Supply Chain Analysis of Nestle, Comparison with Britannia

1. Nestlé
Supply Chain Analysis
By:
Alok Kumar 1510006

2. Introduction
• Established by Henri Nestle in 1866.
• World largest food processing company with total sales of 88785 million Swiss F in
2015.
• 435 production factories operating in 35 countries.
• More than 15000 products are sold across 189 countries.
• Focus on CREATING SHARED VALUE across all channels
Nestle Products
Powdered &
Liquid
Beverages
Water
Milk Products
& Ice Cream
Nutrition &
Health Science
Prepared
Dishes &
Cooking Aids
Confectionery Pet Care

3. Nestlé’s Typical Supply Chain
Group A Group B
Class 1 82 95
Class 2 76 88
Class 3 84 90
• First bullet point here
• Second bullet point here
• Third bullet point here

4. Sourcing & Procurement
• Nestle buys approximately 10 percent of the world's coffee
production, 10 percent of the cocoa crop, and 2 percent of the
milk and sugar.
• Also responsible for the supplier’s way of doing business
• Supply Chain Mapping programme for responsible sourcing
traceability operations.
• To create value among suppliers, technical training is
provided to farmers level which in turn will improve quality.
Supplier
Code
Human
Rights
Safety and
Health
Business
Integrity
Environmental
Sustainability

5. Nestlé's Quality Management System
• Ensuring quality standard are met globally at each step in entire
value chain
• Starts with farms by addressing key global environmental and
social issues.
• R&D network theme is “Quality by design”.
• Good Manufacturing Practices (GMP) to ensure quality and food
safety.
• ISO 9001:2005, ISO 22000:2005/ISO 22002-1, HACCP standards
verified by external bodies
Build trust by
offering expected
consumer product
and services
Comply with food
safety standards,
regulations and
quality requirements
No waste attitude
with Zero Defect
Global Objective:
Quality
Quality
Policy

6. Distribution
• Nestle transports more than 140000 tonnes of product from 1600 warehouses.
• Most of transportation and logistics is outsourced to third parties.
• Under VMI, Nestle distributor makes the replenishment decision.
• Nestle monitors the inventory level using Electronic Data Interchange.
• EDI provides the data related to inventory, pricing, and product movement etc.
• Distributor further connect with retailers to ensure delivery of products to end
consumer.

7. IT Tools & Improvement Programs
• Achilles Supply chain mapping to tracing the source of materials
• EDI to facilitate instant and paperless purchase orders with suppliers.
• Also, ERP, SAP-SCM software are used to ensure seamless information flow across the globe.
• BARLOWORLD CAST Program for supply chain modelling and optimization.
• Project GLOBE: $2.4bn project aimed at standardizing the procurement, distribution
and sales management systems across globe.
• Ingenious: crowdsourcing initiative to facilitate communication about supply chain
challenges, problems and ideas across supply chain teams worldwide.
• Blue Number Program: started by United Nations in 2015. Giving farmers an online
presence, encourages them to improve their sustainability practices by enabling self-
assessment of voluntary standards, and connects them to buyers

8. Nestle India
Supply Chain Management

9. Sourcing in India
• Target – responsible and traceable sourcing in all product categories
• Working alongside NGO partners, they map the supply chains, and conduct supplier
audits and farm assessments to ensure the procurement of 12 priority ingredients
• Example : milk
1.3 million kilograms of milk
per day
110,000 farmers 2,815 milk collection centres
This leads to effective quality control and helps in garnering vendor
support

10. Manufacturing
• 8 factories ( 4-north; 4-south)
• Internationally recognized Good Manufacturing Practices
(GMP) to ensure quality and food safety
• Improving quality through TQM
• Inventory : Continuous Review model using a complete
computerized system.
• WIP inventory is maintained low
• Ware house management systems (WMS) with Radio
Frequency (RF) technology
• During the last 15 years, for every tonne of production, the
Company has reduced the usage of energy by around 47%,
water usage by around 55%, greenhouse gases by around
57% and waste water by around 61%.

