Fonterra: Sustainability Challenges, Quality Management, and Solutions

This report delves into Fonterra's operations management, focusing on the challenges and opportunities related to sustainability within the dairy industry. It begins with a background on Fonterra, a multinational dairy cooperative, detailing its ownership, financials, vision, core values, prominent brands, and key markets. The report then identifies key sustainability challenges, including issues related to food quality, nutrition, and resource scarcity, particularly in a growing global population. It examines the quality management system adopted by Fonterra, including the use of ISO 9001 and ISO 14000 standards, and discusses the challenges faced during implementation. Finally, the report outlines the sustainability initiatives taken by Fonterra to overcome these challenges, focusing on nutrition, environmental responsibility, and continuous improvement within their dairy operations. The report highlights how Fonterra is working to address global concerns about food security and nutrition while striving to maintain high-quality products.

Operations management

Table of Contents
INTRODUCTION...........................................................................................................................4
Provide a brief background of the business organisation.......................................................4
2. sustainability challenges ( LO1):.................................................................................................6
(a) Discuss driving challenges that is faced by Fonterra related to their quality and
performance to maintain sustainability..................................................................................6
(b) Explain about quality management system adopted by Fonterra with issues and challenges
face during their implementation............................................................................................7
(c) ways in which sustainability initiatives taken by fonterra to overcome issues and
challenges...............................................................................................................................8
3. Continuous improvement.............................................................................................................9
(a) Explain initiatives to continuous improve in dairy operations.........................................9
(b) Tools for continuous improvement plan.........................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Operation management is an management approach that concerned with designing and
managing various processes of production to get highest level of effectiveness that is possible for
an organisation. It is primarily concerned with transforming materials and labour into goods and
services to reach at desirable outcomes. This report is based on fonterra that is a co operative
group limited multinational dairy co operative that is owned by 10,500 farmers of new Zealand.
This report is based on whole about the business and its ownership, their financial position and
their values and vision and their famous brands with markets in which it operates. It also
explains challenges and issues faced by them to maintain performance to keep sustainability. It
elaborates about quality management system and issues while implementing into market and
ways to overcome from these problems. In addition to initiatives taken by Fonterra to improve
their quality and major tools and methods.
Provide a brief background of the business organisation.
Operation management is an important tool that helps in enhance their efficiency level up
to possible for an organisation. In that scenario Frontera majorly focuses on improving their
sustainability level regarding the food security and nutrition because large no. of people facing
problem of malnutrition in all over the world. To reach at global level they have to eradicate
these challenges of food production (Brown & Bessant, (2013).). On other hand their farmers
and other stakeholders are forefront for sustainable farming because they require natural
environment and strive towards the high quality dairy products that is nutrition full and aim to
produce high quality dairy products to enlarge their market base.
Fonterra is an cooperative group which is an largest exporter of dairy and related
products, they are leader and of science and innovation (Galindo & Batta, (2013)). They are
owner of various brands portfolio in Asia pacific and they are co partner of world's most leading
food product companies. Its headquarter is in new Zealand and operates more than 40 countries
all over the world.
History:
Fonterra established in October 2001 with the merger of two largest dairy co operatives
companies that is New Zealand dairy group and Kiwi cooperative Dairies that merge with new
Zealand dairy board. Its name come from Latin word which means “spring from the land”. It has

monopoly control over their domestic and export dairy industry. In 2005 company bought large
factories and start collection of milk from farmers and manufacture of power milk. Then it also
started move towards purchasing products from dairy farmers and national foods. In 2008
company acquired yoghurt and Nestle business of dairy dessert that expand their business (Hitt,
& Duane Ireland, (2017)). It change its structure of business by putting company a separate
listed company with maintaining interest area. Its type of ownership is cooperative and deals in
manufacture and retail sector.
Financials:
it has approximately 30% of the world's largest dairy exports with revenue exceeding
than NZ 17.2 billion dollar with it become largest company. Their net income is NZ 0.745 billion
dollar with assets NZ 17.842 billion dollar. It has 21,400 employees and many stakeholders that
invest in their growth and enhancement.
Vision and core values:
Frontera vision is to give pure, natural product with unlimited potential. There are
nutritional possibilities we have yet to explore (Galloway, Rowbotham & Azhashemi, (2012).).
In their core values consist of their corporate social responsibility and their pollution prosecution
and best quality products by protecting from malnutrition. Mostly people in all over the world
suffer from the problem of quality of food so mainly focusing on giving best quality products.
Prominent brands:
Frontera have large chain of products and great brands and it operates almost in 40
countries. There famous brands in which Gardein, slim jim, duncan hines, healthy choice, earth
balance, Marie callender's, orville Redenbacher's, Reddi wip and Birds eye, boom chicka pop,
viasic, Dukes, Hunts, frentera, Udi's and Pam are their major brands the enhance their brand
name in all over the world.
Key markets:
Fronterra deals in almost 40 countries and its products mostly for middle and upper class
people and they operate in new Zealand, Australia, china and Malaysia and many more so it has
large market base and aimed to expand it.

