A Report on Transportation and Distribution Management at Nestle

This report provides a detailed analysis of Nestle's transportation and distribution management. It explores key aspects such as Incoterms selection, the effectiveness of transport capabilities, and the company's overall distribution and transportation approach. The report delves into specific strategies employed by Nestle, including modal shifts, fleet vehicle management, the use of alternative fuels, and carrier relationship management. It highlights how Nestle integrates environmental sustainability into its operations, focusing on reducing greenhouse gas emissions, optimizing routes, and utilizing innovative technologies. The report examines the criteria Nestle uses for carrier selection and evaluates the impact of these strategies on the company's efficiency and environmental footprint, including the implementation of Free Onboard Vessels (FOB) for product transport. Furthermore, it outlines the company's efforts to reduce costs and enhance the use of delivery vehicles through strategic partnerships and technological advancements. The conclusion summarizes the key findings, emphasizing the importance of effective warehousing, trained personnel, and appropriate distribution management for the success of transportation and distribution systems.

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

1TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Table of Contents
Introduction......................................................................................................................................2
Key Information about Nestle.........................................................................................................2
Incoterms selection consideration....................................................................................................3
Analysing the effectiveness of transport capability of Nestle.....................................................3
Distribution and Transportation Approach by Nestle..................................................................3
Incoterms used by Nestle.............................................................................................................4
Carrier selection criteria..................................................................................................................5
Modal shifts.................................................................................................................................5
Fleet vehicles...............................................................................................................................6
Use of alternative fuels................................................................................................................6
Carrier relationship management.....................................................................................................7
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

2TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Introduction
The movement of raw materials, finished products animals, and people highlight the
concept of transport and distribution. With the help of transport and distribution, the business
organizations move the product from one to another using various modes of transportation.
Space, cable, rail, pipeline, water, and road are the major modes of transportation. Management
of people, operations, infrastructure, and vehicles are the key features of transport and
distribution. From the industrial perspectives, transport and distribution are defined as the
delivery of products and materials at the right time to the customers (Payaud, 2014).
This report highlights the effectiveness of distribution and transportation in fulfilling the
objectives and goals of Nestle.
Key Information about Nestle
Nestle is one of the internationally recognized Health, Wellness and Nutrition Company
that dates back its origin in 1866 in Switzerland. Since the establishment, the company has
expanded globally to countries such as the United Kingdom, the United States, Canada, and
Asia. Considering the mission of the company “Good Food, Good Life”, the company provides
highly nutritious food and beverage to the customers. Frozen desserts, meals, pet care food,
chocolates, ice creams, coffee, wafers, beverages, and confectionery are some of the most
popular brands of Nestle. The company generated an annual revenue of 9.066 billion in 2015 that
was comparatively lower from the profit generated in 2014, that was, approximately 14.456
("Nestle", 2017).

3TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Within the cultural category, Nestle ranked within the top 10 as one of the most admired and
popular companies in 2013. Since the establishment of the company, the company has always
strived to enhance the life of the customers by providing them with highly nutritious and healthy
food. The company has developed their products with the aim of helping and caring for the
customers and their family. Therefore, the main motto of the company is to support and
encourage people in leading a healthy life. One of the core values of Nestle is respect. The
company believes in respecting their customers, the future generation along with the surrounding
environment, global diversity and culture. However, Mondelez International Inc. Danone, Mars,
and Cadbury are the major competitors of Nestle ("Nestle", 2017).
Incoterms selection consideration
Analysing the effectiveness of transport capability of Nestle
From the daily perspectives, from over 1600 warehouses, Nestle transports and
distributes an estimated 140,000 tons of products to the consumer markets (Sethi, 2012). Nestle
distributes and transports the raw and finished products in collaboration with the logistics that
travels approximately 270 times regularly around the world. The Nestle products are generally
transported to the customers in the end after being distributed from the factory to the distribution
centres. Nestle is able to analyse the environmental performance and enhance the efficiency of
the network by decreasing the level of noise, traffic congestion, emission of greenhouse gases,
mileage and consumption of fuel (Pfitzer, Bockstette & Stamp, 2013).
Distribution and Transportation Approach by Nestle
Nestle has developed the distribution and transportation approach according to the
environmental sustainability. The main concern of the approach includes:

