GLOBAL SUPPLY CHAIN MANAGEMENT topic nestle – supply chain strategy

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 TABLE OF CONTENTS TABLE OF FIGURES I INTRODUCTION OF NESTLE 1.1 History i 1 1.2 Business scale 1.3 Main competitors 1.4 Vision and mission 1.5 Business segment II DESCRIPTION OF NESTLE’S GLOBAL SUPPLY CHAIN 2.1 Planning 6 2.1.1 Overview of Nestle planning 2.1.2 Demand planning 2.1.3 Supplier planning 2.2 Procurement 2.2.1 Raw material sourcing 2.2.2 Supplier selection 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 3.1 Business strategy 15 15 3.1.1 Cost leadership 15 3.1.2 Differentiation 16 3.1.3 Focus strategy 17 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 TABLE OF FIGUR Figure SAS demand-driven planning categories Figure 2 Supply chain disclosure for Cereals (corn and wheat) Figure SAP Business One Modules .12 Figure Nestle social media overview .13 Figure Nestle distribution channel 14Y Figure Porter’s generic strategies 17 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 AngloSwiss 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 doubleincrease 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 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 History of Nestle 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 subSaharan 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 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 $67.7 billion in 2020 Other notable competitors include Pladis Ltd., a global biscuit, chocolate and confectionery company Mars is a famous food industry and is the topmost producer of confectionery products, while the production of Danone focuses on the production and sale of healthy and delicious food that is custom-made for the requirements of people of all ages (Clara et al., 2018) Table 1 Top 10 Food & Beverage Companies in 2021 Source: Food Engineering (2021) Rank Company PepsiCo, Inc Nestle JBS Currency Total Sales Food Total Sales Food Sales Sales ($m) ($m) $ 70,372 70,372 70,372 70,372 SwF 84,343 72,183 79,114 67,708 R$ 270,204 261,050 52,467 50,690 Anheuser-Busch InBev $ 46,881 46,881 46,881 46,881 Tyson Foods $ 43,185 43,185 43,185 43,185 Mars $ 37,000 37,000 37,000 37,000 $ Archer Daniels Midland Company 64,355 35,395 64,355 35,395 The Coca-Cola Company $ 34,300 34,300 34,300 34,300 Cargill $ 114,600 32,375 114,600 32,375 10 Danone Euros 23,620 23,620 26,927 26,927 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 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 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 electronic data interchange, which is a Logistics and Supply Chain Management special technology that helps in monitoring the size of inventory and distribution activities from warehouses and other sources Nestle is also adopting blockchain across the supply chain to generate a comprehensive history of their goods and ingredients, from source to store shelf, as a founding member of the IBM Food Trust - a SaaS service that allows customers rapid access to food supply chain data Nestle became the first large food and beverage firm to explore open blockchain technology after partnering with the blockchain platform Open SC Figure Nestle distribution channel 2.5.3 Customer service With such a wide range of products in different categories, Nestle serves different pocket sizes too Nestle ensures that the tastes of all customers are taken care of by producing products of different types and sizes and ensuring there is sanity when marketing the products The Customer Service team is primarily involved with the sale of the range of Nestlé products to enlisted distributors They set a monthly target for distributors, based on the Consensus Demand Plan supplied by the Demand & Supply Planning department, and makes sure all the distributors, or customers, are aligned with the company targets After orders have been captured from the distributors, they are edited and finalized before placement into the SAP 16 system, where they develop the outbound delivery report for each order They are accumulated to form the shipping plan, which is transferred to the Distribution Centre, who processes the order, loads the vehicles and dispatches them to all the customers across the market III DESCRIPTION OF NESTLE’S GLOBAL BUSINESS STRATEGY 3.1 Business strategy 3.1.1 Cost leadership Cost leadership is the main generic strategy that Nestle uses in various consumer markets Nestle’s cost leadership strategy also offers many benefits including generating fast brand awareness, broadening the consumer base, boosting consumption, and meeting sales objectives by stressing product price and accessibility - Nestle can increase its market share by focusing on the middle class, which accounts for most of the entire consumer market mix in most nations - Nestle places importance on the cost and accessibility of its products across the world, resulting in high-quality brand recognition and sales growth, as well as a significant competitive advantage - In addition to charging cheap prices through cutting manufacturing costs and maximizing supply chain efficiency, Nestle routinely gives discounts and coupons to reach sales objectives and deal with competitive pressure from its nearest opponent These discount and promotional efforts are meant to raise brand awareness and drive consumption 3.1.2 Differentiation Nestle uses differentiation in combination with the cost leadership strategy to achieve growth objectives - Using a differentiation strategy, Nestle