmonized relationship with business strategies aimed
at satisfying both the internal and external customer. Today, quality and value are, first and above
all, givens, and the customer expects them. Quality in the successful organization is fully
integrated into all of the business processes and is an extension of everything else that has to
happen along the path to success, both for the company and for the people involved.
Quality Definition(s)
As Specified by Joseph Juran, Quality is the fitness of use i.e. it is the value of the goods and
services as perceived by the supplier, producer and customer. The measure also pertains to the
degree to which products and services conform to specifications, requirements and standards at
an acceptable price. Some of the definitions of the term Quality', provided by quality gurus are
as follows:

Quality is fitness for use (JURAN)

Quality is conformance to requirements (CROSBY)

The efficient production of the quality that the market expects (DEMING)

Quality is what the customer says, it is (FEIGENBAUM)

Quality is the loss that a product costs to the society after being shipped to the customer
(TAGUCHI)

The totality of features and characteristics of a product or services that bear on its ability
to satisfy stated or implied needs of the customers (ASQC)

A quality system is the agreed on company wide and plant wide operating work structure,
documented in effective, integrated, technical and managerial procedures for guiding the

co-coordinated actions of people, the machines, or the information of company in the best
and most practical ways to assume customer quality satisfaction and economical costs of
quality. (FEIGENBAUM)
Dimensions of Product Quality
As prescribed by Garvin, the eight dimensions of quality are:

Performance

Reliability

(how often the product fails?)

Durability

(how long the product lasts?)

Serviceability

Aesthetics

(what does the product look like?)

Features

(what does the product do?)

Perceived quality (what is the reputation of a company or its products?)

(will the product do the intended job?)

(how easy is to repair the product?)

Dimensions of Service Quality

Reliability

Responsiveness

Competence

Courtesy

Communication

Credibility

Security

Three Aspects of Quality (Figure)

The three aspects of quality and their linkages with each other have been depicted in the figure
below:
Quality of Design: Consumer's Perspective

The product must be designed to meet the requirement of the customer. The product must be designed right first time
and every time and while designing all aspects of customer expectations must be incorporated into the product. The
factors need to consider while designing the product are:

Type of product

Cost
Profit policy of the
company

Demand
Availability of the
parts

Quality of Conformance: Manufacturer's Perspective

The product must be manufactured exactly as designed. The activities involved at this stage include: defect finding,
defect prevention, defect analysis, and rectification. The difficulties encountered at the manufacturing stage must be
conveyed to the designers for modification in design, if any. The two-way communication between designer and
manufacturing may help to improve the quality of the product.
Quality of Performance
The product must function as per the expectations of the customer. The two way communication between designers
and customer is the key to have a quality product.

Quality Concepts in Nestle

Quality assurance and food safety

At Nestl, we are committed to delighting our consumers with food and beverage products that
are consistently both safe and of the highest quality. We maintain the same high standards in all
countries in which we operate.
Quality assurance and product safety is one of Nestls 10 Corporate Business Principles, which
form the foundation of all we do.

Nestl Quality Policy

Our actions to ensure quality and food safety are guided by the Companys Quality Policy, which
describes our commitment to achieve:

consumer trust and satisfaction with all our brands, products and services;

food safety and full compliance with all applicable regulatory requirements;

quality as a group-wide objective; and

a zero-defect, no-waste attitude by everyone in our company.

When necessary, we have recalled products. For more information see the KPI table.

Nestl Quality Management System

Our Quality Management System ensures that we can deliver on our commitment to quality and
food safety. The Nestl Quality Management System encompasses our systems for food safety
and our requirements for quality compliance, including compliance with all regulatory and legal
requirements.

Good Manufacturing Practices

We apply internationally recognised Good Manufacturing Practices (GMP) to ensure
quality and food safety. GMP addresses all aspects of manufacturing, including design of
equipment, standard operating procedures, people management and training, machine
maintenance, and handling of materials.

Hazard Analysis and Critical Control Points

We use the internationally recognised HACCP system to ensure food safety. This is a
systematic approach for managing food safety covering the entire food production
process from raw materials to distribution. It identifies food safety hazards (e.g. chemical
or microbiological contaminants) and defines the appropriate measure to control the
hazard, with a focus on prevention.

Traceability
Our traceability system follows the "one step up one step down" principle. We know
and have approved the manufacturing for all our raw materials and packaging materials.
Equally we keep records of which product we have sold to which customer.

Compliance to the Nestl Quality Management System is certified by independent Certification

Bodies. The same applies to the Food Safety Management system, which is certified against the
public standard ISO 22000 and ISO 22002-1.

2. Value chain Approach of Quality

The Value Chain is the food production process, starting from the very early stages of
understanding consumer culture, behaviour and needs, and then continuing the innovation
process from ideation to product conception, development and launch. Then, after the product or
service becomes available on the market, Nestl must always test and validate that it satisfies
their needs and expectations.
Our scientists and research are present at every step of Nestls value chain of innovation,
creation and development. Click on the sections of the value chain below to find out how.
Consumer needs

Nestle know that for consumers around the world, Good Food has different meanings. Food
preferences vary incredibly depending on where you live, your culture, religious beliefs, lifestyle
habits and purchasing power. Therefore, we adapt products to fit different lifestyles, cultural
considerations, nutrition needs, budgets and taste preferences.
The challenge of R&D is constantly evolving from making products that respond to the
consumer needs of today - to making new products that anticipate the consumer needs of
tomorrow.
Consumer-centric innovation starts with WHAT CONSUMERS WANT. We must understand
what consumers define as Good Food and how food contributes to a Good Life. Consumer
insights and Nutrition, Health and Wellness benefits are the starting points for our research and
innovation pipelines across all business and product categories.
Nutritional based research
Food provides nutrition which is necessary not only for survival, but for good health and optimal
quality of life. Our Nutrition and Health research provides the scientific basis to evaluate the use
of the right nutrients in the right amounts, so that Nestl can make products that fit your
individual lifestyle and nutrition needs.

