Nestl

Supply Chain Analysis

By:
Alok Kumar 1510006
Introduction
Established by Henri Nestle in 1866.
World largest food processing company with total sales of 88785 million Swiss F in
2015.
435 production factories operating in 35 countries.
More than 15000 products are sold across 189 countries.
Focus on CREATING SHARED VALUE across all channels

Nestle Products

Powdered &
Milk Products & Nutrition & Prepared Dishes
Liquid Water Confectionery Pet Care
Ice Cream Health Science & Cooking Aids
Beverages
Nestls Typical Supply Chain
First bullet point here Group A Group B
Second bullet point here Class 1 82 95
Third bullet point here
Class 2 76 88

Class 3 84 90
Sourcing & Procurement
Nestle buys approximately 10 percent of the world's coffee
production, 10 percent of the cocoa crop, and 2 percent of the Human
Rights
milk and sugar.

Also responsible for the suppliers way of doing business

Environmental Supplier Safety and

Sustainability Health
Code

Supply Chain Mapping programme for responsible sourcing

traceability operations. Business
Integrity

To create value among suppliers, technical training is

provided to farmers level which in turn will improve quality.
Nestl's Quality Management System
Ensuring quality standard are met globally at each step in entire
value chain Build trust by Comply with food
offering expected safety standards,
Starts with farms by addressing key global environmental and consumer product regulations and
and services quality requirements
social issues.
R&D network theme is Quality by design. Quality
Policy

Good Manufacturing Practices (GMP) to ensure quality and food

safety. No waste attitude Global Objective:
with Zero Defect Quality
ISO 9001:2005, ISO 22000:2005/ISO 22002-1, HACCP standards
verified by external bodies
 Distribution
Nestle transports more than 140000 tonnes of product from 1600 warehouses.
Most of transportation and logistics is outsourced to third parties.
Under VMI, Nestle distributor makes the replenishment decision.
Nestle monitors the inventory level using Electronic Data Interchange.

EDI provides the data related to inventory, pricing, and product movement etc.

Distributor further connect with retailers to ensure delivery of products to end

consumer.
IT Tools & Improvement Programs
Achilles Supply chain mapping to tracing the source of materials

EDI to facilitate instant and paperless purchase orders with suppliers.

Also, ERP, SAP-SCM software are used to ensure seamless information flow across the globe.

BARLOWORLD CAST Program for supply chain modelling and optimization.

Project GLOBE: $2.4bn project aimed at standardizing the procurement, distribution

and sales management systems across globe.
Ingenious: crowdsourcing initiative to facilitate communication about supply chain
challenges, problems and ideas across supply chain teams worldwide.
Blue Number Program: started by United Nations in 2015. Giving farmers an online
presence, encourages them to improve their sustainability practices by enabling self-
assessment of voluntary standards, and connects them to buyers
Nestle India
Supply Chain Management
Sourcing in India

Target responsible and traceable sourcing in all product categories

Working alongside NGO partners, they map the supply chains, and conduct supplier
audits and farm assessments to ensure the procurement of 12 priority ingredients
Example : milk

1.3 million kilograms of milk

110,000 farmers 2,815 milk collection centres
per day

This leads to effective quality control and helps in garnering vendor

support
Manufacturing
8 factories ( 4-north; 4-south)
Internationally recognized Good Manufacturing Practices
(GMP) to ensure quality and food safety
Improving quality through TQM
Inventory : Continuous Review model using a complete
computerized system.
WIP inventory is maintained low
Ware house management systems (WMS) with Radio
Frequency (RF) technology
During the last 15 years, for every tonne of production, the
Company has reduced the usage of energy by around 47%,
water usage by around 55%, greenhouse gases by around
57% and waste water by around 61%.
Promotion in Distribution Network
Nestle Super Awards as motivation for channel partners
Incentives for specific target achievements in form of additional margins and
Certificate of acknowledgement
Dealership in Practice (DIP) training
Nestle Quality System
Good Warehousing Practices (GWP)
Good Distribution Practices

