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Raza Saddique

Supply Chain Management
MS (Project Management)
Final Project
CMS No. 17055

INTRODUCTION OF SUPPLY CHAIN

The movement of materials as they flow from their source to the end
customer. Supply Chain includes purchasing, manufacturing, warehousing,
transportation ,customer service ,demand planning , supply planning and
Supply Chain management. It is made up of the people, activities,
information and resources involved in moving a product from its supplier to
customer. Although this Supply Chain definition sounds very simple,
effective management of a Supply Chain can be a real challenge.
EXAMPLE OF A SUPPLY CHAIN:

aw materials
Center

Manufacturer
Customer

R
Distribution

A typical Supply Chain flow of goods is shown above. In some models, the
product is shipped from the Manufacturer to the Distribution Center as soon
as it is manufactured. In other models, such as a Hub & Spoke model, the
product is held at the manufacturer once produced. It is then sent out to the
Distribution Center only when it is needed.
OBJECTIVES OF SUPPLY CHAIN MANAGEMENT:
The fundamental objective is to "add value".
That brings us to the example of the fish fingers. During the Supply Chain
Management '98 conference in the United Kingdom this fall, a participant in
a supply chain management seminar said that total time from fishing dock
through manufacturing, distribution, and final sale of frozen fish fingers for
his European grocery-products company was 150 days. Manufacturing took
a mere 43 minutes. That suggests an enormous target for supply chain
managers. During all that time, company capital is-- almost literally in this
case--frozen. What is true for fish fingers is true of most products.
Examine any extended supply chain, and it is likely to be a long one. James
Morehouse, a vice president of consulting firm A.T. Kearney, reports that the

total cycle time for corn flakes, for example, is close to a year and that the
cycle times in the pharmaceutical industry average 465 days. In fact,
Morehouse argues that if the supply chain, of what he calls an "extended
enterprise," is encompassing everything from initial supplier to final
customer fulfilment, could be cut to 30 days, that would provide not only
more inventory turns, but fresher product, an ability to customise better,
and improved customer responsiveness. "All that add value," he says. And it
provides a clear competitive advantage.

Supply Chain Management becomes a tool to help accomplish corporate
strategic objectives:
 ß reducing working capital,
 ß taking assets off the balance sheet,
 ß accelerating cash-to-cash cycles,
 ß increasing inventory turns, and so on.

SUPPLY CHAIN BENEFITS:
Experience shows that the benefits of a well designed and implemented
Supply Chain Management strategy is substantial. Successfully
implemented projects have provided benefits such as:

Reduction of Transportation, Warehousing, and Distribution Costs
Lean Processing from Supplier to customers
Reduced Direct and Indirect Labor Costs
Optimized Stock Levels
Increased Material Flow Velocity
Accurate Job Costing and Scheduling
Streamlined Purchasing Control
Increased Decision Making Speed and Responsiveness to Demand
Change
 Increased Customer Service







More than 20% of the entire population of Pakistan is involved in this sector directly or indirectly. Accuracies and services  Reduced Operations Support Costs  Reduced Inventory Carrying Costs  Improved Productivity of Procurement Operations  Improved Quality of Products and Services INTRODUCTION OF SUPPLY CHAIN OF MILK IN PAKISTAN Milk is the most perishable and fast moving customer good. Despites of these facts and figures Diary Industry is playing a very crucial role in the Pakistan economy and contributing 14% to the country’s overall GDP. we can divide it in to two categories: One is Formal and second is Informal sector. . Milk is complete diet as it contains every nutrient except iron. Customer Order Fill Rates. If we talk about the Dairy Supply chain management of Pakistan. Increased Inventory Availability. But unfortunately only 27 billion liter of milk is available for human consumption. Fortunately Pakistan is the fourth largest producer of milk in the entire world and its annual production is surprisingly 45 billion liters which is very high. The very first and initial requirement or feed for any human being is milk. Therefore most of the milk is lost and Pakistan cannot fulfill its demand.

milk is collected by different milk collection centre. In the formal sector Nestle is the market leader in Pakistan and contributing 60% of market share as per fact and figure of 2008. In formal sector we can divide it in to two sectors. Large contractors often blackmail small producers and processors. Then it is taken in to the processing plant where milk is stored in cooling towers. farm milk is collected by different milk collectors who sell their milk to the retailers and these retailers provide it to end consumers. Most of the farmers are uneducated and they are unaware of modern technology and equipment. In second case. In first category farm milk is collected by gawalas (milkmen) who sell the milk directly to the consumers or the milk collectors. And again there is no as such Government involvement to train . DAIRY INDUSTRY CHALLENGES IN SUPPLY CHAIN This business is unregulated and there is no as such involvement of government therefore the middlemen often take advantage of poor farmers and charge low prices for their milk and usually delay their payments. In formal sector. milk is processed and packed and then it is distributed to the retailer and finally milk is reached to the ultimate consumer. In the processing plant.The share of formal sector is 4% whereas the rest of 96% of share is taken by the informal sector.

