Supply Chain of NESTLE Milk Production

What is supply chain?

Supply Chain can be defined as the created network between the different companies, which
produce, handle and distribute a type of product. Importantly the supply chain consists of the
steps taken to get a good service from the supplier to the customer(point of origin to point of
consumption)

Stages of supply chain:

Stage 1 :The cows at the diary farm are milked for at least twice a day and the milk is stored
in a refrigerated silo for up to 2 days.

Stage 2:The refrigerated tanker then collects the milk from the silo located in the diary farm
and transports the milk to a processing factory.

Stage 3:The processing factory pasteurizes the milk and is stored in the refrigerated silos

after processing again.

 Stage 4: The refrigerated milk is then transported in the refrigerated tanker on road to the
manufacturers of milk.
Satge5 :The manufacturers produce different dairy products from the milk and the milk is
packaged and induced into pallets and into refrigerated trucks.
Stage 6:This is final stage where the milk pallets are transported in refrigerated trucks to
the supermarkets and retail outlets.

The supply chain in milk is started by the process of production, which is started by the
milking of cows in the first stage that includes the use of water and grass. When we move
on to the next stage where the milk is processed by refrigeration, treatment processing and
packaged into pallets in a sustainable and efficient way. The next step or stage is where the
milk in pallets is transported in the refrigerated truck to the retailers. The final stage is
where the consumers or end customers buy the milk from the retailers or distributors. The
key challenges within the supply chain of milk would be the Milk prices in Retail
Competition, Upstream Competition and Downstream Buyer power and the Bargaining
power in the supply chain. This explains that the bargaining power of the competition
between the processors and the individual processors. Due to less importance to farmers,
the processors have been taking continuous advantage in the supply of milk to the
distributors.

Value chain analysis:

A value chain is a chain of activities that a firm operating in a specific industry performs
in order to deliver a valuable product or service for the market.

Nestle keeps its value by securing:

 supplies of high quality raw materials

 improving community relations
 Lowering manufacturing and distribution costs
 Entering new and emerging markets
 Achieving competitive share holder returns
 Improved yields and incomes
Merits of supply chain:
Supply chain

1. helps to increase savings in labour and procurement costs.

2. helps to achieve better inventory control.

3. is used to get better control over suppliers.

4. can increase market visibility.

5. Chances of product failure rate can be reduced by Supply Chain Management.

6. is used to provide better information on customer needs, tastes etc.,

7. helps to achieve regular and better communication with the customers.

8. helps to improve customer care service.

9. is used to achieve higher revenues.

10. increases performance and profitability.

11. is used to lower transportation, warehousing and packaging costs.

12. enhance value for money.

13. is used to improve reputation of brand in market.

14. increases the value of shareholder.

15. is used for faster and more accurate order processing.

16. allows higher discount on price to wholesaler due large order size.

17. is also good for returns and recall management.

18. is used for production tracking.

Demerits:
1. Sometimes Supply Chain Management can be very expensive to implement.

2. Competitors can easily copy the strategy of Supply Chain Management.

3. For better Supply Chain Management, proper skills and experience is required to achieve
success.

4. Sometimes in Supply Chain Management various functions may be difficult to manage.

5. In Supply Chain Management there may be staff resistance.

References
» http://www.nestle.com.pk
» http://www.nestle.com.my/assetlibrary/
documents/pdf/2017_csv_full_report_eng.pdf
» http://alfimohammad.wordpress.com/2012/11/22/competitive-advantage-andvalue-
chain-nestle/
» http://www.mba-tutorials.com/strategy/1671-porters-five-forces-model-ofnestle.
html
» http://businesscasestudies.co.uk/nestle/creating-shared-value-in-the-supplychain/
conclusion.html#axzz3GQRrkSFl
» http://dac0163sharifahanas02.blogspot.com
» http://www.mindtools.com/pages/article/newTMC_08.htm
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