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Significant Operations in Logistics & Supply Chain at nestle
TABLE OF CONTENT:
- EXECUTIVE SUMMARY……………………………………………………….…2
1.1 NESTLE SUPPLY CHAIN……………………………..……………..…2-4
SNAPSHOT OF NESTLE UK……………………………………………3
1.2 CHALLENGES AFFECTING NESTLE SC PROCUREMENT……… 5 1.2.1 PRO.: Disruption of operations due to shortage of raw materials………………………………………………………………… 5-7
1.2.2 NESTLE W/HOUSING:Case study one Nestle Supply Chain Strategies…………………………………………………………………………7-10
1.2.3 NESTLE SCM: INBOUND, INVENTORY AND OUTBOUND……….10-12
1.2.4 INVENTORY: Disruption impacting the IT infrastructure………….12-15
Supply chain management (SCM) has been a noteworthy part of aggressive procedure to improve organizational efficiency and productivity. This Case Study Report deals with Nestle UK’s Significant Operations in Logistics & Supply Chain management, evaluating their risks, trends and giving recommendations, looking at their strategies and technologies for effectively managing a supply chain.
1.1 OVERVEIW OF NESTLE
Nestle is one of the world’s largest manufacturer and distributor of food products. Established in 1860, Founded in 1866. They have more than 2000 brands of products, and they operate in 189 countries around the world. Their purpose is to constantly achieve UN Sustainable Development Goals in all areas of business operations, while enhancing quality of life and contributing to a healthier future in the world. This led to the creation of Nestle when their founder Henri Nestlé created an infant cereal that saved the life of a child 150 years ago.
Nestlé, as indicated by Gartner’s experts, is amidst rebuilding its Supply Chain and its whole business far from the less-sound nibble nourishment brands and towards wellbeing and sustenance related business. To accomplish that, the organization is concentrating on ability advancement; for example, Nestlé’s acquisition ability currently dwell in three territorial centres, taking into account economies of scale and institutionalization. The organization is additionally concentrating on new item advancement, decreasing fixing multifaceted nature in its assembling forms, and expanding its deals through web based business.(Industry Week, 2018)
1.1 NESTLE SUPPLY CHAIN
Nestle runs a complex based Supply Chain). With a complex mix of dry and wet goods, including water, coffee, confectionery and mix of perishable goods, Nestle is constantly exploring their options on continuous improvement of operation, especially on supply chain which they believe in shared value along their operations. (Gunasekaran, Patel and McGaughey, 2004).
FIG. 1 Source: (A.Ekwensi first Assignment)
The SC have different divisions Procurement, Inventory management and Distribution. In this firm their strength, is their close alignment and coordination within a supply chain, often with the use of shared management information systems, which makes them very innovative and very effective in delivering value in their operations. This is known as supply chain integration, this enables communications channels and linkages within Nestle. Constant collaboration between supply chain partners, customers and suppliers.
- Internal integration: it optimises their effectiveness and efficiency within the organization, cross functional integration.
- Backward integration: they work with First –tier suppliers and increasing with their second suppliers
- Forward integration: Here working with selected first tier customers / services and uncommon second tier customers.
- Forward and backward, This is total integration with both suppliers and customers. This is rare, as they integrate with theory idea. See Fig.2
This organisation currently has a risk Management System in place known as Nestlé Group Enterprise Risk Management Framework (ERM) designed to constantly identify risk and create contingency plans to counter it on time.
1.2 CHALLENGES AFFECTING NESTLE SUPPLY CHAIN
Organizations underestimate the challenges in the absence of accurate supply chain risk assessment.This report will evaluating as follows:
• PROCUREMENT: Disruption of operations due to shortage of raw materials
• INVENTORY: Disruption impacting the IT infrastructure
• INVENTORY: Case study one Nestle Supply Chain Strategies
• INBOUND, INVENTORY AND OUTBOUND: Being completely sustainable in their supply chain operations to drive performance.
1.2.1 PROCUREMENT: Disruption of operations due to shortage of raw materials. Nestle is confronting dangers of having supply difficulties, environmental change is standing up to the European food sector with an unprecedented risk related to supplies of agricultural raw materials, cautions a Nestle Staff (euractiv.com, 2018).Companies blamed the complexity of their supply chains and the inadequacy of supplier responses to their own enquiries.Nestle runs a complex based supply chain ( Bird,2018).
