Nestle's Supply Chain Management and Global Strategy - NEU Report

This report provides a comprehensive analysis of Nestle's global supply chain management and its contribution to the company's global business strategy. It begins with an introduction to Nestle, covering its history, business scale, main competitors, vision, mission, and business segments. The report then delves into a detailed description of Nestle's global supply chain, including planning, procurement, logistics, operations, and market channels. Furthermore, it describes Nestle's global business strategy, focusing on cost leadership, differentiation, intensive strategy, and sustainable strategy. Finally, the report examines how Nestle's supply chain management contributes to the implementation of its global business strategy, highlighting aspects such as demand planning, supplier planning, e-procurement, sustainable procurement, logistics optimization, supply chain management practices, inventory management, sustainability initiatives, marketing strategies, distribution channels, and innovation efforts. Desklib provides access to this report and many other solved assignments for students.

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GSCM Group 7 Nestle Report
International Supply chain management (Đại học Kinh tế Quốc dân)
Studocu is not sponsored or endorsed by any college or university
GSCM Group 7 Nestle Report
International Supply chain management (Đại học Kinh tế Quốc dân)
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NATIONAL ECONOMICS UNIVERSITY
SCHOOL OF ADVANCED EDUCATION PROGRAMS
***
GLOBAL SUPPLY CHAIN MANAGEMENT
Topic: Nestle – Supply Chain & Strategy
Class: Advanced International Business 61B
Lecturer: Dr. Nguyen Bich Ngoc
Group 7: Phan Duc Hieu 11196244
Tran Huong Giang 11196415
Nguyen Thuy Duong 11191276
Vu Minh Huyen 11196225
Dang Thu Trang 11196163
HANOI 2022
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TABLE OF CONTENTS
TABLE OF FIGURES i
I. INTRODUCTION OF NESTLE 1
1.1. History 1
1.2. Business scale 3
1.3. Main competitors 3
1.4. Vision and mission 5
1.5. Business segment 5
II. DESCRIPTION OF NESTLE’S GLOBAL SUPPLY CHAIN 6
2.1. Planning 6
2.1.1. Overview of Nestle planning 6
2.1.2. Demand planning 7
2.1.3. Supplier planning 8
2.2. Procurement 9
2.2.1. Raw material sourcing 9
2.2.2. Supplier selection 9
2.3. Logistics 10
2.3.1. In-house logistics 10
2.3.2. Reverse logistics 11
2.4. Operations 11
2.4.1. Supply chain management 11
2.4.2. Quality management 12
2.4.3. Inventory management 12
2.5. Market channels 13
2.5.1. Marketing 13
2.5.2. Distribution 14
2.5.3. Customer service 15
III. DESCRIPTION OF NESTLE’S GLOBAL BUSINESS STRATEGY 15
3.1. Business strategy 15
3.1.1. Cost leadership 15
3.1.2. Differentiation 16
3.1.3. Focus strategy 17
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3.2. Intensive Strategy 18
3.3. Sustainable Strategy 20
IV. CONTRIBUTION OF NESTLE’S SUPPLY CHAIN MANAGEMENT TO ITS
GLOBAL BUSINESS STRATEGY IMPLEMENTATION 20
4.1. Planning 20
4.1.1. Demand Planning 20
4.1.2. Supplier Planning 21
4.2. Procurement 22
4.2.1. E-procurement 22
4.2.2. Sustainable procurement 22
4.2.3. Advancing production and sourcing of raw materials 23
4.3. Logistics 23
4.4. Operations 24
4.4.1. Supply chain management 24
4.4.3. Inventory Management 25
4.4.4. Sustainability in Nestle Operations 25
4.5. Market channels 26
4.5.1. Marketing 26
4.5.2. Distribution 26
4.5.3. Innovation 27
REFERENCE 28
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TABLE OF FIGUR
Figure 2. 1. SAS demand-driven planning categories................................................7
Figure 2. 2. Supply chain disclosure for Cereals (corn and wheat)............................9
Figure 2. 3. SAP Business One Modules.................................................................12
Figure 2. 4. Nestle social media overview...............................................................13
Figure 2. 5. Nestle distribution channel................................................................14Y
Figure 3. 1. Porter’s generic strategies.....................................................................17
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I. INTRODUCTION OF NESTLE
1.1. History
1866-1905
In 1866, the Anglo-Swiss Condensed Milk Company opened the first
condensed milk factory in Europe. Separately, in 1867 Henri Nestlé developed a
breakthrough infant food to tackle high mortality rates because of infants’
intolerance of breastfeeding.
In 1905, Nestle was established as a result of the merger between the Anglo-
Swiss Milk Company Farine Lactée Henri Nestlé.
