SUPPLY CHAIN

MANAGEMENT
OF NESTLE
PRESENTED BY:
ARPANA(20013)
PRIYANKA(20019)
NISHA(20038)
PRIYANK(20021)
FARJENDRA(20017)
 RANKING
• Fortune 500:
Nestle is ranked 48th company

• Best Global Brands

Nescafe Is placed at 26th rank
Nestle Foods is placed at 58th rank
 ABOUT NESTLE
• Nescafe was developed in 1930 and it became
a main beverage for the American serving in
Europe and Asia

• Total sales increased by $125 million from1938

to 1945.

• It expand it’s product line outside food market

and acquire Loreal the cosmetic company
in1974. Presently it holds 26.4% share in the
company.
 MISSION
• Nestle is dedicated to providing the best foods
to people throughout their day, throughout
their lives, throughout the world.

• With our unique experience of anticipating

consumers needs and creating solutions. Nestle
contributes to your well being and enhances
your quality of life.
 VISION

• To be the leading food and beverage

company in the world providing
customers with healthy food at affordable
prices.
 PRODUCT LINE
• Coffee
• Water And Other products
• Ice-cream
• Chocolates
• Dairy Products
• Infant nutrition
 PURCHASING ISSUES

• The purchasing objectives of Nestlé are to produce and market food

products that satisfy customers and consumer expectations, and to provide
good quality food and value for money.

• The key raw materials purchased by Nestlé are: milk, coffee, and cocoa.
These, as well as fruit, vegetables, cereals, potatoes are partly sourced
directly from farmers
 NESTLÉ’S PRINCIPLES
OF PURCHASING
Purchasing Roles:

• Two primary purchasing roles that encompass strategic and

operational activities are used in Nestlé:1. Strategic Buyers perform
strategic activities such as market research or analysis, supplier
profiling and selection, negotiation, contract management, in
collaboration with other professionals (e.g. engineers for machinery;
logistics for transport; marketing for media).
• Strategic Buyers can remain within their functional area, as long as there
is a line of responsibility to the relevant Head of Purchasing. This will
ensure that they are informed of and contribute to purchasing strategies,
training, budgets, etc.

• Operational Buyers perform operational activities such as sending

purchase orders, call-off against catalogue, etc. These activities may be
performed by members of any organizational unit requiring goods or
services.
LEGAL REQUIREMENTS
FOR PURCHASING
• Written Agreement

• Quality Conformity

• Dispute Resolution Clauses

 SUPPLIERS
• The Nestlé Supplier Code establishes non-negotiable minimum standards

• They ask their suppliers, their employees, agents and subcontractors to

respect and to adhere to at all times when conducting business.

• The Nestlé Supplier Code helps to implement commitment. To ensure

both responsible sourcing and supplier relationships that deliver a
competitive advantage.
 SUPPLIER SELECTION
•In compliance with Nestlé’s Corporate Business Principles,
•Nestlé select suppliers based on the following criteria: – Ability to offer a competitive value proposition;

•Reputation, financial situation and record with Nestlé;

•Ownership, management structure and competence;

•Innovation, service level and transparency;

•Already approved or subject to formal approval prior to first delivery;

•Minimum corporate social responsibility standards;

•Ability and willingness to work with their preferred tools, processes and solution providers;

•Sustainable business practices

 PROCUREMENT
• As one of the world's largest food raw material buyers, Nestle spends
around 60bn (US$71.5bn) a year on central procurement, of which 22bn is
spent on ingredients and 8bn is spent on packaging. With such an immense
commodities-related spend, it is all too clear that the swings of the
commodities markets could have a grave impact on Nestle's bottom line.

• The group is working to minimise the impact that high prices and volatility
have on Nestle's profitability by streamlining procurement and
manufacturing.
 CPFR OF NESTLE
• CPFR Analyst - Wal-Mart
• The successful applicant will be responsible for managing
ongoing Collaborative Planning Forecasting and
Replenishment (CPFR) processes between Nestlé and key
account(s) (eg Wal-Mart) in order to ensure accurate
forecasting, optimized replenishment and superior retail in-
stock and inventory levels.
 MAJOR
RESPONSIBILITIES
• Using CPFR process & replenishment strategies, maintains the Key
account(s) target in stock rates, and weeks of supply.

• · Communicates recommendations’ regarding the resolution of issues to

the relevant internal or external party and reaches agreement on the
appropriate corrective action 

• · Order Processing – create and process co-managed orders.

