Nestle's Efforts towards Full Supply Chain Transparency

This report focuses on Nestle's supply chain management, operations, performance measurement, integration considerations, value generation, and more. It discusses how Nestle ensures full supply chain transparency and the different technologies used to enhance the process. The report also highlights the company's focus on reducing child labor and increasing the use of IT to manage relationships with vendors.

P a g e | 1
Contemporary Issues in Supply chain and Logistics Management
HOW DOES NESTLÉ SPEEDS UP EFFORTS
TOWARDS FULL SUPPLY CHAIN TRANSPARENCY?
Course: AMSC700 Contemporary Issues in Supply Chain and Logistics Management
Assessment Two: Case Study
Instructor: Imran Ishrat
Student Name: ........................................................................................................................
Student ID: …………………………………………………………
AMSC700 Case Study (Assessment two)

P a g e | 2
Contemporary Issues in Supply chain and Logistics Management
Contents
1. Research Question.........................................................................................................................3
2. Executive Summary.......................................................................................................................3
3. Introduction...................................................................................................................................4
3.1 Industry Background....................................................................................................................4
3.2 Organizational Background..........................................................................................................4
4. Operations and Performance Measurement...................................................................................4
4.1 Drivers of Supply Chain................................................................................................................4
4.2 Measurement of Supply Chain Performance...............................................................................5
5. Integration Considerations.............................................................................................................6
5.1 Internal Integration......................................................................................................................6
5.2 External Integration.....................................................................................................................7
6. Value Generation...........................................................................................................................8
6.1 Illustration (Value Stream Map)...................................................................................................8
6.2 Value Creation and its Stages......................................................................................................8
7. Conclusion.....................................................................................................................................9
8. References...................................................................................................................................11
AMSC700 Case Study (Assessment two)

P a g e | 3
Contemporary Issues in Supply chain and Logistics Management
1. Research Question
Nestle was founded in 1866 which is headquartered in Switzerland. It is a FMCG company
which aims at creating better life with better future as well. The Supply Chain Management
of the company is the main point that has to be focused on in this report. The SCM of Nestle
makes sure to maintain a healthy environment by getting highly involved in every process of
its supply chain i.e. from raw materials to finished goods to end users. SCM has gained a lot
of significance in terms of serving operational activities. The SCM has now been considered
as core department of business. Earlier, it was known for support department. It aims at
managing and controlling the overall activities of the business (Peters et al., 2011). In
addition to this, the company has also shown a speedy transparency with the information
related to commodities. Thus, the transparency is quite beneficial and for this, the company
has opened palm oil and pulp and paper supply chain transparency along with soya, meat,
coffee, coconut, spices, seafood, eggs, sugar, cereals, hazelnuts and vanilla.
How does Nestlé speeds up efforts towards full supply chain transparency?
2. Executive Summary
The main idea behind this report is to majorly focus on Supply Chain Management of Nestle.
Nestle is a well-known FMCG company which serves huge varieties of product range
throughout the world. The company offers plenty of products to its potential customers. In the
below report, there are plenty of things that has been discussed related to supply chain
management and different technology that has been used by the company to enhance process
involved in supply chain. The company has amazing supply chain management however; it
must focus on two major areas. One is reducing child labor and other is increasing the use of
IT in order to manage relationship with vendors (Rao & Holt, 2005). Apart from this, the
company has list of suppliers and distributors which aims at working on the company’s
objectives and mission. The company has also majorly focused on value creation aspect
which is most important aspect in today’s world.
AMSC700 Case Study (Assessment two)

