THE SUPPLY CHAIN

MANAGEMENT OF
NESTLE COMPANY
 INTRODUCTION
NESTLE IS ONE OF THE LARGEST FOOD COMPANIES IN THE WORLD. THE PRODUCT
OF NESTLE MAINLY INCLUDES THE CEREALS, BABY FOOD, COFFEE, TEA AS WELL
AS ICE CREAM AND PET FOODS. THE COMPANY WAS FORMED IN THE YEAR 1905 BY
THE MERGER OF THE ANGLO-SWISS MILK COMPANY. THE COMPANY GREW
CONSIDERABLY DURING THE WORLD WAR 1ST. ONE OF THE BIGGEST COMPETITOR
OF THE COMPANY IS THE ANGLO-SWISS CONDENSED MILK COMPANY THAT IS
ALREADY A LEADING MANUFACTURER IN EUROPE. AS A RESULT, IN ORDER TO
COMPETE WITH THIS COMPANY, NESTLE LAUNCHED A CONDENSED MILK PRODUCT
OF ITS OWN.
THE HISTORY OF
NESTLE COMPANY
THE HISTORY BEGINS IN 1866, WITH THE FOUNDATION OF THE
ANGLO-SWISS CONDENSED MILK COMPANY. HENRI NESTLÉ
DEVELOPS A BREAKTHROUGH INFANT FOOD IN 1867, AND IN 1905
THE COMPANY HE FOUNDED MERGES WITH ANGLO-SWISS, TO
FORM WHAT IS NOW KNOWN AS THE NESTLÉ GROUP. DURING
THIS PERIOD CITIES GROW AND RAILWAYS AND STEAMSHIPS
BRING DOWN COMMODITY COSTS, SPURRING INTERNATIONAL
TRADE IN CONSUMER GOODS.
• CHARLES AND GEORGE PAGE HELP ESTABLISH ANGLO-SWISS CONDENSED MILK
COMPANY. USING ABUNDANT SUPPLIES OF FRESH MILK IN SWITZERLAND, THEY
APPLY KNOWLEDGE GAINED IN THEIR HOMELAND TO ESTABLISH EUROPE’S
FIRST PRODUCTION FACILITY FOR CONDENSED MILK IN CHAM. THEY START
SUPPLYING EUROPE’S INDUSTRIAL TOWNS WITH THE PRODUCT UNDER THE
BRAND, MARKETING IT AS A SAFE, LONG-LIFE ALTERNATIVE TO FRESH MILK.
• HENRI NESTLÉ SELLS HIS COMPANY AND FACTORY IN VEVEY TO THREE LOCAL
BUSINESSMEN. THEY EMPLOY CHEMISTS AND SKILLED WORKERS TO HELP
EXPAND PRODUCTION AND SALES.
• FIERCE COMPETITION DEVELOPS BETWEEN NESTLÉ AND ANGLO-SWISS, WHEN
BOTH COMPANIES START SELLING RIVAL VERSIONS OF THE OTHER’S ORIGINAL
PRODUCTS: CONDENSED MILK AND INFANT CEREAL. BOTH FIRMS EXPAND SALES
AND PRODUCTION ABROAD.
• IN 1882 ANGLO-SWISS EXPANDS INTO THE , BUT THE DEATH OF GEORGE PAGE
FRUSTRATES ITS PLANS. IN 1902 IT SELLS ITS -BASED OPERATIONS, WHICH PAVES
THE WAY FOR AN EVENTUAL MERGER WITH NESTLÉ.
• NESTLÉ BEGINS SELLING CHOCOLATE FOR THE FIRST TIME WHEN IT TAKES OVER
EXPORT SALES FOR PETER & KOHLER. THE NESTLÉ COMPANY ALSO PLAYS A
ROLE IN THE DEVELOPMENT OF MILK CHOCOLATE FROM 1875, WHEN IT SUPPLIES
HIS VEVEY NEIGHBOUR DANIEL PETER WITH CONDENSED MILK, WHICH PETER
USES TO DEVELOP THE FIRST SUCH COMMERCIAL PRODUCT IN THE 1880S.