can extend its consumer base by highlighting unique product qualities - Nestle’s strategic goal with this approach is to differentiate itself by incorporating innovation and addressing consumers’ rising health concerns Nestle, for example, has expanded its product line in response to changing customer demands to separate itself from competitors and broaden the scope of business potential Nestle has built a large and loyal consumer base by combining differentiation and cost leadership - Nestle uses a differentiation generic strategy to position its product offerings in a way that makes them stand out from the competition The company uses differentiation as a technique to alleviate the pressure from other brands by 17 proving that it is an experienced brand with a strong foothold Nestle spends millions on marketing, advertising, and celebrity endorsements only to set itself apart from the competition - Extensive expertise, the oldest brand, and a global presence are some of the differentiation aspects that the company’s marketing and communication initiatives highlight - Another aspect of the Differentiation Strategy is its brand logo Nestle created a distinctive and unique brand logo, which has built a powerful brand image in the customer’s mind Furthermore, the organization offers a wide range of flavors to meet the diverse tastes of customers It uses innovation as a tool to provide customers with distinct augmented services that may thrill them and boost their choice for Nestle over competing brands 3.1.3 Focus strategy Focus strategy encourages companies to concentrate their resources on expanding the narrowly targeted segments - Nestle has a focus strategy to keep costs down while providing the highest value Serving the demands of a niche market segment at the lowest feasible price is the low-cost focus strategy While the best value focus approach is used by stressing the taste, size, and design of the product that best meets the demands and expectations of the clients - Nestle revises its branding strategy and introduces constant modifications in product design and packaging by concentrating on product qualities in order to meet consumers’ psychological expectations and optimize value for money Figure Porter’s generic strategies 18 3.2 Intensive Strategy 3.2.1 Market Penetration Market Penetration involves encouraging sales growth within the current customer base It includes the activities used to increase the market share by focusing on an existing product in the existing market Market penetration is the primary intensive growth strategy adopted by Nestle to accomplish the growth objectives In fact, Nestle lowered the prices through cost leader strategy and used different marketing and promotion campaigns to increase the sales voice in the existing market In addition, Nestle provides the product in new, appealing packaging in order to meet sales targets while remaining in the same market When utilizing this method in a competitive consumer market, Nestle has used aggressive marketing tactics During the early stages of expansion, market penetration strategy was critical in ensuring Nestle’s success in its home market Later, national recognition was exploited to expand into other markets all over the world Brand recognition achieved via strong market penetration was also leveraged to introduce new items to existing and potential customers 3.2.2 Product Development Product Development involves the development of new products or modification in the current product lines to make them new to current customer base Nestle has significantly expanded its product line since its beginnings, and its product line has become too broad It helps the firm to diversify its risks by compensating for losses in one product line with profits in other product lines At this time, the company serves more than Competitor product brands all over the world Product development is a crucial strategy for gaining new clients ● Nestle has three major options when it comes to new product development: - First is to introduce new items that are closely related to existing product lines - Second, introduce new items that are in line with current customers’ purchasing habits - Third is to create new items that complement or innovate existing ones Nestle is able to effectively offer new goods by continuously assessing the demands of its customers 19 3.2.3 Market Development Market Development identifies and develop new market segments for current products The corporation continues to invest in research and development to extend its distribution network to cover every corner of the world, particularly in underdeveloped nations where it now has a weak presence However, because a corporation has already established itself in most of the world’s marketplaces, market growth is now only a supporting strategy with secondary significance When entering new geographic locations, Nestle recognizes the necessity of understanding culture and incorporating local customs and values into marketing initiatives Nestle has been able to win popularity in culturally diverse consumer markets thanks to its high cultural intelligence Companies must also perform extensive competitive and market information to implement this approach effectively 3.2.4 Diversification Diversification involves entering new markets with new products Nestle’s portfolio diversification is aided by its cost leadership generic growth strategy, which enables the company to pursue new product opportunities