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Report on Nestle Pakistan

Table of Contents Executive Summary2 HISTORY3 Nestle Pakistan Ltd. History3 NESTLE PRODUCT LINE IN PAKISTAN5 ORGANIZATIONAL STRUCTURE7 Introduction to Nestle’s Supply Chain8 SUPPLY CHAIN VISION8 SUPPLY CHAIN MISSION8 SUPPLY CHAIN PARTNERS9 NESTLE & ITS SUPPLIER END9 Partnership with Suppliers10 FOCAL FIRM13 Manufacturing13 Milk Processing13 Packaging Materials14 Out-Bound Logistics14 Cross Dock/Nestle Ware House15 Objective of Docks/ Nestle Warehouse16 Distribution16 Demand and Supply Planning (D&SP) Department17 Current Situation (SC Mapping)18 Current Process Flow22 Process Mapping With Improvements24

Globe Software26 Migration to an ERP26 Information system and Purchasing26 Conclusion27 Bibliography28 Executive Summary Nestle is today world’s leading nutrition, health and wellness company. Sales for 2009 were CHF 108 bn. employing around 280,000 people and have factories or operations in almost every country in the world. The Company’s strategy is guided by several fundamental principles. Nestle’s existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance.

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The Company’s priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives. This report discusses the supply chain process of Nestle and introduction of its products. It contains supply chain vision and mission. How it manufactures, processes and supplies its products. The report includes Nestle current situation portraying through the supply chain mapping and how final product reaches to the end customer, which channel partners are involved and which is adding how much value process and also there is the current and improved process flow of a specific department i. Milking & Collection department. This report also discusses the supply chain problem identification in Nestle and some recommendations for that. The channel partners and their role in the supply chain, who is the end customer and the procedures performed to deliver the quality milk to the end customer at best possible price. History In the 1860s Henri Nestle, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother’s milk or any of the usual substitutes.

People quickly recognized the value of the new product, after Nestle’s new formula saved the child’s life, and soon, Farine Lactee Henri Nestle was being sold in much of Europe. In 1905 Nestle merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s; the company was operating factories in the United States, Britain, Germany and Spain. The 1920s saw Nestle’s first expansion into new products, with chocolate the Company’s second most important activity. The end of World War II was the beginning of a dynamic phase for Nestle.

Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1960, as did Findus (1963), Libby’s (1971) and Stouffer’s (1973). Diversification came with a shareholding in L’Oreal in 1974. The first half of the 1990s proved to be favorable for Nestle: trade barriers crumbled and world markets developed into more or less integrated trading areas. There were two major acquisitions in North America, both in 2002: in July, Nestle merged its U. S. ice cream business into Dreyer’s, and in August, a USD 2. bn acquisition was announced of Chef America, Inc. Nestle Pakistan Ltd. History As a consequence of joint venture arrangement between Nestle S. A. of Switzerland and Milkpak Ltd. in 1988, the existing production facility of Milkpak in Sheikhupura became a part of Nestle Milkpak. The Milkpak Sheikhupura factory commenced operations in 1981 as a producer of UHT milk. By 1988, it had expanded its operation and was also producing butter, cream, desighee – all under the brand name of MILKPAK and juice drinks under the brand name FROST.

To meet the demands of the large food market that Pakistan offered, Nestle Milkpak reorganized and reinforced the production of existing brands and gave shape to new production lines. The first to come was a milk powder plant, which not only began producing NIDO in 1990 but was also critical to the production of several milk-based products in the future, With the installation of the roller dryer in 1990, the first such product to come was CERELAC – an internationally recognized brand of infant cereal. This was followed by LACTOGEN 1 & 2 in 1991.

In the year 1992 we saw the introduction of GLORIA in bulk packing & MILO and NESLAC came under production in 1994 where as NESCAFE 3 in 1 was introduced in the year 1995. In 1996, Nestle commenced the production of NESTLE PURE ORANGE JUICE. In 1997 NESTLE WHEAT and two variants of POLO viz. Strawberry and Orange was introduced. Flavored milks under the brand FRESH & FRUITY came under production on the new Tetra Filling Machine equipped with the modern “slim” format. MILO RTD and UHT Cream were also shifted to this new format.