Maintaining excellent relationships with vendors will help garner

support in times of difficulty
 Distribution Network
Due to prioritizing on shared value it gained Factory
immense support during the Maggi crisis
enabled to speedily complete the withdrawal Carrying and forwarding agent
without hampering the sale of the Companys
other products. Distributor Super-Stockiest
almost zero attrition amongst the business
partners during this time Wholesaler Distributor
Realises the growing importance of e-retailing and
continues to successfully engage with the leading e- Retailer Retailer
retailers
Consumer
Britannia
Supply Chain Management
Company Overview Food

Established in 1892 in central Kolkata Bakery

Dairy Products
Products

In FY2016, the company recorded a net margin of 9.6%,

International
compared to a net margin of 8.8% in FY2015. Bakery
Britannia Dairy
Holdings Private
Products Limited

JB
Mangharam
Foods
International Operations

Manna Foods

Ganges Vally
Strategic Foods Britannia and Associates Foods
International &
& Britannia Dairy Holdings
Sunrise Biscuit
Al Sallan Foods private limited company

Daily Bread
Gourmet
Foods
Management Objective

Your Company has been making focused efforts to balance cost, quality and aspiration

in its brand for consumer affordability. Cost effectiveness has been a key pillar of

your Companys value creation strategy and this was achieved through scale in

operations, technology interventions and wastage reduction in the value chain along

with efficient management of working capital. Your Company will continue and

intensify the thrust on cost effectiveness in the coming year as well.

Sourcing
Some components are sourced locally.
E.g.: Wheat, Sugar, Butter
Some components are imported
E.g.: Crude Palm Oil which gets refined here in India
Sourcing is not integrated in the supply chain as we saw in case of Nestle.

Engaging with vendors will lead to better control on quality and definitely cost
advantages in long run
Manufacturing
Increasing control on capacity
Acquisition of contract manufacturing unit
Investments in greenfield projects in Tamil
Nadu, Karnataka
Trying to leverage synergies in cost with
existing factories
Consolidation of SKUs done to enhance
operational efficiency but also new product
lines are created
Distribution & Retailing Domestic/
International
Intensive distribution strategy Suppliers

Emphasis on expanding into rural market

Manufacturing Units
Trade channels
General Trade : Standalone shops, retail shops CnF Agents
Modern Trade : Big Bazar, Reliance Fresh, etc.
Institutional Trade : Hotels, Airlines, IRCTC, etc. Distributors

Use of SAP-APO solution to achieve better inventory

deployment across supply nodes
Retailers

Customers
Supply chain metrics
Britannia (in INR) Nestle Global (in CHF) Nestle India(in INR)
Parameters(in INR)
2015-16 2014-15 2015-16 2014-15 2015-16 2014-15

Sales 8097.81 crores 7269.26 crores 88785 million 91612 million 8430.44 crores 10129.5 crores

Cost of goods sold 4622.33 crores 4316.84 crores 44730 million 47553 million 4523.96 crores
3468.91 crores

Average inventory 185.58 crores 166.38 crores 8662.5 million 8777 million 790.02 crores
832.45 crores

Average trade receivable 88.84 crores 62.34 crores 12855.5 million 12832.5 million 91.69 crores
88.76 crores

Average trade payable 637.33 crores 549.95 crores 17237.5 million 16754.5 million 680.88 crores
736.13 crores

Inventory days 14.65 days 8.35 days 70.69 days 67.38 days 28.47 days
36.06 days

Trade receivable days 4 days 3.13 days 52.85 days 51.12 days 3.3 days
3.84 days

Trade payable days 50.32 days 46.50 days 140.92 days 128.61 days 54.97 days
77.49 days
Cash conversion cycle -31.67 days -35.02 days -17.38 days -10.11 days -37.59 days -23.2 days
Conclusion
Depending upon the management objective, supply chain activity system varies
across companies.

Nestle focuses on CSV while Britannia on Cost Effectiveness.

Nestle engages closely for long term while Britannias relationships are short term
and transactional in nature.

Britannia is planning to expand its distribution network in rural area under new
leadership.

Nestle already has strong and intensive distribution in India.

THANK YOU!!!