G.L.

BAJAJ INSTITUTE OF MANAGEMENT & TECHNOLOGY

ASSIGNMENT ON SALES &

DISTRIBUTION

SUBMITTED TO

SUBMITTED BY

Prof. Keshav Bhatia

Swapnil Vaity
Section - A
R.No GM12213

Page 1 of 26

NESTLE

History
1866
Our history begins back in 1866, when the first European condensed milk factory
was opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk Company.

Page 2 of 26

FOUNDER: Henri Nestl (1814 - 1890)

1867
In Vevey, Switzerland, our founder Henri Nestl, a German pharmacist, launched
his Farine lacte, a combination of cows milk, wheat flour and sugar, saving the life
of a neighbours child. Nutrition has been the cornerstone of our company ever
since.
Henri Nestl, himself an immigrant from Germany, was instrumental in turning his
Company towards international expansion from the very start. We owe more than
our name, our logo and our first infant-food product to our founder. Henri Nestl
embodied many of the key attitudes and values that form part and parcel of our
corporate culture: pragmatism, flexibility, the willingness to learn, an open mind
and respect for other people and cultures. Peter Brabeck-Letmathe, Nestl
Chairman

LOGO: The first Nestl logo 1868

1905
The Anglo-Swiss Condensed Milk Company, founded by Americans Charles and
George Page, merged with Nestl after a couple of decades as fierce competitors to
form the Nestl and Anglo-Swiss Milk Company.

Page 3 of 26

1914
The onset of World War I brought severe disruption to us along with the rest of the
world. Acquiring raw materials and distributing products became increasingly
difficult. Shortages of fresh milk throughout Europe forced factories to sell almost
all their supplies to meet the needs of local towns.
1918
Nevertheless, the war created new demand for dairy products, largely in the form
of government contracts. To keep up, Nestl purchased several existing factories in
the United States and, by war's end, we had 40 factories worldwide.
1925
The 1920s were a time of deep economic hardship, and Nestl suffered severe
difficulties along with much of the world. Operations were partially streamlined, but
the company was able to continue, and with the acquisition of Peter, Cailler, Kohler
Swiss Chocolate Company, chocolate became an integral part of our business. This
sparked further variety in the products we offered including malted milk and a
powdered drink called Milo.
1938
Nescaf coffee was launched.

Page 4 of 26

1940
Nescaf became an instant success and was followed in the early 1940s by Nestea.
1939
During World War II, Members of the Board and General Management were
transferred to the U.S. where they coordinated Nestl activities in the Western
Hemisphere, the British Empire and overseas.
1943
Ironically, having slowed the initial launch of Nescaf, the war then helped to
popularise it; with the United States entering the war, Nescaf coffee became a
staple beverage of American servicemen serving in Europe and Asia.

1945

Page 5 of 26

The close of World War II marked the beginning of a particularly dynamic phase of
our history. Dozens of new products were added as our growth accelerated and we
acquired outside companies.
1947
The Maggi products, from seasoning to soups, become part of the Nestl family
following the merger with Alimentana S.A.
1948
Nesquik, the instant chocolate drink, was developed in the United States. Its
original name of Quik was a direct allusion to the speed and simplicity of its
preparation.
1974
For the first time we diversified outside the food industry when we became a major
shareholder in L'Oral, one of the world's leading makers of cosmetics.

1977
Rising oil prices and slow growth in industrialised countries meant that we needed
to respond to a radically changed marketplace. In 1977, we made our second
venture outside the food industry by acquiring Alcon Laboratories Inc., a U.S.
manufacturer of pharmaceutical and ophthalmic products.A boycott against Nestl
was initiated by the U.S.-based organisation Infant Formula Action Coalition over
concerns about our promotion of infant formula in developing countries. This led to
a consultation process with the World Health Organization, UNICEF and nongovernmental organisations. The U.S. boycott ended in 1984 with the signing of a
Statement of Understanding between Nestl and the International Nestl Boycott
Committee.
Page 6 of 26

1981
In 1981 the World Health Assembly adopted the International Code for the
Marketing of Breast-milk Substitutes (WHO Code) and recommended that its
Member States implement it. Nestl was the first company to develop policies
based on the WHO Code and apply them across our entire operations in developing
countries.
1984
An improved bottom line allowed us to make new acquisitions, including a public
offer of USD 3 billion for the American food giant, Carnation. At the time, this was
one of the largest acquisitions in the history of the food industry.