Milk production falls in June and increases in December. animals do not find enough food because grass and herbs dry out quickly.the farmers in modern dairy practices so the famers are lacking in this area. In summer season. The buying capacity for small scale farmers is very low they do not afford high cost of feed for their animals and they are lacking advantage of economies of scale. They do not access to formal market channels and are often exploited by the middlemen who offer low prices for their milk and they enjoy the huge profit margin for their own customer . Average Animal of Pakistani breed gives only 1300 to 2400 kg of milk per annum as compared to yield 6000 kg/animal/year in the modern world. Due to higher temperature the digestive system of animal is weak and farmers yield less quantity of milk. storage and processing make this product more costly. Farmers are not taking the facility of any veterinary doctors which leads to decrease in the milk yield and animal is less productive for longer period of time. The foremost problem dairy industry is facing is the adulteration means adding water. Day by day electricity is a problem in the country therefore majority of the milkmen use ice to keep the temperature of milk low but this method is not optimal and quality of milk is affected. This problem is difficult to control and requires serious consideration from both public and private sectors. The significant difference between the two seasons is really a concern for the dairy sector of Pakistan. If we talk about the facts and figures as per World Bank reports 15%of the milk is lost at the stage of farm due to mishandling and wrong milking practices. fats and other harmful substance to the milk that makes the milk unhealthy and less hygienic. Milk productivity is seasonal and it is going to be the most important issue that milk producers are facing in this industry. Farmers have not sufficient idea of using different types of feed available in the market so they have no precaution to save their animals from diseases. While 5% gets wasted during the transportation stage. As the farmers are not educated in their practices so due to wrong milking methods most of the cow and buffalo have expose to mastitis. Transportation.

000 farmers over 145. has four production facilities. Nestle Pak works as a subsidiary of Nestle S. With its headquarter in Lahore. It has a separate department for supply chain management which was founded in 2001. . Sindh which produces bottled water.INTRODUCTION OF NESTLE PAKISTAN LTD. Nestle Pak. it collects milk from 190. With its 8000 brands worldwide. Nestle Pak started working in Karachi since 1988 under a joint venture with Milk Pak Ltd.A. one in Islamabad and the other in Karachi. Currently. Sheikhupura and Kabirwala which are multi-purpose factories. Two of its factories are in the heart of Punjab province.000 square kilo meters in Punjab and Sindh. The objective behind the creation of separate department of supply chain management is to ensure the smooth running operations from the supply of raw materials from farms or other sources to the supply of finished products into the markets. Nestle is the leading brand in beverages and food industry. Nestle Pak is the biggest milk collector in Pakistan.

 Develop and manage simplified and effective supply network to achieve a high level of service. NESTLÉ PRINCIPLE: Nestlé is based on the principle of decentralization.NESTLE SUPPLY CHAIN VISION: “Nestle’s ambition is to achieve high level of customer satisfaction through low cost. ORGANIZATIONAL STRUCTURE OF NESTLE: . which means each country is responsible for the efficient running of its business . highly efficient operations driven by value creation and continuous improvement” NESTLE SUPPLY CHAIN MISSION:  Optimize and consolidate resources and processes for a low-cost but efficient.including the recruitment of its staff.  Create a continuous improvement culture driven by performance measures and reward.

rich and delicious NESTLÉ® MILKPAK® standardized UHT milk benefits from Nestlé’s expertise in bringing consumer the very best life has to offer and benefits from 140 years of consumer trust. Pure. Nestlé’s extensive milk collection system ensures that the milk you get is of the finest quality. .NESTLE MILK PACK We choose Nestle Milk Pack for our supply chain report among 1000 products of Nestle.

