ASSIGNMENT 2: INTERNATIONAL LOGISTICS

Matric
NAME VIRA BHADRESHVAR A/L RAMESPAPU 012019090408
No.
SUBJECT INTERNATIONAL LOGISTICS MANAGEMENT CODE BMG20403
GRP
PROGRAMMES BIB 31
No.
Submission date:
LECTURER MOSBAH AISSA

DESCRIPTION OF THE ASSIGNMENT:

1. This ASSIGNMENT represents 30% for the coursework.
2. Type: individual
3. Due date: Monday 5 May 2020.

INSTRUCTION:
 Each student needs to choose ONE company (either multinational or domestic) and
produce a COMPREHENSIVE REPORT on the different aspects of international logistics
and how does the company carry them on.
 You also need to comment, criticize, and/or defend the different approaches and strategies
used to carry on these
 Among others, you may need to find information about international logistics activities,
challenges and issue, future prospects, statistics, cost and revenues, geographical
distribution, industry trends, and any other relevant information.
 Illustrate your reports your report with various types of visualization tools (see the rubric’s
criteria).
 One you choose your country, please list it in the group. One country per student. Do not
share the same country.
 Pages: 12-18 excluding cover page & references
FORMAT
1. Font: Arial
2. Size: 12pt.
3. Spacing: 1.5
4. Alignment: Justify

NOTES: If you have any difficulties in submitting the project, please come and consult the lecturer.

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 ASSIGNMENT 2 RUBRIC _ IBM/ BEF2020

COMPANY: NESTLE

Student Name: VIRA BHADRESHVAR A/L RAMESPAPU ID: 012019090408

Criteria Level 1 Level 2 Level 3 Level 4 Score

Quality of Poor Acceptable Good Very good

information
/20

Introduction & Poor Acceptable Good Very good

conclusion
/10
Recent of Generally Not very old Quite very recent
information, old recent
statistics, /10
references
Illustration: Use of Poor Acceptable Good Very good
charts, tables,
graphs /10

Originality Poor Acceptable Good Very good

/10

Neatness Poor Acceptable Good Very good

/10
Grammar & Poor Acceptable Good Very good
Spelling
/10

Format  Poor Acceptable Good Very good

/10

Submission More than 3-5 days late 1-2 days On time

5 days late late /10

Total (100 marks /100

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Table of Contents

1.0 INTRODUCTION 4

1.1 BACKGROUND OF THE COMPANY 4

1.2 VISSION & MISSION 5

1.3 MARKET ANALYSIS 6

1.4 FUTURE PROSPECT 7

2.0 INTERNATIONAL LOGISTICS ACTIVITIES 8

2.1 SUPPLY CHAIN MANAGEMENT 8-10

2.2 VALUE CHAIN ANALYSIS 10-13

3.0 INCOTERM 14

4.0 ISSUES AND CHALLENGES 15

5.0 STATISTICS 16-17

6.0 INDUSTRY TREND 18

7.0 STRATEGY 19

8.0 CONCLUSION 20

9.0 REFERENCES 20

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1.0 INTRODUCTION

1.1 BACKGROUND OF THE COMPANY

Figure 1: NESTLE LOGO

Nestle is one of the leading manufacturers and retailers of food goods in the world.
Established 1860, Founded 1866. They have over 2000 product brands, which trade
around the world in 187 countries. Their aim is to continuously achieve the United
Nations Sustainable Development Goals in all areas of the business operations,
while at the same time enhancing quality of life and contributing to a healthier future
in the world. This led to the creation of Nestle when its founder, Henri Nestle, created
an infant cereal that saved a child's life 150 years ago.

The founder of Nestle was a German-born "Henry Nestle" who lived in a small Swiss
town called "Vevey." From a small start, he formed the company in 1866 in
Switzerland for the manufacture of milk powders for babies. Nestle is officially the
largest food company in the world, with its worldwide headquarters in Vevey,
Switzerland.

Nestle is running a complex supply chain. With a diverse combination of dry and wet
products, including water, cereals, baby food, coffee, tea, chocolate, confectionery,
ice cream and pet foods, Nestle is continuously exploring its options for continuous
improvement in service, especially throughout the supply chain, which they consider
to be of shared value in their operations.

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1.2 VISSION & MISSION

Being the world's largest food and manufacturing company, Nestle Now has one of
the most ambitious mission and vision statements. With its wide range of products,
the organization has set standard in this field.