Nestle then also contracted with McDonald’s to supply its UHT treated milk for its popular soft serves and milk shakes. The greatest achievement worth to mention of Nestle was that Nestle commissioned its prestigious project of NESTLE PURE LIFE in December. Based on the latest water treatment and bottling technology, this marked the entry of Nestle Milkpak in the Pakistan water market and that of Nestle in the world water market. The expansion of high boiled sweet line continued in 1999 with the introduction of Fruit Drops and BUTTERSCOTCH.

The year 2000 saw the production of some exciting products. First came NESCAFE Frothe Original, followed by its two other flavors: Mocha and French Vanilla. NESCAFE Frappe, Where as The fruit juice range was expanded by the production of Mango and Orange-Mango Mix. The success of NESTLE PURE LIFE in PET bottles encouraged the commissioning of 5-gallon bottles production line for home and office in June. And the last product line of the year to be commissioned in November was that of NESTLE Plain Yogurt, a high quality product with special Stay-Fresh Seal.

To meet the needs of safe and quality storage for the ever expanding product range and their volumes, a National Distribution Center (NDC) was completed and became functional in June, 2000. Spread over 6614 square meters; it has the capacity to store up to 8300 pallets (approximately 8000 tons). Specifically serving the needs of NESTLE. Nestle Product line in Pakistan Nestle is offering more than just food and beverages, Nestle Pakistan is a leading health, wellness and nutrition company. At Nestle it is believed that good food is necessary for a good life.

In fact, health and nutrition is more dynamic than ever. Food has evolved from being a necessity to becoming an expression of how we live. This is why Nestle Pakistan products are developed to provide a safe and healthy source of nutrition to all family members. At Nestle, products are developed keeping in view the end consumers, their preferences and health in mind. Millions of consumers around the world has trusted Nestle products for good reason: when they choose a Nestle product they have the satisfaction of choosing quality, taste, variety, convenience and the good nutrition.

With over 140 years of experience and expertise in this field, Nestle has come up with a range of products that makes the portfolio of approx 72 products currently owned by Nestle in Pakistan of health and wellness. The main product line currently running in Pakistan is as follows. Milk, Dairy & Chilled Dairy: • MilkPak • Nesvita • NIDO • NESLAC • EVERYDAY • NESTLE DAHI • NESTLE FRUIT Yoghurt • NESTLE RAITA • MILKPAK CREAM (Break Fast CREAM) • Flavored Milk BEVERAGES • NESCAFE • NESTLE FRUITa VITAL • MILO BOTTLED WATER • NESTLE PURE LIFE BABY FOODS • CERELAC

FOOD • Maggie Two Minutes Noodle Cereals • Nestle CornFlakes • Neslte KOKOCRUNCH Chocolates & Confectioners • KITKAT • KITKAT CHUNKY Currently Nestle is working on the message: | | |[pic] | | | Organizational Structure The Hierarchy is based in accordance with Supply Chain, on which this report is focused.

Rests of the subordinate posts are not mentioned in rest of the departments. Introduction to Nestle’s Supply Chain Nestle Pakistan’s supply chain makes sure that Nestle products are available at maximum level to its customer. The goal of the supply chain is to make maximum availability of Nestle products, to their customer at an affordable price which will resultantly increase Nestle’s sale. There process integrates from the farm to markets, and ensure products are delivered to their customer at the right time and at the right cost and in the right quantities. Nestle is currently having efficient supply chain.

In the first quarter of 2009 alone, Nestle delivered an astonishing volume of 179 million kg of Nestle products all over Pakistan. Supply chain was established as a separate entity in 2001 keeping in view its importance. Since its existence it has achieved a number of milestones, including a cold-chain in 2002, centralized demand and supply planning system in 2003, and implementation of GLOBE in 2005. Supply Chain Vision “Our ambition is to achieve high level of customer satisfaction through low cost, highly efficient operations driven by value creation and continuous mprovement” Supply Chain Mission • Optimize and consolidate resources and processes for a low-cost but efficient utilization. • Develop and manage simplified and effective supply network to achieve a high level of service • Create a continuous improvement culture driven by performance measures and reward. Nestle is working on the core theme of supply chain that involves the suppliers supplier involvement and its development, to customer’s customer with Nestle working itself as a focal firm in the supply chain.

