Strategic Analysis of Nestle: Operations, Supply Chain, and Quality

This report provides a comprehensive analysis of Nestle's operations management, supply chain, and quality management processes. It begins with an introduction to operations management and an overview of Nestle, including its corporate strategy, mission, and vision. The report then delves into Nestle's operational strategy, supply chain, and quality challenges, followed by a PESTLE analysis of the company. It examines supply chain management, challenges, lean management, and quality management within Nestle. The report further explores the challenges of adopting a leaner enterprise and implementing Artificial Intelligence. The report concludes by summarizing the key findings and offering insights into Nestle's strategic approach to ensure its continued success in the global market. References are also included.

Operations Management
Supply chain
7/3/2018
Nestle

OPERATION MANAGEMENT 1
Table of Contents
Introduction................................................................................................................................2
Overview of Nestle................................................................................................................2
Corporate Strategy of Nestle..............................................................................................4
Brief of Operation Strategy....................................................................................................6
Supply chain at Nestle............................................................................................................6
Quality challenges..............................................................................................................6
Present Operation Strategy.....................................................................................................7
Pestle Analysis of Nestle........................................................................................................9
Political Factor...................................................................................................................9
Economic Factors...............................................................................................................9
Social factors......................................................................................................................9
Technological Factor........................................................................................................10
Legal Factors....................................................................................................................10
Environmental factors......................................................................................................10
Supply Chain Management..................................................................................................10
Challenges of Supply chain management........................................................................11
Lean Management and Quality Management......................................................................13
Lean Management............................................................................................................13
Quality Management........................................................................................................14
Challenges of adopting a leaner enterprise......................................................................15
Artificial Intelligence...........................................................................................................15
Challenges of implementing Artificial Intelligence.........................................................16
Conclusion................................................................................................................................16
References................................................................................................................................18

OPERATION MANAGEMENT 2
Introduction
Operation management is the management of business practices to make the maximum level
of efficiency possible in a company. It is related to altering labour and materials into services
and goods as professionally as conceivable to increase the company’s profit (Mahadevan,
2015). The team of operations management tries to balance the costs with the revenue to
attain their maximum possible operating profit. This report is being prepared in order to
understand the concepts of supply chain network, quality management processes and
operations management in the organization. To do so the Nestle Company has been selected.
Moreover, it is very important to know the importance of operations management in a
business so that it can be used to the maximum level (Cooke, 2012). The shared certainty
amongst people was to accept that the operations management was essential just in the
industry of manufacturing. The trust was reinforced with the statement that the industry of
manufacturing need to take care of maximum number of operations and procedures
preliminary from procurement of the raw materials until the services or goods is traded. In
many situations after sales support was also measured hereafter making the trust that the
operations management is essential to the industry of manufacturing (Anastasia, 2016). In
terms of services industry, they possess numerous procedures involved beginning from
understanding the needs of the customer to receiving the feedback on the goods offered. Later
at a certain point, the industry of service tells the industry of manufacturing what they need
and hence to accomplish operations in the service industry it is significant to handle the
operations in the manufacturing industry (Nada Sanders, 2014).
Overview of Nestle
Nestle Company is one of the well-known company of food and drink with headquarter in
Switzerland. It is the biggest company of food in the whole world, measured in terms of

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revenue (Nestle, 2018). The product line of Nestle is comprised of medical food, coffee, dairy
products, frozen food, snacks, baby food, breakfast cereals, tea, bottled water, ice-creams, pet
foods, and confectionery. Twenty-nine brands of the Nestle have around yearly sales of 1
billion which includes products such as Kit Kat, Maggi, Nespresso, Smarties, Vittel, Nescafe,
Stouffer’s, and Nesquik. There are 447 factories operating under Nestle in around 339,000
people. The company was established by the merger of company Anglo-Swiss Milk in 1905,
by the Charles and George page. Nestle Company possesses around 2000 brands from
worldwide icons to local favourites (Rodrigo, 2017).
The purpose of the Nestle Company is improving the life quality and subsidizing to the
healthier future. They try to support in shaping healthier and better world. They want to
encourage people to have healthier lives (Nestle, 2018). This is the way they do something
for the society by confirming the company's long-term success. Company's values are
reflected through their method of doing business, performing activities of business legally
and honestly by respecting both stakeholder and customers (Boha Tala, 2018).
Mission of Nestle
The mission of Nestle Company is to become the leading health, wellness, and Nutrition
Company in the world. The mission i.e. Good food, Good Life is to offer customers with
superior tasting, most nutritious varieties in a varied range of food and beverage types and
eating events, from morning to night (Jurevicius, 2013).
Vision of Nestle
The vision of Nestle is to offer consumer foods that are of high quality, safe food, and offer
the best diet to encounter physiological wants. In support of health, wellness and nutrition,

