Inventory and Distribution Management - Nestle

This paper discusses the diverse elements of Nestle's distribution and inventory management, including the factors analyzed while choosing inventory, transport, and warehouse. The paper evaluates the factors underlying operations of warehouse, inventory, and transport. Moreover, the proper evaluation is conducted to assess the use of an information system or technology in the inventory, warehouse, and transport operations.

Running head: INVENTORY AND DISTRIBUTION MANAGEMENT
NESTLE
Inventory and Distribution Management
2/3/2019

INVENTORY AND DISTRIBUTION MANAGEMENT 1
Table of Contents
Introduction................................................................................................................................2
Background of Nestle.............................................................................................................2
Discussion and Analysis........................................................................................................4
Assets.................................................................................................................................4
Operations..........................................................................................................................7
Information Technology...................................................................................................11
Recommendations....................................................................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................16

INVENTORY AND DISTRIBUTION MANAGEMENT 2
Introduction
The manufacturing companies take inventory management as the most essential process, as it
is comprised of activities like purchases, sales, and logistics. Controlling and monitoring the
stock in the supply chain is known as Inventory Management. Data driven activities are
dependent on temporary recording and planning of the activities. Inventory control is all
about managing the correct level of stock and listing its every single movement. Distribution
management is all about supervising the movement of the stock to the point of sale from the
manufacturing units (Imeokparia, 2013). Distribution management can be defined as the
predominant term that is comprised of different activities and procedures such as logistics,
warehousing, logistics, supply chain, inventory, and packaging. To have effective distribution
management, it is very essential to manage the entire distribution process and important
because it is vital for corporate permanency and financial success (Omgo, 2014). The aim of
the paper is to discuss diverse elements of Nestlé's distribution and inventory management
like the factors analyzed while choosing inventory, transport, and warehouse. The paper will
assess the factors underlying operations of warehouse, inventory, and transport. Moreover,
the proper evaluation will be conducted in order to assess the use of an information system or
technology in the inventory, warehouse, and transport operations.
Background of Nestle
Nestle is one of the well-known business of food and beverages industry with headquarter in
Switzerland. The company operates more than 2000 brands across the world from global
icons to local favorites. Nestle exist in around 189 countries across the globe (Nestle, 2012).
The mission of the company is to improve the quality of life and encouraging people to move
towards a healthier future. It wants to support the community in making a better world and
shaping healthier lives. Nestle offers a wide variety of products which includes coffee, frozen

INVENTORY AND DISTRIBUTION MANAGEMENT 3
food, medical food, bottled water, pet foods, dairy products, tea, breakfast cereals, baby food,
etc. In 1899, Nestle was introduced in the marker with their healthy infant cereal as their very
first products, which helped the company in attaining the success and expand operations
across the world. The company hires personal from around 70 countries of the world, which
is equal to one quarter of the population comprised of million people. This reflects that Nestle
is operating its business in every part of the world. Their hard work, innovation, and
dedication have supported the company in reaching a large number of the population like
Coca-Cola. The mix of product innovation and business acquisition are the key driver for its
success. The reason of Nestlé leading position as the nutrition retailer is its motivation for
diversity (Martin, 2015).
Charles Page and George Page established its condensed milk factory in the Europe market
with the name Anglo-Swiss Condensed Milk Company in 1866. The condensed milk market
of United States was at rise, which encouraged the owners of the company to offer its
services in large quality. In the 19th century, Switzerland became the hub of the milk based
product due to the production of large quality of milk, which supported the Nestle owners to
produce different milk based products in Switzerland. However, their desire to supply milk
products in England was at peak due to which they introduced their milk factory in the
England market (Mowbray, 2017).
Henri Nestle is the founder of Nestle who used to work in a pharmacist as the assistant. He
was trained science and chemistry employee and has visionary nature due to which he was
involved in different types of experiments like cement, food, etc. In 1867, Henri introduced a
mixture of milk, wheat, and sugar, which was very nutritious and supported a family to save
their child life, this incident promoted the product and game name to the product that is
Farine Lactee (Nestle, 2019d). With the success of the mixture, Henri got involve in its huge
quantity production. Henri started buying the necessary milk every morning for the