1906-1938
Following the World War I outbreak and the rocketing demand for condensed
milk yet plummeting supplies, Nestlé turned to the U.S. and Australia for new
establishments of factories. This change was highly fruitful considering the double-
increase in production by the end of the war.
In the 1920s, Nestlé purchased Peter-Cailler-Kohler, the oldest chocolate
company in Switzerland. The following decade witnessed the success of Nestle with
the arrival of the malt chocolate drink Milo in Australia. Soon after, in 1938, the
first mass-market instant coffee, was launched after the Brazilian government’s call
for Nestlé to deal with the excessively produced coffee.
1938-1944
Nestlé felt the effects of World War II immediately. Profits dropped from
$20million in 1938 to $6 million in 1939. Factories were established in developing
countries, particularly Latin America. Ironically, the war helped with the
introduction of the Company’s newest product, Nescafe, which was a staple drink of
the US military. Nestlé’s production and sales rose in the wartime economy.
1944-1975
The end of World War II was the beginning of a dynamic phase for Nestlé.
Growth accelerated and companies were acquired. In 1947 came the mergerwith
Maggi seasonings and soups. Crosse & Blackwell followed in 1960, as didFindus
(1963), Libby’s (1971) and Stouffer’s (1973). Diversification came with a
shareholding in L’Oréal in 1974.
1975-1995
The year 1977 saw the boycott against Nestlé due to the company’s
‘aggressive’ marketing of its breast milk substitutes. The boycott led to the World
Health Assembly adopting the International Code of Marketing of Breast-milk
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Substitutes, which Nestlé signed on to in 1984, bringing an end to the boycott.
Nestlé made its second venture outside the food industry by acquiring Alcon
Laboratories Inc.
1996-2002
The first half of the 1990s proved to be favorable for Nestlé: trade barriers
crumbled and world markets developed into more or less integrated trading areas.
Since 1996, there have been acquisitions including San Pellegrino (1997), Spillers
Pet foods (1998) and Ralston Purina (2002). There were two major acquisitions in
North America, both in 2002: in July, Nestlé merged its U.S. ice cream business into
Dreyer’s, and in August, a USD 2.6bn acquisition was announced of Chef America,
Inc.
2003 +
The year 2003 started well with the acquisition of Mövenpick Ice Cream,
enhancing Nestlé’s position as one of the world market leaders in this product
category. In 2006, Jenny Craig and Uncle Toby were added to the Nestlé portfolio
and 2007 saw Novartis Medical Nutrition, Gerber and Henniez join the company
Nestle is the leading food manufacturing company in the world, with its
presence being felt all over the globe and its products sitting comfortably at the
dining table of almost every homestead around the world.
Figure 1. 1. History of Nestle
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1.2. Business scale
In 2021, Nestle was the world’s largest, most diversified food and beverages
company. This company has a unique global footprint and sells its products in 186
countries worldwide. Nestle is the employer of 276,000 workers and has established
354 factories in 70 nations.
In total, the company reached sales of CHF 87.1 billion in the year 2021. The
majority of its sales were contributed by the American market, with CHF 39.1
billion, accounting for 45% of Nestle’s sales. The figures for Europe, Middle East
and North Africa were lower CHF 25.8 billion (30%) and Asia, Oceania and sub-
Saharan Africa: CHF 22.2 billion (25%).
1.3. Main competitors
According to Food Engineering (2021), the most notable change is at the top,
where PepsiCo claimed the No. 1 ranking from Nestlé. PepsiCo saw its food
revenue increase from about $67.2 billion in 2019 to about $70.4 billion. Nestlé saw
its food revenue decline from $76.8 billion in 2019 to $67.7 billion in 2020. Other
notable competitors include Pladis Ltd., a global biscuit, chocolate and
confectionery company. Mars is a famous food industry and is the topmost producer
of confectionery products, while the production of Danone focuses on the
production and sale of healthy and delicious food that is custom-made for the
requirements of people of all ages (Clara et al., 2018).
Table 1. 1. Top 10 Food & Beverage Companies in 2021
Source: Food Engineering (2021)
Rank Company Currency Total
Sales
Food
Sales
Total Sales
($m)
Food Sales
($m)
1 PepsiCo, Inc. $ 70,372 70,372 70,372 70,372
2 Nestle SwF 84,343 72,183 79,114 67,708
3 JBS R$ 270,204 261,050 52,467 50,690
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4 Anheuser-Busch
InBev
$ 46,881 46,881 46,881 46,881
5 Tyson Foods $ 43,185 43,185 43,185 43,185
6 Mars $ 37,000 37,000 37,000 37,000
7 Archer Daniels
Midland Company
$ 64,355 35,395 64,355 35,395
8 The Coca-Cola
Company
$ 34,300 34,300 34,300 34,300
9 Cargill $ 114,600 32,375 114,600 32,375
10 Danone Euros 23,620 23,620 26,927 26,927
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1.4. Vision and mission
Nestlé pursues the mission of being the world’s leading nutrition, health and
wellness company. Its mission of “Good Food, Good Life” is to provide consumers
with the best tasting, most nutritious choices in a wide range of food and beverage
categories and eating occasions, from morning to night.
