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ASSESSMENT 2 – GROUP REPORT (40%)NESCAFE VIETNAMCourse codeOMGTCourse name Introduction to logisticsand supply chain managementLocation where you study RMIT Saigon South CampusFile submitted Microsoft WordStudent names & IDs1. Nguyen Lam Phuong Uyen - S2. Tran Nguyen Hong Vy - S3. Phan My Linh -...

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STATEMENT OF AUTHORSHIP

ASSESSMENT 2 – GROUP REPORT (40%) NESCAFE VIETNAM Course code OMGT2085 Introduction to logistics

Course name Location where you study File submitted

and supply chain management RMIT Saigon South Campus Microsoft Word 1. Nguyen Lam Phuong Uyen - S3712429 2. Tran Nguyen Hong Vy - S3817828

Student names & IDs

3. Phan My Linh - S3818488 4. Vo Thi Thu Hien - S3804698

Learning facilitator in charge Assignment due date Date of submission

5. Le Thao Ngan – S3836369 Hang Nguyen Thu Sunday (30/5/2021) by 5:00 pm Sunday (30/5/2021) by 5:00 pm 30 4485

Number of pages including this one Word count

1

COVER SHEET for SUBMISSION of INDIVIDUAL/ GROUP ASSIGNMENTS Course code OMGT2085

Course name Introduction to logistics

Dept. Date stamp

and supply chain management Assignment No. Due date Sunday (30/5/2021) by

Assignment title Group report

2 Academic’s name Hang Nguyen Thu

5:00 pm

(For office use only)

STUDENT(S)

1. 2. 3. 4. 5.

Family name Nguyen Tran Phan Vo Le

Given name Lam Phuong Uyen Nguyen Hong Vy My Linh Thi Thu Hien Thao Ngan

Student number S3712429 S3817828 S3818488 S3804698 S3836369

Declaration and Statement of Authorship: 1. I/we hold a photocopy of this assignment which can be produced if the original is lost/damaged. 2. This assignment is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made. 3. No part of this assignment has been written for me/us by any other person except where such collaboration has been authorised by the academic/teacher concerned and as detailed in the assignment. 4. I/we have not previously submitted this work for any other course/unit. 5. I give permission for my assignment to be scanned for electronic checking of plagiarism. 6. I give permission for a copy of my/our marked work to be retained by the Department for review by external examiners. I/we understand that Plagiarism is the presentation of the work, idea or creation of another person as though it is one’s own. It is a form of cheating and is a very serious acad emic offence which may lead to expulsion from the University. Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data, and oral presentations. Plagiarism occurs when the origin of the material used is not appropriately cited. Enabling Plagiarism is the act of assisting or allowing another person to plagiarise or to copy one’s work; this is not acceptable and is also subject to penalty.

Student Signature(s) 1. Uyen

2. Vy

4. Hien

3. Linh

5. Ngan

SUMMARY OF TEAMWORK

Team member’s name

Commitment to the group project

2

Actual level of Team member’s contribution signature

Nguyen Lam Phuong Uyen

Tran Nguyen Hong Vy

Phan My Linh

Vo Thi Thu Hien

Le Thao Ngan



Executive Summary



Channel map & Logistics flows (part II.1)



Inventory (part II/4b)



Introduction (part I) & Conclusion (part IV)



Material Handling (part II/4e)



Discussion B.2



Information flow (part II/2b)



Channel map (part II.1)



Product Planning (part II/4a)



Discussion A.1 & A.2



Product flow (part II/2a)



Distribution (part II/4c)



The objectives and competency of SC (part II.2)



Packaging (part II/4d)



Discussion B.1



Discussion A.3



Financial flow (part II/2c)

20%

Uyen

20%

Vy

20%

Linh

20%

Hien

20%

Ngan

EXECUTIVE SUMMARY Nestle is the largest food and beverage group in the world with 29 brands over the world and their headquarters in Switzerland. Nescafe is a brand under the Nestle group with a long history of being 3