 SUPPLY CHAIN
MANAGEMENT PROCESS
OF NESTLE
 THE KEY FLOWS IN SUPPLY
•
CHAIN
THE PRODUCT FLOW IS SOMETHING THAT STARTS FROM THE RAW MATERIALS TO THE
PRODUCT TO THE CONSUMER. THE PRODUCT FLOW IS VERY EFFECTIVE IN THE CASE OF
NESTLE. THE REASON IS THAT NESTLE ENSURES THE HIGHEST LEVEL OF QUALITY AND
SAFETY BEFORE THE PRODUCTS REACHES THE CUSTOMERS. THE ENSURING OF THE
QUALITY AND THE SAFETY TAKES PLACE MILLIONS TIMES A DAY. THE COMPANY ENSURES
THE HIGHEST POSSIBLE STANDARDS ALONG THE SUPPLY CHAIN THAT STARTS FROM THE
RAW MATERIALS VIA PACKAGING, DISTRIBUTION TO THE CONSUMER. THE PRODUCTS OF
NESTLE ARE CHECKED ON THE PRODUCT LINE AND AS A RESULT, THE CUSTOMERS FEEL
SAFE WITH THE PRODUCT, WHICH INCREASES THE DEMAND. IN ORDER TO MEET THE
STRICT STANDARDS, THE LOCAL, AND THE INTERNATIONAL REGULATION, THE PRODUCTS
ARE CHECKED ON THE LINE OF PRODUCTION.THE MONEY FLOW INDICATES THE FLOW OF
FUNDS FROM THE CUSTOMERS TO THE MANUFACTURERS AND FROM THE
MANUFACTURER TO THE SUPPLIER. THE COMPANY NESTLE MAINLY FACES THREE
IMPORTANT ORGANIZATION RELATED CHALLENGES THAT INCLUDES THE MAXIMIZATION
OF PROFITS, CONSERVING CASH FLOW AS WELL AS THE CREATION OF THE SHAREHOLDER
VALUE. THE CASH FLOWS FROM THE CONSUMERS TO THE MANUFACTURER AS THE
PRODUCTS ARE MOSTLY SOLD IN THE RETAIL SHOPS
 • NESTLE LOGISTICS MANAGEMENT
HAS BEEN EFFECTIVE OVER TIME DUE TO ITS CONCENTRATION ON THE THREE BASICS
OF LOGISTICS INCLUDING INVENTORY MANAGEMENT, NETWORK DESIGN, AND
TRANSPORTATION. THE COMPANY IN QUESTION ENSURES ADEQUATE CONTROL OF
WAREHOUSES, MANUFACTURING PLANTS, AND STORES. THE SUPPLY CHAIN
MANAGEMENT TEAM MONITORS EVERY MOVEMENT OF GOODS TO VARIOUS PLACES OF
THE WORLD IN ORDER TO CONTROL SURPLUS AND SHORTAGE OF GOODS (MASTER 2013).
IN TERMS OF SUPPLY CHAIN MANAGEMENT, THE COMPANY PRACTICES EFFECTIVE
INVENTORY PLANNING, ADEQUATE TRANSPORTATION, PROPER PACKAGING, AND
WAREHOUSING. NESTLE COMPANY TRANSPORTS PRODUCTS THROUGH AIR TRANSPORT,
ROADS, RAILS, AND WATERWAYS. THE COMPANY TRANSPORTS NEARLY 140,000 TONS OF
ITS PRODUCTS PER YEAR FROM 1600 WAREHOUSES THAT IT HAS ACROSS THE WORLD
(NESTLE 2018). WHEN NECESSARY, NESTLE MAKES EFFECTIVE REPLENISHMENT
DECISIONS TO PROMOTE ITS SUSTAINABILITY IRRESPECTIVE OF A FEW DISTRIBUTIONS
THAT GO WRONG. THE COMPANY ALSO MONITORS ITS INVENTORY LEVEL VIA E-DATA
INTERCHANGE, WHICH IS A SPECIAL TECHNOLOGY WHICH ENABLES TO MONITOR THE
SIZE OF INVENTORY AND DISTRIBUTION ACTIVITIES FROM DIFFERENT WAREHOUSES
AND OTHER SOURCES
• LOGISTICS FACILITATES EASY CONTROL AND PLANNINGOF THE SUPPLY OF
PARTICULAR GOODS FROM A POINT OF PRODUCTION TO A POINT OF
CONSUMPTION IN THE MOST CONVENIENT WAY THAT ENSURES
CUSTOMER SATISFACTION. NESTLE COMPANY DISTRIBUTES ITS
PRODUCTS FROM VARIOUS POINTS OF PRODUCTION TO POINTS OF
CONSUMPTION. NESTLE FOCUSES ON DISTRIBUTING ITS PRODUCTS TO
RESTAURANTS, SUPERMARKETS, SMALL BUSINESS OWNERS, AND OTHER
RETAILERS. AVAILABILITY OF SUCH GOODS ENABLES A BUSINESS UNIT TO
REACH ALL CATEGORIES OF CONSUMERS WHO BUY THE PRODUCT AND
CAN GIVE FEEDBACKS.