in new markets while minimizing costs Additionally, the company’s existing infrastructure allows it to pursue new product opportunities in new markets The diversification intense growth strategy’s strategic goal is to extend the portfolio through successful acquisition techniques Due to risk concerns, the corporation concentrates on linked diversification and avoids hazardous initiatives into new areas Rather, the corporation takes use of its brand’s recognition and power to create complementary items in the worldwide beverage sector However, Nestle’s unconnected diversification includes selling everything from refrigerators to shirts to glasses to pencils After studying market trends and evolving client demands, the relevant diversification plan is implemented by purchasing lucrative firms For example, in response to mounting criticism from environmental organizations, the firm sought to offset the loss from dropping sales by investing in green business practices and forming commercial relationships with partners that shared the company’s good brand image 3.3 Sustainable Strategy The chair and executive officer of Nestle USA promise to strive for a more sustainable future toward a healthier planet, a stronger society and a thriving economy Nestle pays attention to greenhouse gas (GHG) emissions, waste-free products That is why Nestle was expanding on its previous work to set ambitious 20 goals that would truly make a difference, and why it was always looking for new and innovative methods to achieve them in its market Nestle SA has announced new commitments and initiatives in the United States, including the testing of electric vehicles in Ohio, as part of the company’s larger ambition to reduce greenhouse gas (GHG) emissions by half by 2030 and achieve net zero by 2050 Nestle is one of the first companies to sign up to the United Nations’ Business Ambition for 1.5°C pledge, pledging to share its precise plan for reaching net zero GHG emissions Nestle wants to accelerate current activities, adapt its operations, and find solutions to balance remaining emissions through high-quality carbon removal projects or innovation as part of its plan IV CONTRIBUTION OF NESTLE’S SUPPLY CHAIN MANAGEMENT TO ITS GLOBAL BUSINESS STRATEGY IMPLEMENTATION 4.1 Planning 4.1.1 Demand Planning Nestlé’s adoption of SAS demand-driven planning has improved its forecast accuracy and made multi-million-dollar reductions in its inventory by removing human judgment and enabling the predicting of future demand SAS demand-driven planning has the capability to forecasts for the shortterm and long-term The Nestlé team wanted the ability to sense demand signals associated with sales promotions, price, advertising, in-store merchandising and economic factors to better understand what things influence consumers to buy their products Once they were able to measure that mathematically, they wanted to be able to use that information to run ‘what-if’ scenarios to shape future demand When Nestlé’s sales and marketing people get together and want to run a sales promotion, the system then calculates the unit lift that was associated with that promotion in the past and tells them whether it was significant in driving incremental demand, or unit demand Once it does that it then goes out to the financial system and determines whether it made any money These promotional plans are also used to drive the forecast used by the supply chain group to ensure product is available to meet consumer demand The sales teams have the capability to measure the impact of in-store merchandising vehicles like end cap displays to determine the incremental unit volume impact, as well as revenue impact within designated market channels (e.g., retail grocery channel) Forecast accuracy improvement drives safety stock, inventory days on hand, storage costs and freight costs reduction By gaining a few points of accuracy at the national level you can generate supply chain savings immediately With confidence in the forecasts, Nestle are letting that number drive through the whole organization, affecting what they produce, where they’re going to ship, all the way up to their top21 line financial commitments This drives all facets of Nestle’s business With SAS Demand-Driven Forecasting, Nestle is better able to accomplish their goal of right flavor, right time, right store It’s hard to put a price tag on it, but it is really invaluable in terms of running the business effectively and better serving the customer 4.1.2 Supplier Planning Having a commitment to Responsible Sourcing, Nestle has been working with its suppliers to create a more sustainable and ethical future Many organizations are pursuing responsible and sustainable sourcing to improve their image, but several are also realizing significant business value as a result Not long ago, Nestle announced that it would disclose its list of suppliers, as well as other data, for its priority commodities The purpose of the disclosure was to be more transparent with consumers It was the first disclosure of this type in the industry Nestle has also made a commitment to responsible sourcing, and its blockchain capability will be key to demonstrating that commitment Traceability has enabled the company to confirm that 73% of its total spend for its most important ingredients qualifies as "responsibly sourced," which means the spending aligns with an extensive list of guidelines established by the company’s Responsible Sourcing Standard Among its