The following picture will show the channel partners of the supply chain for a specific product. Over here we have choose NESTLE MILKPAK from its product line out of Milk, Dairy & Chilled Dairy class. We have developed our project on MILKPAK from the Milking to Quality Check, there from Quality Passing in to the production then to docks and afterwards involving distributors and in the end delivered to the end consumer. Supply Chain Partners 2ndTier 1st Tier Focal Firm 1st Tier NESTLE & ITS SUPPLIER END Improving the Feed Quality (Feeder Development)

Nestle is also providing the services to its milk supplier for improving their feed in order to get maximum milk from the animals. Nestle have planted a variety of fodder crops, which they demonstrate to farmers on field days. Nestle also provide training on best practices in animal husbandry. For instance, they stress the importance of giving cattle enough water, and train farmers in keeping hygiene in milking & perpetuation of milk. Livestock Health & Breeding In Pakistan major portion of milk production comes from the natural & traditional habitat (growth) of buffalo, despite small in number.

The development in the agronomy in Pakistan has provided the farmers to improve the growth with artificial insemination which can actually triple the milk production. Yet artificial insemination is still not widely used as being a costly and due to lack of knowledge in farmers. Today companies like Nestle and others have established a training program for insemination, and provide high quality imported semen at low cost to farmers. These companies with the help from local vets and agronomists are working to improve the milking capacity of the local breed to fulfill the local and to export the tetra pack milk in to the third world countries.

Improving the Standard of Farms Nestle’s agricultural services staff have drawn up technical plans for cowsheds, which are provided free of charge. These mechanics have also developed prototypes of machines to cut fodder quickly and inexpensively. Starting 2004, Nestle went a step further and proposed the system of providing small loans to those farmers who wanted to make improvements to their farms, such as building cowsheds. They drew up the sample specifications for a model farm to be presented to the banks disbursing the loans. The Service even helps farmers fill out applications for loans.

Specialized Milk Delivery Vehicles: To ensure product quality, proper transportation of milk also requires a cold chain. But majority of the agents in the milk collection chain in Pakistan rarely have access to cold storage facilities therefore a major portion of their milk is lost. Nestle being conscious on this is providing its farmer access to such companies who have the cold storage facility, but only few of the farmers can afford to have such kind of transportation. Most of them use their traditional transports using ice blocks to keep the milk cold until it reaches to the nestle agent centre

Partnership with Suppliers In efforts to provide pure, high quality milk to its consumers at distant locations, Nestle entered into an unprecedented partnership with local farmers. 14 years since Nestle entered in to the firs milk district. The hard work and determination of Nestle milk collection & technical assistance teams and their dedication to Corporate Social Responsibility have raised the bar for dairy concerns in Pakistan 1000 small village diaries ? An agent runs the diary. It occupies a small room of about 20 to 30 m either in the agent’s house or in a building that nestle’ rents. The milk collected on average is two times 150 liters per day. ? The agent does a quick tasting test on the milk before recording the delivery in the farmer’s personal milk logbook. ? The dairy is open two or three hour’s morning or evening. ? The agent transports the milk to one of the 972 secondary receptions and cooling station before closing. 972 secondary reception and cooling stations ? These generally occupy about 40 m, divided into two rooms. ? One of these houses an electrically powered milk-cooling tank with a capacity of 600 to 2500 liters. ? Power cuts are frequent, so 95% of the stations have their own generator. An agent who also works as a milk inspector to run quality tests runs each secondary station. Main reception and cooling stations These constitute the final stage in milk collection before it is delivered to factories. ? It also fitted high capacity milk tanks. ? 8 of them are equipped with plate heat exchangers for getting the milk re cooled before transported to the factories. ? The quality analyses run as each tanker of milk arrives are more thorough than in the secondary station. ? The 23 main stations also stores the laboratory supplies needed in the secondary stations and village diaries. Link to the two factories by telephone and Internet, the main stations act as the communication and administration centers for the entire collection system. Maintenance and breakdown service ? Looking after more than 1000 generators with the same number of water pumps and ancillary equipments demands a systematic approach. ? Each of the 23 main stations employs full time mechanics/electricians. ? For more complex problem mechanic/electrician can immediately calls one of the five Nestle maintenance service station located in five of the main reception stations. The Nestle repair service was originally based in shaikhupura factory. But over the period of time it was transferred to the fresh milk-purchasing department. Milk Cooling Tanks Nestle has set up their reception centers near to the farmers location with cooling facilities where farmers and dodhies, small-time milk merchants, could bring their wares. It was a simple solution, but difficult in practice: importing the stainless steel chilled containers required was prohibitively expensive. Nestle invested in milk cooling tanks, between 1988 and 1992 and were able to installed 100 milk tanks. 992 onwards, with full support from the Nestle headquarters in Switzerland, reorganization of the milk collection operation and the provision of agricultural technical assistance became top priorities. The investment paid off. Within a decade, Nestle’s purchase of fresh milk had quadrupled, and the number of small farmers selling milk to Nestle tripled. Milk Collection System Nestle follows a very simple and transparent milking system from the farm to our table apparently, but for a single glass of milk of Nestle how much processes it has to go through is explained in the following steps. Step 1