famous in the world market for a variety of products with more than 30 categories to meet the needs of customers. After years of research and development, Nescafe has built a supply chain system in over 30 countries around the world with sustainable management and long-term value. Over the years, with quality products from coffee, Nescafe has gained the trust of customers around the world. In the Vietnam market, Nestle's Nescafe also captured the main market share when building factories, distribution centers and distributing to retailers quickly. With the goal of sustainable development in the future of the Vietnamese market, Nescafe always develops its supply chain in the most effective and meaningful way. This report analyzed Nescafe's supply chain management system in Vietnam through logistics activities to bring products to consumers. From there, it is possible to understand the logistics structure to find out potential problems in the supply chain of Nescafe Vietnam and the recommendations will be made. Valuable information from Nestle SCM event, data from Nestle articles and reports about Nescafe were collected to compare with information from trusted sources to better understand the activities and challenges that Nescafe in Vietnam is encountering to make the necessary recommendations. Nescafe's logistics flows and the role of the five major supply chain operations were covered and evaluated in the report, including product planning, inventory, distribution, packaging and material handling. In addition, the supply chain network was analyzed to determine the systems and processes Nescafe uses for sustainable and long-term management of push methods. This article also analyzed the importance of the supplier-buyer relationship with the supply chain network to ensure that the requirements were met as well as match the business needs with the capabilities of suppliers. The role of technology has also been mentioned in today's contemporary era with the great benefits it brings to businesses. Therefore, Big Data, automation and robotics played an important role to meet the increasing demand for data storage, automation of operations to bring better productivity for Nescafe. During the COVID-19 pandemic, a number of issues have been raised for Nescafe as restrictions have impacted and disrupted business operations. First, it was necessary to mention the fluctuation of customer demand when the consumer's psychology will reduce the need to consume items that they think are unnecessary. However, the Customer Relationship Management system was proposed to adapt to the fluctuations of demand during pandemic, which is suitable for understanding and communicating customer needs via computer with practical application, strategy, and technology. Another issue concerns the disruption of the supply chain in the context of COVID-19. The delay of the supply chains has caused troubles for dealing with inventory and supply shortages when it is difficult to transport imports from abroad. Mitigation (future) and recovery (momentary) and inventory adjustment strategies would probably 4

partly help Nescafe stabilize the supply as well as more in this period to predict and contact suppliers to adjust to the most reasonable strategy.

Table of Contents I. INTRODUCTION

7

II. SUPPLY CHAIN PROCESS 8 1.

Supply chain channel map 8

5

2.

Three flows description........................................................................................................................................8

a.

Product flow.........................................................................................................................................................8

b.

Information flow...............................................................................................................................................8-9

c.

Financial flow.......................................................................................................................................................9

3.

The objectives and core competency of the supply chain ...............................................................................9-10

4.

The role of following activities in the supply chain objectives and customer services values..........................10

a.

Product planning....................................................................................................................................10-11

b.

Inventory.....................................................................................................................................................11

c.

Distribution............................................................................................................................................11-13

d.

Packaging...............................................................................................................................................13-14

e.

Material handling........................................................................................................................................14

III. DISCUSSION .......................................................................................................................................................14 1.

Discussion A....................................................................................................................................................14

A.1. Supply chain network in use - push/pull or push-pull system....................................................................1415 A.2. The relationships between supplier and buyer within the supply chains....................................................1516 A.3. Technology......................................................................................................................................................16 a. Data...............................................................................................................................................................16 b. Automation Robotics.......................................................................................................................................17 2.

Big &

Discussion B....................................................................................................................................................17

B.1. The fluctuation context...........................................................................17

of

customer

demand

in

the

pandemic

a. Identification of issue......................................................................................................................................17-18 b. Recommendations................................................................................................................................................18 B.2. The disruption of context....................................................................................19

supply

chain

in

the

pandemic

a. Identification issue............................................................................................................................................19

of

b. Recommendations...........................................................................................................................................1920

6

IV. CONCLUSION.................................................................................................................................................20-21 V. REFERENCES...................................................................................................................................................20-26 VI. APPENDIX.......................................................................................................................................................27-30

I.

INTRODUCTION

In the 19th century, the Anglo-Swiss condensed milk company was founded by two American brothers Charles and George Page. A few years later, German pharmacist Henri Nestle invented 'farine lactée' (powder with milk) for infants and built his own Société Farine Lactée Henri Nestlé establishment. At that time, the two giants had always competed fiercely with the desire to replace each other. The rivalry lasted until the death of George Page that led to the merger of their companies with Nestle and the formal creation of the Nestle & Anglo-Swiss in 1905 (Nestle n.d.). Until 2020, Nestle expanded in 186 countries around the world, including Vietnam, with 273.000 employees (Nestle 2020). Due to the impact of the Wall Street Crash in 1929, the Brazilian government asked Nestle to study how to preserve their excess coffee production (Nescafe n.d.). It was not until 1938, Max Morgenthaler - a scientist in a research project successfully processed coffee powder that could be dissolved but still kept the pure aroma of the beans. With brilliant success since its launch, it is estimated that every second, 5500 cups of Nescafe are consumed (Nestle n.d.). Not only that, the growth of Nescafe has created jobs and income for thousands of farmers to become reliable suppliers of the brand. Vietnam is one of the countries that has the opportunity to deploy the Nescafé Plan, a program to protect the future of coffee and improve the lives of local people (Nescafe Vietnam n.d.). Up to now, there have been 35 products under the Nescafe brand, divided into three styles (dissolved, instant, machine-mixed) with dozens of different packaging and flavors sold in the Vietnamese market (Nescafe Vietnam n.d.). Thanks to its strong historical background, Nestle's position in the global market is undeniable. To achieve this, Nestle requires a continuous and consistent end-to-end supply chain. A supply chain is basically defined as the act of adding value to goods and linking the producer/supplier with the distribution channel/consumer. Similar to Nescafe, its supply chain scale even transcends international boundaries with partners in 30 countries (Branch 2008; Nestle n.d.). The complexity in the management process is the reason that Nescafe needs to understand each element of its supply chain deeply to make wise decisions in the future. The aim of the report is to provide findings on existing issues in Nestle's supply chain that may affect Nescafe in particular. Therefore, the sequence of the report will begin with the analysis of flows and