other initiatives, the company is monitoring over 86,000 children who are at risk of child labor and has helped more than 40,000 children access education The company has established a "forest-positive" approach to sourcing ingredients and plans to move toward 100% deforestation-free ingredients by 2022 4.2 Procurement 4.2.1 E-procurement Procurement remains one of the most essential functions as it forms the initial stage of any business that will be conducted Procurement is now focused on 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 Nestle has taken this idea into account by entering e-procurement The efficiency of production will be attributed to the kind and quality of inputs used which will as well affect the quality of the products released to the market The contract entered between Nestle and Free Markets Inc was aimed at providing Nestle access to its B2B (Business to Business) Global Marketplace to source goods across the American market for use in its operation A well-established procurement outsourcing allows the suppliers to be effective, while effective communication that allows feedback on delivery date and quality helps in effective management of inventory and output 4.2.2 Sustainable procurement 22 Nestle works with 81 dairy farms in the UK and are part of the Farmer Connect program, helping farmers to implement sustainable practices on the ground Farmers are paid a premium for implementing practices such as tree planting, conservation of ancient woodland, fencing off water courses and improving soil health On a global scale, Nestle have implemented a Traceability Program in which twelve high-risk commodities have been identified and traced back to farms or plantation Their responsible sourcing audit program was written using UN principles, and the company collaborates with suppliers to close gaps in the standards it lays out By 2025, Nestle wants all of their packaging to be reusable/ recyclable as part of a closed loop system There is an infrastructure challenge that needs to be worked around, as different councils collect different things Processing could also be made easier, for example by not using black plastics As a whole, the company aims to be net zero by 2050 In terms of improving energy efficiency, water efficiency and waste management, Nestle initially focused on their own operations They started this journey in 2007 and set core reduction targets for sites Rather than classing energy reduction as a separate task it was embedded into projects, and employees took ownership of opportunities Targets were set by mapping out energy usage across a site, drawing together data and identifying opportunities for savings The company now works with engineers and operations to ensure environmental aspects are integrated into capital projects from the beginning Since 2007, energy efficiency has been improved by over 42% and this is matched with savings of around £30million They have clearly evidenced the economic sense to taking this approach 4.2.3 Advancing production and sourcing of raw materials With ambitions to translate novel agricultural science into concrete applications and identify the most promising agricultural technologies, Nestlé has launched the Nestlé Institute of Agricultural Sciences On a mission to achieve net zero and transition towards a regenerative food system, Nestlé recognizes the importance of large-scale changes in the way raw materials are produced and sourced Nestlé’s new institute will focus on plant science, dairy livestock, and agricultural systems science, and will assess and combine science-based solutions to improve the nutritional and sensorial qualities of raw materials, as well as their environmental impact Nestlé plans to work in close collaboration with internal and external partners on this project, such as academic institutions, research organizations, start-ups, industry partners, and farmers Nestle’s transition towards a regenerative food system is enabled by agricultural science and new agricultural technologies The new institute will accelerate the translation of science into concrete solutions that can be implemented at farm level, to support farmers globally in improving their environmental footprint, in reducing food and nutrient losses, and in better adapting to climate change while ensuring the quality of the raw materials they produce 23 Nestlé also plans to work with external partners to help to reduce emissions in dairy farming, develop regenerative agricultural practices, and improve biodiversity and soil health In addition, new approaches will be explored to upcycle agricultural side streams to reduce the loss of nutrients and food waste along the value chain 4.3 Logistics The company Nestle distributes its products from different points of production to points of consumption For some manufacturing operations, the manufacturing process begins with companies before they are sent to factories or manufacturing plants After the factory is in production, the consumer goods are taken to the warehouse, where the manager must keep track of how they are being moved out of the facility to the appropriate target market A target market is a specific market in which customers of a particular product are or are expected to appear for commercial purposes Nestle focuses on distributing its products to restaurants, supermarkets, small business owners and other retailers The availability of such goods to entrepreneurs allows them to reach customers who buy products