OPERATION MANAGEMENT 4
products of Nestle offer vital ingredients for the customers of pleasure and taste (Nestle,
2018).
Corporate Strategy of Nestle
Nestle Company is capable enough to handle its goals and mission with three diverse
strategies. The graph reflects three strategies i.e. growth drivers, competitive advantage, and
operational pillars permit Nestle Company to maintain its competitive advantage over its
competitor.
Source [(Parmar, 2018)]
Operational Pillars
 Operational efficiency
 Customer communication
 Renovation and innovation
 However, whenever, wherever
Growth Drivers

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 Out of home consumption
 Wellness, health, and nutrition
 Premiumisation
 Developing markets and status sited products
Competitive advantage
 Unmatched development and research competence
 Values, people, attitude, and culture
 Unmatched brand portfolio and product
 Unmatched geographic existence
All these are the strategies utilized by the Nestle Company in order to confirm that it
flourishes in the market. The thing that helps Nestle in becoming stronger as compared to
their competitors such as General Mills is its strong brand that is capable to make competitive
obstacles. In regards to their operational pillars, Company’s success arises from the
unbelievable marketing. Company’s marketing is dependent on the evidence that they are
capable to offer cheaper and quality priced products by offering satisfaction to the customers.
This arrives from their core health, wellness, and nutrition mission. Different from their rivals
marketing, Nestle Company is capable to provision their tough brands with their inducing
influences of nourishing products (Chystyakova, 2013).
Nestle Company has also gone above its rivals by utilizing its strategy of matchless
development and research competence. They have united with big corporations, for instance:
Coca-Cola. They also perform differently as compared to their rivals; Nestle Company has
attained native companies in order to make local managers who have the understanding of the
native culture and market. This permits them to attain a strategic advancement in the

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worldwide regions of which they are part to attain improved satisfaction of the customer
(Parmar, 2018).
Brief of Operation Strategy
The company is contributing towards the healthier future by improving the quality of life,
focused towards delivering justifiable, leading financial performance in the industry, and earn
trust. For 150 years, the company has created an effective business by accepting and
forestalling needs of the customer and adjusting to prosper in a developing marketplace.
Depending on the convincing strategy, the company is offering reliable value over the short
term and long term (Nestle, 2018).
Supply chain at Nestle
At Nestle, the professionals of Supply chain play an important role in confirming quality
products influence the customers. In order to attain this, the company collaborates with
commercial teams in order to do the forecast of the demand, and with the suppliers in the
whole world to confirm accountably sourced materials. In association with the operations, the
company manages the levels of inventory to introduce the correct product supply (Nestle,
2018). The time production takes place, the teams of the supply chain are accountable for
transporting and storing safety of the product to fulfil the customer's needs. It is a united,
active, and adjustable organization, which is dedicated to distributing results, not just in the
supply chain, but also in the support of complete business priorities (Nestle, 2018).
Quality challenges
There is intense competition in the market due to which company cannot compromise with
the quality of its brand; otherwise, it will have to lose its huge market share.
The company is dealing with diversified products; therefore, it is difficult for the company to
maintain the high quality of every product.