A small farmer in rural Sheikhupura district milks his buffalo twice a day and takes about 4 liters to one of Nestle’s 500 Village Milk Collection Centers. Step 2 At the Village Milk Collection Centre the farmer’s milk is poured into aluminum churns. The agent checks the milk’s freshness and purity, and enters the quantity into the farmer’s logbook. He takes it to one of Nestle’s 1308 Secondary Reception and Cooling Stations, about 2-4 kilometers away. Step 3 The Secondary Reception Station has a large electrically powered cooling tank. A milk inspector measures the fat content, the non-fat solids content, and the milk’s acidity.

Once satisfied, he entered the milk in to piping system of Nestle that takes the milk to one of 27 Main Reception and Cooling Stations. Step 4 At the Main Reception and Cooling Stations the milk is poured into huge tanks and is thoroughly checked for quality. Then the milk is dispatched to the factories through pipes straight to factory where the further processing is performed. Step 5 At the Sheikhupura and Kabirwala factories, the milk is processed and packed into the familiar Nestle cartons you can find in your grocery store. It is checked for quality thrice before being released for sale.

Some is processed into yoghurt, powdered milk, or other dairy products. Focal Firm Manufacturing Manufacturing is very important part of supply chain. In Nestle, the objective is to maximize eco-efficiency – that is to maximize the production of goods, while at the same time, minimizing of consumption of resources and reduce wastage and emissions. The factories are equipped with complete testing and monitoring facilities for wastage and emission enables them to stringently monitor the gaseous environments and ensure that these are in accordance with environmental standards (NEQS).

Milk Processing Milk Reception:[pic][pic] The Milk Reception Unit receives milk and liquid milk products for a milk processing plant. The unit measures and pumps the product for buffering or further treatment. Mixing:[pic] Tetra performs in-line mixing for a wide range of powders and liquids for dairy applications such as reconstituted and recombined milk, yoghurt milk, flavored milk, evaporated milk, recombined concentrated milk, ice cream mix, chocolate slurries, dairy desse. Heating & Cooling:

Heating and cooling are basic processes within dairy processing and take place in plate or tubular heat exchangers. Tetra Pak heat exchangers have high thermal efficiency for low energy consumption. Standardization: The Automatic direct in-line standardization of milk and cream. Accurate control of fat, fat/solids and non-fat ratio gives better utilization and control of the production parameters. Pasteurization: Along with correct cooling, pasteurization is one of the most important processes in the treatment of milk.

If carried out correctly, these processes will supply milk with longer shelf life. Temperature and pasteurization time are very important factors which must be specified precisely in relation to the quality of the milk and its shelf life requirements etc. The pasteurization temperature for homogenized, HTST pasteurized, regular-grade milk is usually 72-75 °C for 15-20 seconds. UHT-Treatment UHT treatment is a thermal process for preserving liquid milk. UHT stands for Ultra High Temperature and by heating to 137 – 140 °C for a very short time (2-10 s) the micro-organisms are inactivated.

If the milk is packaged under aseptic conditions it can be stored at room temperature for months. Packaging Materials Nestle is committed to reduce the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products. As far as milk is concern packaging is very important, it is a perishable item which requires special packaging to preserve it for few months. To meet this objective Nestle Milkpak use tetra Pak to deliver fresh milk to its customer without sacrificing in health measures.

Nestle have following objectives in mind regarding packaging: • Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity; • Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation; • Avoid the use of substances that can adversely impact the environment during packaging production and disposal; • Decrease packaging waste at all stages in the supply chain, including package manufacturing, utilization and disposal; • Increase the use of recycled materials wherever possible, and increase the recyclables and compatibility of packages with existing waste management schemes. Out-Bound Logistics In Nestle the Out bound logistics concerns finished milk movement from factory to different warehouses located in different cities. This includes the movement at the upper stream part i. e channels partners such as Distributors & Retailers. Nestle has included its Nestle ware house in the out bound part because when the Milk is packed in its packing and finally approved for distribution from the Quality assurance department and out of the factory, then it is stored at the Docks for 3-4 days before dispatching to the concerned distributor.