Nestle's mission statement is the world's leading nutrition, health and fitness
organization. Their goal of "Fresh Health, Happy Life" is to provide consumers with
the best tasting, most healthy options in a wide variety of food and beverage
categories and nutritional occasions, from morning to night. "This statement shows
that Nestle puts the needs of its customers at the top of its goals. Nestle’s mission
major point is boost health, improving healthy lives and improving communities.

For years, Nestle has been known for its consistency in ensuring that the products it
manufactures meet with appropriate quality requirements and regulations. The
organization is doing it to ensure that all customers are safe from contamination and
at the same time providing them healthy food to satisfy their needs.

Nestle's vision statement is to be a leading, competitive, nutrition, health and

wellness organization providing improved shareholder value by being a trusted brand
owner, valued employer, preferred provider of preferred goods. Setting pace and
guiding us in the right direction is something Nestle is doing well on the basis of this
concept.

Nestle principles are to full ethical compliance, honesty, equal trade, integrity, and
respect. Nestle has continued to foster good standards among all its employees in all
corners of the globe. Such guiding principles promote doing the right thing when
adhering to the accepted processes. It also stresses the importance of proper
interrelationships between different parties.

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1.3 MARKET ANALYSIS

Nestle is one of the world's leading beverages, fruit, and snacks businesses.
Although world-renowned for its chocolate, the Swiss corporation has rapidly turned
itself as a truly multinational leader in the food industry, growing into other areas of
the industry such as baby products, drinks and frozen foods.

The company, which sells more than 2,000 products, employs almost 291,000
workers and operates in more than 84 countries and 403 factories worldwide. Today
its revenue is around $92.6 billion and is also the world’s largest consumer food
company.The company began in 1905 from a merger as a milk company specialized
in baby formula products and processed dairy goods, and has since developed to be
one of the largest multinational food corporations and a strong global leader in the
sector in terms of sales and revenue. [ CITATION Dav18 \l 1033 ]

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 Figure 2: NESTLE RETURN ON INVESTED CAPITAL

1.4 FUTURE PROSPECT

The business future prospect of Nestle are to become a leader in fitness, health, and
nutrition and to be trusted by stakeholders in the business as well. The company's
goal is also to form a reference for financial growth in the food industry. The
organization aims to develop leadership and loyalty simply by meeting all customer
standards.

The company aims to promote leadership and attain trust easily by meeting all the
customer demands. The organization specializes in building long-term sustainability
values. The business also seeks to develop processes and plans which will generate
value for the society in which the organization works. Nestle Company is building a
workforce unity behind a series of strategic structures that will help increase the
development of the business. This allows staff to have a combination of long-term
inspirations to develop short-term and future business activities.

The company believes that by building long-term and positive relationships with
stakeholders, complying with all regulatory requirements and ensuring that all
operations performed by the organization are successful and result in the production

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 of value for both the business and community at large. Supply chain management
become a tool to help accomplish this by corporate strategy objectives, reduce
working capital, reducing assets off balanced the sheet, accelerate cash to cash
transaction and increase inventory turnover.

2.0 INTERNATIONAL LOGISTIC ACTIVITIES

International logistics is the process of planning, implementing, and controlling the flow and
storage of goods, services, and related information from one point of origin to a point of
consumption located in another country.

2.1 SUPPLY CHAIN MANAGEMENT

Supply is a crucial organizational role for organizations to accomplish their essential

objectives at the edge of their operations. Nestle Company is a multinational food
and drinks company with headquarters in Vevey, Switzerland. This organization is
the largest food company in the world in terms of revenue. The achievements of the
company are recognizable worldwide. Nestle supply products such as medical food,
coffee, tea, pet foods, bottled water, confectionery, snacks, and dairy products. While
the organization does not have branches in every region, its goods are commonly
used in almost all countries of the world because of its large and effective supply
scale. About 28 products of Nestle earn $1 billion per year. The business deals with

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products, the competitiveness of which relies mainly on the delivery of its goods to its
consumers in many countries.

Figure 4: NESTLE DISTRIBUTION CHANNEL

Throughout the time, Nestle's logistics strategy has become successful due to

its emphasis on the three fundamentals of logistics such as inventory management,
network design, and transportation. The business concerned maintains proper
supervision of factories, manufacturing facilities, and stores. The Supply Chain
Management department tracks every movement of supplies to various regions of
the world to track surplus and product shortages. The business is conducting
efficient inventory planning, adequate transportation, proper packaging, and
warehousing in terms of supply chain management. [ CITATION LOG \l 1033 ]

Inventory management is the prediction and minimization of supply chain and

logistic costs for maximizing the organization's profits and improving its efficiency.
Major supplies by the company need careful planning that will enable the smooth
operation of the company, the delivery of the goods to the consumers and the
product's accessibility at the right time. Nestle does not create a general supply of
items, but aims at the shipment of particular products to specified areas to ensure
that the customer's specific demands are fulfilled.