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Present Operation Strategy
The application of wellness, health, and nutrition strategy contribute to the operation strategy
of Nestlé. The company forms strategies to offer customers who are eager to have a healthy
lifestyle. The operations are intended by the practical aids from innovation, which is
unceasingly determined by the business by the leading research and development of the
industry. The whole situation supports the continuous transformation of the portfolio of food
and beverage of the company. Besides this, the activities of research and development of
Nestle Company are constantly concentrating on discovering the roles of nutritious
treatments for confirming the development to the lifestyle and health of people (Nestle,
2018). With the support of these activities, the business is increasing concentration on make
awareness among people from various societies for taking care for their wellbeing and health.
Hence, the Nestlé’s operations strategy is mostly dependent on struggling to supply a positive
influence on the many communities in the world in terms of their activities (Afflink, 2018).
To attain the particular aim, Nestle Company insistently shares several visions in terms of
worldwide wellness, health and nutrition challenges forms larger partnerships with other key
businesses, and involves with the officials, stakeholders, and key leaders, from the specific
company’s operation of geographical location.
From the above information, it can be understood that the policy or strategy designed by the
company for advertising nutrition and health add to the growth of the organization. Hence, it
could be said that the business plan is sufficiently based on the sustainability and growth of
wellness and health initiatives intended and accomplished by the Nestle. Some company’s
approached regularly activated to permit people in the society to take a decision at the time
they buy food products. By the science-based programmes application advertising nutrition
and health aspects of people, an increasing number of consumers are becoming definite to
purchase and consume the products of food and beverage provided by the Nestle Company.

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For instance, the programme of healthy kids programme created by Nestle purposes to
endorse the healthy drinking and eating habits, particularly for the kids as they grow older
(Nestle, 2018). Consequently, the operational policies of the company develop to impart
nutritional wants and significance to the parents and their children to while inspiring to the
part of different physical activities in order to preserve some level of obligatory fitness. This
type of activities directly affects the strategy of the business of the company to make value
for the company’s operations.
On the other side, continuous development of the Nestlé’s operations strategy could be
observed because of the necessary effect of the interventions and policies of the government.
Because of such situations, the important alteration to the company’s commitments is
witnessed. For instance, the business has effectively dropped the sugar, saturated, and salt
quality from its main products in order to remove the part of trans-fat by fulfilling the
important customer preference. The similar situation smears in the printing and labeling
GDAs (Guideline Daily Amounts) in the development and packaging stage of the Nestle
Company. The recognized developments add to the company’s operations advancement and
making it transparent and affordable for the worldwide consumers.
The Nestle Company is dealing with a varied range of products that have offered it a huge
success in the worldwide market. However, it deals with different challenges in its operations
such as child labor. The company has made use of child labor in its cocoa production plant,
which is a violation of the child labor law. The solution to this challenge or issue is to
observe every supply chain participant and set clear standards of labor. This will help
administrators that all the participants are adult and are not violating any standards of the
company. Along with this, the company can establish the supplier code of Nestle and operate
all the activities as per the rules and regulations of the government. By introducing supplier

OPERATION MANAGEMENT 9
code the relationship with the supplier of labor, raw material and company can be maintained
effectively.
Pestle Analysis of Nestle
Political Factor
Nestle Company offers its services in different countries. The rules framed by the
government are diverse in a different area. Nestle must concentrate in these political changing
aspects such as excise duties on import-export, taxation, permission of the government to
take entry in the target market and also to establish hygiene products permitted by the
synchronized bodies (Haseeb, 2017). Furthermore, in the current trends considering the
stability of the government, Nestle must see and identify all the risks that can be involved.
Economic Factors
Diverse countries have diverse development level. Country’s economy varies everywhere.
Thus, the Nestle Company has to make different economic strategies for diverse segments.
The product price is a vital decision need to be taken while planning the economic strategies
as per the rate of inflation and the segment’s purchasing power. An analysis report must be
prepared by the Nestle regularly in order to get the complete information of the diverse
income levels and inflation rates.
Social factors
The mutual beliefs and thoughts of the consumers affect the operations of the business. The
lifestyle, values, culture, and norms force Nestle to supply precise product to the correct
target segment. Till date, Nestle has taken into account the social perspectives very well. It
has acknowledged the concept that customers altering attitude has huge importance. People
are focused towards living a healthy lifestyle.

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Technological Factor
Technology offers various opportunities for the new product development or enhancement of
remaining ones. New marketing techniques like e-commerce and internet are essential to
concentrate in this current period. Hence, Nestle Company make use of technology in various
operations of the business such as to handle the databases with the support of software. The
increasing use of the social media is tapering the gap between the customer's direct
interaction and the business. Nestle Company must follow such a truism that increase the
number of innovations with the support of advancements in the technology.
Legal Factors
Legal factors comprise the company's legal environment and its impact on the working in
order to fulfill the demand and reduce the cost. For example, Nestle Company has to track the
safety and health laws for their workers and also to make asepsis products for the customers.
Nestle need to focus on these too while operating in different regions of the whole world.
Environmental factors
Presently, the world is aware of having a clean environment. Nestle Company has to
concentrate on the rules and regulations while making healthy food with environmentally
friendly processes. Many countries set diverse rules, to upsurge the approval of the products
by the directed segment the rules are important to follow. Nestle Company has been
considering the substantial devotion towards its contribution in the society.
Supply Chain Management
Supply chain management is the combination of science and art that undergoes in the
enhancing the directions a company finds:
The raw modules it requires to create service or a product

