Operations Management Nestlé Report PDF

Preview

Summary

Include discussions and research on Nestlé's supply chain, quality improvement and risk and recovery management....

Description

Operations Management Report of Nestlé July 1, 2021 Word Count: 2231

Table of Contents

Introduction

2

Supply Chain Management Supply Chain Evaluation of Nestlé Operating recommendation Supply chain relationship End-to-end supply chain Dynamics control

3 3 4 4 4 4

Quality Management Gap model of Quality Operation’s and customer’s specification gap Concept and specification design gap Quality specification and actual quality gap Actual quality and image communication gap Quality characteristics

5 5 5 5 5 6 6

Managing Risk and Recovery Types of risks in Operations Management Operations’ Failures Recovery Discover Act Learn Plan

7 7 8 8 8 9 9

Conclusion

9

References

10

Introduction Nestlé is one of the world's leading nutritional-producing companies based in Switzerland (About us, 2021). Since 1866 it has been widely recognized for its active role in innovating assorted tasteful and healthy products which are generally accessible in daily lives

ranging from health solutions, foods, and beverages. Currently, more than 2000 brands have distributed, 186 regions across the globe. Nestlé's corporate purpose is "Good food, Good life" committed to enhancing the health and living of the consumers and achieving a sustainable contribution to the environment. The company's strategy adoption of specialization, convenience, affordability, accessibility, safety, and satisfying customer demand strengthened its consistent performance and prominence against competitors (Strategy, 2021).

1.

Supply Chain Management As stated by Slack, N., and Brandon-jones, A. (2019), supply chain management

refers to the supervision of the overall products and services' transformation flow chain of value through operational and processing stages until the final delivery to the consumer. The operations involve the coordination, development, and implementation of economically and efficient production activities across sectors and enterprises, comprising raw materials suppliers to the manufacturer, logistics, and informative systems (Fernando, J., 2021). An efficient supply chain management essentially supports businesses to accomplish competitive advantage and maximizing customer value by minimizing extra costs and firm delivery. 1.1.

Supply Chain Evaluation of Nestlé

Firstly, there are constant shifts in Nestlé’s consumers’ preferences and tastes on the revolving economic, lifestyle, and digital trends (Nestlé S.A., 2019). Due to the moderate volatility, a rapid response in informative upstreaming, prototyping, and R&D is being practised. Production volume and variety of Nestlé are high, a maximization of capacity utilization is pursued due to the various product lines manufactured in different 479 factories in 81 countries. Each day, the distribution of the stocks from the hubs will have to reach consumers at 1 billion units daily. The lead time generally takes around 12 months for R&D and the launch of a new product, which essentially regulates a rapid downstream supply chain to fulfil sufficiency (Speed to market, 2021). In terms of suppliers, low-cost for a high volume for economies of scale are chosen to control costs and efficiency (Suppliers, 2021). Altogether, the profit margin of Nestlé products is significantly around 18%. Referring to the observation of Nestlé's nature of demand and supply chain objectives, its supply chain strategy operates as make-to-stock, regulating an efficient policy with a quick response to consumer’s demand.

1.2.

Operating recommendation

Supply chain relationship As a resource-based view, since Nestlé products' innovation are majorly manufacture-focused, supplying raw ingredients will cost better by collaborative outsourcing to achieve economies of scale. A long-term partnership may be appropriate for the company as the supplying of ingredients can secure a sustainable production flow and ensure sufficiency as well as saving transactional costs. Moreover, Nestlé can cooperate with the supplier to ensure transparency and sustainable compliance. End-to-end supply chain From the supply side, Nestlé's main agriculture ingredients supplies can be identified as leverage transactional items. According to Slack, N., and Brandon-Jones, A., (2019), a delegated-sourcing strategy is solely suitable, allowing a concentrated supplier management handling bundling procurement of supplies from multi-sources. Additionally, Nestlé can effectively choose the supplier by selecting a competent candidate with agreeable terms of qualification, procurement and compliance.

