A Case Study on Supply Chain of Nestlé

Bangladesh

Submitted to
Lisan ahmed
Lecture
Adjunct Faculty, Army IBA

Submitted by
Shifa Sarker
ID: B4170B019

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 Executive Summary

One of the leading Nutrition, Health and Wellness company, Nestle, strives to serve its
customers with the best quality products. Thus, its story of excellence is not limited to
product sales solely, rather it also concentrates in providing brilliance consistently for every
group of stakeholders. Being a part of Nestlé S.A, Nestlé Bangladesh also shares the similar
vision of continuous excellence and growing together concept. It focuses not only to nourish
its employees, distributors, retailers and other stakeholders but also to nurture its respective
vendors’ businesses also.

Accordingly, its internal structure is designed in an organized and systematic manner so that
stakeholders can contribute efficiently. An open platform is created by the internal
organizational culture where every member are allowed to exhibit their extraordinary views
and opinions that ultimately help Nestlé Bangladesh to be competitive at all of its operational
phases. Thus the description of the internal department, mainly Supply Chain, gives a
welldefined picture through this report that explains the process and also showcases the inner
relation and operational procedure.

Thus, the objective of the report basically demonstrates NBL and its specific Supply Chain
department along with the key roles, duties and responsibilities of an intern of that particular
department.

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1 Overview of Nestlé

1.1 About Nestlé global:

Nestlé is the world’s leading Nutrition, Health and Wellness Company that boost and enrich
lives with science-based health and nutritional solutions for almost all ages of people, in
every stages of life. The company sells its products in almost 197 countries, having 436
factories positioned in 86 countries and overall it employs over 335,000 people globally,
with its headquarters that is located in Vevey, Switzerland. This Swiss corporation often ends
up being known as the “multinationals among multinationals” because it ended up acquiring
a global sales of CHF 88.8 billion in 2015 and again proves itself to be the world’s leading
Nutrition, Health and Wellness Company. Nestlé is a public limited company which has
more than 250,000 shareholders, enabling no single shareholder holding more than 3% of the
stock and around one third tend to be Swiss. It is the worldwide leader in various product
categories like soluble coffee, infant nutrition, bottled water, condensed and evaporated milk,
ice cream, chocolate, malt drinks as well as culinary. The shareholder value of Nestle is
upsurged by means of sustainable, efficient and profitable long-term growth.

1.2 Globally recognized Brands of Nestlé:

Nestle manages a wide array of brands, including almost every type of food and beverage
categories. To serve consumers by providing the tastier and healthier commodities that they
can enjoy upon at every stage, every occasion of their lives is their utmost motive. A very
noticeable and interesting fact is that, Nestlé manages around more than 2000 brands to best
serve its consumers’ need, demand and expectations. However, some of them can be
demonstrated in Fig: 01 where Nestlé’s product categories and the corresponding brand
extensions against can be pointed out.

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 Exhibit: 01 – Brands of Nestlé

There are also certain brands that are identified as “Billionaire Brands” by Nestle. The title
was received by them as 70% of Nestlé’s total food and beverages arise from certain
particulars that generate over CHF 1 billion, each, in sales. These brands can be exhibited in
Fig: 02.

