OPERATIONS MANAGEMENT

Project on

Supply chain management and production process

Submitted to Mr.Asit Bandhopadhay

Submitted by Jatin Aggarwal (9502915) Sunil Singh(9502934) Prabhat Singh(9502935)

Index

S.NO 1. 2. 3.

Content About Nestle 1.1 Nestls processing units in India Strategy - Nestl Roadmap to Good Food, Good Life Supply Chain Management- Nescafe 3.1 Nestls Trading Methods 3.2 Buying Direct

4. 5.

Production process- From bean to bar 4.4 system and technology in production conclusion

About Nestle
Nestl's relationship with India dates back to 1912, when it began trading as The Nestl Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. After India's independence in 1947, the economic policies of the Indian GoverNestleent emphasised the need for local production. Nestl responded to India's aspirations by forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the GoverNestleent wanted Nestl to develop the milk economy. Progress in Moga required the introduction of Nestl's Agricultural Services to educate, advise and help the farmer in a variety of aspects. From increasing the milk yield of their cows through improved dairy farming methods, to irrigation, scientific crop management practices and helping with the procurement of bank loans. Nestl set up milk collection centres that would not only ensure prompt collection and pay fair prices, but also instil amongst the community, a confidence in the dairy business. Progress involved the creation of prosperity on an on-going and sustainable basis that has resulted in not just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving hub of industrial activity, as well. For more on Nestl Agricultural Services. Nestl has been a partner in India's growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company's activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestl Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices. Nestl India manufactures products of truly international quality under internationally famous brand names such as NESCAF, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of

daily consumption and use such as NESTL Milk, NESTL SLIM Milk, NESTL Dahi and NESTL Jeera Raita. Nestl India is a responsible organisation and facilitates initiatives that help to improve the quality of life in the communities where it operates.

Nestl processing units in India

After nearly a century-old association with the country, today, Nestl India has presence across India with 7 manufacturing facilities and 4 branch offices spread across the region. Nestl Indias first production facility, set up in 1961 at Moga (Punjab), was followed soon after by its second plant, set up at Choladi (Tamil Nadu), in 1967. Consequently, Nestl India set up factories in Nanjangud (Karnataka), in 1989, and Samalkha (Haryana), in 1993. This was succeeded by the commissioning of two more factories - at Ponda and Bicholim, Goa, in 1995 and 1997 respectively. The seventh factory was set up at Pantnagar, Uttarakhand, in 2006. The 8th factory was set up in Tahliwal Himachal Pradesh in 2012

Strategy - Nestl Roadmap to Good Food, Good Life

Competitive advantages

UNestleatched product and brand portfolio UNestleatched R&D capability UNestleatched geographic presence People, culture, values and attitude

True competitive advantage comes from a combination of hard-to-copy advantages throughout the value chain, built up over decades. There are inherent links between great products and strong R&D, between the broadest geographic presence and an entrepreneurial spirit, between great people and strong values.

Growth drivers

Nutrition, Health and Wellness Emerging markets and Popularly Positioned Products Out-of-home Premiumisation

These four areas provide particularly exciting prospects for growth. They are applicable across all our categories and around the world. Everything we do is driven by our Nutrition, Health and Wellness agenda, Good Food, Good Life, which seeks to offer consumers products with the best nutritional profile in their categories

Operational pillars

Innovation & Renovation Wherever, whenever, however Consumer engagement Operational efficiency

Nestl must excel at each of these four inter-related core competences. They drive product development, renewal and quality, operational performance, interactive relationships with consumers and other stakeholders and differentiation from our competitors. If we excel in these areas we will be consumer-centric, we will accelerate our performance in all key areas and we will achieve excellence in execution.

Supply Chain Management- Nescafe

Nestl has a first class supply chain, with high quality linkages from where the coffee is grown in the field, to the way in which it reaches the consumer.

The supply chain is the sequence of activities and processes required to bring a product from its raw state to the finished goods sold to the consumer. For coffee, the chain is often complex, and varies in different countries but typically includes:

Growers - usually working on a very small plot of land of just one or two hectares. Many
do some primary processing (drying or hulling) themselves

Intermediaries - intermediaries may be involved in many aspects of the supply chain.