INVENTORY AND DISTRIBUTION MANAGEMENT 4
production of Farine Lactee. However, by 1869, this strategy was not practically working so
Henri started purchasing the milk from different suppliers who were instructed to provide the
delivery directly to his factory (Nestle, 2019d). The Nestlé’s business understanding and
Henri’s quality product together worked for the inspiring growth of the company. After
completing 8 years the products of Nestle were present across the world in countries such as
Indonesia, Argentine, Egypt, and the United States.
Discussion and Analysis
Assets
Warehouse
Selecting the perfect warehouse for placing the stock is one of the difficult as well as
essential decisions that have a direct influence on all the functions of the business. Choosing
a warehouse directly contribute toward the company's competencies and the entire customer
experience.
Storage Area
Material handling and storage area are the fundamental aspects but the significant question
for the warehouse providers. Nestle is the leading company of the food and beverages
industry which is focused on offering a wide range of quality products across the world. This
increases the responsibility of the company to have proper material handling system that can
save the company’s stock.
Zenon Automation SAICT is known in the market for designing different automated
solutions for the business to help them in touching the success heights. Zenon has designed
an integrated automated solution that is meeting the needs of Nestle. It has allowed the
organized process in the Nestle like cartons lifting from the exit level to the transport level of
the central conveyor belt, placing each carton in the single main conveying line and overhead

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transportation of the cartons from the area of packaging to the palletizing area. The listing
and recoding of the cartons according to their origin is done with an industrial camera. The
robots are involved in the procedure for the carton placement, palletizing procedure, and
interlayers to improve pallet stability (Interroll, 2018). This solution installed by the Zenon
Automation SAICT in the warehouse premises of the Nestle supported company in achieving
tangible advantages in the reliability and flexibility. The system also took out the best from
the existing company’s resources and utilized the maximum space available in the
warehouse.
Desires Customer base
When Nestle chooses the location of its warehouse, the first point that comes in the mind of
the company is the end user of its offering. Defining the customer base and the area business
is targeting are the two essential aspects prioritized by the Nestle at the time of choosing the
warehouse location (Mai, 2018). According to the management of Nestle, it is significant for
the successful operations of the business to select the warehouse located close to the
customer's place as it allows quick deliveries. Moreover, close proximity decreases the
shipping cost of the business. Quick product delivery and low shipping cost improve the
customer experience and opinion towards the company. Nestle has total 15 warehouses
across the Northern and Central Florida which are placed accordingly in order to provide
quality services to the entire Florida state professionally and quickly.
Inventory
Being the leading organization of wellness, and health, Nestle is aimed towards enhancing
the customer’s life quality around the world with tasty, nutritious, and healthy food and
beverages. It is common that customers require a sense of quality and wellbeing about the

INVENTORY AND DISTRIBUTION MANAGEMENT 6
production procedure in order to understand the product offered by the company is safe and
not damaging the environment.
Product Type
Inventory management should consider the diverse types of products in the stock of the
company. For instance, a few of the products can be perishable in nature and therefore have a
shorter life in comparison to non-perishable products. In this situation, inventory should be
handled in order to confirm that these products or items are rotated in line with expiration
dates.
Products and Brands
The strength of the Nestle is its innovative offerings and brands that have offered the business
a higher position in the global industry of food and beverages. Six worldwide famous brands
of Nestle are Nescafe, Buitoni, Nestle, Maggi, Friskies, and Nestea contribute approximately
70% of the total group’s sales, whereas the Nestle brand adds 40% to the total sale (Nestle,
2000).
Beverages
The sales of Nescafe is increasing since the soluble coffee was introduced in 1938, as it is
being consumed around 300 cups every second. The ready to drink product that is Nescafe is
to date the famous brand of coffee across the world. Besides this, Nestle is the worldwide
leader in the category of chocolate/malt beverages such as Nesquik, Milo, and Nescau.
Besides this, Nestle is operating in the market of fruit juice and its main brands are Libby's in
the United States and Nestea as the ready to drink and solvable drink. In addition, Nestle is
managing its brand of mineral and spring water like Furst, Vittel, Contrez, S.Pellegrino,