1.3 Product Range of Nestlé Bangladesh:

Category Products

Baby Foods BABY&ME Maternal Nutrition Supplement

CERELAC Stage1
CERELAC Stage2
CERELAC Stage3
CERELAC Stage4

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Beverages COFFEEMATE

NESCAFE
FRUITA VITALS
MILO
NESTEA
NIDO FORTICHOCO

Breakfast Cereal NESTLE KOKO CRUNCH

NESTLE CORN FLAKES

Nutrition NAN

LACTOGEN
NIDO 1+
NIDO 2+
NIDO 3+

Dairy NIDO FORTIFIED

NESTLE EVERYDAY

Culinary MAGGI NOODLES

MAGGI SOUP
SHAD E MAGIC

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Nestlé Supply Chain

2.1 About Supply chain:

Supply chain management (SCM) is the system of people, organization, activities, technology,
information and resources combined together to transfer a particular product or service from
manufacturer to customer. It basically transforms the natural resources, raw materials and
components into finished products and delivers it to final consumers. Supply chain is mainly a
dynamic process that involves the constant flow of information, product and funds within
different stages of an organization and also with other organizations. It is a chain of process
that ensures steady flow of products or services moving from suppliers to manufacturers to
distributors to retailers and lastly to end consumers. Supply chain, within its array of
networks, include not only manufacturer and supplier but also engrosses warehouses,
transporters, retailers and sometimes customers also.
Supply chain management in every business is crucial as, an optimized SCM chain will enable
a cost minimization along with fast production process. It is such a network that allows
companies to produce and accordingly distribute through this particular framework. SCM is
based on mainly two core ideas, first being the fact that normally every product that do
reaches to its end consumers represents the collective effort of multiple organizations, and
these firms are jointly refer as the supply chain. However, the second fact is that most
organizations, for a long time, paid attention to those activities that actually occurred within
their territory. On the contrary, few companies understood this entire chain and as to that the
result was disjointed and ineffective supply chain.

The Global Supply Chain Forum identified eight key processes that make up the core of
supply chain management (Croxton, Dastugue, & Lambert, 2001, p. 14):
• Customer Relationship Management

• Customer Service Management

• Demand Management

• Order Fulfillment

• Manufacturing Flow Management

• Procurement

• Product Development and Commercialization

• Returns.

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The Supply Chain Management Program integrates topics from manufacturing operations,
purchasing, transportation, and physical distribution into a unified program. Successful
supply- chain management, then, coordinates and integrates all of these activities into a
seamless process (Zigiaris, January 2000). SCM, therefore, falls under the active management
to exploit customer value and also to achieve sustainable competitive advantage. Thus, it
covers all the activities ranging from development of product, sourcing, production, logistics
and also includes the information system and other related works needed to coordinate and
manage these actions effectively. In simpler terms, SCM deals about what to manufacture and
process in-house along with the roles that supplier and buyers play within each other’s
business decision and operational activities.

Exhibit: 05 – Components of SCM

In general, SCM comprises of five parties to complete its value chain that is used to create
value of products right from its manufacturing till its delivery to the hand of final end
consumers. In order to complete the entire process (the chain) the sixth important aspect is
the customer to whom actually all the initiatives are targeted. However, these components

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include:
 Manufacturer  Logistics
 Distributor/reseller  Retailer
 Supplier  Custom

Primary objective of Supply Chain:

Like other business activities’ goals, the basic core goal of supply chain is ultimately to
ensure that the manufactured products or services reach safely and in sound condition to
target customers’ hands and also to satisfy them. In addition to this, another important motto
it shares is the profit it can generate for the organization. Hence the ultimate motive is o
maximize the overall value it creates within its chain. Thus, the greater is the profit extent the
more successful the supply chain is.

The prime goal of any supply chain is to ensure its manufactured product or service is
produced and distributed-

At the right quantities To

the right locations
At the right time
Satisfying service level requirements while minimizing overall system-wide costs

2.2 About Nestlé Supply Chain:

Supply chain is the heart of Nestlé as Nestle is the leading nutrition, health and wellness
company. Thus, even though it has a sophisticated chain, Nestle keeps customers at the center
with the motto being the leader in supply chain in its industry. Hence, every component of the
supply chain exerts heavily on strong interpersonal relationships with other related areas that
formulates a community of people who are very co-operative. It creates such a team that
shares strong ethos where each individual makes their best way to aid each other deliver.
Thus, no exaggeration is contained to explain that its aptitude to manage such a huge
sophisticated process in a timely and effective manner is where Nestlé’s actual success relies.

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2.3 Organogram for Supply Chain Function Nestlé Bangladesh:

Fig: 06 – Organogram for Nestlé Bangladesh Supply Chain Function

The supply chain function of Nestlé Bangladesh is basically divided into three distinct
departments:
1. Demand & Supply Planning (D&SP)

2. Procurement

3. Customer Service & Distribution (CS&D)

From these departments onwards, there are six more sections which are:

1. D&SP - Category Planners

2. Procurement - Raw Material, Packaging Materials, Service & Indirect Material

(S&IM)
CS&D - Customer Service (HO) and Distribution Centre

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2.4 Demand & Supply Planning (D&SP):

This department mainly focuses on the planning of demand and supply of Nestlé’s products’
range by properly executing and utilizing resources, budget and time. Thus, it deals with
many sophisticated stages for creating the approximate demand charts at national level, in
basis of which supply is decided and accordingly production is executed.
This section basically does the national Consensus Demand Planning (CDP) and National
Supply Planning, for each product, for eighteen months period. To associate their findings
with actual production, they do share their activities with factory supply chain and production
department on weekly basis. The team of D&SP also deals with Material Requirement
Planning (MRP) for the imported raw and packaging material to be used. Maintaining Inter
Market Supply Planning (IMSP) with related Nestlé inter-market subsidiaries and also
ensures regular participation and facilitation of Monthly Business Planning (MBP) that are
related with other internal stakeholders like finance, brand, sales, etc.