On the demand side, the distribution of the supply chain in the domestic regions where the factories and major hubs are situated, Nestlé can consider operating logistics such as inventories, transportation and delivery in-house for a close monitor, information integration and save excess costs. Meanwhile, specialized third-party logistics (3PL) can be selected for operating in other international regions. Nestlé may practise customer relationship management to address the consumers' buying behaviour and demand by collecting consumers data from retail stores, social media and shopping applications for product and service development. Dynamics control Unpredictable sales fluctuations to an immediate customer change can create dynamics from volatility and inaccuracies of the supply chain's upstream (Slack, N., and Brandon-jones, A., 2019). Consequently, Nestlé can regulate the use of Electronic point-of-sale (EPOS) systems, Electronic data interchange (EDI) and blockchain technology to generate an accurate real-time forecast of the consumers' behaviours and enhancement of upstream to integrate and adjust the entire supply chain.

2.

Quality Management Quality management refers to the act of monitoring the overall activities and tasks

performance ensuring that a satisfactory level of operating quality and standardisation is accomplished and maintained (Barone, 2020). By implementing quality management mechanisms into business operation, the best quality production system will be controlled under consistent criteria measures (Juneja, 2015). Ultimately, to excel in emphasizing quality over quantity is prominent for businesses to derive its success. Generally, expectations of existing customers can be met and attract new customers by reducing complaints, expanding to new markets and building trusts (ACS Registrars, 2019). 2.1.

Gap model of Quality

Comprehensive quality management involves a harmonious unification of both customers’ perceived satisfaction and solid operating performance. A gap model is applied to pinpoint the gaps that may exist between the customers and operations product delivery (Gap Model of Service Quality, 2019). Operation’s and customer’s specification gap There can be a misperception of the consumers' quality preference of the ingredients specification, product packaging, material or size by the influence of the trends and inefficient conduction of customer surveys from the marketing department. Concept and specification design gap Nestlé may desire to keep the cost-efficient and preserving the original taste while developing the specification that the consumers perceived. The company's initial cost-efficient intention may leave out the possibility of preserving the original taste of the product. Quality specification and actual quality gap While there is a specification of either packaging, materials or even ingredients, Nestlé may encounter the error gap between the expected specification and an actual production result. In this case, there might be technical, unexpected errors and in the specification or poor standardisation.

Actual quality and image communication gap Nestlé may advertise or market the quality of the product inaccurately and misleading labels, flavours, ingredients.

Initially, Nestlé may close the gap by enhancing the marketing department and consumer gap by implementing proper consumer research, comparing and examining the customer's quality perception through statistics, focus groups, and interviews. Subsequently, the company can close the second gap by ensuring communication and perspective of the product quality specification and concept design will need to meet. For instance, conduct regular meetings to review and test a sample of the specification until mutually agreed. Additionally, Nestlé can implement a strong regulation of operating standardisation, checking the machinery and regular quality check in short time intervals to ensure that quality meets. Furthermore, Nestlé may need to strengthen the marketing department to present the quality that the company is capable of creatively or conducting market-test for advertisement accuracy. 2.2.

Quality characteristics

Quality characteristics determine the measurable aspects that will guide products and services evaluation and enhancement for achieving an adequate result (Quality Characteristics, 2021). Quality characteristics comprising 6 main principles including functionality, appearance, reliability, durability, recovery and contact (Quality planning and control, 2017).

Nestlé's functionality may be evaluated based on the ability to perform the development and production of nutritional and consumable products for consumers measured by the sufficiency of nutritional content in products, the approved taste, the approved food-grade, and hygiene control. Subsequently, the appearance of the product or service of Nestlé will represent the attractiveness and image to the consumers such as aesthetic packaging of the product, and the convenience of the consumption that appeals to the consumers. Nestlé’s reliability may be the ability to manufacture and distribute products on time at the declared volume to the retailers, wholesalers or agents. Moreover, the product has to have the quality that it had marketed or labelled. Nestlé's durability may be the duration that the quality of the product can preserve where they are stock, delivered, retail and stored

by consumers until consumption. Also, flexibility in changing the strategy or concept for business competitive stability extension. Furthermore, there is the ability to recover the failures of the R&D, machinery failures, and unsatisfying product taste, packaging, and hygiene from customers with strategic improvement. For contact, relevant knowledge for corporate representatives that may give consultation or assist the consumers, clients or partners in the most helpful ways along with accessibility and convenience for feedback, complaints, and queries.