Nestle follows the vision to be a leading, competitive, Nutrition, Health and
Wellness Company delivering improved shareholder value by being a preferred
corporate citizen, preferred employer, preferred supplier selling preferred products.
1.5. Business segment
Nutrition has been the cornerstone of Nestle Company since its inception in
the year 1867. Therefore, most products and services provided by the company
revolve around nutritional needs. The company strives at providing quality products
and services which will help in promoting the better and healthy well-being of its
consumers. Nestle has gained a world reputation for its consistency in providing
quality and safe products.
Nestle provides a diversified range of products with over 2,000 brands,
which can be classified into 12 categories: (1) Baby food; (2) Bottled water; (3)
Cereals; (4) Chocolate and Confectionery; (5) Coffee; (6) Culinary, chilled & frozen
food; (7) Dairy; (8) Drinks; (9) Food service; (10) Healthcare nutrition; (11) Ice
cream; (12) Pet care (Nestle, 2021). Nestle’s portfolio covers almost every food and
beverage category. This enables the company to serve customers of all age brackets
thereby increasing the opportunities for return and spread the risks of investments.
According to Nils-Gerrit (2021), the primary product segment of Nestle was
chocolate, which generated 5,716 million CHF, about five times as much as the
figure for biscuits. Meanwhile, the sugar confectionery sales were only 651 million
CHF.
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Figure 1.1. Sales of Nestlé’s confectionery sector worldwide 2010-2021, by
segment
Source: Nils-Gerrit (2021)
II. DESCRIPTION OF NESTLE’S GLOBAL SUPPLY CHAIN
2.1. Planning
2.1.1. Overview of Nestle planning
Helen Armstrong (2013) reported that in 2001, Peter Brabeck, then CEO of
Nestlé, recognized that as the company was getting bigger and bigger its size may
become a liability. The global organization needed a local component, which gave
rise to the Nestlé GLOBE Centers, one each to cover Europe, the Americas and the
Asia, Oceania and Africa. They were set up to accelerate performance by
harmonizing business processes, standardizing and managing data. The GLOBE
Centers would also standardize the IT systems, taking advantage of Nestlé’s
worldwide scale whilst retaining the ability to act locally. This is to ensure that a
single set of processes, in manufacture and administration, is implemented with a
common method of formatting and storing data. In other words, Nestle’s businesses
in over 200 countries can operate with a single set of information systems as well as
the same manner from the phases of demand planning, procurement to distribution
and sales.
The three baseline edicts for project GLOBE were: harmonize processes,
standardized data, and standardize systems. This included how sales commitments
were made, factory production schedules established, bills to customers created,
management reports pulled together, and financial results reported. Gone would be
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local customs, except where legal requirements and exceptional circumstances
mandated an alternative manner of, say, finding a way to pay the suppliers of
perishable products like dairy or produce in a week rather than 30 days.
The adaptation of the GLOBE program into Nestle’s global supply chain
management connects all Nestle departments around the world and makes company
information accessible to all its employees thereby allowing communication flow
between people in the company.
2.1.2. Demand planning
The demand planning is made in tandem with the monthly sales review
meeting. The monthly breakdown then moves to weekly schedule of production and
dispatch planning. For the supply planning the primary objective is material
requirement planning for all direct materials. Nestle also maintains close contact
with inter market subsidiaries to ensure lead time communication for imported
semi-finished bulks.
According to Andreas Gartner (2011), Nestlé adopted state-of-the-art
statistical forecasting and predictive analytics to improve demand planning
efficiency and accuracy by signing a contract with SAS. SAS demand-driven
planning as a high-performance forecasting solution complement well the Nestlé
Demand Planning solution which is based on SAP APO (Advanced Planning and
Optimization).
In SAS demand-driven planning codes are created for the segmentation of
the product portfolio. Products are segmented into four categories depending on
the volume of the product and volatility of demand: (1) Horses (large volumes, low
volatility); (2) Mules (small volumes, also low volatility); (3) Jack Rabbits (low
volume but jumping around); and (4) Mad Bulls (large volumes and very volatile).
This segmentation provides Demand Planners with easy terminology with which to
communicate and to challenge numbers presented from sales and see the gaps
earlier.
Figure 2. 1. SAS demand-driven planning categories
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