Sustainable Transportation and Logistics

This assignment delves into the realm of sustainable transportation and logistics. It examines various aspects such as the impact of air pollution from transportation sectors, the role of plug-in hybrid electric vehicles in mitigating emissions, and the implementation of efficient delivery truck systems. The exploration extends to railway management, fishing vessel energy efficiency, and smart grid integration for electric vehicle charging. The focus is on analyzing existing practices and identifying opportunities for improvement in achieving a more sustainable transportation future.

Running head: TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Transportation and Distribution Management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................2
Overview of Nestle..........................................................................................................................2
Incoterms Selection Consideration..................................................................................................3
Transportation and Distribution Approach used by Nestle.........................................................4
Carrier Selection Criteria.................................................................................................................5
Carrier Relationship Management...................................................................................................7
Recommended Incoterms used by Nestle....................................................................................9
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
The concept of transportation and distribution is defined as the movement of people,
animal, raw materials and the finished goods. The business organizations with the help of
distribution and transportation channel move their products from one place to another such as
from warehouse to the end customers. The major modes of transportation used by the business
organizations include space, road, rail, vehicles, cable, and pipeline (Su et al., 2012). Therefore,
the significant features of distribution and transportation include effective management of
infrastructure, organizational operations, employees and the vehicles used for distribution. The
delivery of raw materials and finished goods at the accurate time to the target customers ensures
successful distribution and transportation.
This report introduces the effectiveness of the distribution and transportation with respect
to the goals and objectives of Nestle.
Overview of Nestle
Nestle was established in 1866 in Switzerland and is one of the globally recognized
Health, Wellness and Nutrition Company that promotes healthy living for the people. Nestle has
made the successful international venture in countries such as Asia, United Kingdom, United
States and Canada since its origin. “Good Food, Good Life” is the mission of the company due to
which the company aim towards providing highly nutritious beverage and food to the target
customers globally. Nestle sells a wide range of products that include confectionary, pet care
food, chocolate, meals, desserts, beverages, ice creams, coffee, and wafers. In 2015, Nestle

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generated 9.066 billion as the annual revenue that is comparatively lower than the profit
generated in 2014. In 2014, Nestle generated approximately 14.456 billion ("Nestle", 2017)
In 2013, Nestle was ranked as one of the companies in the top 10 within the cultural
category. This is due to the immense popularity and admiration of the company among the target
customers globally. The company has always aimed towards enhancing the quality of life of the
customers by providing them with highly nutritious and healthy food. The company aim towards
caring and helping the family of the customers. Thus, the principal aim of Nestle is to encourage
and support people in leading a healthy life. Respect is one of the core values that Nestle follows
while conducting the business. Nestle believes in respecting their customers, the surrounding
business culture, environment, customers, future generation, and diversity. Mars, Danone,
Cadbury and Mondelez International Inc are the potential competitors of Nestle ("Nestle", 2017).
Incoterms Selection Consideration
Level strategy is implemented by Nestle for appropriate conduction of planning and
production. According to the concept of the approach, the company emphasizes to develop
values for the target customers along with exploring the core competencies thereby, achieving
the competitive advantages. The strategies and decisions used in managing the distribution and
transportation aim towards establishing a strong customer relationship thereby, gaining
competitive advantage. The incoterms follows the international commercial terms that is
applicable for the importer and the exporter during transaction. Additionally, the incoterms
monitors the action of the stakeholders in order to ensure risk management and responsibility
(Zheng et al., 2014).

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Transportation and Distribution Approach used by Nestle
Keeping in mind the requirement of environment sustainability, Nestle has designed and
developed their transportation and distribution process. The main features of the distribution and
transportation process of Nestle include:
 Using the available distribution networks and the operating routes of Nestle in the most
effective manner
 In order to gain the ability to handle both safety and environmental issues by training the
driver extensively
 For enhancing the transportation options, Nestle aim towards exploring the various
opportunities by cleverly selecting the modes of transportation as well as using fuels that
are less harmful to the environment (Moradijoz et al., 2013)
Figure 1: Incoterm Selection Consideration
(Source: Moradijoz et al., 2013)
Nestle aims towards effectively using the resources of the company by decreasing the rate of
empty transportation of the trucks, evaluating the distribution of strategic network and
maximizing the use of vehicles for distribution and transportation. Effective management of the

