Contents

Table of Figures........................................................................................................................iii
List of Tables............................................................................................................................iv
Introduction................................................................................................................................1
Product.......................................................................................................................................2
Detailed description of the product....................................................................................2
Product Size/ Volume and Packaging................................................................................3
Target Market......................................................................................................................3
Procurement Process..................................................................................................................4
Suppliers................................................................................................................................4
Procurement Process...........................................................................................................5
Warehouse Strategies.................................................................................................................6
Types of Warehouse.............................................................................................................6
Warehouse Location and Size.............................................................................................7
Logistics Strategies....................................................................................................................9
Transportation of Raw Materials.......................................................................................9
Wholesale and Distribution Strategies.....................................................................................11
References................................................................................................................................13
Table of Figures
Figure 1:Kit Kat Flavours in Malaysia.......................................................................................2
Figure 2: Kit Kat Packaging and Sizes......................................................................................3
Figure 3: Existing Plot of Land to be Sold.................................................................................7
Figure 4:Existing Warehouse to be Sold....................................................................................8
Figure 5: Nestle 2020 Financial Results..................................................................................12
List of Tables
Table 1: List of Possible Raw Material Suppliers......................................................................4
Introduction
Kit Kat debuted in London in 1935 and was known as the Rowntree Chocolate Crisp
(Hershey, 2021), it was later changed to the name Kit Kat two years later and in 1988 it
became a part of Nestle’s range of candy products. Kit Kat is now one of the most well know
chocolate brand in the world. KitKat products sold in Malaysia are produced locally, and
some foreign imports are also seen available in Malaysia. Currently Kit Kat is exported to
more than 11 countries in Asia (Nestle, 2021).

1
Product
Detailed description of the product
Kit Kat is a three layer wafer that is covered in chocolate wrapped in a vibrant red
packaging, it is one of Nestle’s product that is sold all around the world, it is a non-perishable
product, but can melt at temperatures above 39 degrees (Bloomberg, 2015). They offer
multiple variations of the product, the flavours of Kit Kat that they produce are cookies and
cream, green tea, mocha, caramel, milk tea, hazelnut, a limited edition strawberry flavour and
a Chinese New Year edition mandarin flavour.

Figure 1:Kit Kat Flavours in Malaysia

2
 Product Size/ Volume and Packaging
Kit Kat comes in various forms and formats, they include the two finger wafer, four finger
wafer, mini wafer cubes and large single wafer. All products offered by Kit Kat is always one
form or another with varying amounts. Example, Kit Kat sells their two finger wafers as a
single pack or in packs of 12 or 15 and a box of 48, for the large single wafer it is sold in
single packs and also in boxes of 24, mini wafer are sold in bags that weigh between 40
grams and up to 200 grams. All of them are wrapped in vibrant red packaging except for
green tea flavour as it has a dark green packaging as can be seen in figure 1.

Figure 2: Kit Kat Packaging and Sizes

Target Market
Kit Kat can be enjoyed by people of all ages, but generally sweets are generally liked
by younger consumers (Hoffman, et al., 2016). Their main market segment is consumers
aged 30 to 40, who usually have children aged above 5, this influences them to buy Kit Kat.
Hence, target market for Kit Kat is people aged between 18 to 40 (Rastiogi, 2018).

3
Procurement Process
Suppliers
There are various ingredients needed to produce a single Kit Kat, it include cocoa,
milk, sugar, flour, food additives and also plastic and aluminium for the packaging. At least 6
suppliers are required to supply materials to Kit Kat to start production. Kit Kat’s main
ingredient is chocolate, and currently it is sourced from Côte d’Ivoire and Ghana (Nestle,
2020). Materials like milk, flour, sugar, food additives and packing materials can be sourced
locally. The table below shows possible suppliers for the Kit Kat factory.

Table 1: List of Possible Raw Material Suppliers

Material Supplier/ Company Location

Milk Eco-Farm Located in Kuching, Sarawak
Flour Interflour Located in Kuching, Sarawak
Sugar Lian Hua Seng Located in Kuching, Sarawak
Food Additives GSI Located in Port Klang, Selangor
Packaging Kuek & Kueh Located in Kuching, Sarawak
Materials Packaging
Industries

Food Materials and food grade packaging materials should be sourced from local suppliers or
companies since a large amount of it is required to produce substantial amounts of candy.
Food additives like emulsifiers and stabilizers are not manufactured in East-Malaysia so it is
required to be source from Peninsular Malaysia, it is also less volume of it required as Kit Kat
products has about 9% of food additives by volume in them.

4
 Procurement Process
The procurement process has 6 steps, it starts with identifying what is required,
ingredients needed for production are first identified to determine what is needed, the
procurement managers is responsible for listing out the items that are needed to be ordered,
then they create the purchase request that is then reviewed by financial and procurement team
to confirm the contents of the request.

Once it is approved then they assess and select suppliers, the procurement team will
determine the most appropriate vendors though information requests, quotations and
proposals (Jijnyasa, 2019). Once the suppliers are selected then the procurement team will
negotiate contracts, specific terms like discounts and best prices with the chosen suppliers for
purchases.

A purchase order is then created to buy the ingredients, it should outline the price and
specifications for the items, once completed it is then forwarded to the supplier, and the
supplier then sends an invoice for the price of requested goods, if the organization accepts the
pricing the supplier, then carries out the purchase order.