P a g e | 4
Contemporary Issues in Supply chain and Logistics Management
3. Introduction
3.1 Industry Background
Nestle was established in 1866 headquartered in Switzerland, with the establishment of the
Anglo-Swiss Condensed Milk Company. Later, in 1905, Nestle group was formed by the
merger of Anglo-Swiss Milk company. The products offered by the company includes baby
food, water, cereals, coffee, confectionary products, dairy products, ice cream, pet foods and
snacks. It operates in 450 factories with globally working in 86 countries and 328,000
employees working (Shah, 2009). One of the major shareholder of L’Oréal (a giant cosmetic
company) is Nestle.
3.2 Organizational Background
The main purpose of the company is to enhance better life and contribute to create a healthy
life with better future as well. In addition to this, the company has defined their goals into
three categories given below.
FOR INDIVDUALS AND FAMILIES: Help 50 million children live heathier lives
FOR COMMUNITIES: Help 30 million livelihoods in communities directly
connected to the activities of business.
FOR PLANET: Work to create zero environmental impact in their business
operations.
The supply chain management of Nestle company ensures to maintain the highest possible
standards which takes place from the raw materials, packaging and distribution to the
customer. The products offered by Nestle are checked on the product line and as an outcome,
the customers are fully satisfied with the product which automatically boosts the demand.
Here the supply chain management of the company includes amazing production facilities
which has captured market since long time. The main reasons behind the successful business
is the transparency, vendor management and intelligent distribution system. As the world’s
top leading nutrition, health and wellness company, nestle aims on managing complex
operations by being totally dependent on the supply chain management (Mitra & Bhardwaj,
2010).
AMSC700 Case Study (Assessment two)

P a g e | 5
Contemporary Issues in Supply chain and Logistics Management
4. Operations and Performance Measurement
4.1 Drivers of Supply Chain
Transparency in Supply Chain
The company has already disclosed list of suppliers with number of data related to
commodities. This will lead to generate full transparency for the customers as well. The
commodities shield 95% of the company’s yearly sourcing of raw materials (Meyer & Kirby,
2010). The customers are keen to know what are the ingredients in their food and how does it
come? Thus, the transparency is quite beneficial and for this, the company has opened palm
oil and pulp and paper supply chain transparency along with soya, meat, coffee, coconut,
spices, seafood, eggs, sugar, cereals, hazelnuts and vanilla (Sethi, 2012).
Distribution system
The market of nestle is totally dependent on the distribution network and is managed well by
the channel members and logistics department. The company also ensures to distribute every
product to each area to meet the demand and reach the products on time. It makes sure there
should not be any gap between the demand and supply. The set made by the distribution
channel is linked with the production system, thus, the company do not need to look after the
inventory on the regular basis.
Vendor Management
The company has opted JIT i.e. Just In Time concept in the procurement of their raw
materials. Here, vendors are linked with the procurement and procurement is linked with the
production and other different assistance departments as well (Marshall, et al., 2016).
Because of the concept of JIT, the company is able to reduce the unnecessary cost and it is
also capable to maintain a low level of inventory as well. The vendors ensure that the raw
materials reach to the company on time as well.
4.2 Measurement of Supply Chain Performance
Supply Chain Management has earned its significance in serving operations and being a huge
part of strategic management of the company. The SCM has now been considered as core
AMSC700 Case Study (Assessment two)

P a g e | 6
Contemporary Issues in Supply chain and Logistics Management
department of business. Earlier, it was known for support department. It aims at managing
and controlling the overall activities of the business. In this modern world, there is no single
organization which tends to survive without SCM. The role of vendor and vendor
management also plays an equal role in the company because it helps in building a healthy
relationship with employees, customers, suppliers and distributors (Kruschwitz, 2013).
The methods used to measure inventory starts with counts of total units, volume and weight.
In addition to this, inventory can be measures is three basic ways.
Average Aggregate Inventory Value
Average aggregate inventory value: *No: of units of item A typically on hand *value of each
unit of item A+ *No: of units of item B typically on hand *value of each unit of item B
Weeks of supply
Weeks of supply: Average aggregate inventory value/weekly sales (at cost)
Inventory turnover
Inventory turnover: Annual sales (at cost)/ average aggregate inventory value
5. Integration Considerations
5.1 Internal Integration
The integral integration defines the future growth of the company. The company aims at
focusing on its corporate strategy form the very past time period. The company also tend to
create its core competencies and boost itself based on the internal factors which is comprised
of products, R and D, global presence, people, brand name and culture (Kiran & Sharma,
2011).
People: The company has aimed to gain successful and potential customers towards it
because of the quality of products offered. The company makes sure there should not
be any gap between demand and supply so that it will generate more new customers
and gain more profit in terms if services provided.
Brand Name: The company has its name well known throughout the world. Today
people are happy and satisfied to buy the products of Nestle. The company has built
its name in the mind of customer which has created a positive impact in the market as
well.
AMSC700 Case Study (Assessment two)