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operations is one of the ongoing processes conducted by Nestle for optimizing distribution and
transportation. Keeping in mind the significance of sustainable business approach, Nestle is
emphasizing towards restricting the use of traditional modes of transportation from road to rail or
short-sea freight (Cui et al., 2012). Therefore, Nestle is facilitating the use of natural gases for
the transportation vehicles rather than using fossil fuels. This initiative will help Nestle in
reducing the emission of greenhouse gases thereby, controlling the adverse environmental
impact. For the warehouses, Nestle is emphasizing towards selecting an alternative source of
renewable energy by decreasing the energy consumption rate. In order to ensure reduced the
adverse environmental impact, it is important that Nestle generates and implements unique and
advanced technologies for distribution and transportation channel (Tsao & Lu, 2012).
Carrier Selection Criteria
Considering the adverse impact of transportation on the environment, Nestle has opted
for carrier transportation of the finished products and the raw materials. Maximizing the
transportation efficiency, minimizing the transportation cost and the reducing the emission of
greenhouse gases are the major factors that influenced the carrier selection process of Nestle.
Therefore, the importance of the above-mentioned factors in determining the carrier selection for
distribution and transportation by Nestle is stated below:
Fleet vehicles: Nestle has been using various advanced technologies in terms of freezing
cabinets in the trucks that are used for distribution and transportation. The use of advanced
technologies in the carriers is an initiative undertaken by Nestle to maximize the transportation
efficiency (Leou, Su & Lu, 2014). Nestle has installed eutectic freezing plates in the range of
trucks used by them for the purpose of transportation. The trucks remain cool overnight due to

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the installation of the eutectic plate while they are stationed in the distribution centers overnight.
More than 1500 trucks with eutectic freezing plate are being used by Nestle for transporting,
delivering and distributing Nestle products such as ice creams and pizzas to the distribution
centers, retail outlets, and the target customers. Nestle has also installed Telematics in order to
reduce the idling time of the trucks. The report suggests that in the past two years nearly 32% of
the idling time of the trucks has been reduced due to the installation of Telematics (Amini &
Islam, 2014). As a result, nearly 250,000 gallons of fuels have been saved. Nestle has also
emphasized in training the drivers to enhance the efficiency of the environmental and safety
programs for the drivers.
Nestle also puts 30% weight on the reliability of the carrier as the organization prefers
consistent, trustworthy and quality while shipping the products. This provides an opportunity for
the organization to create positive value and relationship with the customers. Nestle transports
superior quality products to more than 60000 retail outlets that can be challenging if the
company uses unreliable carrier resources. Additionally, unreliable carrier selection can delay
the production and exportation of the Nestle products. Therefore, Nestle ensures that the carrier
selected by the organization is reliable and trustworthy that will help in fast delivery of products
to the customers at the right time. Reliable exportation also helps in increasing the level of
customer satisfaction (Profillidis, 2014)
Nestle puts almost 20% weight age on the technical capabilities of the carrier selected.
Keeping in mind technical capabilities of the carrier, Nestle emphasizes on system that has
appropriate skilled personnel, safe shipment and maintenance of the quality of the product.
International transportation is more prone to risks due to various factors such as pace, quality and
customers satisfaction. Moreover, Nestle also abides with the environmental conservation

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policies and implement a sustainable carrier system in order to achieve global standards.
Therefore, Nestle needs to use a transport system that has state-of-the-art communication
thereby, ensuring continuous shipment follow-up (Caiazzo et al., 2013).
Nestle places 30% weight on the transit time while selecting the carrier system for
distribution and transportation. The transport management of Nestle emphasizes on delivering
the products in the minimum time possible in order to accomplish the core value of the fastest
production. The main competitive advantage of Nestle is their capability to products hygienic
product faster compared to the competitors in the market. Additionally, while shipping the
products, Nestle also needs to consider the new strategies in the market within the minimum time
possible. This will provide an opportunity sufficient sales time before introducing the new
production batch. Nestle primarily uses air transport due to which the company has procured jets
along with cargo planes. This ensured faster shipment of products for Nestle (Amini & Islam,
2014).
Carrier Relationship Management
Partnership with relevant stakeholders determines the success of the international
transportation. It is a mutual relationship with the business and the carrier that involves a mutual
agreement with the customer duty individual, freight, local distributors and the purchase
insurance. The main aim of Nestle is to create positive relationship with the associated
stakeholders that are involved in shipping. Therefore, the company implements all the possible
methods for ensuring healthy relationships with the carriers. The company believes in
maintaining healthy relationship with the carriers both imports and exports that can achieved
through adequate implementation of payments and regulations. Additionally, Nestle has positive

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relationship with airfreights and insurers that has values in terms of customers’ satisfaction and
service delivery.
Nestle prefers in maintaining a honest and continuous communication with transport and
distribution partners thereby, helping in mitigating the possibility of misunderstandings and
maximizing trust and reliability. With the recent technological advancements, Nestle shares
important and crucial information with the partners that includes freight data and evaluation of
the shipment. This provides an opportunity for Nestle to recognize the possibility of cost cutting
and transport intelligence within a given time duration. Nestle also implements and follows full
web-based communication system due to which the carriers are able to access relevant data such
as freight bill, airway bill and loading bill easily (Hirsch, 2013).
Nestle believes in respecting the objectives of the transport and distribution partners and
ensures that they do not underestimate their goals or limit their opportunities. Nestle believes in
upholding the satisfaction level of the distribution and transport partners just like their customers
(Lee, Thomas & Brown, 2013). Additionally, Nestle has an expert team that are solely
responsible for communicating, negotiating and maintaining positive relationship with their
transport and distribution partners. On the other hand, the selection of the appropriate carrier also
determines the carrier relationship management. This is because the nature and objectives of the
partners also determines the success of the business. Considering this, Nestle selects carriers by
keeping in mind the goals and objectives of their transport partners (Arnas, Holmstrom &
Kalantari, 2013).