and give feedback According to Marion, effective logistics management strives to deliver services and products to customers at the right time (2013) For Nestle, some customers place an order while others make a purchase when they arrive at the market The company has an obligation to meet the needs of both people regardless of whether they use different approaches to market access and receive goods Efficient logistics management is said to be one of the factors contributing to Nestle’s huge profits at the end of a certain financial period As mentioned earlier, effective logistics management is concerned with customer satisfaction through improving customer service in one way or another Finally, effective logistics management reduces transportation costs by making prudent shipping decisions Nestle typically ships perishable items via aircraft and ensures that they are kept safely in refrigerators and other recommended safe places Notably, Nestle ships bulky goods that not need urgent shipping to their various destination markets because ocean freight is relatively cheap and saves transportation costs 4.4 Operations 4.4.1 Supply chain management Nestlé’s goal with GLOBE was simple: replace 14 different SAP enterpriseplanning systems, each in use in a different country, with a single set of factory and administrative processes, backed by a single way of formatting and storing data, and a single set of information systems for all of Nestlé’s businesses Harmonize procedures, standardize data, and standardize systems were the three foundation edicts for Project GLOBE 24 Over the years, the GLOBE helps Nestle in many countries around the world develop and expand significantly with profitable growth and reduced net working capital In Israel, the implementation of the project “Integrated Commercial Planning: Nescafe" has increased market share from 37% to 41%; the total trade spend has also been reduced by 2.5% during the first quarter of 2005 In France, there has been a 25% reduction in database management time, 66% reduction in data and a variety of new business opportunities identified Moreover, in Turkey, they applied the “Order to Cash" program and as a result, the customer service level was increased by points, along with the improved resolution time and customer focus Another example of GLOBE’s success was in Chile The business improved collection process yielded over US$200,000 in 2005 In southeast Africa, a noticeable change is that the year-end book closing was reduced from 14 to days which means an amount of reduced cost approximately CHF million with better management information 4.4.2 Embracing blockchain Blockchain technology makes product distribution faster, more transparent, and cost-effective It also assists businesses in reducing risk and improving supplier coordination Moreover, open blockchain technology is crucial to establishing universal awareness across the food supply chain Because some of their partners are unable to use proprietary blockchain technology, most organizations only have limited access to their supply chains Organizations large and small might join in an open-source model, safely exchanging data points over a broad blockchain network to establish a traceable system unequaled by other technology 4.4.3 Inventory Management With a steadfast spirit and a belief that slowly but surely will succeed, Nestle has finally paid off At the end of the project in 2002, the implementation of “Best” via the aforementioned SAP’s ERP framework had lasted for years, and cost more than 200 million USD, exactly as originally planned Despite numerous errors that cost time and money, Nestlé estimates that the savings through the new system amounted to $325 million at the end of 2002 – which is more than the cost of the investment fees And even without considering the return on investment (ROI), the lessons Nestlé learned about implementing ideas in businesses are very useful Nestlé can estimate sales with relative accuracy to the distribution center level by building a dependable demand forecasting system based on a unified database and management procedure When there is a variation in the volume of goods at the storage stations, this minimizes storage expenses as well as redistribution costs 4.4.4 Sustainability in Nestle Operations 25 To be able to survive and grow in the long run, Nestle places a high priority on maintaining long-term sustainability in operation and business, and Lean production is the tool that helps them so Nestlé has implemented a series of solutions on the NCE platform to reduce seven types of waste in the factory: wasted time and energy transporting materials; wasted storage space for unused materials; unnecessary moves; wasting time waiting between stages; waste due to repetition of actions; waste due to excess raw materials and waste due to redoing stages; and defective products Through JIT, finished goods, work in progress, and raw materials needed are kept to a minimum by ensuring that stockpiles are only used when needed and are always prepared enough, and the financial resources spent on purchasing raw materials will be converted into working capital to create added value for the company In addition, streamlining the production stages also helps Nestlé to limit operations that can lead to errors in the production process, while reducing the time to produce a product unit, improving productivity and bringing the best value for money effect through direct economics The integrated solution