INVENTORY AND DISTRIBUTION MANAGEMENT 7
Levissima, Panna, Neleczowianka in Europe and Ozarka, Zephyrhills, Deer Park, Polland,
and Arrowhead in the U.S (Nestle, 2000).
Transportation
Types of transportation mode
On time, delivery of the high quality products from the factory to the end customer is the
main part of the Nestle business. To have effective distribution management, Nestle has
managed to adopt tactical and strategic approaches. Network optimization is the distribution
network could reduce the air emission, noise, road congestion, and choosing the best
transportation modes such as rail over the road could offer superior benefits. For instance,
Nestle has created the distribution intermodal network for the movement of the product to the
customers of Western Canada with 99% of deliveries to the West are being supplied with the
help of rail transportation (Supply Chain Management Association, 2014).
The planning and scheduling of the stock for Nestle is very important to have the best trailer
loading for fuel-efficient intermodal transportation through the rail. Though always using rail
as the transportation mode is not feasible considering the short or medium distances, hence,
the Nestle also make use of trucks to cover short distances (Nestle Waters, 2019).
Operations
Warehouse
Inbound Process
Inbound Procedure is the key portion of the supply chain management of Nestle. The work is
processed after receiving the final shipment documents from the raw material division. The
inbound procedure majorly operates to issues imported products from the central port. The

INVENTORY AND DISTRIBUTION MANAGEMENT 8
process is responsible for managing the Duty payment to the administration department. The
detailed inbound procedure is presented below:
 Ensure Supply
Ensuring supply stage is concerned with taking the approval from the exporting country to
supply the products of the specific warehouse. There are two types of products offered by the
company are raw material and finished products. The inbound procedure is majorly involved
in the importing of the goods at the specified time and at the selected location (Nestle, 2013).
 Custom Clearance
The inbound procedure is responsible to manage and pay all the Duty and taxes with H.S.
Code.
Outbound Process
The steps involved in the outbound process of Nestle:
 The Nestlé’s outbound process is linked with the products and services distribution to
the end users
 Nestle Company favors distributing its goods by returning inland transportation in
place of short sea shipping or rail train because the probability of the delivery of its
products in safe condition is higher.
 After confirming the safety of its products company uses huge lorries for the loading
of the products to avoid vehicles empty runs
 After the loading of the products in trucks and rail, it is responsible to ensure the stock
deliver at the branch of Nestle
 The time stock reaches the brand of Nestle is its distributed to different grocery shops
like Tesco and Giant.

INVENTORY AND DISTRIBUTION MANAGEMENT 9
Inventory
Inventory Planning
The lifecycle procurement followed by Nestle Company is separated into different integrated
modules and comprises a variety of intermediary process like goods receipt, accounts
payable, purchase order, inventory management, purchase requisition, and vendor
involvement. Together these procedures create the life cycle of the procurement procedure
(Paultrudgian, 2017).
The inventory planning system of Nestle is automated which is focused on managing the
complete detail of the stock managed by the company. For example, the system automatically
updates the stock quantity the time any single item is issued from the stock if Nestle. A time-
consuming procedure is shortened by determining the best source of supply, matching and
accessing the vendor's pricing, issue of the purchase order, dispensation of the payment
invoices, and recording the inventory are all done by the inventory management system of
Nestle (Nestle, 2018). For a successful supply chain at Nestle, it is very important to have
proper stock planning and activities must be combined in an even flow of the business
procedure. In the inventory planning of Nestle, there are three kinds of product movement
like a good issue, goods receipt, and transfer posting. At the time entry regarding good
movement is made, the system updates its material document used to list every event. Besides
this, if there is any change in the valuation are, the account ting documents are created.
Inventory Order Placement
Nestle plans its inventory every six months, and accordingly, place the purchase order to its
suppliers. In June 2018, Nestlé's total inventory was $9,671 m and every six months the
company increases 10-20% of its total inventory (Guru Focus, 2019).