3.

Managing Risk and Recovery In general, business operations have the probability of encountering failures despite

the regularity of improvement efforts (Slack, N., and Brandon-jones, A., 2019). Risk and recovery management crucially contributes to restricting the exposure of errors and damage that may encounter either minorly or severely in operational activities (Peters, 2020). Additionally, resilient risk management can benefit the business in terms of cost-efficiency, stimulate productivity, and develop customer retention (Evolve IP, 2021). Business requires to bounce back from those failures encountered at a quick pace and resume the operations (The Importance of a Recovery Plan, 2021). 3.1.

Types of risks in Operations Management

According to Matthews (2008), operational risks cannot precisely be identified as there is a wide range of intensity and types. On the other hand, we may address the risks by considering the factors relative to reputation, process, systems, people and events (Myers, 2017). To begin with, Nestlé may consider the supply failure risk as the company is responsible for manufacturing a high volume of products varieties of different brands, supply contributes crucially ensuring the supply chain flow. Supply failure represents the incompetent delivery of supplies at the agreed quality, quantity or time (Law Insider, n.d.), Nestlé may operate behind schedule, lose productivity and credit as a consequence. Following this, there is the risk of operational technology and facilities failure that may interrupt Nestlé's vital stage of processing product value as manufacturing equipment, IT systems, and machines operate extensively and at long intervals. An unpredictable operational facilities breakdown may cause a significant reduction in businesses' downtime revenues and production capacity (Deloitte, 2017). On top of that, there can be risks from

customer failures. Customer failure is defined as any action that involves customers, affecting the impact of customer's experiences and business' productivity (Tax, Colgate and Bowen, 2006). Nestlé's consumers may not acknowledge the appropriate way of use, store or consume. For instance, Nestlé’s enjoyable nutritious brand such as Nesquik, overconsumption may affect in terms of high sugar intake and lower the quality of the product. 3.2.

Operations’ Failures Recovery

In order to reduce the impact of failures that may happen, recovery planning of business continuity is required to distinguish the source, handle the situation, learn and implement preparation for similar future failures recovery (Todaro, 2020). This approach will be applied as a tool to recover from Nestlé's Kitkat customers' failure as a case study. Discover Nestlé has to begin with acknowledging the overall situation that has been impacted. Furthermore , addressing the people who may be affected and briefly diagnose the root of the problem. For instance, complaints about the Kitkat consumed were not solid, consumers, retailers, wholesalers and the corporate image was affected, and caused by Kitkat cannot preserve its shape and texture until the final consumption resulted from the consumers' unacknowledgement and unsupported packaging. Act Begin with informing significant stakeholders involved about the recovery proposal, contain the situation and effects to prevent further spreading that may cause further conflicts to the company and assure that the containment was successful. For instance, the company may inform the complained consumers and R&D department about the investigation, following by apologizing/compensating and put the Kitkat distribution and packaging manufacture on temporary hold then assign teams to check the progress. Learn Nestlé may reinvestigate the scenario in detail to find the element contributing to the failure and analyse a method for prevention. For instance, discuss with the R&D department to figure out the connection of the consumers' condition with the product. After found that

unclear storing advice in the label and the packaging being too temperature-sensitive, Nestlé may redesign the specification of Kitkat's packaging and insert noticeable storing directions for consumers. Plan To obtain the use of the occurred failure, prevent similar issues and enhance the operations in relevant areas, Nestlé will have to perform potential failures identifications, regulate, and implement formal procedures for an effective encounter in the future. The company may add a Q.C stage for the consumers' failures during the R&D, not only packaging but also other parts. Secondly, the manufacturing, distributing, and communication system can be redesigned to be more flexible for instant specification adjustment.