• Develop external customer relationships and focus on the customers

agenda. 
 SOURCING
• Sourcing has to contribute to the sustainable and profitable
development of our company by providing the base for quality
differentiation of finished products (customer / consumer
satisfaction) and by assisting operating companies to be a
competitive producer.
• This requires a supply of raw materials at specified quality, in
the quantities and at the timing needed, and at the lowest
possible system costs.
 STRATEGIC
SOURCING
• The strategies employed in sourcing depend on the
proprietary characteristics of the raw materials and on the
requirements of the factories.
• Most of the raw materials are bought through the trade, but
part are bought directly from farmers.
• This direct procurement is more common for perishable
products (e.g. milk), and where the company has specific
needs. Nestlé does not own any commercial farming activities
SUPPLY CHAIN
 SUPPLY CHAIN
STRATEGIES
• Market Saturation Driven-Focuses on generating high profit margins
through strong brands and forceful marketing and distribution. This is the
strategy of successful A-brand suppliers likeNestle.

• Operationally Agile:
Configures assets and operations to react fast to emerging consumer trends
along lines of product category or geographic region. Both assortment and
shelve presentation are systematically adapted to actual local sales, and
replenishment is executed using computer assisted ordering.
• Freshness Oriented:
Concentrates on earning a premium by providing the consumer with
product that is fresher than competitor's offering. For instance, a leading
fresh food supplier considers cold chain critical to success since
temperature is the dominant factor in shelf life.

• Consumer Customizer:
Uses mass customization to build and maintain close relationships with end
consumers through direct sales
• Value for Money Focused:
This strategy puts a priority on "low price, best-value" for the customer,
but it focuses less on brand than on dedicated service.

• Logistics Optimizer:
Emphasizes a balance of supply chain efficiency and effectiveness.
However, only collaboration between multiple trading partners will yield a
synchronized supply chain. This often maximizes end consumer value
proposition and ultimately value to each trading partner.
EFFECTS OF SUPPLY CHAIN INTEGRATION
ON MANUFACTURER
 EFFECTS OF SUPPLY CHAIN
INTEGRATION ON RETAILERS
 TQM IN NESTLE
• TQM capitalizes on the involvement of management, workforce, suppliers,
and even customers, in order to meet or exceed customer expectations.

• Quality in business, engineering and manufacturing has a pragmatic

interpretation as the non-inferiority or superiority of something.

• Quality is a perceptual, conditional and some what subjective attribute

and may be understood differently by different people. Consumers may
focus on the specification quality of a product/service, or how it compares
to competitors in the marketplace
 QUALITY
MANAGEMENT
• Superior quality is a competitive advantage and a joint effort by all parties
in the value chain is needed. Suppliers are therefore considered an
important link in this chain.

• To achieve Nestlé’s objective of offering consumers high quality

nutritional products, Nestle expect suppliers to guarantee the quality of the
material/goods they supply or the service they provide. Whenever possible,
Nestlé’s goal is to be able to rely on their suppliers’ competence and ability
to implement jointly defined “Quality Management” and “Supplier Quality
Assurance (SQA)” programmes.
 QUALITY ASSURANCE
DEPARTMENT
• The duties of the quality department are to:

• 1)Develop, with input from all personal, the core values, vision statement,
mission statement, and quality policy statement

• .2)Develop the strategic long term plan with goals and the annual quality
improvement program with objectives.

• 3)Determine and continually monitor the cost of the poor quality.

• 4)Continually determine those projects that improve the process,

particularly those that affect external and internal customer satisfaction
 PACKAGING
• Packaging serves a major role in Nestle daily lives.

• It protects food products from spoilage and ensures safety from

manufacture through storage, distribution and consumption.

• Packaging may also provide tamper-evidence features. It communicates

information, including nutritional information and serving instructions, and
provides the convenience demanded by today’s consumers.

• Nestlé is committed to reducing the environmental impact of packaging,

without jeopardizing the safety, quality or consumer acceptance of its
products.
 PDSA Cycle:

• Nestle strongly rely on PDSA cycle for solving several of its

problems. A PDSA cycle is a system for continuously improving
environmental management systems.

• Following this cycle, Nestle will Plan (set environmental policies and

targets for itself and create a plan to achieve them), Do (put the plan
into practice), Study (check the results and make corrections) and
Act(make revisions and improvements for the next step in the cycle).
SUSTAINING COMPETITIVE
ADVANTAGE
• Modifying Positional Advantage in International Markets
• The Growing Integration of Markets
• Building Market Presence and Position
• Strategic Flexibility
• Speed of Resource Deployment
 ERP
IMPLEMENTATION
• In June 2000, Nestle SA signed a much-publicized contract
with SAP – and threw in an additional $80 million for
consulting and maintenance – to install an ERP system for its
global enterprise.