Monthly Sales Review (MSR) is regularly checked every month and meeting is organized
with sales department for planning the eighteen months period’s forecasted demand. To
identify any lag in budget, meeting with finance department is also initiated naming Monthly
Gap Review (MGR). By this meeting it is checked that whether the associated budget will fix
with the forecasted demand and supply planning.

After all these, the D&SP team organizes the Monthly Forecast Review (MFR) with all other
department directors to finalize the Consensus Demand Planning (CDP) that came through
MSR and MGR meetings. In addition D&SP also arranges a monthly based meeting naming
Monthly Operational Review (MOR) with all department directors and also factory head to
identify that if there is any operational issue present while implementing the forecasted
figures. The D&SP team ensures the maximum freshness possible for Nestlé’s products by
enhancing that right product is available at right time to right location to best serve the target
consumer. The ultimate motive of this team is not only to utilize but also to optimize the
inventory of raw and packaging material and also finished goods.

2.5 Customer Service & Distribution (CS&D):

The CS&D department deals with primary sales of Nestlé with its distributors. Nestlé divides
Bangladesh into 6 regions to sale its products, known as sales region, and in addition appoints
109 distributors around the country. These regions are:

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 1. Dhaka North

2. Dhaka South

3. Chittagong

4. Bogra

5. Khulna

6. Sylhet

However, sales are categorized into three categories:

1. Primary sales – products that are sent to distributors throughout the year.

2. Secondary sales – products sent from distributors to assigned outlet.

3. Tertiary sales – products sent from outlet to the target consumers.

Customer Service involves with primary sales only. For each of Nestlé’s products monthly
target is set and for that there is CDP (Consensus Demand Planning). Customer service
ensures that monthly CDP is properly handed over to all distributors.

There is a norm present for each product for the distributor coverage, that is, they cannot keep
any particular product over the norm. This distribution norm is managed by Customer
Service by assessing current stock and new stock as per order. The use of the well-known
software SAP is used to carry out all the procedures of this section smoothly. Nestlé
Bangladesh shares a policy – “at first they take the payment and then deliver product”.
Customer Service also maintains shipment planning and also truckload plan to ensure the
extent of product to be carried out.

2.6 Procurement:
The procurement department comprise of four distinctive category naming – Raw Material,
Packaging Material, Service & Indirect Material (S&IM) and Inbound Logistics.
Thus, the functions of each of these sections can be precisely discussed as follows:

2.6.1 Raw Material:

The vital activity of raw material section is to receive raw material requirement for Nestlé’s
products for a horizon of 1-2 years period and procure supplies based on lead time and
quantity. They manage both the imported and local raw materials. They do follow SAP for

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collecting orders generated by Purchase Requisition (PR) for raw materials from D&SP.
Accordingly they also creates Purchase Order (PO) to confirm the ordering quantity, as per
accepted lead time, for the enlisted suppliers. For imported materials, in return for PO
Proforma Invoice (PI) is received that includes, description of goods, price, quantity, bank
details of supplier, shipment date, invoice number, etc. Accordingly, LC is opened against
authorized bank and is forwarded to suppliers. Necessary shipping documents including
Commercial Invoice, Packing List, Certificate of Origin, Shipping Documents, etc are also
collected for further processing requirement in port. This team deals with all the activities
related with raw materials from the scratch.

2.6.3 Service & Indirect Material (S&IM):

The Service & Indirect Material (S&IM) team basically deals with the requirement of all the
indirect materials and services required for smooth flow of Nestlé Bangladesh’s operations. It
procures all the indirect items and services needed in head office, factory and distribution
center. The functions of supply chain are spread in 10 specific categories. They are:

1. Advertising:

2. Marketing & Sales:

3. Point of Sales Assets (POS)

4. Utilities, Environment & Facility Management

5. Fixed Assets, Equipment. & MRO

6. Administration & HR Services

7. Other Professional Services

8. Contract Manufacturing

9. Logistics

10. IS/IT & Telecommunication

2.6.3.1 Organogram for S&IM:

Exhibit: 07 – Organogram for Service & Indirect Material (S&IM)

The 10 components of S&IM is split among five category buyers who are responsible either
individually or combined. The role of these category buyers are defined in two specific terms
naming category Strategic Buyer (SB) and category Operational Buyer (OB).