Customers and partners progressively need to recognize what is in their sustenance, where it originates from and how it is made. Nestle depends sourcing best practice with help real time information, guaranteeing the honesty and sustainability in their business and providing foundation for compliance for their raw materials. (Nestle.com, 2018).
Procurement is now focus towards innovation, involving lots of collaborations , partnership monitoring with values on the organizational goals, which requires constant, accelerated pace of change especially in leadership, talent and innovation within the management of the Supply Chain.
Surprisingly, compared to last year, there has been less use of closer collaboration with suppliers to deliver value, indicating a continued focus on more tactical levers to support the achievement of procurement strategies. (Deloitte United Kingdom, 2018).
Nestle needs to constantly collaboration, with suppliers, partners, and contractors within the organisation with sound policies, processes, controls and regular monitoring to ensure high‑quality products and prevention of health risks, arising from handling, preparation and storage throughout the value chain. (From procurement of materials, manufacturing and supply of finished goods for all product categories).
Knowing your Suppliers. With large, global supply chains it is difficult, if not impossible, to efficiently view your entire supply chain. As a result, priority is given to top suppliers, and the rest are managed as needed. (Partners.mastercard.com,2018).
Nestlé need to always view their vendors and suppliers, with proactive alerts when issue arise that can affect their competitive position. They should prioritize the most strategic suppliers, but having more comprehensive view elevates supplier governance and support.
Souurce Kraljic matrix (1983)
This matrix is used to create purchasing portfilo that will help an organizations to prioritize buying activities their products and services. based on profit impact and level of risks involved, this makes more robust in their operations.
They run the Manufacturing type of inventory. Their activities here transform from raw materials to finished goods. This is where Nestle manufacture have various products. The processing and manufacture of final goods ready for outbound.
Nestle is confronting dangers of having supply difficulties.
FIG.4 Source: (A.Ekwensi first Assignment)
INVENTORY is the goods and materials that an organization or business holds for the ultimate goal to maintained for many purposes, the most common being to satisfy normal demand patterns both internal and external. Inventory management involves the balance between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space, quality management, replenishment, returns and defective goods, and demand forecasting.
Inventory is the core asset of the supply Chain operations, it enhance flexibility and provide competitive advantages of the organization .If ran efficiently inventory will reduce operational cost costs and increase profitability.Here in Nestle it operates a goal of demand-driven inventory management
Nestle Water is a leading a fast‑growing category with the Nestle Organisation. Competitive priorities are a firm’s strategic preferences or the ways in which it chooses to compete in the marketplace (Hayes and Wheelwright, 1984). Today, “lean” may no longer be fashionable but its core principles (flow, value, pull, minimizing waste etc.) have become the paradigm for many manufacturing (and service) operations. Lean is concerned with eliminating waste in a pull-based value stream of activities with level production (No idle time nor surge in demand strategy) Just in time inventory management. (Mangan and Lalwani, 2016)
At Nestlé Waters has no space to expand to meet the demand. Inefficiency in the production process, needed to optimise their operation
- They could be sustainable using lean production. –Lean is a systematic method for waste minimization (“Muda”) It’s a philosophy which the main purpose is to reduce waste, eliminating non value added activities in the operations.
- The has various concept Kaizen, Kaban
- Kaban is a lean method to manage and improve work across human systems (Kanban system is means of limiting work-in-progress and signalling when capacity is available to start new work. This is known as a “pull system.”) The approach to process change for organizations which uses visualization. Being able to visualize the work flow. It focuses on the customer and work which meets their needs. It involves the operational work process and improving the process, keeping and intensifying useful changes and learning from, reversing and removing ineffective processes that are waste in the operations. It’s a concept that makes improvement the responsibility of everyone involved in the production. Its continuous improvement and efficiency.
- MUDA Japanese word meaning WASTE. It’s a key concept in Lean thinking process. Value can be added by reducing waste which also helps to reduce operational cost. Muda has Seven different kinds of waste. Which makes up the mnemonic TIMWOOD
Transportation of materials, Energy and time cost time
prevent waste and being more sustainable in their operations
Excess Stock Increases the cost of Storage
Moving goods on time to Customers outlet to prevent operational cost eg. Storage cost
Unnecessarily and excessively travelling and People movement
Performance management via effective project planning
Continuous improvement in cost of wastes employees and customers time
Milestones ,Timelines,Leadtimes designed properly and planed ahead
Repetitions of activities cost time lead to time wasting in operations
Eliminate unnessarily and repetitions operations in the work process
Excess Stock has cost attached to it
IT modelling mange the inventory, helping to keep track of raw materials and stock as needed
Reworking wastes time and materials
Designing product using Computer modelling. Segments results in extra expense and delays.