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Manufacturers for the delivery of service or product to its consumers ((Chopra and
Meindl, 2016)
The flow of services and goods and all procedures that convert raw material into finished
products is known as Supply chain management. It is comprised of the active restructuring of
supply side activities of a business to increase customer value and attain a competitive
advantage in the industry. Supply chain management signifies an effort by dealers to cultivate
and execute supply chain that is economical and efficient. Supply chains involve all the
aspects from manufacturing to the development of the product to the information systems
required to direct these activities.
Challenges of Supply chain management
Nowadays supply chains are becoming complex because of various reasons. Consumers are
increasingly asking for innovative products at the correct time at an affordable price. This has
appeared as the emerging challenge for the businesses because making both cost-effective
supply chain and responsive supply chains is unfavourably difficult.
Globalization
The largest challenge that businesses are dealing with is how to decrease their cost of the
supply chain. To satisfy the price expectations of the customer, businesses have chosen to
transfer manufacturing to the countries that support in manufacturing products at low cost
around the world to decrease indirect and direct costs and to reduce taxes (Bossard, 2018).
Then, possessing worldwide suppliers adds considerably to the complexity that derives from
prolonged delivery lead times. Consumers not just need low price products, but along with
this, they also demand delivery of their product (Berrios, 2014).
Nestle is conducting its business operations in different countries with a varied range of
products, hence in order to serve at all the locations it much time unable to deliver the

OPERATION MANAGEMENT 12
products on time which eventually makes the customers irritated. The suppliers or dealers of
Nestle have created this problem or challenge since they are inaccurate in providing the
delivery of the inventory or stocks in hands (Nestle, 2018).
Nestle needs to make the dealer management systems (DMS) in order to deal with the delay
in the inventory from the supplier's side. Since, DMS is the software and the solution that
offers tools for handling services, inventory and parts management, sales, core architecture,
and business management integration. The software was created to maintain good relations
with customers and dealers. Nestle can adopt this software to maintain all the up to date
records of the transactions taking place with the dealers so that delays can be ignored at
maximum level.
Customer preferences
The global supply chains are very complex. Moreover, with the changing product features the
complexity increases and so as challenges. The time new product introduced in the market,
the customers start putting pressure on the company to come up with more innovative and big
products on the market. Innovation is very essential as it permits businesses to remain
competitive; however, it is a big challenge. To improve a product, businesses need to
redesign their network or supply and fulfill the demand of the market in a method that is clear
for consumers.
Nestle is dealing in the food and beverages industry which is full of competitors who are
dealing in the same product line and offering new and different products for the customers to
attract them. Hence, it puts huge pressure on the company to come up with new product and
increase the delivery speed of the product in the market. In order to do so, the company needs
to increase its number of raw material suppliers, which will increase the speed of product
manufacturing and delivery of the product in the market. Moreover, the increased number of

OPERATION MANAGEMENT 13
suppliers will offer more market information about the competitors that will eventually help
in understanding the strategy of the competitor and company can offer the innovative and
new product in the market to compete with the competitor’s product.
Lean Management and Quality Management
Lean Management
An approach used to operate an organization that assists in the notion of nonstop
improvement, a lasting approach to the world that analytically pursues to attain small,
incremental variations in the procedure to enhance quality and efficiency is known as Lean
Management. It pursues to exclude any time wastage, money or effort by classifying every
step in the process of business and then reviewing or eliminating steps that do not generate
value (Machado and Davim, 2016).
Approaches to Lean management
Create core competencies- In order to follow lean management, Nestle needs to make its
core competencies such as strong supply chain network, effective customer service, talented
team of research and development, skilled and talented employees, and innovative ideas. All
these specified competencies help business in bringing new and innovative products to the
market.
Create the lean approach compulsory and inspiring- The business should adopt this
important approach of making lean approach as mandatory in the company. If all the
employees in the business will be instructed to offer innovative ideas by showing them long-
term benefits, the business will grow and offer new products in the market regularly.
Cultivate the attitude of nonstop improvement- Just in time approach can support business
in attaining the attitude of regular improvement (Success 360, 2018). This technique helps in
aligning the orders of raw material from the suppliers directly with the schedules of