USA. wholesome goodness of milk with NESTLÉ® MILKPAK®! A 250 ml glass of NESTLÉ® MILKPAK® fulfills your daily requirement of 2730% of Calcium. eat a healthy. It is equally beneficial in keeping grown-ups bones strong. All parties in the chain need to have a particularly good grasp of .Encourage your family to exercise regularly. especially for large companies dealing with a complex network of suppliers. as Recommended Dietary Allowance by the National Academy of Sciences. 6-9% of Vitamin A and 160-16 Kcal of energy. Milk is a must-drink for your children as it is a rich source of Calcium that helps in the growth and development of strong bones and teeth. distributors and consumers. 31-34% of Phosphorous. well-balanced diet and drink pure. 15-18% of Protein. So live to the fulles and enjoy the pure. customers. CHALLENGE: Supply chain knowledge is becoming more and more critical to ensure competitive supplies of goods and services. as so we chose MILK PAK to explain the supply chain of Nestle Pakistan. nutritious milk for good health. SUPPLY CHAIN PROCESS OF NESTLE MILK PAK PAKISTAN Nestle Pakistan has a wide range of products from nutrition to beverages.

milk is then reached to the factory warehouse which is near the premises of the factory. Supply Chain of Nestle MILKPAK guarantees environmental friendly practices and for this they are continuously making their contributions in the society for keeping the environment safe and secure. profits and business activities intact. Key Performance Indicators (KPIs) provide the standard metrics for measuring supply chain performance. In both stages the temperature of the milk is kept at 4C to keep the quality of milk up to standard. safety and volume growth of raw materials Mitigate price volatility exposure Reduce transaction costs and serving our brands guaranteeing access to specific raw materials  Ensure safety & quality of raw materials Secure availability of adequate agricultural raw materials     Milk is collected from more than 2000 village milk centers and 500-600 sub centers and then milk is transported to 25 main centers. In the processing stage milk is passed through different stages i. it is transported to the Sheikhupura and Kabirwala factories. How do Nestle create competitive gaps in the upstream supply chain? With “Farmer Connect”. Finally milk is transported to the south. where they have direct contacts with producers to: Ensure traceability up to farmers’ level Assure quality.how their individual activities work together and affect the performance of the whole supply chain. After processing. At Nestlé. After whole process of milk collection. Their ultimate objective is to make sure that the green supply chain is in practice while keeping their benefits. north and central regions.e standardization. . Then finally distributors of MILKPAK carry it and transport it to the super marts and retail shops so that it’s available to the end consumers. pasteurization UHT treatment and packaging. Nestlé launched a new initiative to communicate the value and use of KPIs to line managers.

 Better Equipment Nestle agricultural services staff have drawn up technical plans for cowsheds. and train farmers in hygiene and milking. despite their small yield. . Farmers know that they can call on our trained vets whenever necessary. and provide high quality imported semen at low cost to farmers Nestle Pakistan concentrate on preventative measures against the most common diseases that afflict cattle in Pakistan.SUPPLIER’S SUPPLIER:  Improving Feed Even before calling Nestlé in. their vets and agronomists independently formed an NGO to promote artificial insemination using high quality semen. had tried to ensure that milk cows were given fresh fodder during the summer. Yet artificial insemination is still not widely used. Nestle agronomists have shown that with artificial insemination they can actually triple milk production. For instance. with help from Nestlé and others. they stress the importance of giving cattle enough water. they have established a training programs for inseminators. Their teams are always prepared to offer practical advice. In 1996.  Livestock Breeding & Health Pakistan's vast milk production comes largely from buffaloes. They also provide training on best practices in animal husbandry. Milkpak Ltd. Today. Their mechanics have also developed prototypes of machines to cut fodder quickly an inexpensively. which are provided free of charge. They have planted a variety of fodder crops and demonstrate to farmers on field day.

000 sq.  The milk collected on average is two times 150 liters per day. It occupies a small room of about 20 to 30 m either in the agents house or in a building that nestle’ rents. km of Punjab and Sindh. The Service even helps farmers fill out applications for loans. Nestlé entered into an unprecedented partnership with local farmers. the hard work and determination of our milk collection & technical assistance teams and their dedication to Corporate Social Responsibility have raised the bar for dairy concerns in Pakistan.Starting 2004. PARTNERSHIP WITH SUPPLIERS: Nestle always do efforts to provide pure. 1000 Small Village Diaries  An agent runs the diary. such as building cowsheds. Today. 14 years after Nestlé first entered the milk district in force. Nestle drew up the sample specifications for a model farm to be presented to the bank disbursing the loans.000 farmers spread over 146.  The agent does a quick tasting test on the milk before recording the delivery in the farmer’s personal milk logbook. Nestlé Pakistan collects quality milk from 190. high quality milk to consumers in distant towns. . we went a step further and proposed a system of small loans for farmers who wanted to make improvements to their farms.  The dairy is open two or three hours morning or evening.