When the ordered goods arrive, the procurement team then inspects the items and accept the
receipt, if the delivered goods are damaged or there is a missing amount, the procurement
team can reject the delivery to request another order of goods from the supplier.

After receiving the goods, the procurement team should cross validate key documents or do a
3-way match to determine that the authorized purchases are reimbursed (AccountingTools,
2021). Purchase orders, packaging slips and vendor invoices are used in this phase to identify
any discrepancies in the transactions.

Lastly, after the document are validated, the invoice can be approved and payment to the
supplier can be arranged. All relevant documents for this transaction must be stored, to
prevent legal issues during an audit (Kolenko, 2020).

5
Warehouse Strategies
Types of Warehouse
There should be two types of warehouses, or a single large warehouse with a
partitioning system needed along the supply chain network. A raw-material warehouse and a
temperature-controlled warehouse (Gregory, 2015). A work in progress warehouse is not
needed since semi-finished goods cannot be stored, wafer that is exposed to open air for too
long can become stale.

The raw-material warehouse should be a private warehouse that is used by Kit Kat to store
ingredients like, cocoa beans, sugar, flour, food additives and packaging materials, it should
also have a cold storage area to store milk to prevent it from spoiling (Khoo, 2020), it should
also have a receiving area to receive the raw materials from delivery trucks.

The temperature-controlled warehouse is used to maintain the temperature of the goods

stored inside (Sunol, 2019); the warehouse is used to store finished Kit Kat products to
prevent it from melting (Elliot, 2019).

6
Warehouse Location and Size
The warehouses should be located near the factory to eliminate the risk of the milk
from spoiling during the transportation to the factory. It should also be relatively close to the
city and a port so that it can be easily deliver product to distributors throughout Malaysian
and also receive products from suppliers.

The warehouse should be about to 110000 square foot with the height of about 20 meters. A
large warehouse should be used so that the factory is able to supply the whole Malaysian
market. Since it is a private warehouse, it can be acquired by either buying existing
warehouses or building a new warehouse in bought piece of land.

Figure 3: Existing Plot of Land to be Sold

Figure 4:Existing Warehouse to be Sold

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Logistics Strategies
Transportation of Raw Materials
Kit Kat would receive raw materials from suppliers via semi-trailer trucks, ships and
tankers. It should take raw materials that are located domestically 2 to 3 days. For materials
that are not located in Kuching, Sarawak, it would take longer because it requires
transportation via sea.

Materials like flour, sugar and packaging materials would be transported with containers that
is carried by semi-trucks. The reason semi-trailer trucks is used is that it is able to carry large
quantities of items in a single trip (Nova Lines, 2019).

Tankers are used to deliver milk from farms to the warehouse, the tankers must have a special
stainless steel insulated tank to maintain the freshness of the milk. Using tankers also can
lower carbon emissions, a full tank is comparably more milk in volume compared to a normal
truck (Allen, 2019).

Ship are used for the delivery of cocoa beans from Ghana and Côte d’Ivoire, delivery by sea
is preferred because it is the cheapest option for importing goods and also there is no urgency
in delivering them since raw cocoa beans can last a long time (Wong-Shing, 2021).

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Transportation of Finished Goods

For delivery within east Malaysia semi-trailer trucks can be used to send them to
distributors. Ten to fifteen trucks can be used to transport it from Sarawak to Sabah it could
take 1-2 day to complete the delivery, and another eight to ten throughout Sarawak. Two to
five truck from the trip to Sabah can be used to supply the chocolate to Labuan which would
take 3-4 days.

For Peninsular Malaysia, sea freights is used to minimize cost, containers used should be
insulated or not in direct sunlight so that the chocolate will not melt. It would take about 1
week to transport it to Peninsular Malaysia, and once it has reached it will be moved to a
trailer to be transported to a distribution centre.

Subalipack Malaysia can be used to transport the products throughout Malaysia, they offer
freight forwarding service by air, sea or land to any place in the world (Subalipack, 2021).
Using a single logistics company allows better and easier management since there are a
smaller number of companies to deal with.

9
Wholesale and Distribution Strategies
The Kit Kats will reach end-customers via distributors. The distributors will sell and
supply retail markets like Aeon, Giant, Tesco, KK Mart, Speed 99 and other similar stores
with Kit Kat.

There should be 14 distributors located in each state of Malaysia and an additional one
located in Labuan since it is not connected to any other state by land. Having distributors
spread out in many areas allows the reach of the product to be larger, while reducing the risk
of order fulfilment fails or delays.

Direct distribution to end-customer from distributor is possible with online shopping

platforms, end-customers are able to order Kit Kat online through shopping platforms like
Shopee or Lazada. The delivery of the online orders are then carried out by courier services
like PosLaju, DHL, J&T or Citylink. While it is possible to order online, it would not be
recommended as there would be more variables that could cause the Kit Kat to be subpar
upon delivery.

10
 Conclusion
Opening a new factory is do-able with the steady increase of revenue from 2016 to
2020. But with the current pandemic outbreak the net profit that the company had in 2020 is
greatly lower than in 2016 (Nestle, 2021). Having a new factory in East Malaysia may have a
large initial cost, but it has the potential to offer multiple benefits to Nestle. It also aligns with
Nestles plan to reduce their carbon footprint and reduce their logistics cost (Nestle, 2021).

Figure 5: Nestle 2020 Financial Results

11
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