Nestle follows FIFO system in MilkPak because it is a perishable item and does not have long shelf life so the product which is manufactured first has to be dispatched accordingly. Cross Dock/Nestle Ware House Nestle warehouses are located within the facility area, but it is not included as a part of the manufacturing and treated under a separate department which procurement. Rest the operation that is performed at the warehouse includes: • Proper storage of Milk. • Inventory Management. • Transportation. Storage of Milk: As milk is a highly perishable item, therefore the conditions required for its storage must be an effectual one to preserve milk in its suitable condition.

Lifters are used to transport rack of milk cartons from one place to another and it is carefully taken in to consideration that to minimize the damage level almost to 0% at the warehouse. Proper ventilation system is put into service at the warehouse to maintain a standardized temperature not more than 38-degree Celsius. Nestle is using best technology available to maintain the standards. Inventory Management: Because of its perishable nature, the inventory management of Nestle MilkPak is done on the FIFO (First in first out) basis. The inventory managed at the warehouse is with the help of the batch number. As the production made at the factory is in batches. So every box of milk has printed batch number and each box contains following arrangement. Type of carton |No. Of item units | |1 liter |12 | |1. 5 liter |8 | |250 ml |27 | |500 ml |12 |

Along with the batch number the production date and the expiry date of each pack of milk is printed. Later on it’s easy to trace that which pack/box belongs to which particular factory. For example; 10 105 15 8 012. This includes Year + Number of day’s passes from January 1st + Factory Number as for Sheikhupura it is 15 + Shift number + Machine number and at what time it is packed. These minute details are just to achieve Quality control. Transportation: Nestle is using the state of the art transportation vehicles best cold storage technology available in Pakistan for the transportation of milk from factory to the distributors in the different cities.

As Nestle is having only two milk processing factory one in Sheikhupura and the other is at Kabirwala, from there the transportation of milk is only made possible through cold storage vehicle. Although Nestle does not own the fleet of vehicles but they are in such a contract with the transportation company that if the damage is made due to negligence from the transport company side, Nestle claims from them. The trucks that are used to transport milk from docks/Nestle warehouse to the distributor or warehouse following types of vehicle are used with the approved capacity. The data is based upon carton per truck. |Size of item |No.

Of cartons | |1 liter |1092 | |250 ml |1815 | |1. 5 liter |1040 | |500 ml |1750 | Objective of Docks/ Nestle Warehouse The main objective of docks/Nestle warehouses is the movement of the finished milk from factory to different warehouses located in different cities.

The logistics usually take 3 days to arrive at Nestle’s warehouses in Karachi from their manufacturing factories at Lahore, Kabirwala and Sheikhupura. Rest to manage the inventory effectively and to record daily issuance of milk against sales requisition. Distribution Nestle is using distributors for the mass circulation of their milk in the market. To be effective and avoid the irregular demand pattern, therefore Nestle has located it sales office around the country depending upon the size of the city the sales office vary. Nestle has divided Pakistan into three geographical zones and then in further Regional Sales Offices, where they think that the demand can be fulfilled. Following are the zones: ? Central Zone o Lahore Faisalabad o Gujranwala o Multan o Sahiwal ? South Zone o Karachi o Hyderabad o Quetta o Sukker ? North Zone o Islamabad and north outstations o Peshawar o Jhelum Shelf Life of MilkPak Due to Tetra Packing Nestle MilkPak has 3 months of shelf life from the date of its production. Return Policy Nestle being the initiator in introducing return policy of such perishable item, Nestle believes in the inverse supply chain. Nestle is only responsible for those damaged packs that are returned by the end user only incase if it got damaged or spoil in the manufacturing process. Nestle MilkPak has an efficient return policy for inventory in case of any defect. Every carton and item has assigned a certain batch number. ? If any defect has found in item or carton then the batch number of that item or carton is noted and disposes the defected item right on there. From here onwards the distributor is responsible to deliver the cartons to the different retailers. Nestles distributer selection criteria is very strict and not all can have the license to sell Nestle products. As Nestle has to maintain the quality standards at distributor end, the procedure is that personnel from the quality department frequently visits the distributor warehouse where he stores the milk and vehicle he is using to distribute. Demand and Supply Planning (D) Department

In every standard enterprise planning department act as a back bone of the company, which is responsible for scheduling sales and making predictions about the demand and plan accordingly the production and if the production is there, then how to create a demand in the market by using different marketing tools. In Nestle the department that is responsible for the forecasting and scheduling is the D department. This department involves cross functional team that includes people from Marketing, Sales, Production& technical, Procurement and Finance. These people forecast demand for 18months ahead and set goals for coming 18 months and divide those goals on monthly basis. Up till now they have only deviated 1% from their set goals and their success rate is almost 97% in achieving these set targets.