Conclusion

From the research, analysis and observation of operations management through Nestlé, supply chain, quality, and risk and recovery management played a significant role in supporting business overall efficiency. Firstly, the company's supply chain operates innovatively and efficiency-based. Nestlé may operate the supply-side as a partnership with competent suppliers through delegated sourcing. For the demand side, in-house logistics domestically and 3PL internationally is advised for distribution, customer relationship management can perform through a constant exchange, EDI, EPOS and blockchain technology can be utilised for dynamics control. For quality management, Nestlé can close four gaps to meet both operations and customer's perception by implementing intensive customer research, enhancing internal communication, manufacturing standardisation, and accurate advertisement. Corporate quality characteristics of food excellence, attractive packaging, on-time distribution, preservation concept, issues recovery and accessible contact have to be maintained. Nestlé may encounter risks of supply, operational facilities, and customers' failure. To recover from the failures that may occur in the future, Nestlé may use the recovery cycle to discover, act, learn and plan.

References 1. Acsregistrars.com. 2019. Benefits of a Quality Management System - ACS Registrars. [online] Available at: [Accessed 29 June 2021]. 2. Barone, A., 2020. Quality Management: An Inside Look. [online] Investopedia. Available at: [Accessed 28 June 2021]. 3. Datarapt. 2017. Quality planning and control. [online] Available at: [Accessed 29 June 2021]. 4. Deloitte Insights. 2017. Making maintenance smarter. [online] Available at: [Accessed 30 June 2021].

5. Evolve IP. 2021. 4 Benefits of Disaster Recovery Planning | Evolve IP. [online] Available at: [Accessed 29 June 2021]. 6. Fernando, J., 2021. Supply Chain Management (SCM): What You Need to Know. [online] Investopedia. Available at: [Accessed 24 June 2021]. 7. Ironmountain.co.uk. 2021. The Importance of a Recovery Plan. [online] Available at: [Accessed 29 June 2021]. 8. Juneja, P., 2015. Importance of Quality Management. [onlineris] Managementstudyguide.com. Available at:

[Accessed 29 June 2021]. 9. Lapaas Digital Marketing Company and Institute. 2019. Gap Model of Service Quality. [online] Available at: [Accessed 29 June 2021]. 10. Law Insider, n.d. Material Supply Failure Definition: 9 Samples | Law Insider. [online] Law Insider. Available at: [Accessed 30 June 2021]. 11. Matthews, H., 2008. Operational Risk. [online] Cimaglobal.com. Available at: [Accessed 30 June 2021].

12. Myers, G., 2017. Study tips: identifying operational risks - AAT Comment. [online] AAT Comment. Available at: [Accessed 30 June 2021]. 13. Nestlé Global. 2021. About us. [online] Available at: [Accessed 26 June 2021]. 14. Nestlé Global. 2021. Speed to market. [online] Available at: [Accessed 26 June 2021]. 15. Nestlé Global. 2021. Strategy. [online] Available at: [Accessed 26 June 2021].

16. Nestlé Global. 2021. Suppliers. [online] Available at: [Accessed 27 June 2021]. 17. Nestlé S.A., 2019. Nestlé Annual Review 2018. [online] Cham and Vevey (Switzerland): Nestlé S.A. Available at: [Accessed 26 June 2021]. 18. Peters, K., 2020. Business Recovery Risk Definition. [online] Investopedia. Available at: [Accessed 29 June 2021]. 19. Slack, N., and Brandon-jones, A. (2019), Operations Management 9th Edition PDF eBook, 9th Edition, Pearson International Content. Available from: VitalSource Bookshelf. 20. Sogeti. 2021. Quality Characteristics. [online] Available at: [Accessed 29 June 2021]. 21. Tax, S., Colgate, M. and Bowen, D., 2006. How to Prevent Your Customers From Failing. [online] MIT Sloan Management Review. Available at:

[Accessed 30 June 2021]. 22. Todaro, D., 2020. How can Operations recover from the effect of failure?. [online] Linkedin.com. Available at: [Accessed 30 June 2021]....