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specific role of each logistics activity in the Nescafe supply chain. Besides, the practices adopted in logistics operation or internal partnerships are also well studied. Significantly, latest social events will be evaluated whether there is a negative impact on the supply chain, then discuss appropriate recommendations for Nescafe Vietnam to tackle these challenges. II.

SUPPLY CHAIN PROCESS

1. Supply chain channel map

2. Three flows description a. Product flow The movement of materials and products has become referred to as the product flow. Because of the geographic distance, multinational supply chains have typically had difficulty coordinating resources and product flows (Coyle et al 2016). Nestle gets coffee, cocoa, and milk straight from over 626 000 farmers via Farmer Connect. They even provide training and assistance to farmers, the majority of whom are small-scale farmers in underdeveloped and developing countries. Farmhouse visits and inspections are conducted on a regular basis by sourcing professionals in accordance with their Responsible Sourcing Standard standards (Nestle n.d.). From raw ingredients through packaging to distribution, the organization maintains the highest standards across the supply network. Customers feel comfortable with Nestle's products since they are checked on the product line, which boosts demand. The items are inspected on the 8

production line to ensure that they meet the high requirements, local, and international regulations (Stadtler 2015). b. Information flow Information flow is increasingly becoming an indispensable element for any modern business model because of the high collaboration and innovation it brings (Madenas et al. 2014). Equally, Nescafe integrates information flow across suppliers, thereby enhancing the quality and efficiency of core manufacturing operations. Proof of this, the NESCAFE Plan program paved the way for the idea of implementing Digital Farmer Field Book based on digital technology (FARMS App – Farmer Relationship Management Solution) to replace the complicated paper management. As a result, NESCAFE Plan experts not only easily monitor the production activities of farmers, but also close the relationship between them (Nestle 2020). c. Financial flow The circulation of financial resources and money is referred to as financial flow (He et al. 2010). These movements are necessary to ensure the flow of information and materials. In addition, Nestle's financial flow includes inflow and outflow. Nestle's inflow is direct cash transfers, which are derived from product payments made by consumers. Its outflow originates from the reimbursement of logistics costs and expenses, solicitation from appropriate sources, deductions for services provided, and goods sold to chain participants. Significantly, because Nestle must pay its suppliers before marketing goods, outflows occur before inflows. Hence, the organization's financial resources are regulated promptly and provide adequate volume, time, and funding. 3. The objectives and core competency of the supply chain Supply chain in F&B refers to the procedure of making sure that foods and drinks can be placed in the customers’ hands on time and at a reasonable price. Particularly, Nescafe's supply aims to ensure that pollution is kept to a bare minimum. Waste can take many forms, including squandered goods, capital, manpower required, distribution time, and more. Their supply chain management seeks to adjust processes for reducing waste by handling manufacturing, procurement, distribution, and logistics. They currently use used coffee grounds as biofuel in 20 factories on a global scale, which reduces 195,000 tons of carbon dioxide emissions annually (Nescafe 2021, p.14). Another important aim is to ensure that the quality and the consumer service are as constructive and effective as possible, allowing the company to respond quickly to evolving demand (such as new drinking patterns and shifting customer tastes). Last but not

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least, Nescafe’s supply chain entails enhancing and preserving the supply chain's overall reliability. To ensure the business operates properly, the company always strives to forge and retain good relationships with their vendors and distributors (Demand Solutions 2020, para.5). About core competencies, Nescafe has created a solid base of scalable supply chain operations, with the support of skilled people and advanced technology, to compete in today's hyper-competitive industry. Firstly, they understand the value of a repeatable and precise forecasting method. Their precise predicti...