P a g e | 7
Contemporary Issues in Supply chain and Logistics Management
Culture: The work culture found inside the company is quite cooperative and
employees work effectively and efficiently. The employees working are aware of the
mission and vision of the company and they keep on working based on the company
objectives (Wolf, 2014).
Products: The products offered by the company is found in huge varieties and ranges.
The company deals in many areas such as baby food, water, cereals, coffee,
confectionary products, dairy products, ice cream, pet foods and snacks. The products
of the company are highly trustable and demanded by the customers.
Global Presence: The company offers huge number of products and services globally
where the logistics department makes sure to provide each product to each area based
on the demand of the particular product in a particular area (Gold, Hahn & Seuring,
2013).
5.2 External Integration
External integration is comprised of suppliers, distributors, warehouses and competitors.
External integration tries to interconnect the upstream as well as downstream in the process
of supply chain management.
Suppliers: The suppliers of the company have already gained a competitive market
and potential customers to deal with the products and services offered. There is a
speedy transparency in the supply chain management process so that questions in the
customers’ mind related to the war materials can easily be resolved. How the products
are made and what are the ingredients used are all visible to customers.
Distributors: The company always majorly focused on creating shared value
experiences with its distributors, suppliers and customers. Due to this, the company
earned huge assistance while the Maggi crisis took place. the distribution channel of
Nestle is well managed with all the departments (Galbraith, 2011).
Competitors: The major competitors of Nestle are Mars, Unilever, Heinz, General
Mills, Danone, Kraft Foods and many more. These are the major competitors. The
company uses mixture of value based and product based positioning strategy which is
totally dependent of the types of product Nestle is branding and the market where the
company is selling its products and services.
Warehouses: The company delivers its products either for transportation or export. In
addition to this, the products are then loaded into the vessel which is selected by the
AMSC700 Case Study (Assessment two)

P a g e | 8
Contemporary Issues in Supply chain and Logistics Management
buyer. Once the products are loaded into the chosen vessel by the buyer, all the risks
and further costs are transferred to the buyers’ side.
Technology: The company is now focusing on creating a E- platform for E retailers.
In that way, the company will be able to maintain a healthy relationship with its
employees, customers, suppliers and distributors as well. Providing electronic
platform to the customers plays a major role in today’s generation. The customers are
now free to deal online and buy the products. The online platform also provides huge
number of options available to the customers.
6. Value Generation
6.1 Illustration (Value Stream Map)
Process. A process is represented with a rectangle and the word "Process"
Inventory. A triangle with an "I" inside represents the exchange of inventory during
the process
Shipment
Supplier and Customer
Electronic flow
Kaizen burst
Go see
Quality
AMSC700 Case Study (Assessment two)

P a g e | 9
Contemporary Issues in Supply chain and Logistics Management
Source: Value Stream Map Templates for Word PPT and PDF Unique value stream power
point template, 2019.
6.2 Value Creation and its Stages
Value can be known as the total amount of money that the people wishes to pay for pa
particular products and services offered to the. This complies to satisfy their needs and
demands as well. In each stages involved in the supply chain, a value is created and this
changes based on different technology, and demands of the customer as well (Cordon et al.,
2013). A group of interrelated activities creates a value chain which also aims at generating a
competitive advantage. In addition to this, the value chain can easily be tracked via value
stream map. Majorly, there are three basic stages. These are Information flow, material flow
and Timeline.
Material Flow: It includes how the whole process takes place i.e. form very initial raw
materials to finished goods that goes to the final destination i.e. to the customers. This
can easily be tracked through different stages of the flow. It also keeps the record of
stock, material and components that are stored in the inventory (Berthon, et al., 2012).
AMSC700 Case Study (Assessment two)