The head of all the five buyers is the Manager of S&IM and accordingly the Senior Manager
is the head of all raw material, packaging material and S&IM teams. At the top is the Head of
Department (HOD) or the director of Supply Chain who is a member of Management
Committee (MANCOM).

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2.6.3.2 Strategic Buyer & Operational Leveraging supplier’s know-how
Buyer: to improve Nestlé products and
processes Leveraging spend category
knowledge of operational buyers and
internal users, through cross regional /
cross-functional sourcing teams.
Strategic Buyer

A Strategic Buyer is a purchasing

employee who, either independently or
Operational Buyer
with input from cross-regional or cross-
functional sourcing teams, defines a
spend category strategy that specifies: An Operational Buyer is an employee who is
authorized by his/her manager to order
Nestlé's approach towards the
goods and/or services from external vendors
supply market for a given spend
on behalf of Nestlé.
category; Nestlé's approach
towards the internal users of a An Operational Buyer can belong to any
given spend category.
department within Nestlé.

Based on the defined spend category

strategy, the Strategic Buyer initiates and
maintains all supplier relationship Operational Buyer Responsibilities:
management activities. The Operational Buyer has the
responsibility to assure delivery of goods
and services to the internal user:

Strategic Buyer Responsibilities: on the requested date;

Reduction of total cost of at the requested place;
ownership through: in the requested quantity and quality;
• Fact-based negotiation with with all the required documents; preceded by
suppliers all the requested confirmations and
• Leveraging of spend on regional / acknowledgements.
global level
• Specification and supplier reduction
Operational Buyers should, as much as
• Challenging usage patterns
possible, create purchase orders that
• Improving supply reference a contract negotiated by a
processes Reduction of Strategic Buyer. In case of repetitive
purchases from a vendor, they should inform
supply risk Increasing supply
a Strategic Buyer if a contract with that
flexibility vendor is not in place.
2.6.3.3 Workflow of S&IM:

o Purchase Requisition (PR) is received by category buyers that follows a system

generated number

o Based on the requirement, vendors are short selected o Request for Quotation (RFQ)
is then accordingly circulated with a due deadline o Suppliers submit their quotation

o The quotation received is further analyzed and based on the scope available a revised
final offer is asked

o To further evaluate the final quotation, a comparative statement (CS) is prepared that
includes a summary of the entire supplier’s bidding price along with necessary
information related to delivery. It also includes a short summary that defines
everything from the beginning.

o Based on the CS, the lowest bidder gets the order. However, for Nestlé it not always
the situation that the lowest quoted price gets the deal it is also based upon the
potentiality of the vendor, their capability to align with Nestlé’s requirement and their
field of expertise.

o Finally, again a system generated Purchase Order (PO) is received by the specific
buyer who hands over the PO to the final short selected vendor confirming the deal.

o In response, the supplier acknowledges the receipt of PO and a timely delivery is

ensured again.

o Buyer, on specific intervals, makes regular follow up and after final delivery supplier
needs to submit proper documentation to head office.

o After final assessment of those given documents finance department settles down the
payment.

o This entire process is also maintained in a common shared file among the category
buyers, which includes every step of this procedure. That particular file needs to be
 filled out with specific date and description and an average evaluation phase is
assigned there to calculate the HIT or MISS target for every order.

2.6.4 Inbound Logistics

Another section of NBL supply chain is the Inbound Logistics that actually deals with all the
related tasks after final shipment documentations are received from Raw Materials section.
The role of Inbound Logistics team is to release imported goods from Chittagong port or
Dhaka Airport or Benapol port. The mainly settles the duty payment to government and after
the goods are released they also ensures the transportation from port to factory. Their roles
can be precisely defined as follows:
 Ensuring Supply: 
Inbound logistics basically ensure supply of products that are imported and also
confirms its transportation to factory. NBL usually imports Raw Materials and
Finished goods and Inbound Logistics takes care of importing the required item at
right time and at right place. Thus its operations lie with monitoring and following up
the imported items so that a constant supply is ensured without any breakdown.
 Customs clearance: 
Another vital role of Inbound logistics is to take care of custom clearance and import
duties as per compliance, ensuring proper commercial value, duty and taxes with H.S.
Code (Harmonized Coding System). It facilitates all customs activity getting the
important materials within a specified lead time.
 