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Recommended Incoterms used by Nestle
Keeping in mind the various kinds of customers Nestle has, the selection of incoterms
will vary accordingly. Therefore, based on the type of the customers, the incoterms for shipping
the Nestle products are selected. The retail store customers are considered as one of type of
customers. Thus, Nestle spends shipment cost for the respective stores and is suggested to use
Delivery Duty Paid in the case. Under DDP, Nestle will responsible for the delivery costs in the
retail outlets. Additionally, more money needs to be paid to the customs from import and export
facilities along with considering the risk of loss until the product reaches the retail outlet (Ruiz,
2012).
The following are the recommended incoterms for Nestle:
 Nestle must consider using Free on Board as it shall enable the company to deliver the
goods on board the vessel as per the nominations of the buyer at the specific port of
shipment or procures the goods already so delivered. In this situation, the risk of loss of
or damage to the goods passes when the goods are on board the vessel, and the buyer
bears all costs from that moment onwards (Bowker et al., 2015). Therefore, it is
recommended that Nestle must continue using Free on Board incoterm in order to save
costs and reduce the risk involved.
 Another incoterm recommended for Nestle is EXW (Ex Works). In this case, the buyer is
required to pay for everything. The buyer hires a forwarder for the airfreight and
destination services. In this case, the buyer also pays for the transportation from the
supplier’s warehouse to the port, customs clearance, handling charges, and other costs
that may occur. This incoterm provides the buyer additional control over the shipping but
also involves extra costs in tracking the activities at the origin.

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Figure 2: Incoterm DDP 2010
(Source: Bowker et al., 2015)
 The Cost and Freight (CFR) incoterm is also recommended for Nestle considering
because of their online customers. According to CFR, Nestle will be solely responsible
for cleaning the products for export along with delivering the product for railway
shipment port and paying the required charges. The implementation of this incoterm will
enable Nestle to ensure that the delivery is free of obligation. This will provide an
opportunity for Nestle to establish effective relationship with the online customers and
ensure brand awareness. However, on the contrary, this incoterm places the associated
risks on the buyer.
Figure 3: CFR

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(Source: Bowker et al., 2015)
 Cost, Insurance and Freight (CIF) incoterms can also be used by Nestle. According to this
approach, the seller or the exporter is solely responsible for delivering the goods onto the
vessels along with clearing the customs in the country. In this case, Nestle will be
responsible for buying the insurance in collaboration with the importer that act as the
beneficiary. The risk is transferred to the buyer once the products are shipped on to the
carrier. The use of this incoterm is recommended for Nestle, as the risk is transferred to
the importer thereby, compensating with the financial loss.
Figure 4: CIF Incoterm
(Source: Bowker et al., 2015)
 It is also recommended that Nestle use incoterms such as Delivered At Frontier (2000),
Delivered Ex Ship (DES) and Carriage Paid To (CPT). This is because the use of the
aforementioned incoterms will allow Nestle to deliver goods to other countries with the
help of importers and saving the risk of distribution and transportation.

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Conclusion
In this report, it can be concluded that distribution and transportation is a significant
function in international trade, as it involves various types of regulations, partnerships and costs.
A global company like Nestle has to make decisions that sticks to their core business values
along with maintaining with the international standards and customer demands. Nestle
implements international commercial terms or incotems for delivering their raw materials and
finished products to more than 600 outlets in various countries internationally. Therefore, while
shipping their products to the international markets, Nestle uses Delivery Duty Paid (DDP), Cost,
Insurance and Freight (CIF) and Cost and Freight (CFR). Appropriate transit time, reliability and
speed are the primary goals that Nestle considers while selecting the carrier for transportation
and distribution. However, geographical locations and technical capabilities are also considered
by Nestle while selecting the carrier. Air carrier is primarily used by Nestle for transportation
and distribution. Nestle aim towards managing the relationship with their carrier partners. Nestle
uses ethical negotiation standards as the main approach for managing carrier relationships
thereby, upholding accountability, integrity, transparency and respect. Nestle also ensures that
constant communication with the transportation and distribution partners are maintained by using
latest technologies.

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