That is the main cause behind the Nestle MilkPak success in the market and it helps it to become the market leader. Nestle has two types of forecasting periods, first is Lean Time (shortage period) is the summer season and second is Flush Time (Peak period) is the winter season. Nestle manage these demand periods in the following manner; Demand Planner: The demand planner committee organizes a meeting before the upcoming period, which consists of three departments i. e. Production, Sales & Marketing and Finance The supply chain member of these departments join their heads together for making a forecast of future demand of all the available products e. g. Milk, beverages, etc. The members argue and prove the forecast of sales in the meeting.

Whatever the target is decided in the meeting, it is finalized and the company has to reach that demand target otherwise the company consider itself in loss. The forecasting is based on the previous data of sales and the feedback from the retailer to distributor the information flow, future economical conditions of the country and most importantly keeping in view the seasons. Supply Planner: The supply planner committee consists of two department’s functional team, one is the Production & Technical and other is the Purchasing. They mutually decide the target for the next years that how much of the raw material will be needed for meeting the future sales target.

They are to manage their material requirements and machine production and shutdown time and plan accordingly to the future sales which the company has decided, provided by Demand Planer committee. Current Situation (SC Mapping) At present the operations, functions that are performed, departments and channel partner that are involved in delivering the goods to the end user are portrayed in this pipe line mapping chart; Most of the process that is followed in the pipe line mapping is already discussed briefly in the report, but the function goes like this: The whole process starts from the demand generation and accordingly maintaining the supply end.

First stage of the process is the selection of farms which takes round about 4-6 months; this is done by the Milk & Collection department, who is responsible for fulfilling the required supply of milk demanded by the company. Currently it takes 4-5 months for the selection of farms, because before selecting the farm its sales, hygiene of the milk and the reputation of the farmer in the market is observed. In the second stage Nestle pursue their farmers to improve the breeding & feeding of their cows to get maximum output from the selected farmers, to do so Nestle is already investing a lot to live the standards of their farmers by providing them sheds and other facility free of cost. This is also done under the Milk & Collection department.

After that milk is extracted by the farmer in the third phase and that milk is then transported the company’s collection centre located near to the farms, which is transported through cold storage trucks or with steel chunks to the collection centre where it checked for the quality of the Raw Material i. e. milk. This process takes 3-4hrs then the cooling & agitation process is performed on the milk to keep it at a normal temperature that will protect it from getting decomposed. Over here two departments are involved one is Milk & Collection and second is Purchasing as it involves money (payments to the farmer which is on a credit note of 30-45 day).

This procedure takes 2 hrs Afterwards, if the milk passes the quality measures then it is poured in to the storage silos where it is stored for a small period of time and various operations are performed such as contents are added e. g. fats are some time added to maintain a prescribed level of fats in the milk before it will put in to the manufacturing process. From over here the milk is transported to the factory for the manufacturing of the tetra milk box through pipes from silos directly to the factory. This takes 4-5 hrs before reaching to the factory. When the milk arrives at factory the first procedure that is performed on the milk is the separation and standardization, which means butter and powder milk, is separated and they put in to further process and milk passes on for further treatment.

Pasteurization method is used for making separation & standardization and at the same time making milk free from diseases, in this process every particle of milk is heated to specific temperature for a specified period of time without allowing recontamination of that milk during the heat treatment process. This takes only 30 seconds to 1 min. Then milk is forwarded in to the next machine where the UHT (Ultra High Temperature) treatment is performed. This treatment is specially performed to sterilize the milk in order to increase its shelf life from 2 weeks to 3-5 months, which Nestle is already offering. Over here milk is only heated for 2-3 seconds at temperature above then boiling i. e. at 135 degree Celsius, after this milk has to go through homogenization before final packing. Milk is pumped through thin tubes after the UHT treatment for the homogenization process.