972 Secondary Reception And Cooling Stations  These generally occupy about 40 m. Main Reception And Cooling Stations These constitute the final stage in milk collection before it is delivered to factories. .  An agent who also works as a milk inspector to run quality tests runs each secondary station. divided into two rooms. Maintenance Service And Breakdown  Looking after more than 1000 generators with the same number of water pumps  and ancillary equipments demands a systematic approach.  The quality analyses run as each tanker of milk arrives are more thorough than in the secondary station.  Link to the two factories by telephone and Internet.  8 of them are equipped with plate heat exchangers for getting the milk re cooled before transported to the factories.  It also fitted high capacity milk tanks.  The 23 main stations also stores the laboratory supplies needed in the secondary stations and village diaries.  One of these houses an electrically powered milk-cooling tank with a capacity of 600 to 2500 liters. the main stations act as the communication and administration centers for the entire collection system. The agent transports the milk to one of the 972 secondary receptions and cooling station before closing. so 95% of the stations have their own generator.  Power cuts are frequent.

568 68. Each of the 23 main stations employs full time mechanics/electricians.205 53.259 137.693 65.784 . But over the period of time it was transferred to the fresh milkpurchasing department.  For more complex problem mechanic/electrician can immediately calls one of the five Nestle maintenance service station located in five of the main reception stations.394 121.  The Nestle repair service was originally based in Shaikhupura factory. Number of farmers selling their milk to Nestle (Figures got from Google) Year 1994 1996 1998 2000 2002 2004 2006 Number of farmers 39.277 89.

A milk inspector measures the fat content. the non-fat solids content. Within a decade. and enters the quantity into the farmer's logbook. 100 milk tanks were installed. It was a simple solution. reorganization of the milk collection operation and the provision of agricultural technical assistance became top priorities. By 1988. After acquiring a share in Milkpak Ltd in 1988. from humble beginnings on tiny farms in Sheikhupura district. all the way to your table! Step 1 A small farmer in rural Sheikhupura district milks his buffalo twice a day and takes about 4 liters to one of Nestlé's 500 Village Milk Collection Centers. Step 2 At the Village Milk Collection Centre the farmer's milk is poured into aluminum churns. small-time milk merchants. He takes it to one of Nestlé's 1308 Secondary Reception and Cooling Stations. with full support from the Nestlé headquarters in Switzerland.MILK COOLING: Milk pack set up reception centers with cooling facilities where farmers and dodhies. 1992 onwards. Once satisfied. MILK COLLECTION SYSTEM Follow the story of Nestlé's dairy products. the company purchased 120 tons of milk a day from 26. but difficult in practice: importing the stainless steel chilled containers required was prohibitively expensive. Nestlé's purchase of fresh milk had quadrupled. could bring their wares. about 2-4 kilometers away. Between 1988 and 1992.000 farmers. The investment paid off. and the milk's acidity. he takes the milk to one of 27 Main Reception and Cooling Stations. Step 4 . Nestlé immediately began investing in milk cooling tanks. The agent checks the milk's freshness and purity. and the number of small farmers selling milk to Nestlé tripled. Step 3 The Secondary Reception Station has a large electrically powered cooling tank.

but by 1988 had expanded to produce butter. powdered milk. hygienic and safe. reducing and treating wastewater. cream and ghee. Some is processed into yoghurt. or other dairy products. logistics has always been a problem especially for sensitive product like milk in the hot weather. from Islamabad in the north. In Pakistan. the milk is processed and packed into the familiar Nestlé cartons you can find in your grocery store.  Sheikhupura Factory The factory commenced operations as part of Milkpak Ltd in 1981. As citizens of Pakistan. It is checked for quality thrice before being released for sale.At the Main Reception and Cooling Stations the milk is poured into huge tanks and is thoroughly checked for quality. Initially the supplier who supplied there milk NESTLE FACTORIES: Our products are manufactured in five facilities scattered around the country. The milk is dispatched to the factories. to Karachi in the south. At the time it produced only UHT milk. Step 5 At the Sheikhupura and Kabirwala factories. We are constantly working to reduce emissions at our factories. Two state-of-the-art multipurpose factories are located in the agricultural heartland of the Punjab. INBOUND LOGISTIC: Inbound logistics used for milk collection from different milk collection centre is centrally owned by nestle Pakistan limited. and making our packaging environmentally friendly. Regular audits have confirmed that our factories' environmental management meets the Nestlé international standard. Milk filling machine TBA-22 (most modern and efficient and high speed equipment available in dairy . and the remaining three are dedicated to producing our trusted brands of bottled water. as well as fruit drinks. we consider it our duty to make sure that our manufacturing processes are clean.