P a g e | 10
Contemporary Issues in Supply chain and Logistics Management
Timeline: It reveals Value added time versus Non-value added time. It is one of the
vital waste indicator in the entire process of value stream map.
Information Flow: It is basically the demand that is generated from the end user to
previous company in the network. The flow travels from supplier to customer and
then later from customer to back to suppliers. It goes in two-way direction so called
bi-directional. The information that flows in between suppliers and customers are
quotations, purchase orders, delivery status, invoices, and customer complaints and
many more. In terms of Nestle, the information flows are coordinated well and
managed effectively so that no information is mistaken that will create hurdles in the
entire process.
7. Conclusion
In the above report, there are plenty of things that has been discussed related to supply chain
management and different technology that has been used by the company to enhance process
involved in supply chain. The company named Nestle was majorly focused along with its
strategies. The company has amazing supply chain management however; it must focus on
two major areas. One is reducing child labor and other is increasing the use of IT in order to
manage relationship with vendors.
Issues and recommendations in Supply Chain Management
Nestle is highly involved in the managing its supply chain to ensure the quality and fairness
to their customers. In the recent time, it was found that Nestle is involved in the process of
child labor which has created issues in the entire company. Child labor is majorly found in
chocolate industry by Nestle (Alvarez, Pilbeam & Wilding, 2010). There are huge number of
suppliers who are involved in such issues. To eradicate such issues, nestle has taken some
strict actions and refused such suppliers who do so. In addition to this, the employees
working in the company are also facing some issues in working conditions. They are prone to
abuses which has become a serious issue for the company. For such issues, the company has
taken moves towards self-disclosure (Muller, 2013).
AMSC700 Case Study (Assessment two)

P a g e | 11
Contemporary Issues in Supply chain and Logistics Management
8. References
Alvarez, G., Pilbeam, C., & Wilding, R. (2010). Nestlé Nespresso AAA sustainable quality
program: an investigation into the governance dynamics in a multi-stakeholder supply
chain network. Supply Chain Management: An International Journal, 15(2), 165-182.
Berthon, P. R., Pitt, L. F., Plangger, K., & Shapiro, D. (2012). Marketing meets Web 2.0,
social media, and creative consumers: Implications for international marketing
strategy. Business horizons, 55(3), 261-271.
Cordon, C., Hald, K. S., & Seifert, R. W. (2013). Strategic supply chain management.
Routledge.
Galbraith, J. R. (2011). Designing the customer-centric organization: A guide to strategy,
structure, and process. John Wiley & Sons.
Gold, S., Hahn, R., & Seuring, S. (2013). Sustainable supply chain management in “Base of
the Pyramid” food projects—A path to triple bottom line approaches for
multinationals?. International Business Review, 22(5), 784-799.
Kiran, R., & Sharma, A. (2011). Corporate social responsibility: A corporate strategy for new
business opportunities. Journal of international business ethics, 4(1), 10.
Kruschwitz, N. (2013). Creating shared value at Nestle. MIT Sloan Management
Review, 55(1), 1.
Marshall, D., McCarthy, L., McGrath, P., & Harrigan, F. (2016). What's your strategy for
supply chain disclosure?. MIT Sloan Management Review, 57(2), 37-45.
Meyer, C., & Kirby, J. (2010). Leadership in the age of transparency. Harvard Business
Review, 88(4), 38-46.
Mitra, A., & Bhardwaj, S. (2010). Alignment of Supply Chain Strategy with Business
Strategy. IUP Journal of Supply Chain Management, 7(3).
Muller, M. (2013). Nestlé baby milk scandal has grown up but not gone away. The
Guardian, 13.
Peters, N. J., Hofstetter, J. S., & Hoffmann, V. H. (2011). Institutional entrepreneurship
capabilities for interorganizational sustainable supply chain strategies. The
International Journal of Logistics Management, 22(1), 52-86.
Rao, P., & Holt, D. (2005). Do green supply chains lead to competitiveness and economic
performance?. International journal of operations & production management, 25(9),
898-916.
Sethi, S. P. (2012). Multinational corporations and the impact of public advocacy on
corporate strategy: Nestle and the infant formula controversy (Vol. 6). Springer
Science & Business Media.
Shah, J. (2009). Supply chain management: Text and Cases. Pearson Education India.
AMSC700 Case Study (Assessment two)

P a g e | 12
Contemporary Issues in Supply chain and Logistics Management
Wolf, J. (2014). The relationship between sustainable supply chain management, stakeholder
pressure and corporate sustainability performance. Journal of business ethics, 119(3),
317-328.
AMSC700 Case Study (Assessment two)