Operations Management in Fonterra

This report discusses the history, vision, and mission of Fonterra, challenges faced by the company, quality management systems, sustainability measures, and continuous improvement initiatives. The report also talks about tools that can help the company in the arena of continuous improvement.

Running head: OPERATIONS MANAGEMENT IN FONTERRA
Operations Management in Fonterra
Name of the student
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1OPERATIONS MANAGEMENT IN FONTERRA
Executive Summary
The primary purpose of this report is to elucidate on the history, vision and the mission of
Fonterra in New Zealand. The report discusses about challenges that it faces pertaining to quality
and that of performance that made them adopt a sustainable approach. The report states about
Quality Management Systems that has been adopted by Fonterra. The report also talks about
sustainability initiatives that have been undertaken by the company that can help them in
overcoming issues along with challenges. The report also throws light on five initiatives that
have been taken by the company that can help it in improving the dairy operations. The report
also talks about tools that can help the company in the arena of continuous improvement.

2OPERATIONS MANAGEMENT IN FONTERRA
Table of Contents
Introduction......................................................................................................................................3
Sustainability Challenge..................................................................................................................4
Challenges of Fonterra.................................................................................................................4
Quality Management Systems and their implementation............................................................5
Sustainability Measures of Fonterra............................................................................................6
Continuous Improvement................................................................................................................7
Initiatives of Fonterra for improving operations.........................................................................7
Tools for continuous improvement..............................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

3OPERATIONS MANAGEMENT IN FONTERRA
Introduction
Operations Management refers to area of the management that deals with designing along
with controlling process pertaining to production which is involved in producing good or a
service. It helps in ensuring the fact that business operations run in an efficient manner that helps
in meeting the needs of the customer. Fonterra was created in the year 2001 with the merging of
two co-operatives called New Zealand Dairy Group along with Kiwi Co-operative Dairies.
Fonterra is a global dairy company that is owned by around 10,000 farmers along with their
families (Fonterra.com., 2019). The company works along with the farmers in a partnership
approach that helps in bringing about a difference in the community. Fonterra is the name of a $
19.2 billion dairy co-operative that is owned by the farmers in New Zealand. The mission of
Fonterra is to create pure and natural products that have a lot of potential. The mission of the
company would be to come at the forefront of the dairy innovation for the coming generations.
Their vision relates to sharing dairy with the outside world and they want to evolve as the top
brand in relation to dairy products. The products of Fonterra are yoghurt, milk, specialty cheese
and ice cream. The core value of Fonterra is to become natural source pertaining to dairy
nutrition for everyone in the world. This report discusses about the challenges that is being faced
by Fonterra in relation to quality that compelled them to adopt the notion of sustainability. The
report also throws light on the quality management system that has been adopted by Fonterra in
the present age. The report also elaborates on five initiatives that has been taken by Fonterra that
has helped them in improving the dairy operations. The report also talks about five tools that can
be applied to Fonterra for improving its operations.

4OPERATIONS MANAGEMENT IN FONTERRA
Sustainability Challenge
Challenges of Fonterra
The challenge that was being faced by Fonterra that made them adopt sustainability
relates to their global operating context that made them take recourse to the sustainability
approach. Fonterra taking into account the factor of sustainability can help them in spreading
their presence in the global sphere and create a name for themselves across the world. The food
production system is undergoing transformation owing to the growing population along with the
environmental limits. Challenge was faced by Fonterra owing to the fact that the customers
wanted to know the source of their food and its impact on the environment. The source of the
food being sustainable can help Fonterra in become a global brand. Fonterra wanted to transition
to that of a low carbon future by making investment in the aspect of innovation (Haksever &
Render, 2018). The fourth challenge that was faced by Fonterra is in relation to acting as
contributor to that of carbon footprint that was having a bad impact on the environment. The
dairy animals like cows were producing methane at the time of digestion that was jeopardizing
the environment. The methane is produced at the time of burping of the cows that causes harm to
the environment. Nitrous oxide is released owing to the fact that urine of the cows along with the
fertilizers are broken that releases greenhouse gas that threatens the global atmosphere. The fifth
challenge was in relation to increasing use of the energy along with electricity within the farm
operations (Hitt,, Xu & Carnes, 2016). The demand pertaining to energy use has grown in the
present age. It is being estimated that the demand of energy in the world would increase more
than that of 70 % by the end of the year 2040. The energy is mainly produced from the non-
renewable fuels that give rise to pollution.