• The Switzerland-based consumer goods giant intends to use

the SAP system to help centralize a conglomerate that owns
200 operating companies and subsidiaries in 80 countries
including India.
 DISTRIBUTION
SYSTEM
• Distribution system of Nestlé is one of major source of competitive edge over its
existing rivals.

• Distribution of products from the factory to the customer involves transport and
storage.

• Nestlé has its own distribution networks equipped with all necessary transportation
facilities. They transport their products at major regional sales offices, which are
situated at different cities of India.

• These sales offices (distribution centers) have their own vans with sales people who
sell and transport goods to the small retailers.
 CONT…
• Manufacturer
• Carriage and Forwarder Agent
• Distributor
• Wholesaler
• Retailer
• End Customer
 LOGISTICS
• logistics objective as providing maximum customer service at the
least cost.
• logistics system can both maximize customer service and minimize
distribution costs. Maximum customer service implies rapid delivery,
large inventories, flexible assortments, liberal returns policies, and
other services—all of which raise distribution costs.
• In contrast, minimum distribution costs imply slower delivery,
smaller inventories, and larger shipping lots—which represent a lower
level of overall customer service.
 Major Logistics Functions

• Order Processing
• Warehousing
• Inventory
• Transportation
 INTEGRATED
LOGISTICS

• Cross-Functional Teamwork Inside the Company

• Building Channel Partnership
• Third party logistics
 CRM IN NESTLE
• At Nestlé, Nestle committed to offering consumers high-quality food
products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is
a symbol of this commitment.

• Nestle also believe in maintaining regular contact with Nestle consumers.

This applies both to how nestle present Nestle products and to how Nestle
address Nestle consumers' questions and concerns.

• Nestle has a relationship panel with a tag line “TALK TO NESTLE”

PERFORMANCE
MEASUREMENT
 PERFORMANCE
EVALUATION

Two criteria are of equal importance:–

• The measurement of the efficiency of suppliers

• The evaluation of the effectiveness of Purchasing.

 BENCHMARKING

The concept of benchmarking should: – Be seen as a continuous process

of evaluation;–

• Ensure that results are quantifiable and actionable

• Be supported by a direct management commitment
 BEST PRACTICES

• Purchasing practices must be modified,  improved or adapted, so as to

produce the internal changes that will result in increased efficiency and
effectiveness.

• By following or copying best practices available and working with

suppliers, Purchasing can pro-actively seek change and realize the desired
breakthrough
• EFFICIENCIES

• Efficiencies are also the execution of specific programs implemented

through benchmarking. For example the use of ,e-Requisitioning
(Catalogues), e-Supply Chain and are commended in order to bring
economic benefits and efficiency.
• EFFECTIVENESS
• Purchasing effectiveness is measured by the function’s ability to “do it
right first time” and achieving maximum value within the parameters of
the total cost of ownership concept.
• COST SAVING INTIATIVES

• A cross-functional approach and continuous improvement in areas such as

quality, service, logistics, etc, must generate cost saving initiatives where
purchasing contribution will be defined, targeted and monitored.
 FUTURE OF SCM
• THE GREENING OF SUPPLY CHAIN
• The Nestlé Environmental Management System (NEMS) Is Management
an essential corporate management tool that consolidates all organizational
and technical measures taken by the Group to achieve environmentally
sound business practices.

• The NEMS objectives include the following:

• To ensure the continuous improvement of Nestlé’s environmental
performance, for example through the conservation of natural Nestle and
the minimization of waste.
• Intranet Purchasing
The Purchasing Intranet is a Nestle e-based communication tool used
internally within the Nestlé purchasing community to share information about
market prices, supplier information, organisations, send information, templates
and best practices.

It is regularly updated and continually evolves to meet the needs of Nestlé.

• E-Procurement
Nestlé promotes the use of electronic tools to optimize the value chain to
Nestle costs, create efficiencies, drive Product availability and enhance
customer.
 
• To achieve compatibility with international voluntary standards on
environmental management systems, such as ISO 14001 and the European
Union Eco-Management and Audit Scheme.

•To build mutual trust with consumers, governmental authorities and business
partners. The Nestlé Environmental Management System is being
implemented throughout Nestlé’s entire operation.
 CONCLUSIONS
• Nestle’s supply chain is an integral part of its approach to the markets it serves.

• The supply chain needs to respond to market requirements and do so in a way that
supports the Nestle’s business strategy.

• The business strategy of Nestle starts with the needs of the customers that the Nestle
serves.

• Depending on the needs of its customers, Nestle’s supply chain must deliver the
appropriate mix of responsiveness and efficiency.

• Nestle whose supply chain allows it to more efficiently meet the needs of its customers.

• It will gain market share at the expense of other companies in that market and also will
be more profitable.