 Sea -Transport:
For imported materials to be shipped through sea, Inbound logistics need to dispatch
country of origin, invoices, packing lists, other related import document for the goods
to be released in a timely manner. This team deals with shipping agents who ensure
transportation of goods from one country to another.
 Inland Transport: 
Inbound logistics maintain inland transport services carrying the goods from different
ports to warehouse.
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 Legal activity: 
Inbound logistics also accomplish legal activities such as resolving disputes at customs
for any variations of imported goods’ documents. It settles all disputes as per import
Policy order, Valuation rules, Customs Act and NBR (National Board of Revenue).
 Claim Settlement: 
 Furthermore, inbound logistics facilitates insurance claims of imported goods if any
damages occur. It also carries insurance as act retrieved all imported damaged
shipments and also any other damage shipment. These all occurs as per Insurance
norms defined for each and every condition.

Findings
• Nestle Bangladesh Supply Chain is one of the best Supply Chain department of
Bangladesh. As most of the raw materials are import based the overall process in
supply chain is much complex and lengthier. This is why along with the product
development function and Marketing function Supply Chain should strive to explore
local sourcing options more.
• Food and Beverage business in Bangladesh is becoming very competitive day by day.
Price is becoming the most important determinant for consumers. Considering this the
high price product offerings are becoming so risky to survive. In order to raise
Marginal Contribution (MC) of product and also to charge an affordable price the
sourcing strategy need to be reviewed by searching for local suppliers and developing
them to meet Nestle standard.
• Nestle Supply Chain always emphasizes to make Nestle a Lean organization. As
already shared in the report Lean means no wastage (money, time or anything). For
Nestle Bangladesh Supply Chain department this is a continuous Journey to be Lean.

Recommendation
• Local Supplier Development: Nestle Bangladesh need to develop local suppliers of our
country to gain benefit in longer period of time. For this they should teach the local raw
materials suppliers about the cultivation methods. Now-a-days in terms of quality products
and materials our local companies are also doing well. Especially for Milk Powder, Spices
or Oil items they can develop local supplier. This will save huge amount of money and
time for Nestle and also will be beneficial for our country too.
• Import Lead time reduction: At present most of the raw materials are imported and for
most of them the lead time (Order to Factory arrival time) is very high. Average lead time
is 2 months to 4 months. Here Nestle Bangladesh need to reduce lead time by negotiation
with international suppliers or Nestle inters market subsidiaries.
• Regional Distribution coverage: Nestle Bangladesh need to set up some regional
distribution warehouses at least in the major Divisions like Chittagong, Khulna and
Barisal so it will be beneficial for quick product supply in the political unrest situations.
• Setting more alternate Supplier: Setting more alternative suppliers will help during the
crisis period especially when one supplier failed to supply materials on time, they can
quickly get the materials from another supplier.
Conclusion
Nestlé is one of the Leading Nutrition, Health and Wellness Company that focuses on the core
factor of benefiting and satisfying its consumers by serving the best quality products. Thus its
operations do not focus only for internal gains and growth rather it moves with the vision of
benefiting every other stakeholder involved with it. Nestlé Bangladesh always shares the view
of growing together where it supports not only its internal members but also the external ones
to flourish with good growth degrees. In Nestlé Bangladesh, every employee and staff is
considered to be a part of the Nestlé family where they work as a team sharing the similar
objective of ensuring continuous excellence. Like all other departments, Supply Chain
possesses the most structured and mannered systems so that its members can operate with
great efficiency.
This particular report gives an overall view of my internship journey I completed within the
stated time period. The key roles, duties and responsibilities I followed are well defined here
with proper detailing. I gained a handful of great new experiences that escalated by core
competencies to new heights. I am more of interested, right now, to explore further potential
opportunities in the Supply Chain sectors. Thus, all such skills I gathered from NBL actually
changed my perception towards this supply chain field which grew more curiosity within me
to work for this sector, undoubtedly.
Bibliography

1. (n.d.). Retrieved 12 2, 2016, from Nestle Global:

http://www.nestle.com/aboutus/history

2. Croxton, K. L., Dastugue, S. J., & Lambert, D. M. (2001). The Supply Chain
Management. The International Journal of Logistics Management , 12 (2).

3. Zigiaris, S. (January 2000). Supply Chain Management. Innoregio Project.