Powder filling machine will be added.industry) National distribution centre was also constructed in 2000 with capacity to store 8300 pallets.  Clarity in the way the information is presented. both for powder and liquid. By 1997 it was a fully owned unit of Nestlé Pakistan Ltd.In 2005 Fresh milk capacity was increased from 676 to 800 tons per day. Nestlé Milkpak acquired the Kabirwala factory. The project has seen expansion of milk processing capacity to triple its current size. PLANNING: The successful execution of a planning strategy demands that the analysis has been performed with:  Confidence in the accuracy of the information provided. 2006 has seen the commencement of Kabirwala Extension Project that would be completed in April 2007 at a cost of about Rs. Planning must also address the resources and expertise that will be needed to implement the chosen purchasing strategy.0 billion. a stick pack filling machine and 1000 gr.The production capacity of the factory is approximately 8000 bottles per day. 4. In 2007 an additional raw and packing and semi finished product stored and a bigger distribution. Centre. located in Khanewal district of the Punjab.  Kabirwala Factory In 1990.  Islamabad factory: AVA water factory Islamabad was acquired by Nestle Pakistan in 2001 and was subsequently merged with it. The trend to outsource both the initial conversion of raw .  Completeness of the information to be considered. as a subsidiary. Thereby becoming a fully owned unit of Nestle Pakistan in 2003.

while at the same time.materials. The factories are equipped with complete testing and monitoring facilities for wastage and emission enables them to stringently monitor the gaseous environments and ensure that these are in accordance with environmental standards (NEQS). the manufacture of certain semi-finished or finished products and some services. the objective is to maximize eco-efficiency – that is to maximize the production of goods. MILK PROCESSING:  Milk Reception The Milk Reception Unit receives milk and liquid milk products for a milk processing plant. requires that the original expertise in purchasing these materials and services is now needed to manage suppliers fulfilling a higher added-value process. minimizing of consumption of resources and reduce wastage and emissions. In our factories. The task of planning a S&IM purchasing initiative may well require a different skill set and knowledge base to that traditionally expected of a Strategic Buyer. In addition. The realization of the importance of the S&IM spend categories will result in Purchasing allocating more attention to them.  Mixing . MANUFACTURING: Manufacturing is very important part of supply chain. The unit measures and pumps the product for buffering or further treatment. consideration must be given to decide the specific value drivers of the subcontracting initiative for which Nestlé needs to control either the sourcing or pricing (or both).

fat/solids and non-fat ratio gives better utilization and control of the production parameters  Pasteurization Along with correct cooling. If carried out correctly. chocolate slurries. Temperature and pasteurization time are very important factors which must be specified precisely in relation to the quality of the milk and its shelf life requirements etc.Tetra performs in-line mixing for a wide range of powders and liquids for dairy applications such as reconstituted and recombined milk. yoghurt milk. dairy desse ghee. Tetra Pak heat exchangers have high thermal efficiency for low energy consumption. ice cream mix. HTST pasteurized. pasteurization is one of the most important processes in the treatment of milk. recombined concentrated milk. If the milk is packaged under aseptic conditions it can be stored at room temperature for months .  Standardization Automatic direct in-line standardization of milk and cream. regular-grade milk is usually 72-75 °C for 15-20 seconds. UHT stands for Ultra High Temperature and by heating to 137 – 140 °C for a very short time (2-10 s) the micro-organisms are inactivated. flavored milk. The pasteurization temperature for homogenized. evaporated milk.  UHT treatment UHT treatment is a thermal process for preserving liquid milk. Accurate control of fat. these processes will supply milk with longer shelf life.  Heating and Cooling Heating and cooling are basic processes within dairy processing and take place in plate or tubular heat exchangers.

. utilization and disposal. At Factory warehouse temperature is controlled to ensure the condition of the milk is fresh when it reaches the consumers. without jeopardizing the safety. and increase the recyclables and compatibility of packages with existing waste management schemes. Milk is a very perishable item.  Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation. including package manufacturing.  Decrease packaging waste at all stages in the supply chain.  Avoid the use of substances that can adversely impact the environment during packaging production and disposal. Packaging Materials Nestlé is committed to reducing the environmental impact of packaging. it is perishable item which requires special packaging to preserve it for few months. To meet this objective Nestle Milkpak use tetra Pak to deliver fresh milk to its customer without sacrificing in health measures. FACTORY WAREHOUSE OF NESTLE: The finished tetra pack is sent to the factory ware house which is 4 km away from the processing plant. therefore it requires very effective storage conditions at warehouses to preserve milk in its real condition. quality or consumer acceptance of its products.  Increase the use of recycled materials wherever possible. As far as milk is concern packaging is very important. Nestle have following objectives in mind regarding packaging:  Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity. For this Nestle milkpak warehouses contains very suitable temperature that should not increase from 38’C in order to keep preserved milk in its fresh condition. Factory ware house is located near the plant to reduce the transportation cost.