Just In Time is used in production and manufacturing (TPS _Toyota Production System) another technique. Its philosophy pointed at reducing times within production system and response times within manufacturing or production system from suppliers and to customers. JIT focuses on continuous improvement work as part of strategy.
It becomes necessary to find suppliers that are close by or can supply materials quickly with limited advance notice. When ordering small quantities of materials, suppliers’ minimum order, fewer materials are to be held at any point, which reduces working capital.This leads to better returns.
1.2.3 NESTLE SCM: INBOUND, INVENTORY AND OUTBOUND: Facing risk of not being completely sustainable in their supply chain operations to drive performance.
An Earth-wide temperature boost, environmental change, and different issues rotating around environment are having a grave and tangible impact on our day by day experience nowadays. These effects have not just advanced the centrality of overseeing feasible issues in supply chain in organizations and businesses, but they have made sustainability an outright need for organizations in achieving their natural, economic, and social performances. Logistics outsourcing has been widely used by organisations as a means to reduce costs and increase flexibility.
Here Nestle is using a 3PL approach. Nestle have been in business for many years, they confront not being totally sustainable in their supply chain operations to drive performance. Organizations adopting Green Supply Chain practice can decrease the danger of being indicted for anti- environmental and unethical practices. (Emmett and Sood, 2010). Numerous organizations around the globe have begun to understand that working alone won’t be adequate in their turn towards a greener supply chain (SC) (Ramanathan, U., Bentley, Y. and Pang, G.,2014).
Third-party logistic provider (3PL) organizations assume a noteworthy job in (SCM) via carrying out specialized functions—in particular, integrated operation, warehousing, and transportation administrations. Mulling over sustainability issues into consideration makes reverse logistics even more noteworthy. (Mavi, Goh,and Zarbakhshnia, 2017).
On the off chance that a business is all around arranged and very much arranged to deal with these risk events, it could advance beyond its opponents and decrease the normal long haul harm to its business. Risks could both be external and internal, and coping with them is a key in maintaining a profitable, efficient, productive, and dynamic business. (Mavi, Goh,and Zarbakhshnia, 2017).
Nestle is not just try to be sustainable only on their logistics, cause efficiency solution are not just restricted for transportation, but all through the operational in the supply chain, this is why Nestle is partnering with 3PL Organization to a first class green warehouse that would reduce their environmental footprints designed to be more efficient, with new innovative technology like more efficient heating, refrigeration and lighting systems. (Mangan and Lalwani, 2016)
Nestle made an invested of 55million pounds a high-tech distribution centre, they are partnering with XPO logistics, outsourcing gives them greater freedom to focus on functions that are central to business. This DC will meet all the sustainable objectives for Nestle in the UK operations. This will go live by 2020. This Facility is strategically located in the Midlands to benefit from direct access to the M1 motorway for road transport, the East Midlands Airport for cargo flights, and an onsite rail cargo terminal with direct access to the significant UK ports of Southampton Felixstowe, London Gateway and the Channel Tunnel this was mentioned by Nestle staff.
This will be a flagship the digital warehouse and technology laboratory at the East Midlands Gateway Logistics Park. This will encourage innovation and experimentation in our UK logistics operations to improve their business operations. This project will make Nestle more responsive to their customers across their different brands, still reducing the environmental impact of current logistics and Supply Chain Operations.
- PICK AND PACK
- LIGHT MANUFACTURING
- VENDOR MANAGED INVENTORY
- CUSTOM CLEARANCE
- TRADE FINANCING
- MANAGING REVERSE LOGISTICS
- PARTS DISTRIBUTION
- INVENTORY MANGEMENT
Supply chain (SC) has been conceptualized as a network of agents (e.g., suppliers, manufacturers, distributors, retailers and consumers) who are interconnected throughout the transference of material or information (Carter, Rogers and Choi,2015). Contingency plans along with policies and controls should be in place aiming to protect and ensure compliance on both infrastructure and data.