of the manufacturing and transportation processes has reduced space and time while also allowing management to better manage raw material inventories In general, through the lean production process, Nestle not only receives many economic benefits by increasing production efficiency and reducing waste, but also creating a comfortable working environment as well as satisfying the needs of customers requirements for safety and welfare of workers 4.5 Market channels 4.5.1 Marketing Nestle always uses a form of communication associated with their products and brands Through its communication strategies, Nestle has conveyed messages to customers and consumers The firm has chosen to advertise each product one by one to make it easier for customers to remember their products Previously, when Nescafe appeared in Vietnam, Nestle succeeded in using the image of a red coffee cup in hand with a scent to help users remember forever The communication associated with each of these individual products has made Nescafe’s recognition to a great extent In Vietnam, Nescafe also has a large market share, even though Vietnam is a strong coffee country Nestlé succeeds in interacting with real customers on social media as a business Their 850 Facebook accounts for diverse companies typically have 210 million fans It is a great approach to get consumer feedback rapidly and effectively The firm publishes roughly 1,500 new items every day on the social web to achieve a high degree of engagement Understanding customers’ demands for a company’s products is a prerequisite for running a business efficiently when it comes to the global business plan of localization 26 4.5.2 Distribution Currently, Europe and America are the two markets that bring the majority of revenue for Nestle Nestle chooses a distribution channel from the factory and sends it to C&Fs (A kind of warehouse to store products), then sends to distributors and finally, the retailers Therefore, large distributors can completely get better discounts Together with SAP System (business management software), an advanced automation technology called Obiter Robot helps to optimize the area and double the cargo capacity Besides, the Radio Shuttle racking system will provide a much safer, effective and cost-effective solution than traditional racking systems In addition, having a distribution center next to the factory also demonstrates a “onetouch” mindset, keeping distribution costs competitive while providing the highest quality products to customers In fact, if before, the logistics industry was defined by trucks and warehouses, but over the years, new technologies have begun to change the logistics landscape with the use of solutions of mobile, GPS, electronic toll collection, electronic vehicle log Besides, advancements in the industrial revolution 4.0 such as blockchain and self-driving cars are shaping the future of logistics According to experts, modern technology increases productivity and reliability in Logistics activities and Nestlé’s application of 4.0 technologies will help the company speed up the transportation and preservation of goods and ensure the quality of products in Vietnam highest standards when supplying to the market 4.5.3 Innovation Customer satisfaction has always been the key to Supply Chain Management’s performance, as well as a conduit for a company’s competitive edge and profitability (Rosenthal, 2001) Additionally, coordinating all actions from the time raw materials are sourced to the time completed products are delivered to the user is time-consuming and can influence the usefulness of the items to the consumer - having the appropriate product at the right time and in the right place As a result, Nestle believes it is critical to adopt a unified Supply Chain that guarantees product quality is maintained at all times Lynne Xing, director of Nestlé China’s e-commerce supply chain operation said that: “Nestlé believes that in the face of New Retail, the brand has been given greater chances, particularly in three areas: brand innovation spurred by consumption improvements, online-and-offline integration to provide consumers with multi-sensory brand experiences, and data When it comes to New Retail, it is critical to discuss big data and how it’s driven by data” Nestlé is focusing on reorganizing its supply chain to take advantage of the benefits of New Retail According to Xing, by focusing on data, the firm was able to raise online availability from less than 80% in 2017 to over 94 percent now 27 Nestlé uses a strategy called "Branding the Nestlé Way (Branding the Nestlé Way - BBNW)" to develop products that appeal to people Focusing on profiling consumers using their brand is one of BBNW’s six core concepts Nestlé is, in fact, highly involved with its customers, particularly through digital means The 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(2021) Supply Chain Management at Nestle Retrieved from https://studycorgi.com /supply- chain- management- at -nestle/ 10 Michael Wilson (2017), Case Study: A Deep Dive into Nestle? ??s Supply Chain Afflink... DESCRIPTION OF NESTLE? ??S GLOBAL BUSINESS STRATEGY 3.1 Business strategy 3.1.1 Cost leadership Cost leadership is the main generic strategy that Nestle uses in various consumer markets Nestle? ??s cost... DESCRIPTION OF NESTLE? ??S GLOBAL BUSINESS STRATEGY 3.1 Business strategy 15 15 3.1.1 Cost leadership 15 3.1.2 Differentiation 16 3.1.3 Focus strategy 17 3.2 Intensive Strategy 18 3.3 Sustainable Strategy