of products but also in which lane they are and in what volume they are in. Lay out of the warehouse This warehouse has no shelving or racking system instead the goods are kept on pallets. receiving and dispatching of goods can be done at the same time which is a time saver. Another method for managing the inventory is “Manual Counts” that is done by the “inventory clerk” on daily basis. The whiteboard information is updated every time a picker picks the order and also when the goods are loaded on a truck for delivery. The warehouse’s height is about 17 feet. Information tags are placed on every carton as well as on the top of the pallets. the lanes were designed in such a way that it creates a “U shaped” flow of goods which makes easier for the pickers to carry the goods to the trolleys using safe lifting and reduces the time and motion wastage. There are two gates. Barcodes are also placed to scan the cartons of the products every time they enter or exit the warehouse. The building is divided into two sections. There is a room used as check post to ensure the safety and security along with keeping track of what goes in and out of the warehouse. The counted stocks are recorded on a whiteboard that’s placed inside the warehouse.  Inventory Management in the warehouse The inventory is managed by software called SAP (System Applications and Products). . For further verification. It contains not just the information about the name and no. one for receiving the goods and the other for distribution. who is specially hired for this purpose. In this way. The whole warehouse was divided into individual lanes. one for carrying heavy weights products and the other for carrying lighter ones.

quantity. so it needs to be delivered first.  How goods are delivered from the warehouse? There is a gate in the warehouse from where the goods are delivered. Two of them pick the goods. the third one gives instruction and the fourth person rechecks it. time to record and place an order along with the delivery process. The data is on the basis of cartons per truck. The supervisor assigns 4 of them to pick products by a list. once the picker picks up the goods. Orders are received from distributors across the country.  Capacity Of Trucks Nestle milkpak has trucks which have the following capacity. The FIFO method is adopted in the warehouse because Nestle is a FMCG company and most of its goods are perishable and have limited time span. Of cartons 1 liter 1092 . As for Nestle MilkPak. LIFO is used because it takes transportation cost. So what first goes into the warehouse should be dispatched first. The list contains information about the product batch number. the process of delivery from warehouse begins. Size of item No. of times a good goes through the machine  A machine code  How the goods are picked in the warehouse? There are five pickers in the warehouse.Every batch of goods has a batch code like this 2 043 1382 1 Z Which tells the following information:  The year in which that product was Manufactured  The day of the year in which it was Packed  A plant code in which it was Manufactured  The no. lane number and the pallet number. packed in the right way and loaded in the right truck. The supervisor of the warehouse rechecks the goods are picked in the right quantity. it has an expiry of 6months.  How the goods are ordered? The goods are ordered on the basis of LIFO method.

250ml 1.5 liter 500ml 12 27 8 12 OUTBOUND LOGISTICS: Outbound logistics concerns finished milk movement from factory to different . Of item units 1 liter 250ml 1. HANDLING AND TRANSPORTATION CONDITIONS ACCEPTANCE LETTER Acceptance letter is the conformance letter that ensures that the warehouse accepts or receives the inventory. UNLOADING. it includes:        Invoice number Whom to sold Whom to ship Dispatch date From whom Product description Unit price  MAJOR ITEMS SALE 1 liter of Nestle milkpak has the major 55% of total sales. 250 ml of Nestle milkpak has 25% of sales 1.5 liter of Nestle milkpak has 10% of sales 500 ml pf Nestle milkpak has 10% of sales NUMBER OF ITEMS PER CARTON Type of carton No.5 liter 500ml 1815 1040 1750  LOADING.

Pakistan is divided into three geographical zones and then in further Regional Sales Offices. Of cartons 1 liter 250ml 1. kabirwala and shaikhupura Size of item No.5 liter 500ml 1092 1815 1040 1750 DISTRIBUTION: According to the distribution.warehouses located in different cities. The logistics usually take 3 days to arrive at Nestlé’s warehouses in Karachi from their manufacturing factories at Lahore.     North Zone: Islamabad and north outstations Peshawar Jhelum       Central Zone: Lahore Faisalabad Gujranwala Multan Sahiwal  South Zone:  Karachi  Hyderabad .