The company's strategy to transport and delivery is focused on sustainability in

the environment. Nestle Company transports their products by air transport, road,

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 rail, and waterway transport. This focus on optimizing distribution routes and
planning networks in all operations, exploring opportunities to improve their transport
options by switching to other modes of transport and identifying less harmful fuels.
The organization transports nearly 140,000 tons of its goods per year from 1600
warehouses across the world. Nestle uses a 3PL strategy. Nestle has been in
business for several years, struggling not to be completely sustainable in their supply
chain operations to drive performance. Organizations adopting Green Supply Chain
practice can reduce the risk of being charged with anti-environmental non-ethical
practices

The transportation and distribution of the company's goods is performed mainly

by a partnership of third-party logistical service suppliers that travel around the globe
on a daily basis approximately 270 times. Through logistics service providers, Nestle
can evaluate its environmental performance and improve its network efficiency by
reducing fuel consumption, mileage and emissions of greenhouse gases, congestion
and noise. Nestle is shifting their transportation method from the traditional transport
method, such as road transport, to short sea freight or rail transport. Likewise
switching fossil fuels to trucks using natural gasses with a focus on reducing the
transport related environmental effect.

2.2 VALUE CHAIN ANALYSIS

Figure 5: NESTLE VALUE CHAIN

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 Figure 6: NESTLE INBOUND LOGISTICS

The primary activities of Nestle are actively involved in the manufacture and
distribution of the product to target customers. Analysis of primary value chain
activities may boost Nestle's efficiency.

Inbound Outbound Marketing

Operation Service
Logistics Logistics & Sales

Inbound logistics, the inbound logistics include warehousing and inventory

control. In Nestle it is a computerized and automatic inventory control system which is
different for each country. The company also tracks its inventory level through
electronic data interchange it is a specialized technology that helps track the scale of
warehouses and other sources inventory and delivery activities. The company package
its goods into recycled materials, depending on the size and quantity of the product.
Nestle barely store their products in warehouses for a long period because that might
pose a risk, of breakage or cause damage to the goods in the warehouse. Nestle deals
with food goods and drinks, it should not have kept things in the warehouse for a very
long period of time.

Other than that, by developing strong relationship with suppliers is crucial because
their help is required to purchase, store and deliver the product. Nestle will face multiple
difficulties in product development processes without analyzing the inbound logistics.

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Inbound logistics research allows a company to remain focused on any element of
transformation from raw material to finished goods.

Nestle's operations are very productive as they turn a lot of raw material into very
nutritious goods and develop value for their customers. Operational activity analysis is
important to improve competitiveness, increase performance and ensure Nestle's
competitive success. The improved productivity would help Nestle achieve sustainable
economic growth, improve competitiveness, and set a strong basis for competitive
advantage.

Figure 6: NESTLE OUTBOUND LOGISTICS

Outbound logistics involve the operations to distribute the goods to the consumer
by the use of multiple intermediaries. In an effort to increase the level of productivity
Nestle has implemented different programs. Nestle deployed SAP R/3 for a period of 5
years and served around 6,000 users at a time. Nestle later began another Y2K
Enterprise Resources Planning (ERP) project that began in 1998. ERP is an software
program which integrates various organizational information systems to efficiently
manage information and to develop business process performance. SCM and logistics
are among the managerial roles where ERP can be helpful and applicable.
Implementation of ERP in an enterprise is meant to boost the organization performance
by optimizing productivity.

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 Other than that, Nestle setting up sales channels in every country where its
manufacturing plant is set up to ensure timely supply. This could help Nestle to analyze
and improve outbound logistics to explore sources of competitive advantage and meet
its goals for business growth.

Marketing and sales, throughout this stage Nestle would highlight the advantages
and selling points of the goods sold to convince the consumers that their service is better
than competitors. Before Nestle invests in marketing and sales activities, only producing
a high-quality product at competitive costs and distinctive features will build value.
Effective and wisely integrated marketing strategies could build Nestle's brand image
and make it stand out from the competition.

The service area is the one that responds to complaints and after-sales support, and
Nestle takes every attempt to give good customer service to every consumer who might
be dissatisfied with the product. In order to avoid damaging brand image, the
organization must analyze its support activities and then utilize them as a platform for
spreading positive word of mouth by quick, effective and productive support services.