In homogenization process the fat level is maintained up to a certain level that is required by the body of a human being e. g 2-3 % fat level is maintained in Nestle milks. This is to keep the natural touch in the milk and drinkable for the users. This takes 30-60mins before packaging. Finally the processed milk is packed in to boxes of different sizes that are already available to Nestle from Packages. No delay is observed here. Production department is responsible from the stage where the milk enters in to factory from the silos till the final packaging of the milk. Quality department is also involved in this process but only after the packaging. The random sample testing is done from the batch production.

Quality department keep this batch production to itself for 3-4 days for testing before handing over to the Nestle warehouse for dispatch. From factory to Nestle warehouse and from warehouse to the distributor Nestle is considering this in outbound side of the logistics. From factory to warehouse Nestle is using its own vehicles and from Warehouse to the distributor Nestle has a third party contract with a transport company having specialized vehicles that have cold storage facility. In Nestle warehouse the FIFO method is being used for inventory management system. At the time of delivery to the distributor the order is checked before loading at the warehouse site and unloading at the distributor warehouse to avoid any complaints.

Nestle allows only 2-3 days credit to its distributor only on the condition if he is an old or key distributor of Nestle otherwise sales made to distributor is on Cash. Here on wards distributor uses its own vehicles for the distribution of Milk to different retailers in the city and from there to the end user. Current Process Flow Process Mapping of milk & collection department Description of the Process & Roles of players involved in the Process: 1- First of all the demand is calculated based on D forecasting of 18 months (ahead). 2- Accordingly the supply is checked if it is fulfilled through the current suppliers then the material is purchased from them and went through different steps. If not then new farms are searched and selected. 3- If no then: a.

The new farms are selected only on the basis if they meet the criteria of Nestle for this 4-6 months are required, if the farm is meeting the minimum criteria then Nestle confirms the farmer. Nestle also advises to develop its farm plus the livestock for more and quality milk production. b. Then quality is checked for the Village Milk Collector (VMC) that has been set by the Nestle which requires 48-72 hrs for finalizing. c. Then Nestle goes in to the contract with the farmers which require more (24-48 hrs) d. Then VMC made the delivery to the Collection agent of the company. 4- If yes then, milking is done that requires 3-4 hrs. 5- Then milk is loaded in the specialized cold storage vehicle that takes 1-2 hrs for the loading of milks. – Afterwards milk is transported to the collection agent (time 1-2 hrs) 7- Then milk is unloaded at the collection agent (30-min) 8- At the place of collection agent the milk is tested for the quantity and spoiled milk percentage, whether it is satisfying all the requirements of Nestle Quality standards. a. If yes then it is poured in to the silos in which cooling & agitation process is performed. b. If no, then milk is returned back to the farmer. On the other hand it is also checked that how much of the quantity of milk is damaged. If it is up to the acceptance level of Nestle then it is accepted otherwise it is rejected. 9- Then again milk is checked by the quality department, over here it is checked for the contents like fats, vitamin if it is not up to requirements of the company a. If no, then contents are added to raise the ratio in the milk before it is forwarded to the factory for the processing. b.

If yes, then it is directly forwarded to the company from silos to the factory through pipes, for the further processing and value addition. Process Mapping With Improvements Improved Process Description of the Process & Roles of players involved in the Process: 1- First of all the demand is calculated based on D forecasting of 18 months (ahead). 2- Accordingly the supply is checked; if it is fulfilled through the current suppliers then the material is purchased from them and went through different steps. If not then new farms are searched and selected. 3- If no then: a. The new farms are confirmed from the list which is already prepared in advance by the department.

In this list the potential and the future prospect supplier both are listed if needed only confirmation needs to be done for this 1months is required in order to check whether the farms is already in contract with the competitor or he is willing to go in contract with Nestle at the moment. Nestle also advises to develop its farm plus the livestock for more and quality milk production. b. Then Village Milk Collector (VMC) is also selected from the already prepared & surveyed list according to the requirements of the Nestle. This will only take 24 hrs to in contract. c. Then VMC made the delivery to the Collection agent of the company. 4- If yes then, milking is done that requires 3-4 hrs. 5- Then milking and the loading is done at the same time by using piping to transport milk in to the specialized cold storage vehicle that will reduce the time from 1-2 hrs to 00:40 hrs for loading milk. – Afterwards milk is transported to the collection agent (time 2-3 hrs) 7- Then milk is unloaded at the collection agent (30-min) 8- At the place of collection agent the milk is tested for the quantity and spoiled milk percentage plus it is also checked for the content addition e. g. fats & vitamins, whether it is satisfying all the requirements of Nestle Quality standards. a. If yes then it is poured in to the silos in which cooling & agitation process is performed. b. If no, then milk is returned back to the farmer, it is also checked that how much of the quantity of milk is damaged. If it is up to the acceptance level of Nestle then it is accepted otherwise it is rejected.