1986
The Nespresso story began in 1986 with a simple idea: enable anyone to create the
perfect cup of espresso coffee, just like a skilled barista.

1988
The Italian brand Buitoni, in Sansepolcro, became part of our portfolio in 1988.
Nestled in the hills of Tuscany, Casa Buitoni is the symbol of the brands ongoing
commitment to quality, creativity, and tradition. The UK-based organisation, Baby
Milk Action, launched a boycott against Nestl. While there are still boycott
activities in the UK today, the following organisations have officially ended their
support for it: the General Synod of the Church of England in July 1994, the Royal
College of Midwives in July 1997, the Methodist Ethical Investment Committee in
November 2005 and the United Reformed Churches in November 2011.
1993
The first half of the 1990s were favourable for Nestl with the opening up of Central
and Eastern Europe, as well as China good news for a company with such farflung and diverse interests.
Page 7 of 26

2001
We merged with the Ralston Purina Company, which had been founded in 1983, in
2001 to form a new pet food company, Nestl Purina PetCare Company.

2002
Two major acquisitions were made in North America in 2002: in July, the merger of
our U.S. ice cream business with Dreyers; and in August, a USD 2.6 billion
acquisition of Chef America Inc., a leading frozen food product business.

2003
Nestl acquired Mvenpick Ice Cream, enhancing our position as a market leader in
the super premium category.
2005
Our Chairman Peter Brabeck-Letmathe recognised that the eating habits of the
worlds population were changing and we began our own transformation. We began
to move away from being a processor of agricultural commodities towards
becoming a producer of food with added benefits and ultimately a provider of a
wide range of products and services in the areas of nutrition, health and wellness.

2006
Page 8 of 26

We acquired Jenny Craig and Uncle Toby's. With the help of Harvards Michael
Porter and Mark Kramer, we articulated for the first time the concept of Creating
Shared Value. Creating Shared Value expresses our conviction that we can only be
successful over the long term if we create value, not just for our shareholders, but
also for society.

2007
We acquired Novartis Medical Nutrition, Gerber and Henniez.
2009
We held the first Creating Shared Value Forum in New York, with leading experts in
the areas of nutrition, water and rural development coming together to discuss
serious global challenges facing us in these three areas and the role of business in
helping to solve them. The Creating Shared Value Forum has been held on an
annual basis since then, with London in 2010 and Washington, D.C. in 2011. We
celebrated the opening of the Chocolate Centre of Excellence in Broc, Switzerland.
January 2010
We sold our remaining Alcon shares to Novartis and also acquired Kraft Foods
frozen pizza business.
March 2010
We faced a challenge from Greenpeace who wanted to be reassured about our
commitment to sustainable Palm Oil. It was the first time we saw social media
being used in a substantial way to challenge us and ask questions. We didnt get
the handling of our response to the campaign itself quite right in social media, but
on the issue at its heart palm oil - we took steps to both strengthen our position
and to explain it more clearly.
May 2010
This month Nestl launched Special.T.

Page 9 of 26

We launched the Nestl Cocoa Plan which will supply 38 million high quality,
disease-resistant plantlets to farmers helping them rejuvenate their farms and
increase productivity. The Nescaf Plan was also launched investing CHF 500
million to address responsible farming, sourcing and consumption across our coffee
supply chain. We also awarded the first Nestl Prize in Creating Shared Value to IDE
Cambodia for its Farm Business Advisors programme and we announced our
partnership with the Forest Trust to work to combat deforestation.

September 2010
We announced the creation of Nestl Health Science and the Nestl Institute of
Health Sciences, innovative ventures aimed at the prevention and eventually
treatment of chronic medical conditions with science-based personalised nutrition
solutions.
January 2011
We voluntarily submitted our policies and procedures to the FTSE4Good Policy
Committee for independent review.
March 2011
We became the first infant formula manufacturer to be included in the FTSE4Good
Index. This is the London Stock Exchangess responsible investment index and the
only index that evaluates companies on their responsible marketing of breast-milk
substitutes, alongside human rights and supply chain criteria.

April 2011
China was at the forefront, as we announced a partnership in April with Chinese
food company Yinlu, a manufacturer of ready-to-drink peanut milk and canned rice
porridge.
July 2011
We announced a partnership with Hsu Fu Chi, a confectionery and snacks
manufacturer.
Page 10 of 26

November 2011
We became the first food company to partner with the Fair Labor Association. This
partnership will help us investigate if children are working in cocoa farms that
supply our factories and, where we find problems, to solve them.