The secondary activities of Nestle, the support activities play a significant role in
organizing and promoting the activities of the primary value chain.

The firm infrastructure represents a number of activities such as quality control,

managing legal issues, accounting, finance, planning, and strategic management.
Efficient management of assets will allow Nestle to maximize the benefit of the entire
value chain. Nestle may monitor maintenance operations to strengthen sustainable
positions within the market.

Nestle could analyze human resource management by evaluating different

aspects of HR, including recruiting, placement, training, rewarding, performance
monitoring and other staff management activities. Better HR management will allow
Nestle to reduce the competitive burden based on its workforce's motivation, dedication
and expertise. The company can also help achieve the expense minimization goals by
comparing the effects of recruiting and training and their relative return. Nestle's high
dependence on the skill of employees would raise the importance of this value chain
support activity.

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 Almost any supply chain operation in this newly technologically developed world
relies on technical help. Technological integration of manufacturing, delivery, marketing
and human resource practices allows Nestle to understand the value of technological
growth. It can be divided into product and process technology development activities.

The procurement phase in the value chain represents the processes involved in the
purchasing of goods that that range from equipment, machinery, raw materials,
supplies and other products required for the manufacture of the final product.
Procurement will lead to the efficient and successful growth of the business by offering
the foundation for the quality differentiation of finished goods to the consumer. This
requires the procurement of raw materials at the specified price, quantity and timing
needed at the lowest possible system expense. Nestle must carefully evaluate its
procurement practices with a view to maximizing inbound, organizational and outbound
performance.

3.0 INCOTERMS used by NESTLE

Incoterm originally founded in 1936 by the International Chamber of Commerce

(ICC). Incoterms inform sales contracts which specify the respective obligations,
costs and risks involved in the delivery of products from the seller to the buyer, but
they do not conclude a contract themselves, determine the price payable, currency
or credit terms, govern contract law or define where the title to the goods are
transferred. Nestle is a internationally recognized company for Nutrition, Health and
Wellness. Nestle Group, founded in 1866 in Switzerland, has grown to enter global
markets such as the United States, Canada and the United Kingdom.

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 Figure 7: NESTLE FOB INCOTERM

The Nestle Company uses the Free Onboard (FOB) incoterm vessel to carry its
goods to their designated destinations. According to the International Chamber of
Commerce (ICC), FOB is described as 'Free Onboard Vessel is a kind of hybrid,
where the seller is required to carry the goods all the way to the port, approve the
goods for export, and see that the product are loaded onto a vessel which was
designated by the purchaser. Nestle delivers its products to be certified for shipment
or export, which are then delivered to the vessel selected by the purchaser. When
the products have been loaded onto the means of shipping, all risks and costs are
passed to the purchaser.

4.0 CHALLENGES AND ISSUES

Interruption of the logistic activities due to COVID-19

Nestle has stop their production on a temporary basis due to the restriction of the movement
introduced by the government in some location. The supplies of ingredient and material are
interrupted due to COVID-19. This current situation has brought up some challenges for souring
raw materials and packaging material for Nestle products and many of their business partners
and suppliers are facing serious challenges. This cause Nestle production decreased globally
because of low employee presence and it cause low production. [ CITATION Kat20 \l 1033 ]

Inability to maintain the quality of the product

Nestle faces the risks of supply challenges because of environmental change is standing up
to European food industry with an unprecedented risk associated with the supply of agricultural
raw materials. Nestle does not have a constant collaboration with its suppliers, partners and
contractor within their organization. This increase the risk of low-quality product production and
less control on their product. Nestle has a poor warehousing practices and delay in
transportation.

Lack of inventory control in warehouse

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Nestle lack in inventory control which leads to excess of stock increase the cost of storage.
Inventory is to monitor expenses and improve consistency, and to please the clients, the
inventory must be handled carefully.  If inventory run effectively it can reduce operational costs
and increase profitability. Weak monitoring may lead to delays in delivery, disturbances in the
supply chain and declines in revenue that would negatively impact a global business.

Risk of waste in operation

Factors that lead to waste of operations such as, repetitions of activities cost time which
could lead to time wasting operations. Just in Time is used to reduce time within the
production system from suppliers to customers. To improve company operational cost
Nestle could adopt lean principles in all manufacturing activities.

5.0 STATISTICS

Figure 8: NESTLE SALES IN BILLION CHF

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The sales figures as shown above shows that consistent increase in the year between
2015 and 2019. In 2019, the Nestle Group generated sales of about $92.57 billion CHF. The
highest recorded sales was in 2008 which was $109.9 billion CHF. In the year 2011
there was a incline in the sales which is $83.64 billion.