4TRANSPORTATION AND DISTRIBUTION MANAGEMENT
 Extensive training for the drivers in order to gain the ability to handle both safety and
environmental issues effectively
 Optimizing the distribution networks and routes for conducting the operations
 In order to improve the options of transportation by exploring the opportunities
extensively by selecting alternative transportation modes along with recognizing less
harmful sources of fuels.
Increasing the use of vehicles, analysing the network of the strategic distribution along with
minimizing the rate of empty transportation are some of the methods of optimizing the
performance of the company (Smith, 2012). However, route planning is one of the ongoing
processes of optimizing the fleet operations for Nestle. Based on the sustainable business
approach by Nestle, the company aim towards eliminating the traditional modes of transportation
and use rail or short-sea freight (Biswas et al., 2013). For example, Nestle aim towards
mitigating the use of fossil fuels but increasing the use of natural gases in order to reduce the
adverse environmental impact of transportation. From the warehouse perspective, Nestle aims
towards reducing the rate of energy consumption along with selecting an alternative source of
renewable energy. Additionally, Nestle also aims towards developing and implementing new
distribution and transportation technologies that includes unique and innovative ideas that will
help the company to ensure effective environmental improvements (Rahman, 2017).
Incoterms used by Nestle
Free Onboard Vessels are used by Nestle to transport and distribute their products from
warehouses to respective destinations. The International Chamber of Commerce defines Free
Onboard Vessels a mixture that enforces the seller to bring the goods from the port along with
clearing the goods for export and confirming that the products are loaded onto the ship that will

5TRANSPORTATION AND DISTRIBUTION MANAGEMENT
take it to the buyer (Dolley-Sonneville, Romeo & Melkoumian, 2013). The buyer is able to
determine the risk only when the goods have cleared the railing process. According to the
concept of Free Onboard Vessels, Nestle transports the product that needs to be exported which
is then loaded onto the vessel selected by the buyer. All the costs and risks are transferred to the
buyer, once the products are loaded to the vessel by Nestle.

6TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Figure 1: Incoterms used by Nestle
(Source: Rojas-Rueda et al., 2012)
Carrier selection criteria
Nestle selected the carrier for transportation of the raw and finished products based on
three main factors. The factors include increasing the efficiency of transportation, reduction the
emission greenhouse gases and decreasing the cost of transportation and distribution. The
significance of the aforementioned factors in selecting the most suitable factors are discussed
below.
Modal shifts
Nestle aims towards implementing a more sustainable business approach by reducing the
emission of greenhouse gases while transporting and distributing their raw materials or finished
products (Rabl & Nazelle, 2012). Therefore, Nestle has decided to the long distance
transportation and distribution of their products through sea or rail instead of roads. This
approach or modal shift will allow Nestle to reduce the emission of greenhouse gases along with
avoiding traffic congestion and increasing the efficiency. By 2016, according to the EU Marco
Polo Project initiated by Nestle, the company aim towards transporting and distributing 360,000

7TRANSPORTATION AND DISTRIBUTION MANAGEMENT
tons of pet care, water, and cereal products through rail instead of the road. This initiative will
allow Nestle to withdraw almost 5000 trucks annually. In accordance with the initiative, Nestle is
going to take the advantage of the rail connections between Italy, Germany, Slovakia, and
France. Successful and effective execution of the strategy will allow Nestle to save
approximately £2.8 million in the coming three years (Maizlish et al., 2013).
Nestle aims towards launching another project named Green Alps Project under which the
company proposes to distribute the raw materials and products between Italy and France solely
through the train. The successful execution of the project will help in reducing approximately 2.3
million greenhouse gases, as 2800 trucks will be taken off the road thereby saving £750,000
(Rojas-Rueda et al., 2012).
Fleet vehicles
Nestle currently has approximately 2000 fleet of trucks that are used for distributing and
delivering pizza and ice cream to the customers along with using several technological
advancements that are used for the freezer cabinets. Eutectic freezer plates are used while
constructing the new trucks. This allows the trucks to cool overnight when the trucks are
stationed in the distribution center. Additionally, for reducing the idling time of the trucks GPS
system such as Telematics are installed within the trucks. The installation of Telematics has
helped Nestle to reduce the idling time of the trucks by 32% in the last two years thereby, saving
almost 250,000 gallons of fuels. Additionally, the company has also increased the environmental
and safety efficiency programs for the drivers (Ellison, Greaves & Hensher, 2013).

8TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Use of alternative fuels
With the aim of reducing the emission of greenhouse gases such as carbon dioxide,
Nestle has continuously explored other means of using environmentally friendly fuels. In
accordance with the aim of reducing the emission of greenhouse gases, the water segment of
Nestle in North America has approximately 28 trucks that are powered by gas. By the end of
2016, Nestle is also aiming towards maximising the propane driven trucks by 200. Moreover, in
Italy, Nestle has agreed that an estimated 15 trucks will use liquefied natural gas while
distributing and transporting the products. By the end of 2016, the Nestle Waters of Thailand
aims towards maximising the number of trucks that will use natural gas (Lee, Speight &
Loyalka, 2014).
Carrier relationship management
The main components of carrier relationship management include optimizing the use of
vehicles and planning of the route along with reducing the cost and adverse environmental
impact by mitigating the use of empty trucks. As commented by Han & Murphy (2012), trucks
with limited loads are inefficient and costly. Therefore, Nestle is aiming towards utilizing the
entire capacity of the trucks while distribution and transportation of products. The maximum
volume and weight of the product limit the total load carried by the truck at any time. However,
exceeding the total weight of the load thereby reduces the distribution and transportation cost by
$5 million. This eventually reduces in decreasing an estimated 29,000 tons of greenhouse gases
annually. Nestle is aiming towards ensuring that each vehicle leaving the loading site are
completely full in order to decrease the emission of greenhouse gases by making an effort of
reducing the environmental pollution. In order to increase the backhauling, Nestle has combined
the outbound and inbound trucks along with optimizing the loads planning and routes by the

9TRANSPORTATION AND DISTRIBUTION MANAGEMENT
distribution and transportation management. Additionally, Nestle shares the transportation
facilities with partners such as suppliers, manufacturers, and retailers (Lee, Speight & Loyalka,
2014).
Effective use of the delivery vehicles is ensured by Nestle with adequate cooperation
from the suppliers and the customers. Therefore, the company has ensured that after delivering
the product, the delivery trucks of Nestle does not travel empty. As a result, Nestle has installed
transport control centres. The installation of transport control centres provided an opportunity for
Nestle to visualize the transportation circuits thereby, preventing the travelling of empty trucks
after delivering the products. Additionally, Nestle has installed the circuit at a global scale in
order to enhance the use of delivery trucks and containers. After installation of the transport
control centre, 10 distribution channels of Nestle has been redesigned globally in order to
enhance the efficiency of the distribution and transport efficiency. For example, Nestle has
established only one company for packaging of the raw materials, distribution centre and import
and export warehouse in the Middle East. This gave rise to synchronized transportation along
with reduced empty trips by the trucks. Approximately 2000 tons of emitted carbon dioxide is
reduced due to Nestlé’s redesigned distribution and transportation networks (Rodrigues et al.,
2014).
Nestle is the owner of the largest fleet in the United States. This is because Nestle
directly distributes, delivers and transports frozen products and water to offices, stores, and
residents. Considering the optimization perspective, pizza and ice cream are directly transported
from the store. The implementation of the approach is aimed towards recognizing new
distribution and route planning thereby, saving the fuel consumption by 3.7 million litres
annually (McKinnon, 2012).

10TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Conclusion
In this paper, it can be concluded that transport and distribution aim towards delivering
the products and materials to the target customers, business and government. The effective
warehousing, trained workers and managing the distribution appropriately determine the success
of transport and distribution. The transport and distribution system includes the combined effort
of the various stakeholders such as the carriers, planners, transport managers and the employees.
Therefore, the distribution and transportation system implemented by Nestle is both effective and
efficient. It can also be concluded that Nestle has successfully invested in various programs and
projects in order to enhance the transportation standard. Reducing the emission of carbon dioxide
along with the operational cost are some of the steps undertaken by Nestle to increase the
efficiency of the distribution and transportation method. Moreover, Nestle has undertaken
several other initiatives of improving the distribution and transportation. The initiative includes
optimizing the using of the vehicle capacity along with cutting down the environmental pollution
by prohibiting the use of empty trucks. Nestle has also taken suitable measures for cutting down
the operational costs by improving the distribution networks and optimizing the planning route
of distribution of the goods.

11TRANSPORTATION AND DISTRIBUTION MANAGEMENT
References
Biswas, A. K., Tortajada, C., Biswas-Tortajada, A., Joshi, Y. K., & Gupta, A. (2013). Creating
Shared Value: Impacts of Nestlé in Moga, India. Springer Science & Business Media.
Dolley-Sonneville, P. J., Romeo, L. E., & Melkoumian, Z. K. (2013). Synthetic surface for
expansion of human mesenchymal stem cells in xeno-free, chemically defined culture
conditions. PloS one, 8(8), e70263.
Ellison, R. B., Greaves, S. P., & Hensher, D. A. (2013). Five years of London’s low emission
zone: Effects on vehicle fleet composition and air quality. Transportation Research Part
D: Transport and Environment, 23, 25-33.
Han, S. K., & Murphy, G. E. (2012). Solving a woody biomass truck scheduling problem for a
transport company in Western Oregon, USA. Biomass and bioenergy, 44, 47-55.
Lee, S., Speight, J. G., & Loyalka, S. K. (Eds.). (2014). Handbook of alternative fuel
technologies. crc Press.
Maizlish, N., Woodcock, J., Co, S., Ostro, B., Fanai, A., & Fairley, D. (2013). Health cobenefits
and transportation-related reductions in greenhouse gas emissions in the San Francisco
Bay area. American Journal of Public Health, 103(4), 703-709.
McKinnon, A. C. (2012). Reducing energy consumption and emissions in the logistics sector. In
Energy, transport, & the environment (pp. 521-537). Springer London.
Nestle. (2017). Nestle.com. Retrieved 7 November 2017, from http://www.nestle.com/aboutus

12TRANSPORTATION AND DISTRIBUTION MANAGEMENT
Nestle. (2017). Nestle.com. Retrieved 7 November 2017, from
http://www.nestle.com/stories#/category/featured-stories/1
Payaud, M. A. (2014). Marketing strategies at the bottom of the pyramid: Examples from Nestle,
Danone, and Procter & Gamble. Global Business and Organizational Excellence, 33(2),
51-63.
Pfitzer, M., Bockstette, V., & Stamp, M. (2013). Innovating for shared value. Harvard Business
Review, 91(9), 100-107.
Rabl, A., & De Nazelle, A. (2012). Benefits of shift from car to active transport. Transport
policy, 19(1), 121-131.
Rahman, N. (2017). Supply chain of Nestlé Bangladesh.
Rodrigues, V. S., Beresford, A., Pettit, S., Bhattacharya, S., & Harris, I. (2014). Assessing the
cost and CO 2 e impacts of rerouteing UK import containers. Transportation Research
Part A: Policy and Practice, 61, 53-67.
Rojas-Rueda, D., De Nazelle, A., Teixidó, O., & Nieuwenhuijsen, M. J. (2012). Replacing car
trips by increasing bike and public transport in the greater Barcelona metropolitan area: a
health impact assessment study. Environment international, 49, 100-109.
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.
Smith, E. (2012). Corporate image and public health: an analysis of the Philip Morris, Kraft, and
Nestle websites. Journal of health communication, 17(5), 582-600.