11. Promotion in Distribution Network
• Nestle Super Awards as motivation for channel partners
• Incentives for specific target achievements in form of additional margins and
Certificate of acknowledgement
• Dealership in Practice (DIP) training
– Nestle Quality System
– Good Warehousing Practices (GWP)
– Good Distribution Practices
Maintaining excellent relationships with vendors will help garner
support in times of difficulty

12. Distribution Network
Consumer
Wholesaler
Retailer
Super-StockiestDistributor
Carrying and forwarding agent
Factory
Retailer
Distributor
• Due to prioritizing on shared value it gained
immense support during the Maggi crisis
• enabled to speedily complete the withdrawal
without hampering the sale of the Company’s
other products.
• almost zero attrition amongst the business
partners during this time
• Realises the growing importance of e-retailing and
continues to successfully engage with the leading e-
retailers

13. Britannia
Supply Chain Management

14. Company Overview
• Established in 1892 in central Kolkata
• In FY2016, the company recorded a net margin of 9.6%,
compared to a net margin of 8.8% in FY2015.
Food
Bakery
Products
International
Bakery
Products
J B
Mangharam
Foods
Manna Foods
Ganges Vally
Foods
Sunrise Biscuit
company
Daily Bread
Gourmet
Foods
Dairy Products
Britannia Dairy
Holdings Private
Limited
International Operations
Strategic Foods
International
&
Al Sallan Foods
Britannia and Associates
&
Britannia Dairy Holdings
private limited

15. Management Objective
“Your Company has been making focused efforts to balance cost, quality and aspiration
in its brand for consumer affordability. Cost effectiveness has been a key pillar of
your Company’s value creation strategy and this was achieved through scale in
operations, technology interventions and wastage reduction in the value chain along
with efficient management of working capital. Your Company will continue and
intensify the thrust on cost effectiveness in the coming year as well.”

16. Sourcing
• Some components are sourced locally.
– E.g.: Wheat, Sugar, Butter
• Some components are imported
– E.g.: Crude Palm Oil which gets refined here in India
• Sourcing is not integrated in the supply chain as we saw in case of Nestle.
Engaging with vendors will lead to better control on quality and definitely cost
advantages in long run

17. Manufacturing
• Increasing control on capacity
– Acquisition of contract manufacturing unit
• Investments in greenfield projects in Tamil
Nadu, Karnataka
• Trying to leverage synergies in cost with
existing factories
• Consolidation of SKUs done to enhance
operational efficiency but also new product
lines are created

18. Distribution & Retailing
• Intensive distribution strategy
• Emphasis on expanding into rural market
• Trade channels
– General Trade : Standalone shops, retail shops
– Modern Trade : Big Bazar, Reliance Fresh, etc.
– Institutional Trade : Hotels, Airlines, IRCTC, etc.
• Use of SAP-APO solution to achieve better inventory
deployment across supply nodes
Domestic/
International
Suppliers
Manufacturing Units
CnF Agents
Distributors
Retailers
Customers

19. Supply chain metrics
Parameters(in INR)
Britannia (in INR) Nestle Global (in CHF) Nestle India(in INR)
2015-16 2014-15 2015-16 2014-15 2015-16 2014-15
Sales 8097.81 crores 7269.26 crores 88785 million 91612 million 8430.44 crores 10129.5 crores
Cost of goods sold 4622.33 crores 4316.84 crores 44730 million 47553 million
3468.91 crores
4523.96 crores
Average inventory 185.58 crores 166.38 crores 8662.5 million 8777 million
832.45 crores
790.02 crores
Average trade receivable 88.84 crores 62.34 crores 12855.5 million 12832.5 million
88.76 crores
91.69 crores
Average trade payable 637.33 crores 549.95 crores 17237.5 million 16754.5 million
736.13 crores
680.88 crores
Inventory days 14.65 days 8.35 days 70.69 days 67.38 days
36.06 days
28.47 days
Trade receivable days 4 days 3.13 days 52.85 days 51.12 days
3.84 days
3.3 days
Trade payable days 50.32 days 46.50 days 140.92 days 128.61 days
77.49 days
54.97 days
Cash conversion cycle -31.67 days -35.02 days -17.38 days -10.11 days -37.59 days -23.2 days

20. Conclusion
• Depending upon the management objective, supply chain activity system varies
across companies.
• Nestle focuses on CSV while Britannia on Cost Effectiveness.
• Nestle engages closely for long term while Britannia’s relationships are short term
and transactional in nature.
• Britannia is planning to expand its distribution network in rural area under new
leadership.
• Nestle already has strong and intensive distribution in India.

21. THANK YOU!!!