.Company’s discretion based on markets served  Distribution process The distributors have sales force to collect orders. Quetta  Sukker  Selection of Distributors The Criteria followed are: 1Capital Investment  Depends on both present and future capital investments by distributors  Amount vary from Area-wise to marketwise 2. that means there is a chain of intermediaries through which a product moves through additional steps as it moves from manufacturing business via distributors to wholesalers and then to retail stores or super marts. There are two methods for distribution of goods: ORDER BOOKING (Where sales force first books force is given a van orders from the shops or retailers goods to sell) and then delivers the goods) SPOT SELLING (Where sales full of Nestle Nestle Milkpak goes for indirect channel of distribution.Relevant experience  Prior experience in FMCG sector is preferred to save on training expenses  Distributor should not be dealing in Competitor’s product  Should handle entire range of Nestle products (Both fast and slow moving SKU’s) 3.Infrastructure  Godowns / Storage space with appropriate refrigeration as per product needs  Delivery vehicles  Salesmen 4.

kabirwala and shaikhupura. while in the “C” territory. In this report we have covered distribution channel of Nestle MilkPak in Karachi.  Distribution Channels: Nestle employs different distributors for different areas.  Daily Incoming And Outgoing Logistics Minimum one or two nestle milkpak trucks daily being arrived at each ware house from the sheikhupura and kabirwala factories.distributors. In the “A” territory. the vans visit the retailers at least twice a week. The targets differ from area to area and set on the basis of history of the area sale and also from the monthly forecasting. The norm usually is that if a retail client asks for 12 pack the distributor’s sales team sells him 15.The distribution strategy of Nestle MilkPak is intensive as it is covering wide market. In other cases they have to be persuaded to buy more. they provide the products inventory to the main distributor that is further dispatched to retailers and sub. SHELF LIFE OF NESTLE MILKPAK Nestle milkpak has 3 months of shelf life. . In some cases the clients themselves ask for more stock.Nestle milkpak has their owned and outsourced trucks. The distributors achieve this by selling more units to the existing clientele (outlets in their region).  Distributors’ sales target: It is interesting to note that the distributors are given sales targets. and is distributed in the same amount to the retailers all over the city. Every distributer has three territories per area. The targets are usually like 15% annual growth in sales. The reason is to leave no space available for the competitors. In the “B” territory. Distributors employ their own sales force and vans. In order to reach remote areas the company is linked with the main distributor and sub-distributors. the vans visit once a week. which are then communicated by the distributors to their sales team. the distributor’s vans visit the outlets every alternate day. The logistics usually take 3 days to arrive at Nestlé’s warehouses in Karachi from their manufacturing factories at Lahore. The company is directly linked with the main distributors. There are regional headquarters of the company in all big cities of Pakistan. which deliver Milk Pak to the doorstep of the retailers.

Objectives Of Nestle’s Distribution Centers Or Warehouses There are three main objectives of Nestlé’s distribution centers.  Eid  Ramazan and  Moharram There is a shortage of supply of milk during the pregnancy season of cows.  Every carton and item has assigned a certain batch number. .  Meeting the targets  Distribution at Right time  At Right place DEMAND FLUCTUATION OF NESTLE MILKPAK: The demand of Nestle milkpak usually increases in the festivity season or any event such as. RETURN POLICY OF NESTLE MILKPAK: Nestle milkpak has an efficient return policy for inventory in case of any defect.  If any defect has found in item or carton then the batch number of that item or carton is noted and disposes the defected item right on there.

 Standardization of data and. health and wellness company in the world and possess one of the most sophisticated supply . distribution centers and three zonal offices went live on the new application. all factories. Over View of Supply Chain of Milk Pack So what makes our supply chain so special? Well. The project has three main objectives. On that date all Nestle sites including the head office. we're the leading nutrition. 2005.GLOBE (GLOBAL BUSINESS EXCELLENCE) In the year 2005 the successful launch of GLOBE remained probably the most significant achievement for Nestle Pakistan. real-time purchasing data/information will permit aggregated spend category analysis. common business applications and best practices. It was recognized locally as well as in the Nestle world as the most successful implementation of GLOBE.  Standardization of information technology system. This will help identify opportunities and define more effective purchasing strategies with the objective of achieving lower total cost. for a start. Information system and Purchasing Purchasing task will be greatly facilitated by standard IS/IT infrastructure. Nestle Pakistan achieved this final migration on February 7. GLOBE is a worldwide program/project designed to align Nestle Pakistan with other Nestle companies around the world and to learn and benefit from each other’s experience. Migration to an ERP The final phase of the project entails migration of Nestle Pakistan to an ERP (Enterprise Resource Planning) called SAP (System Application Products). which is one of the most integrated business application software in the world. Visibility of standardized.  Creation and adoption of common business practices across all countries where Nestle operates.