INVENTORY AND DISTRIBUTION MANAGEMENT 10
Transportation
Nestlé’s Operation Planning
1600 warehouses of Nestle transport over 145000 tonnes daily that is equal to the delivery of
around 274 times daily around the globe. The Nestlé’s partnership with its logistics provider
permit tracking of their environmental presentation and enhance competence by reducing fuel
consumption, miles traveled, noise, congestion, and GHG emissions.
Different approaches adopted by the Nestle for its distribution and transport planning are:
 Optimize – Nestle works towards enhancing its distribution network, route planning,
and avoiding empty vehicle space
 Explore – The experienced and skilled team of Nestle is working towards identifying
new transportation methods and substitutes of fuel
 Prepare – Nestle is concerned towards providing training to the vehicle drivers in
order to improve environmental efficiency (Nestle, 2019b)
Incoterms Selection Consideration
Nestle is using Free Onboard Vessel (FOB) for the transportation of its products to specific
locations. According to International Chamber of Commerce, Free Onboard Vessel is defined
as the kind of hybrid, where the dealer is obligated to transport the products to the port, clear
the goods for export, and ensuring that they are loaded on the ship by the buyer (Pomfret,
2011). When the goods clear the vessel railing, the consumer undertakes the risk. The
company deliver its products for the exporting and are loaded to the selected vessel by the
consumer. The time product has loaded the cost and risk are transferred to the consumer.
Carrier Selection Consideration

INVENTORY AND DISTRIBUTION MANAGEMENT 11
The Nestlé’s bottled water delivery is done through rail transportation in order to ensure
effective product carriage over a long distance. According to the report, around 30% of the
transportation in 2014 was done through railway comprising deliveries 33% to Italy and 43%
to the United Kingdom (Transportation and Logistics, 2019).
Carrier Relationship Management
The limited load vehicles and empty delivery are not feasible for the company, therefore
Nestle tries to use the maximum of the vehicle capacity. The approach of “no vehicle left
empty” is used in order to decrease the level of pollution due to transportation. The
transportation and distribution management has quickly improved the planning of the route
and loads by combining the inbound and outbound trucks in exploiting backhauling. Nestle
also encourage its retailers, manufacturers, and suppliers to share the transportation facilities
whenever possible.
Information Technology
Warehouse
Nestle is planning to build 638,000 square-foot distribution center with XPO logistics which
is the leading supplier of transport and logistics supplier solution. Both the businesses have
planned to create a future digital warehouse by using information system for the customer-
packaged products and executed as a testbed environment for the prototypes XPO technology
before the global release (Nestle, 2018).
Both the companies have planned to implement the digital distribution center in 2020
involves advance feature of cataloging structure and robotics. The system will also be
comprised of analytical data and progressive machinery that will provide most advance and
digital center of distribution management. The use of information system for the creation of
digital distribution center will allow fast deliveries and easy access to the stock information,

INVENTORY AND DISTRIBUTION MANAGEMENT 12
which will be more effectual to the KitKat, Nescafe, Maggi and different brands loved by the
customers of Nestle.
Inventory
Nestle is trying to retain its leadership position in terms of research and development by
introducing its global confectionery product technology center, which is established in the
U.K. The product technology centers will be responsible to perform two roles that are to
establish progressive technologies and to organize these technologies in the company's
operations. This center will be used by Nestle in its factories to ensure effective
manufacturing of its products by meeting the changing customer requirements. The uses of
information system in inventory operations Support Company in reducing the cost and time,
which can evaluate reduce the company’s total expenses. Besides this, it helps in maintaining
proper records of inventories, how must order and when to order.
The product technology center will also be comprised of an information system that will
manage the complete information of inventory such as the issue of inventory, the return of
inventory, damage of inventory, etc., and will accordingly update the records (Nestle, 2019a).
Transportation
SAP Transportation Management