2. sustainability challenges ( LO1):
(a) Discuss driving challenges that is faced by Fonterra related to their quality and performance
to maintain sustainability.
Fonterra is an leading brand name in dairy products and every organisation face issues or
problems to maintain their sustainability level. It mainly deals in food products so it faces
problem of quality and performance of food. In world wide people suffer from the problem of
malnutrition that effects on their health (Jacobs and Chase, 2012). On other hand their
stakeholders tried to strive to maintain standards for maintaining sustainability in organisation. It
want to true leader in field of sustainable dairy nutrition and want to high quality products to
meet expectation of environment. Their main centre to maintain sustainability is food that offer
by them and globe majorly concern for security and nutrition level of food. There are some
major concerns that face by fronterra regarding quality and performance in their organisation.
Growing population:
In the whole world population rises in rapid manner and it is very hazardous for frontera
to maintain quality and performance of products and services. The reason behind the issue is that
resources are scare and the population is large so to maintain quality and performance is very
difficult for them.
Accessibility to nutrition:
To maintain quality level of products and services when in world wide people are so
much poor and away from the nutrition food and services. In that case frontera not able to access
nutrition level to everyone (Krajewski, Ritzman & Malhotra, (2013)). Nutrition food is
expensive and people are not able to afford it so it creates problem in front to maintain quality
and performance level.
Quality of water and scarcity of resources:
Wastage of water and intensification in agriculture creates scarcity of water in all over the
world that is the main reason behind the shortage of nutrition in food quality. Day by day
shortage of water increases and it become hazardous for them to maintain good quality and
performance of food and related products.
Dynamic climate:
The food production and operation directly related with the environment and climate. The
climate is very dynamic in nature. In case of organisation they have face many challenges while

performing functions because climate not in favour of them. Control of every activity of food
industry totally depends on the climate that majorly affect on their business and their
proceedings.
Aware people and health crisis:
In case of Frontera in whole world mostly deaths occurs due to the food and lack
nutritional resources in food. So it creates lot of trouble for food industry to maintain their brand
loyalty and faith in front of their consumers (Lewis & Brown, (2012)). People are mostly
overweight and obese so to maintain quality level of food is very difficult for them and give best
quality products to their target market is very difficult for them.
There are some other issues that face by fronterra while providing food and their related products
to their consumers. It is very difficult for them to maintain quality and performance level of their
customers to give proper satisfaction.
(b) Explain about quality management system adopted by Fonterra with issues and challenges
face during their implementation.
Quality management system is chain of processes related to business that focus on
consistently meet their customer's requirement by giving them satisfaction. It is aligned with the
purpose and strategic direction of the business (Peng & Lai, (2012)). Quality management is
one of the most important aspect to deliver desirable products and services to their ultimate
consumers by fulfilling their needs and wants. There are various measures to maintain quality of
products and services that are as follows:
ISO 9001:
The ISO 9001 sets the standards and criteria for quality management system and it is one
of the most important standard in 9000 family that can be certified. It used by organisations,
rather large or small and any field of activity. There are millions of organisation in whole world
over 170 countries that uses that standard. It based on different quality management principles
that focus on customer and their motivation level. It is process and continuous improvement
approach. It helps in consistently maintaining quality of products and services. It gives standards
to maintain quality and performance of products and services that avail by fontera to attain
desirable outcomes.
ISO 14000:

ISO 14000 family of standards gives tools and techniques for all organisation that helps
in manage responsibilities for an organisation. It gives standards for protect the environment
from hazardous effects that it faces in future. It also focuses on audits, communication, labelling
and life cycle analysis that challenges that face by an environment such as climatic changes. It
sets standards for environmental management system and get certification and provide map to
bring management and coordinate different activities. These tools are very beneficial in case of
fonterra to get standards so that by ruling out they can attain desirable outcomes.
Issues or problems that faced by an organisation while implementing quality management
system:
There are many problems or issues that faced by an organisation while implementing the
quality management system that are as follows:
Resistance to change:
The one of the most common barrier while implementing the quality management is that
due to that process different types of changes in organisational structure and works with
proceedings changes (Ronen, Pliskin & Pass, (2012)). In order to begin with when manufacture
start for adaptation to new changes according to demand of their consumers. It hinders their self
interest and employees not pleasant to adopt that changes because it hinders their comfort zone
with self interest also.
Takes huge cost:
In case of Frontera when it implement quality management system in their organisation
then it reduce the defects but requires huge investment and proper observation that requires huge
cost and time to manage all things in better manner (Schniederjans, Cao & Triche, (2013).). It
requires verification of personnel training and development with help of statistical process
control that give better results by auditing.
(c) ways in which sustainability initiatives taken by fonterra to overcome issues and challenges.
To overcome from the different issues and problems fonterra takes many initiatives to
maintain their sustainability level that are as follows:
To give sustainability in organisation firstly employees have to clearly defined about their goals
and objectives so that they majorly contributes in organisational development and enhancement.
To eradicate with these issues by improving quality of products and there are three main pillars
to get sustainability in market.