Figure 9: Free On Board (FOB) Table

Fi
gure 10: NESTLE PRODUCT SALES IN MILLION CHF

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GEOGRAPHICAL DISTRIBUTION

2019 Sales by geographic are

Americas: CHF 42.3 billion
Europe, Middle East and North Africa: CHF 26.5 billion
Asia, Oceania and sub – Saharan Africa: 23.8 billion

6.0 INDUSTRY TREND

The food and beverage industry are exposed to very strong demographic growth trends that
are powered by global population growth. Although the ongoing global crisis has slowed the
rate of expansion, the fundamental food and nutrition demands, accentuated by customer
consolidation in developed countries, remain high and ready to move the market forward.
Recent trends in the consumer market sector lead to an increase of mainly cheaper private
label goods packaged consumer sold by retailers. This is a loss for the manufacturer's
branded products.

Other than that, taste will be the number 1 in consumer choices. Nestle as a food company
gives main priority to consumer taste preference based on trend. Nestle also prepared
frozen foods to prepare foods easily by the consumers. Nestle products has more flavors
more nutrients which is good for the consumers. Nestle is bringing variety choices of foods
to the consumers. [ CITATION Nes10 \l 1033 ]

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 Nestle also focus on e-commerce delivery trends. Nestle e-business sales grew at twice rate
of the industry in 2018. In future Nestle will develop and invest in the growth of enabling e-
commerce capabilities across the business.

Climate change effects consumer food preference. Consumer change their eating habits
because of climate change. Nestle need to be on trend to know its consumer taste and
preferences during climate change. Nestle conducted survey, younger generation are the
most who change their eating habits during climate change.

7.0 STRATEGY

Nestle wants to give a product portfolio that grows with customer preferences, offers good
quality and delights the senses, contributes to healthy, better balanced lives and a healthy
society. International strategy that has been adopted by Nestle is through local companies in
order to form a group of autonomous regional managers who know more about the culture
of the local markets than Americans or Europeans. Other than that, Nestle has implemented
a wide-ranging policy for Asia involving the manufacture of various goods in each country to
provide the region with a given product from one country. For example, Nestle produces soy
milk in Indonesia, Thailand coffee creamers, Singapore soybean flour, Malaysia sweets, and
Philippine cereals, all for regional distribution.

Nestle enters the developing markets at an early stage in order to create a network before
the competitors. Nestle actually buys the local brand names that the customer is used to.

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 This lets the business tackle cultural barriers and consumer mistrust towards global
products. Nestles' plan is to build the groundwork and then grow into more niches as
competition grows.

Nestle hires local workers. Local workers have a better knowledge and understanding of
local culture and business practices. This will result in a more effective way of responding
effectively to local demand situations, thus increasing the company's market share and
productivity.

Besides that, Nestle has developed its expatriate employees which is a group of almost 700
managers who have a lot of experience in handling operations abroad. These managers are
highly qualified and trained to allow them to work on a global scale.

8.0 CONCLUSION

Nestle is the world's largest food manufacturer and industry leader in both coffee and
mineral water, offering a wide variety of products, including prepared dishes and cooking
aids, dairy products, cereals, instant coffee and baby food. Nestle is making great efforts to
fulfill its visions of becoming the best in the Nutrition, Health and Wellness Industry by
delivering quality food content for the customers. Nestle also analyses their customers
preferences from time to time and satisfies consumers as much as possible. Nestle’s has a
high financial capability, effective strategic marketing capability, strong research and
development, as well as great leaderships have helped them through the obstacles. Other
than that, Nestle can save money through their shipping costs. Because Nestle logistics
associated with third party logistics (3PL) as 3PL charges through quantity, inventory
storage capacity, value-added services like special handling, and more. This could be
helpful in the short term, but definitely not in the long run, because Nestle is based on the
long-term market and aims to maximize productivity and effectiveness.

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 9.0 REFERENCE

References
Askew, K. (2020, April 8). Nestle on Covid-19: 'We need to focus our efforts on securing supplies,
manufacturing and logistics'.

Kabii, D. (2018, November 22). Nestle Market Analysis and Marketing Strategy.

LOGISTICS AND SUPPLY CHAIN MANAGEMENT: NESTLE COMPANY. (n.d.). Retrieved from
file:///C:/Users/User/Downloads/Logistics_and_Supply_Chain_Management_1.pdf.

S.A, N. (2010). Nestle.

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