On the other hand if the contents measurement is not up to mark then the contents are added after pouring it in to the silos. 9- From Silos milk is pumped through pipes directly in to the factory for further processing. Globe Software (Global business excellence) In the year 2005 the successful launch of GLOBE remained probably the most significant achievement for Nestle Pakistan. It was recognized locally as well as in the Nestle world as the most successful implementation of GLOBE. GLOBE is a worldwide program/project designed to align Nestle Pakistan with other Nestle companies around the world and to learn and benefit from each other’s experience.

The project has three main objectives; ? Creation and adoption of common business practices across all countries where Nestle operates. ? Standardization of data and, ? Standardization of information technology system. Migration to an ERP The final phase of the project entails migration of Nestle Pakistan to an ERP (Enterprise Resource Planning) called SAP (System Application Products), which is one of the most integrated business application software in the world. Nestle Pakistan achieved this final migration on February 7, 2005. On that date all Nestle sites including the head office, all factories, distribution centers and three zonal offices went live on the new application.

Successful implementation of SAP has increased the onetime cost of Nestle, but in longer run it has helped to reduce its cost in reducing and effectively managing the inventory level. In addition to that real time data can be viewed anytime from anywhere in the world by just getting through authorized access. Information system and Purchasing Purchasing task will be greatly facilitated by standard IS/IT infrastructure, common business applications and best practices, Visibility of standardized, real-time purchasing data/information will permit aggregated spend category analysis. This will help identify opportunities and define more effective purchasing strategies with the objective of achieving lower total cost. Conclusion After going the all the report we came up to the conclusion the Nestle is orking effectively and having very little loop holes in their supply chain processes only problem we came to identify after watching their processes and functionaries that the main problem they are facing from the supplier end as the milk is not available in that much quantity that can fulfill the demand in the overall national market, with respect to the processes we came to find out the problem they are having is with the Milk & collection department and in that they are facing delays in selecting farm if the demand is more and the current raw material supply is not fulfilling the demand. There was no delay found in the production of the Tetra MilkPak because it is total automated process and is controlled by only few persons.

Among these the most important department for Nestle is the D department (Demand and supply planning department. This department is completely responsible for projecting the future sales and in accordance with that making sure the availability of the raw-material (Milk) available for production. This department is consisted of cross-functional team from different departments. On the basis of their projections figures the sales and the marketing department set their goals and achieve the targets. Company is making sure that it takes care of the entire channel partner from the supplier end to the customer end by providing services and quality to the customer and offering incentives to the supplier and lifting there standards.

For information flow Nestle has implemented the ERP system, with the help of this the information sharing at the customer end becomes very easy and it reduces the occurrence of bullwhip effect, and overall controlling their inventory cost by keeping minimum inventory at the dock/warehouses. Bibliography Websites: 1. www. nestle. pk 2. www. nestle. com 3. www. tetrapak. com 4. www. cia. gov. com 5. www. wekipdia. com 6. www. wisegeek. com 7. www. reference. com Books: 1. Nestle management report 2006 2. Supply Chain Management By: Stanley E. Fawcett, Lisa M. Ellram & Jeffery A. Ogden Articles & Case Studies: 1. The Effect of Heat Treatment on the Nutritional Value of Milk, By: Erin Gillis 2. Chain Safety (Ten Precautions to heed when refining your Supply Chain) By: Powerism 3. A Case Study of Milk Processing, By: Khalid Raza (The Lahore Journal of Economics 13 : 1 (Summer 2008): pp. 7-128) 4. Effective Collection, Transport & Distribution of Milk, By: M. Anquez & B. Tiresonnier 5. Pakistan: A dairy sector at a crossroads, By: Umm E. Zia Contacted Person • Mr. Adeel Aslam (Supply Chain Manager) ———————– Q. Assurance Officer Manager Q. C Manager Plant Logistics Officer Manager Purchase Manager Procurement NESTLE Managing Director Head of Legal affairs Head H. R. Head of supply chain Head of Technical Head of Sales Head of Marketing B. O. D. s Manager Milking & Collection Farmers VMC Nestle Ware House Distributor 4th Tier 3rd Tier Retailer End Consumer 2nd Tier Tier Information Flow Material & Services Flow

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