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production. Business can use this strategy to enhance efficiency and reduce waste by getting
goods when they are required in the process of production, thus reducing the cost of
inventory.
Quality Management
Quality management is the process of supervising every activity and tasks required to handle
a preferred excellence level. This comprises the purpose of a quality policy, making and
executing quality assurance and planning, and quality improvement and quality control
(Kiran, 2016).
Approaches to Quality management
Quality Circles- It is a group of workers who perform a similar type of work, who conduct
meetings regularly to classify, examine and resolve problems related to work (Account
Learning, 2018).
Statistical Process Control- It is a methodology that is used for controlling and measuring
quality in the process of manufacturing.
Tools of Quality Management
Diagram of cause and effect- It diagram is used to recognize various possible causes for a
problem and categories ideas into valuable groups.
Histogram- This quality management tool is used as a graph which reflects the frequency
distributions, or how frequently every diverse value in a group of data occurs.
Check sheet- Checksheet is an organized, equipped form of gathering and examining data, a
general tool that could be approved for a varied range of purposes (American Society for
Quality, 2018).

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Lean management and quality management both are very essential for the development and
growth of the business as to survive in the competitive market it is important to offer
continuous improvements and innovative products to attract and gain the trust of the
customers. Whereas, on the other side, it is also important to innovate and offer new products
by considering quality because today customer is not just greedy about the innovative product
but he/she also wants good quality that does not adversely affect their health.
Challenges of adopting a leaner enterprise
The common challenge in the implementation of lean is to maintain it. Lean is a non-stop
procedure. Various businesses execute the concept of lean thinking that it will be done only
once. Handling leaning is very challenging and needs efforts that the business is not ready to
commit.
Another challenge in executing or implementing lean is supposing that it can be only utilized
in manufacturing. Jones and Womack established the concept of Lean Enterprise, which
involves the utilization of lean management all over the company's departments. This
includes distribution, marketing, accounting, and human resource. If the implementation of
lean is done in a single department, the instant outcome might be encouraging but with time,
as the subdivision is impacted or disturbs other subdivisions, then the outcomes will begin to
diminish (Mwacharo, 2013).
Artificial Intelligence
Artificial intelligence is creating great progress in refining efficiency in the business
environment which resulting in improved performance. Artificial intelligence also offers
serious information to assist administrators in making informed decisions of the business.
The ways the business process can be enhanced through artificial intelligence are:

OPERATION MANAGEMENT 16
Accurate demand forecasting- By using artificial intelligence, systems can check hundreds
of production mathematical models and possibilities outcome, and be accurate in their
examination while adapting fresh information like the introduction of new product, sudden
alterations in demand and supply chain disruptions.
Predictive maintenance- Now business has started realizing that spending in predictive
maintenance solutions is profit making since it is a dependable way to develop operating
competence and thus has a nearly instant influence on the bottom line (Jimenez, 2018).
Challenges of implementing Artificial Intelligence
Legal Challenges
Legal Challenges associated with the application of Artificial intelligence in the finance
department or industry can be linked to the concerns of data governances and erroneous
algorithms. Erroneous algorithms, because of the lack of suitable data, can drop a large dent
in the company's profits by making improper and maybe damage forecasts. Deprived data
governance can effect in breaching of data where personal identifiable information of the
customers that works as a feedback to a procedure misused by the hacker and can result in
legal challenges for the company (Kappal, 2017).
Conclusion
The above report has concluded that Nestle offers a variety of goods to its customers and
possess excellent operation and corporate strategies such that it can deal with intense
competition in the market and can survive for longer time duration. Besides having such
excellent strategies, business is dealing with some issues related to quality and supply chain.
In order to deal with these challenges, the report has suggested some strategies such as to
build dealer management system to keep the proper record of the transactions and good

OPERATION MANAGEMENT 17
relations between customer and dealer. Along with this to manage, the changing preferences
of the customer company can increase the number of raw material suppliers that will support
it in delivering products on time in the market, which will result in gaining the trust of the
customers and increased market share.

OPERATION MANAGEMENT 18
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