Development
The inviting challenge for R&D is to translate scientific discoveries into practical applications
and production on a factory scale. Processes and technologies that work in the laboratory must be
up-scaled by Nestl's R&D centres to meet industrial production needs, where hundreds and
even thousands of products can be produced each hour!
Quality Assurance
uality & Safety is of utmost importance to Nestl. With outstanding scientific expertise, Nestl
scientists develop and validate methods to test ingredients and products throughout production,
from raw materials to finished products. These validated and tested methods can then be
implemented by Quality Managers in Nestl laboratories, factories and distribution channels
worldwide.
Consumption
After a product is developed and launched, we must ensure that it continues to meet consumer
needs. Therefore Nestl employs its 60/40+ initiative, involving rigorous consumer product
testing of all products to guarantee that consumers are happy.

Nestl SA, the worlds largest manufacturer and marketer of foods, has leveraged the
Nestl Continuous Excellence (NCE) program, a continuous improvement initiative based
on LEAN and TPM principles, to deliver the Nestl Model of steady, five to six percent
organic sales growth. Introduced in 2008, NCE has enabled annual savings of CHF 1.5
billion. Even though the context is an MNC food giant, the story of NCEs inception, rollout
and adoption provides lessons to mangers in other industries as they seek to embark on
continuous improvement and change initiatives in complex organizational environments.
Nestl SA, one of the largest companies in the world with 2011 revenues of CHF 83.6 billion and
281,000 employees spread across 86 countries, has, over the past decade, consistently delivered
the Nestl Model of five to six percent organic sales growth as well as year after year EBIT
margin and capital efficiency improvements. One of the main reasons for the companys
continued success is the Nestl Continuous Excellence (NCE) program1. Formally introduced in
2008, NCE has allowed the company to accelerate its efficiency drive across the value chain and
achieve annual savings of CHF 1.5 billion.
Recently, analysts have also taken note of NCEs impact on the company:

We see Nestls Continuous Excellence (NCE) programme (and corporate cultural tool for
change) as a key driver for the group in coming years. Annual savings of CHF1.5bn enabled by
NCE should rise to CHF2bn and beyond in the next 24 months, we believe, as what we have
dubbed the Alpine equivalent of lean six sigma (war on waste, simplified processes, collective
value goals) is rolled out through manufacturing sites and to the broader group.2
In Brazil, Nestl had implemented LEAN Thinking, a management philosophy focusing on zero
waste, and on Total Productive Maintenance (TPM) in its plants beginning in 2005. In Malaysia,
semi-autonomous work teams (SAWTs) front-line production teams that were empowered to
determine their own goals and directions for improvement in alignment with the company and
factory goals had been in place since 2003. In Australia, Nestl had been working in mini
business units, which were similar to the concept of SAWTs in Malaysia. Nestl USs Future
Manufacturing initiative focused on teamwork with teams having 100 percent responsibility
and utilizing all talent in the company. Nestl Germanys Aufwind program was closely related
to TPM. In Southeast Asia (the Philippines, Thailand, Japan and Indonesia) quality circles and
small group activities (SGA) had sprung up during the 1990s; these groups of employees
identified a problem and were given two months to come up with a solution, which they
presented as a group, then the best projects were implemented.
The
NCE
model
After touring Nestl operations around the world, Lopez developed his vision of the NCE model
a single operating system for Nestl operations that built on the best practices already
implemented internally around the world. He argued that having a common model for the entire
organization was critical as it would (1) ensure the sustainability of the program independently of
changes in management, (2) use one validated set of best practices, (3) eliminate duplication of
effort and (4) enable sharing of learning on implementation.

Lopez advocated an approach that went beyond cost-cutting and focused on consumers, quality
and safety. His proposed performance improvement emphasized three areas The 3Cs of (1)
delighting the Consumer; (2) delivering Competitive advantage; and (3) excelling in
Compliance. NCEs guiding philosophy of LEAN Thinking the Nestl Way would be
supported by five key principles that focused on value creation: (1) engage our people; (2)
understand value; (3) evaluate which activities add value or not; (4) eliminate non-value-added
activities; and (5) continuously improve value creation.
After touring Nestl operations around the world, Lopez developed his vision of the NCE
model that built on the best practices already implemented internally around the world.
To implement this philosophy, three NCE foundations had to be in place before undertaking any
further activity. The first foundation element was the Nestl Integrated Management System
(NIMS), which served to ensure that health, safety and quality guidelines and processes were in
place and complied with to consistently deliver high-quality products and services to consumers
in a safe and trustworthy manner.

The second foundation element was Leadership Development, which consisted of three
components: success profiles (defining roles and behaviours), talent pool and succession
planning (developing the right people for the job), and leadership and coaching. A major
emphasis was placed on coaching and empowerment as these were considered essential to
engaging people and unlocking their potential.
The final foundation was Goal Alignment, a set of practices that aimed to align employees
actions with business priorities and to ensure reliable execution of those actions. Cascading
objectives allowed everyone to understand the link between the strategy and their day-to-day
actions and promoted teamwork. It included several visual elements: an operational master plan,
performance measures, reviews, standard routines and basic problem solving.
An operations unit had to demonstrate that it had effectively implemented the three foundations
in order to unlock the gate and begin TPM. The next step was to optimize manufacturing
operations using the seven TPM pillars. All of these elements combined were called the ONE
Nestl Operating Model.

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case series: Nestl Continuous Excellence 3-2212, 3-2214, 3-2214, 3-2314.
2. John Cox, Keplar Corporate Research Analyst Report, 9 June 2011