chains in the world . So what does Nestle do in order to stay successful in its supply chain management? There are multiple innovative strategies that Nestle employs time-to-time on a global level. a lack of investment in infrastructure has a serious impact on the quality and quantity of raw materials that Nestlé and other companies rely on.putting the customer at the heart of everything we do. As a result. Nearly 40% of this goes on three main ingredients: milk. . You'll quickly come to appreciate this diverse environment. every failure) we experience is multiplied to the nth degree. every success (and. Each element of the supply chain relies heavily on strong relationships with other areas. It is a prime example of Nestlé’s Creating Shared Value approach to business The initiative aims to help farmers to run profitable farms. coffee and cocoa. “Farmers Connect” sourcing model contribute to…  Replicable and consistent quality and food safety . have a good quality of life and give their children a better education. dedication and energy from our people that drives our winning culture. CREATING SHARED VALUE ALONG THE SUPPLY CHAIN : Supply chain activities transform natural resources and raw materials into finished products which are delivered to the end consumer. long-term impact on the local economy and farmers’ standards of living. regardless of which role you find yourself in. Each stage of the process adds value to the overall end product. It's the passion. that should be an exhilarating prospect. a real team ethos where everyone goes out of their way to help each other deliver. Its milk supply chain goes from farms to facility. To conclude: Sustainability. by definition. And for the right type of person. protect the supply and quality of its raw materials and have a positive. respect the environment. Nestlé sources materials from thousands of farms. Nestlé operates within complex supply chains. many of them small farmers in poorer rural regions of the world. Around two-thirds of Nestlé’s worldwide expenditure is on raw materials. In many rural communities. and that creates a community of like-minded people. Nestlé provides training in order to encourage sustainable production. Compliance.

c. Nestle Pakistan can establish their own dairy farms near their factory. b. Less dependency upon local farmers. These dairy farms will act as Crisis Management point in dynamic conditions as we have recently faced in the form of worst floods in all over Pakistan. Benefits a. Transportation cost that incurs from the collection centres to the factories will be minimized.    Predictable timing and volume Increased price stability Sustainable production Farmer loyalty RECOMMENDATIONS 1. .

c. Nestle can also establish a few of their own retail outlets or franchises in major cities of Pakistan to fill the demand and supply gap more efficiently just like Millac (Pvt) Ltd. it should use the ample space above the lower shelves. Eids. These outlets will serve as a competitive advantage for Nestle in their marketing strategy. These retail outlets will align with Nestle’s production planning with the demand of customers. 2. such as building cowsheds. As milk is collected twice a day so there will be less repetition of work. everything is properly managed. CONCLUSION In the end. These outlets will save the repute of the company from stock outs in peak seasons like Ramazan. 4. This system will allow the storage of goods in segregation. As Nestle’s warehouse has a ceiling of 17 feet. They drew up the sample specifications for a model farm to be presented to the banks disbursing the loans. They have a strong relationship not only with their customers but also with their suppliers. e. e. Nestle should introduce vertical shelf system in the warehouse Benefits a. Nestle will also be less dependent on other retailers. & Moharram. Nestle should install Voice Picking technology in warehouses. distributors and retailers.d. Nestle proposed a system of small loans for farmers who wanted to make improvements to their farms. From Nestlé’s manufacturing system to its Distribution channels. if Nestle establishes its own dairy farm near its factory. There will be less occurrence of bullwhip effect. b. They maintain a proper Corporate Social Responsibility by training their local farmers about milking and feeding of their animals. 3. In 2004. Although it’s a bit expensive. b. More employment opportunities for local people around that region. but use of this technology will benefit Nestle in future as it reduces the time and human error and increases efficiency. Benefits a. Benefits a. d. we would like to conclude that Nestle Pakistan is the leader in FMCG industry. The Service even helps farmers . Nestle keeps track of its goods by maintaining its supply chain all over the country.

from the manufacturing department to distribution. The manufacturing plant of Nestle is the strength and serves as a competitive advantage for Nestle because of its perfect system. safety and security control is done under Nestle MilkPak’s manufacturing plant. everything is done perfectly .fill out applications for loans. The hygiene. In short. We learnt a lot about Nestle’s Supply Chain. Nestle takes care of its inside and outside customers.