Nutrition:
To overcome from the above mentioned issues or problems to improve the health and
well being by serving best quality products and services. They by giving healthy and responsible
products and services to their consumer base with promoting healthy diet. It by giving nutrition
at affordable pricing to satisfy needs and wants of communities.
Environment:
Environment is one to the most important aspect to maintain sustainability in organisation
that helps in environment for society. In all over the world company facing the transformational
challenge that exceed according to consumer needs and demands (Schwarz, Hall & Shibli,
(2015).). It helps in increase their sustainability in organisation while adopting various important
measures that are beneficial for organisational growth and enhancement.
3. Continuous improvement
(a) Explain initiatives to continuous improve in dairy operations.
Continuous improvement is an ongoing process that helps in improve the performance
level of products, services or processes. These processes should be incremental or break through
at a time. There are some steps that taken by fronterra to continuous improvement in their
performance level that are as follows:
Energy and emissions:
As per the case the main objective in front of fronterra is that they are targeted to
reduction in gases of green house for every unit of production. So it is the first and foremost step
of continuous improvement plan to get highly qualitative products to their customers.
Waste management:
to improve in quality of products and services they apply plan of waste management in
which they take their raw material from the farmers that are largest supply source (Subramanian,
& Ramanathan, (2012)). In that case they focus on minimization of food wastage by applying
right kind of supply chain. With also enables to deliver maximum return to farmers.
International audits:
to get effective results frenterra takes steps by regular and third party audits that helps in
set standards and according to them they measure their own performance according to the brief.

In that scenario they with help of Sedex, ethical trade audit and standard for labour practices are
important practices that help in improve their quality.
Sustainable operations:
To improve and give best quality of products frenterra taking care of every resources in
better manner so that products should be achieve in effective and minimize wastage of energy
and it investing in new technologies with equipments that helps in their long term goals and
objective.
Dairy farming:
To improve performance level of product it focus on save the environment and caring the
health of an individual and their cows that are the main source of their business (Tayur,
Ganeshan & Magazine (Eds.). (2012).). They start long term sustainable dairying program that
helps in increase their performance level that are very essential for achieve growth and
productivity.
(b) Tools for continuous improvement plan.
There are many tools and techniques which helps in enhance their performance level that
are as follows:
Kaizen:
Kaizen is an approach that helps in continuous improvement for small changes that
brings positiveness in organisation. It is an activity that helps in improve all functions and
employees to assemble product line to get effective results.
just in time:
Just in time is an manufacturing and it is also known as just in time production that have
main aim to reduce time in production system with time of response to their suppliers with their
customers (Wright, (2018).). It is basically use for align material orders from suppliers directly
with the schedule of production. Companies use that strategy to increase efficiency level and
reduce wastage at time of production of goods and services.
Kanban:
it is an scheduling system that is use for lean manufacturing and just in time approach. It
is developed with motive of improvement in manufacturing. It is an effective tool that supports
in production system and best way to enhance improvement. Problems arise and highlighted by
lead time and cycle time to gaining results in proper way.

PDCA plan:
PDCA is an four step management method or tool that is used in business to improve
continuous performance in business management. In which some steps should be taken to take
necessary improvements. In plan they define the problem that should be addressed by collecting
relevant data and information (homé, Scavarda & Scavarda, (2016)). In Do step they develop
and apply the solution of problem and take effective step. In check step they confirm the results
by comparing the data. In another step that is act document the outcomes, inform about the
changes and make recommendations accordingly.
Value stream mapping:
Value stream mapping is an lean management method that evaluate about the current
state and design the future stage accordingly (Perez Arrau, Eades and Wilson, 2012.). It begins
with customer and helps in reduce wastage by comparing the current map by evaluating the
standard mapping. In case of fronterra they choose lean manufacturing system to get best quality
products and services for their ultimate consumers. That is the best method for Frontera to
achieve desirable outcomes.
CONCLUSION
From the above report it has been concluded that operation management is an important
approach of management that is very useful in operating various activities to get desirable
outcomes. Sustainability is very important aspect for organisational development and
enhancement for that organisation have to take necessary improvements in their production
process to get desirable outcomes. To give effective results organisation have to adopt various
methods and tools to improve the quality of products and services that is very important in
efficiency level of organisation. Quality and performance is one of the important aspect to
maintain quality level and give best attributes in products that satisfying needs.