Information technologies are enablers of the supply chain integration, likewise ideal and uniform organisational structure are fundamental to integrating various functions, that is the different operational functions in the supply chain.
Source: A. Ekwensi
Source: Lecture Notes Breo
As global supply chains become more and more complex, as international logistics cost continue to rise, you will know that digitizing data and collaboration tools in the supply chain are more crucial than ever.
Overseeing supply chains in the present aggressive world is progressively testing. The more prominent the vulnerabilities in free market activity, globalization of the market, shorter and shorter item and innovation life cycles, and the increased use of manufacturing, distribution and logistics partners resulting in complex international supply network relationships, have prompted higher introduction to dangers in the supply chain. (Christopher and Towill, 2001) Disturbance or Disruption of system, network facilities offices (hubs or curves) bringing about loss of framework usefulness is of specific worry in the operation of critical network infrastructures.
In planning for occasions, for example, cataclysmic events, mishaps, and additionally undermine, various interruption conceivable outcomes exist for any system and endeavors to defend against the most destructive of those are frequently sought. (Matisziw, Murray and Grubesic, 2008). “The impact of data-driven and autonomous supply chains provides an opportunity for previously unimaginable levels of optimization in manufacturing, logistics, warehousing and last mile delivery that could become a reality in less than half a decade despite high set-up costs deterring early adoption in logistics,” says Kückelhaus. (Burnson P. 2018).
Infrastructure systems are usually spatially distributed in a wide area and are subject to many types of hazards. For each type of hazards, modeling their direct impact on infrastructure components and analyzing their induced system-level vulnerability are important for identifying mitigation strategies
Organization, manage their SC is the oversight of the whole lifecycle, this is from raw material, to the assembling or manufacturing of the, to its distribution, to the retailer, and after that at last, to the buyer. Every one of these phases of the stage is a link in a chain. Each progression is affixed to the following, interconnecting to encourage the formation of a product.
In this organization the use enterprise resource planning (ERP) solution, provides control of all operations and activities of their supply chain. They need for more efficient staff, systems and processes, this ramps up the entire operations making them more productive by reducing waste (MUDA), giving Nestle continuous improvement driven to be more competitive in the market. This automation diminishes repetitive errands and can build exactness, the distance to your client’s accepting dock. That can wipe out bottlenecks, enhance arrange procedures, and limit both dealing with time and overhead. ERP gives you the ability to find real time information, continuous data, making organization more robust, efficient and proficient in decisions making.
In a high impact disruption context, resource reconfiguration fully mediates the relationship between supply chain disruption orientation and firm resilience. (Ambulkar, Blackhurst and Grawe, 2015) Contingency plans along with policies and controls should be in place aiming to protect and ensure compliance on both infrastructure and data.
SNAP SHOT CHALLENGES AGAINST THEIR RECOMENDATIONS
Disruption of operations due to shortage of raw materials.
Constant collaboration, with suppliers, partners contractors within the organisation with sound policies, processes, controls and regular monitoring to ensure high‑quality products and prevention of health risks, arising from handling, preparation and storage throughout the value chain. (from procurement of materials, manufacturing and supply of finished goods for all product categories).
• Know your Supplier (KYS)
• Create define and govern the relationship
• Spot, improve monitor and sustainability supply chain operations
• Train and manage the workforce.
• Enforce environmental and social compliance
• Identify and mitigate all source of risk within the supply chain
Disruption impacting the IT infrastructure
Contingency plans along with policies and controls should be in place aiming to protect and ensure compliance on both infrastructure and data
Being completely sustainable in their supply chain operations to drive performance.
Making the new DC will meets all the sustainable goals for Nestle in the UK operations. Nestle is using a 3PL approach to go green in their SC, this will go live by 2020.
Risk of waste in operation
In order to improve their operational cost efficiency, companies have adopted lean principles in all their manufacturing activities, in particular, just-in-time supply chain. However, a consequence of this policy makes the transportation network from the local supply chain time critical. (Mo and Cook,2018)
Re engineering in all area of operation applying all the lean strategy to be constantly completive
This report focused on the Significant Operations In Logistics, Supply Chain of Nestle in the UK. Identifying The Key Issues and Challenges Currently faced, and also identified some key innovative operations and gave recommendations. Looking at collaboration of stakeholders from the local suppliers to the customer, via the Supply chain with a strong sustainability values.
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