5OPERATIONS MANAGEMENT IN FONTERRA
Quality Management Systems and their implementation
International Organization for Standardization (ISO) helps in the creation of international
standard that helps in giving specifications to the product, services along with systems. ISO 9001
has been adopted by Fonterra that helps in ensuring quality along with efficiency pertaining to
dairy farming within New Zealand. It consists of standards that helps in the developing of quality
system related to the organizations in the world. ISO 9001 can establish a global normative
frame that helps in managing the services of a dairy company (Bozarth & Handfield, 2019). ISO
certification acts as an important strategy for Fonterra as it helped in providing confidence to the
consumers of Fonterra.
The Hazard Analysis and Critical Control Point (HACCP) has been adopted in Fonterra
that helps in carrying out the hazard analysis that helps in the identification of critical points in
relation to process (Mahadevan, 2015). This quality management system helped in the
increasing level pertaining to product quality that helps in offering production to the customers
of Fonterra. This system helps in taking care of the raw milk along with the temperature
conditions that safeguards the health of the consumers.
The key challenge in relation to implementation of ISO 9001 was in relation to the fact
that top management did not understand about the leadership requirement that was required in
relation to the implementation of ISO 9001. Challenge was perceived in Fonterra due to the fact
that it was difficult to consult along with participate at the time of implementation of ISO 9001
(Hitt, Carnes, & Xu, 2016). Fonterra was facing problem at the time of implementing the
HACCP on account of the fact that it created financial drain for the company and so they had to
struggle so that they could maintain their profitability in the competitive environment of New

6OPERATIONS MANAGEMENT IN FONTERRA
Zealand. The diversion of the funds along with the resources had to be weighed against that of
devastating cost that the company had to bear that created challenges for the company.
Sustainability Measures of Fonterra
Sustainability initiatives have been undertaken by Fonterra that helps them in overcoming
various issues along with challenges. Fonterra takes care of the animals that are instrumental in
production of high quality of milk. Cows are crucial in relation to dairy farm and the welfare of
the cows are important for the company. Fonterra manages the animals in a responsible manner
that helps in improving the welfare outcome (Choi, Cheng & Zhao, 2016). Fonterra builds on
that of the animal welfare legislation and also carry out work with the industry bodies that helps
in delivering outcomes that are consistent with that of the animal welfare policies along with the
standards. The standards of Fonterra are aligned with that of the international welfare standard
that has been set by that of World Organisation for Animal Health.
Fonterra plays an important role in touching the lives of large number of people from that
of family run farms to that of the international business. It makes a great amount of contribution
to that of regional New Zealand along with national economy. They support the rural livelihoods
and play an important role in relation to community development (Swink et al., 2017). The dairy
cows helps in providing daily source of food along with cash. Cows also play an important role
in the generation of manure that is of value as fertilizer along with fuel. The money that is earned
by Fonterra by exporting the dairy products across the world is returned to that of the farmer
shareholders within the regions.
Fonterra has the Trusted Goodness quality seal that helps the consumers in knowing more
regarding the company. The consumers in the present age look for the products that they can

7OPERATIONS MANAGEMENT IN FONTERRA
feed families. The pastures of Fonterra have clean air surrounding it and it enjoys sunshine that
helps in making the animals healthy which in turn gives way to great milk (Ross, 2017). Fonterra
takes care of the fact that the cows can graze outdoors so that they can feed on the grass. The diet
of the cows comprise of grass silage, forage crops along with hay that helps in looking after the
health of the animals.
Fonterra takes care of the fact that there is sustainable sourcing in relation to the palm
products and they work so that they can improve the practices in relation to the supply chain. The
company has Palm Products Standard that needs that the vendors of the palm products are
committed to the policies that does not support the aspect of deforestation (Sanz-Calcedo et al.,
2015). The company engages with the vendors that help in supporting transformation of palm
industry towards that of sustainable supply. Fonterra plays an important role in the production of
palm oil that is certified.
Continuous Improvement
Initiatives of Fonterra for improving operations
Fonterra made use of sophisticated information technology that can help them in
improving operations pertaining to the company. Information management capability that is
superior was utilized by Fonterra that helped them in the creation of new business model that can
help them in the aspect of their survival. Fonterra developed the digitized process that is
appropriate for augmenting the agility. IT management capability helped them in achieving
success. Fonterra took recourse to Internet Computing along with customer relationship
management that helped them in serving the needs of the customer (Psomas & Antony, 2015).