They may buy coffee at any stage between coffee cherries and green beans, they may do some of the primary processing, or they may collect together sufficient quantities of coffee from many individual farmers to transport or sell to a processor, another intermediary, or to a dealer. There may be as many as five intermediary links in the chain

processors - individual farmers who have the equipment to process coffee, or a separate
processor, or a farmers, co-operative that pools resources to buy the equipment

GoverNestleent agencies - in some countries the goverNestleent controls the coffee

trade, perhaps by buying the coffee from processors at a fixed price and selling it in auctions for export

Exporters - they buy from co-operatives or auctions and then sell to dealers. Their expert
know-ledge of the local area and producers generally enables them to guarantee the quality of the shipment

Dealers/brokers - supply the coffee beans to the roasters in the right quantities, at the
right time, at a price acceptable to buyer and seller

Roasters - people like Nestl whose expertise is to turn the green coffee beans into products
people enjoy drinking. The company also adds value to the product through marketing, branding and packaging activities

Retailers - sellers of coffee products which range from large supermarkets, to hotel and
catering organisations, to small independent retailers.

Nestls Trading Methods

Nestl is a pioneer in purchasing coffee direct from growers. A growing percentage of the company's coffee is bought direct from the producer and it is now one of the world's largest direct purchasers. In countries where this is not possible Nestl operates in a way that takes it as close to the growers as possible.

Buying Direct
In coffee-growing countries where Nestl also manufactures for export or local consumption, it has a policy of buying coffee direct from the farmers. The company offers a fair price to the farmers, and so ensures regular supplies of guaranteed quality for its own factories. Higher quality commands a higher price - a premium that Nestl is happy to pay, since good quality raw materials are essential to its business. In countries where direct buying takes place, there is a widely advertised Nestl price, and a minimum base price. By providing a reference level for growers, other traders are forced to keep their offer prices competitive. Nestl began its direct buying policy in 1986 and the amounts involved have steadily increased. In 1998, around 15 per cent of its green coffee purchases were bought directly. As an example, in the Philippines, farmers bring their produce to Nestl's buying centres situated in the coffee growing regions. Quality is analysed while they wait and growers are paid on the spot. In 1998, direct purchases accounted for over 90 per cent of the green coffee destined for its two instant coffee factories in the country.

Production process- From bean to bar

Chain of production
The supply chain is the sequence of activities and processes required to convert raw materials and components into consumer goods and services and to deliver them to the consumer. For cocoa, the chain is often complex and varies from one country to another. However, a typical pattern would pass through the following stages

Primary Producers
The first stage is to grow the cocoa beans. Often the many small farmers involved will live some distance from the market. They depend on people operating in the tertiary or service sector of the economy to collect, purchase and transport the cocoa product to warehouses. In an exporting country like Ivory Coast, export warehouses are located near one of the country's ports, Abidjan and San Pedro. It is at this stage that companies such as Nestl play an important role in the supply chain by checking consigNestleents for quality. Nestl may buy directly from an export warehouse, or it may approach intermediary suppliers who buy cocoa beans in bulk from across the world and arrange shipment to the confectionery manufacturers.

Secondary Stage
The secondary stage of production is the manufacturing companies. These companies bring together the sugar, cocoa and other raw materials to manufacture the chocolate products we know so well: they convert the beans into chocolate bars and other finished products.

Tertiary Stage
The final stage in the production chain is selling (retailing) to final consumers. Just as Nestl buys in bulk from exporters and suppliers, retailers buy in bulk from Nestl. Every Kit Kat or other chocolate product that you buy will have been through all these stages of production.

Production
Chocolate production consists of many stages. Farmers are at the start of the production chain.

Cocoa plants are generally grown in low lying areas and planted in the shade of other trees such as banana or coconut. It takes up to five years for a new plant to fruit, after which it may have a life span of 30 years, unless severe weather or disease destroys it.

Ripe pods are cut from the tree, broken open and the beans removed.

The beans are then allowed to ferment, often in baskets, perforated vats, holes in the ground, or in piles covered by banana leaves. This process takes about six days.

The beans will by now have turned brown. They will then be spread out to dry in the sun. Sometimes they are dried artificially. This process reduces the moisture content from 60 to 13 The beans are then sold. Manufacturers and processors are the major buyers.