 RESOURCE PLANNING
• ERP IS AN INNOVATION PROGRAM THAT INTEGRATES VARIOUS
ORGANIZATIONALINFORMATION SYSTEMS TO MANAGE INFORMATION
EFFECTIVELY AND PROMOTE EFFICIENCY IN BUSINESS PROCESS. SUPPLY CHAIN
MANAGEMENT AND LOGISTICS IS ONE OF THE MANAGERIAL ROLES WHERE ERP
CAN BE APPLICABLE AND HELPFUL. NESTLE HAS IMPLEMENTED VARIOUS
ENTERPRISE SYSTEMS IN AN ATTEMPT TO IMPROVE ITS LEVEL OF EFFICIENCY.
FOR A PERIOD OF 5 YEARS, NESTLE IMPLEMENTED SAP R/3 THAT SERVED ABOUT
6,000 USERS AT A TIME (NESTLE 2018). LATER ON, NESTLE STARTED ANOTHER ERP
PROJECT FOR Y2K THAT BEGAN IN 1998. THEREAFTER, THE EMPLOYEES HAD AN
ADDITIONAL OBLIGATION TO LEARN NEW SKILLS AND ADOPT TO THE NEW
TECHNOLOGY THAT THE COMPANY IMPLEMENTED TO ENSURE CUSTOMER
SATISFACTION AND BEAT ITS COMPETITORS. THE COST OF ERP FOR NESTLE AT
THE TIME WAS ABOUT $280 MILLION, WHICH WAS RELATIVELY EXPENSIVE
(MASTER 2013). HOWEVER, THE COMPANY, THROUGH ITS MANAGERS, BELIEVED
THAT THE ERP THAT THEY WERE TO IMPLEMENT WAS WORTHWHILE AND WOULD
PAY BACK IN THE NEAR FUTURE. UPDATING OF ERP IS AN ORGANIZATIONAL
CULTURE OF NESTLE SINCE IT IS ORIENTED TOWARD GROWING FURTHER,
 REDUCTION OF LOGISTICS COST

COST REDUCTION IS AN INDIRECT OBJECTIVE OF AN EFFECTIVE

BUSINESSES THAT LOOKSFORWARD TO MAXIMIZE PROFITS.
EFFECTIVE MANAGERS IDENTIFY APPROPRIATE DEPARTMENTS OR
AREAS WHERE THEY CAN MINIMIZE COST AND STILL PROMOTE
EFFICIENCY. SUPPLY AND ACCOMPLISHMENT OF ORGANIZATIONAL
OBJECTIVES. MORE SPECIFICALLY, THE NOTABLE WAYS IN WHICH
LOGISTICS COST IMPLEMENTATION OF PRUDENT DECISION MAKING.
FIRST, SHIPMENT CONSOLIDATION MEANS JOINING VARIOUS
LIGHTER OR COST.
SECONDLY, ORGANIZATIONS SHOULD CONSIDER HIRING ADEQUATE
LABOR RATHER THAN EXCESS LABOR THAT MAY LEAD TO THE
STORAGE AND TRANSPORTATION OF GOODS IS KEY SINCE IT
MAXIMIZES EFFICIENCY BY REDUCING THE POSSIBLE LOSS OR
PILFERAGE OF STOCK.LOGISTICS IS ONE AREA WHERE MANAGERS
MAY CONSIDER IN REDUCING COSTS USING NUMEROUS PRUDENT
WAYS THAT WOULD PROMOTE CUSTOMER SATISFACTION AND
ENABLE THEREDUCTION MAY TAKE PLACE INCLUDE SHIPMENT
CONSOLIDATIONS, AVOIDING EXCESS LABOR, VESSEL
MAINTENANCE, APPLICATION OF LATEST TECHNOLOGIES
ANDSMALLER GOODS INTO ONE CARRIER TO SAVE SPACE AND
FUNDS. FOR EXAMPLE, NESTLE COMPANY HAS VEHICLES OF
DIFFERENT SIZES THAT HELP IN TRANSPORTING A GIVEN AMOUNT OF
GOODS DEPENDING ON THE QUANTITY; THIS SAVES SPACE AND
REDUCESMORE SPENDING. MOREOVER, THE MAINTENANCE OF THE