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Source [(ERP, 2012)]
Source [(ERP, 2012)]
Nestle is planning to implement the new transportation solution that is SAP transportation
management (information system) into its business functions. The Nestlé's transportation
system is not homogenous because the business is a mix of third party and own fleet. Nestle
is planning to move away from the legacy system to the common platform in order to exploit
economies of scale, automate transport optimization to reduce the chances of empty trailers
and transportation cost, and reducing the impact on the environment. The motive behind
designing the SAP TM into the business is to have a common and strong transportation
solution that could reduce the chances of delays in the deliveries and product damage (SAP,
2013). Besides this, the system will support the company in decreasing the transportation and
information technology cost.
Transportation management is used in Nestle as the platform for the collaboration of carrier.
Transportation Management is combined with external rate engines such as SMC3 and UPS.

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SAP Transportation Management is generally utilized to track the shipments. SAP
Transportation Management system will support in the international and domestic inventory
shipment since Nestle has the diversity of modes and multi-modal shipments. In addition, the
SAP TM also assist in different transportation includes frozen transport, ambient transports,
and chilled transport on a single platform (SAP, 2013).
Recommendations
The above report has analysed the logistics and distribution system and it could be
recommended that Nestle must consolidate its drink and food distribution under one roof as it
will assist in reducing the cost of distribution, and syndicate its supply chain of the product in
order to make greater flexibility.
Nestle is suggested to acquire Hampton Creek, it is a start-up used to convert the food
industry into plant based machinery. It will support company to be aligned with its goals of
providing healthy and nutritious products in order to encourage them to have a healthier live.
In addition, it is said to be cost effective strategy to reformulate existing services and
manufacture eco-friendly products. The adoption of this strategy will result in enhancing the
brand reputation and image of Nestle.
Nestle should get involved in the manufacturing of Spirulina and products filled with the
ingredient. It will permit Nestle to provide nutritional and healthy benefits to the consumers.
The positive aspect of adopting this strategy is the company has to deal with less number of
rivals that make use of this strategy in their operations.
Furthermore, Nestle can reinforce its chocolate and confectionary segment by reducing the
size of its candy portion while cumulating the supply of chocolate to its subsidiaries and

INVENTORY AND DISTRIBUTION MANAGEMENT 15
competitors. The strategy will assist the business in eliminating the chances of empty trucks
or containers, which will result in reducing company’s overall cost.
Conclusion
The paper is based on the detailed discussion regarding the distribution and logistics
management of Nestle Corporation in order to recognize the key drivers of a company's
success. Nestle is the leading organization of Switzerland offering a wide variety of products
to customers across the world. It is aimed towards enhancing the customer's life quality with
the help of its quality products. The paper has elaborated different parts of the topic logistics
and distribution management of Nestle like the factors it considers while choosing inventory,
transportation, and warehouses. In addition to this, the paper has provided the discussion
related to the significance of operational planning in the transportation, inventory planning in
the inventory operations, and outbound and inbound procedures of the warehouse. From the
analysis, it has been recognized that Nestle Corporation regularly do research and
development in order to introduce innovative products for the customers and install advanced
technology for the distribution and logistics management. Considering the warehouse
segment, Nestle uses Zenon Automated solution as the material handling and storage system
into the operations such that it can avoid goods damage and execute fast deliveries. In
inventory management, Nestle gives priority to the type of inventory manufactured or offered
to the customers. Furthermore, under the transportation segment, the company consider the
type of transportation for the delivery of the products and try to avoid the situation of empty
vehicles.

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