The manufacturer then takes over the production process. This involves: Cleaning: ensuring materials such as sticks and stones are removed Winnowing: the shells are cracked open, the beans isolated, collected and heated Roasting: the beans are roasted in furnaces at temperatures between 100c 150c for 20 to
50 minutes. This releases the cocoa's full flavour and aroma

Grinding: this process breaks down the cocoa butter on the beans and produces a smooth
liquid (cocoa paste)

Blending: different varieties of cocoa paste are combined to ensure a consistent final
product and to determine the flavour, quality and hardness of the chocolate. Thereafter, manufacture follows two different paths to produce either cocoa powder (used in chocolate drinks, pastries, ice creams and desserts) or solid chocolate. Because cocoa powder requires a low fat content, the paste is pressed to remove most of the cocoa butter. It is then crushed, pulverised and finely sieved. Making solid chocolate requires combinations of four basic ingredients: cocoa paste, cocoa butter, sugar and milk. The mixture depends on the type of chocolate being produced. Other processes involved in providing high quality chocolate include: Refining to reduce the size of the particles

Conching (stirring) to produce a smooth and glossy chocolate

Tempering (heating at 45c to produce an even smoother end product

Moulding the chocolate into shape, before it is finally packaged. Typically, chocolates are produced using a continuous flow method along a production line dedicated to producing large quantities of a single product. To make soft-centre items such as Rolo, liquid chocolate is poured into deep moulds. These are inverted very quickly, leaving a coating of chocolate on the inside. Once this hardens, the mould is again turned over. The filling is then poured inside and covered with another layer of chocolate to form the base.

A continuous flow method is far more economical than producing in batches, for example, because once the equipment settings have been established the line can run cost efficiently. This production advantage is known as a technical economy of scale. By producing very large quantities at very low costs per unit, a company like Nestl is able to offer consumers good value for money and so remain competitive.

SYSTEM AND TECHNOLOGY IN PRODUCTION

Nestle is an organization which heavily depends upon new systems and technologies to excel in the market. The organization is well equipped with new developed systems and technologies especially in their operations.

COMPETITIVE PRIORITIES
Following are the competitive priorities of Nestle. i. ii. iii. Consistent quality Development speed Volume flexibility

QUALITY
Quality is the cone competitive priority of Nestle. They take quality in two ways. High performance design and consistent quality.

CONSISTENT QUALITY
Nestle pays special attention for maintaining consistent quality. They have special sort of equipments and process which facilitates in maintaining a consistent quality. So the each and every unit of its product equally satisfies its customers. DEVELOPMENT SPEED As for as develop speed is concerned Nestle is the industry leader not only in Pakistan but all over the world. They have a team of very innovative people which consistently focus on the development of new products and to improve the already existing products.

VOLUME FLEXIBILITY
Volume flexibility is one of the competitive priority of Nestle. When the availability of Milk is high in winter season they increase their production as the milk cannot be stored for longer period of time. In season when there is shortage of milk their production rates dropped. So they can adjust their volume of production according to their requirements.

FLOW STRATEGY
Flow strategy is one of the primary element of operations strategy. Based on competitive priorities a flow strategy is selected. It specifies has the operations system to be organized and handled. For different set of products different flow strategies can be implemented.

LINE FLOW STRATEGY

Nestle has adopted the line flow strategy here the system is organized around the product. In this strategy all products follow linear pattern in facility. Nestle has high volume production with highly automated facility and huge capital investment is there and the standardized products they produce. So they follow the line strategy.

STRATEGIES BASED ON FLOW Following are the flow based strategies adopted by Nestle. MAKE TO STOCK STRATEGY Nestle follows the make to stock strategy. They have high volume production and the demand for their products can be forecasted quite well, there exist repetition of work and a consistent quality is maintained old these priorities lead to make to stock strategy. STANDARDIZED SERVICE STRATEGY The products which are provided by Nestle are standardized. Therefore the standardized service strategy also exist in Nestle Ltd. They have standardized and consistent quality products.

Conclusion
Creating wonderful cups of coffee is not only Nestl's business, it is the business of everyone involved in the supply chain. It is in everyone's interest - the farmers' and Nestl's - that farmers receive a fair income from their coffee. This ensures that they will continue to grow coffee, and to invest in increasing their yield and quality, and this in turn guarantees the supply of quality coffee which companies like Nestl require.

Large confectionery companies meet customer requirements with a wide selection of different types of chocolate products to meet a variety of tastes. A company like Nestl is involved at every stage of the production chain. It gets to know as many people as possible in the supply chain, providing growers with technical advice, advising intermediaries about quality issues, and of course researching the market to find out what the consumer wants. Large organisations like Nestl are able to pass on to us the benefits of economies of scale, coupled with their experience of producing high quality chocolates over many years. As a result, we consumers are able to enjoy products built around cocoa beans from a small farm and transformed by complex production processes into sophisticated products such as Quality Street, Smarties, Aero, or many other forms of chocolate product