8OPERATIONS MANAGEMENT IN FONTERRA
The company managed the information technology in a manner that can help them in supporting
the business processes along with the activities in an adequate manner.
Fonterra made use of Total Quality Management that has helped in improving the
performance of the company. The organization is assessed externally that has helped them in
enhancing the organizational performance. Total Quality Management has helped Fonterra in
achieving competitiveness within that of the changing environment (Ingason, 2015). This has
helped Fonterra in differentiating itself from the rivals. The company lays stress on the aspect of
quality that can help it in achieving long term success.
Fonterra used of liquid ring vacuum pumps that helped in the efficient running of the
company. These pumps played a great role in the processing of foodstuffs, pharmaceuticals
along with oil. It has a modular design along with that of integrated flow channel that makes the
pumps compact. This device has got mechanical shaft seal that depends on that of pumping
medium that helps in ensuring the fact that this device has long life cycle.
Fonterra used financial record keeping system that was instrumental in recording the milk
weights and the milk samples are taken from the cows for the purpose of component analysis
(Siva et al., 2016). Fonterra took recourse to Excel along with spreadsheet program that helped
them in the aspect of book keeping. Blank spreadsheet programs were used by Fonterra that
helped in meeting the demands of the dairy company.
Fonterra used the herd management numbering system that helped in locating the cows.
The tags should be imprinted by manufacturer so that it lasts for a long time (Stark, 2015). The
numbering system was used with that of colour coding that helped in the arena of herd
management of Fonterra. The herd management record reflected data that helped in managing

9OPERATIONS MANAGEMENT IN FONTERRA
the herds of Fonterra. The consecutive numbering system was used by Fonterra that helped in
providing vital information about the herd.
Tools for continuous improvement
There are tools that can be used in Fonterra that can help in bringing about improvements
in the dairy company. The tool of Kaizen can be used that stresses on the continuous effort given
by each employee so that it can bring about improvements in all processes along with systems of
an organization. Fonterra can lay emphasis on the element of team work that can help in
improving performance of employees of the company. The employees of the company should be
capable of organizing the things well that can help in the proper running of the company
(Mahadevan, 2015). The method that helped the company in the aspect of organization was their
organizational culture that has played an important role in transforming the business. There
should be set policies in Fonterra that can help in increasing efficiency of performance of
employees of organization.
Just in Time can act as a useful tool for Fonterra that can take care of the fact that the
products are supplied when they are needed and in quantity in which it is needed. The pasture
based model of Fonterra helps in production of best milk within the world at that time when the
consumers want to pay premium for the food which has been produced in a responsible manner.
The technique that can help them in the application of these tool is by being demand driven that
can help in the production of high value products. PDCA is indicative of a management method
that is used in the business for improving processes along with the products (Choi, Cheng &
Zhao, 2016). Fonterra can implement the Food Safety and Quality System that can help them in
the area of delivering safe along with high quality of product across the world. The marketing of

10OPERATIONS MANAGEMENT IN FONTERRA
the products of Fonterra are carried out in an honest manner that is integral in helping people
lead a balanced lifestyle.
Value stream mapping can be used by Fonterra that can help them in analysing their
current state and the designing of the future state. Value stream can help the company in
focusing on the areas that can help in adding value to a product. Riparian management is the
method that can be undertaken by Fonterra that can help them in improving the quality of the
water and enhance the ecosystem health. Another method that can be applied to Fonterra is 5s
Method that can help the company in sorting, standardizing along with sustaining (Ross, 2017).
The new financial tool of Fonterra can help the farmers in gaining certainty regarding what they
would be paid for their milk. Fixed Milk Price can act as a boon for Fonterra that can help the
farmers in making investments in the farm. It can help the Co-operative in the aspect of
standardization tht can help them in achieving certainty.
Conclusion
Operations Management is indicative of the designing of the controlling process that
involves the production of a good. It takes care of the fact that business operations run smoothly
which can help in meeting needs of consumer. Fonterra had to face challenges since they had to
operate in the global arena that compelled them to use sustainability approach. Consumers
wanted to know source of food and this posed challenges for the company. Fonterra
implemented the ISO 9001 that ensured quality of dairy farming of their brand. Fonterra used
information technology that was useful for them for improving the operations. Fonterra took
recourse to record keeping system that can record information pertaining to milk samples which
have been taken for serving the purpose of that of component analysis. They used spreadsheet

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programs that offered them help in the arena of book keeping. Fonterra used the superior
capability pertaining to information management that gave birth to a new model of business
model which can ensure their survival. Kaizen can act as a useful tool for employees of Fonterra
that can improve systems pertaining to the organization. Fonterra can use value stream mapping
that can help them in designing of future state.

12OPERATIONS MANAGEMENT IN FONTERRA
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MANAGEMENT.
Choi, T. M., Cheng, T. C. E., & Zhao, X. (2016). Multi‐methodological research in operations
management. Production and Operations Management, 25(3), 379-389.
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Books.
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operations management: A response to Bromiley and Rau. Journal of Operations
Management, 41(10), 107-109.
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quality management system. Procedia-Social and Behavioral Sciences, 194, 192-200.
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