Planning, Sales Forecasting & Budgeting

Strategic Planning
Nestls objectives are to be recognised as the world leader in Nutrition, Health and
Wellness, trusted by all its stakeholders, and to be the reference for financial
performance in its industry. We believe that leadership is not just about size; it is
also about behaviour. Trust, too, is about behaviour; and we recognise that trust is
earned only over a long period of time by consistently delivering on our promises.
These objectives and behaviours are encapsulated in the simple phrase, Good
Food, Good Life, a phrase that sums up our corporate ambition.

Competitive advantages

True competitive advantage comes from a

Unmatched product and brand portfolio combination of hard-to-copy advantages
throughout the value chain, built up over
Unmatched R&D capability
decades.

Unmatched geographic presence

People, culture, values and attitude

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

Page 11 of 26

Operational pillars

Innovation & Renovation

Wherever, whenever, however

Consumer engagement

Operational efficiency

We are seeking to achieve leadership and earn that trust by satisfying the
expectations of consumers, whose daily choices drive our performance, of
shareholders, of the communities in which we operate and of society as a whole.
We believe that it is only possible to create long- term sustainable value for our
shareholders if our behaviour, strategies and operations are also creating value for
the communities where we operate, for our business partners and, of course, for
our consumers. We call this Creating Shared Value.
We are investing for the future to ensure the financial and environmental
sustainability of our actions and operations: in capacity, in technologies, in
capabilities, in people, in brands, in R&D. Our aim is to meet todays needs without
compromising the ability of future generations to meet their needs, and to do so in
a way which will ensure profitable growth year after year and a high level of returns
for our shareholders and society at large over the long-term.

Sales forecasting
Underlying sales growth at Nestle missed forecasts in the first half and lagged the
performance of key rivals, prompting the worlds biggest food group to cut its sales
goal as price erosion continued in Europe. Organic growth was somewhat muted,
reflecting lower pricing by our markets, as we leveraged softer input costs to meet
the expectations of todays more value conscious consumers, the group said in a
statement today, lowering its full-year target to around 5 per cent sales growth,
from 5-6 per cent previously.
Food groups have been grappling with lower growth in emerging markets, where
Nestles growth rates have slowed to a single-digit pace for several quarters now,
and gloomy consumers in recession-hit Europe. Nestle said substantially increased
investment in its brands had delivered stronger volume growth momentum it
expected to continue in the second half. Underlying sales growth slowed to 4.1 per
cent in the first half, and implying a further slowdown from 4.3 per cent in the first
quarter, mainly due to a weaker performance in Europe.

Page 12 of 26

Disappointing organic growth rate due to weak development in waters, beverages

and prepared dishes and cooking aids. Slowdown in the emerging markets to 8.2
per cent (from 8.4 per cent in the first quarter), Vontobel analyst Jean-Philippe
Bertschy said. By contrast, Nestle positively surprised at the profitability level with
a 20 basis point margin improvement, we were expecting a flat development, he
said.

Budgeting

Nestle is trying to keep earnings growing in a flagging global economy by focusing

on its most profitable food businesses such as infant formula and premium coffee
Espressos. Its exposure to emerging markets has helped it outperform rivals like
DANONE (DANO.PA) and Procter & Gamble (PG.N) that are more reliant on sluggish
developed economies. But that has also made the maker of KitKat chocolate bars
and Maggi soup sensitive to any slackening of demand in those faster-growing
regions.
Its expansion in emerging markets, which make up 43 percent of sales, slowed last
year to 11 percent from 13.3 percent in 2011.Analysts said they were disappointed
by weaker-than-expected growth in the last quarter in the Americas, which
contributes a third of sales, and Asia, Oceania and Africa (AOA), resulting in annual
sales growth of 5.2 percent and 8.4 percent respectively. Chief Financial Officer
Wan Ling Martello said there had been fewer of the one-off events such as typhoons
in the Philippines and social unrest in Egypt that hit sales in the third quarter, but
analysts were underwhelmed.
"Sentiment is likely to take a knock after the disappointing Q4 performance in Zone
AOA," said analyst Ronny Landolt at Barclays Capital. "This region has not bounced
back after a series of one-offs affected Q3." Nestle shares, which hit a record high
on Wednesday of 64.70 francs after positive news from cosmetics firm L'Oreal
(OREP.PA), in which it holds a large stake, fell 2.5 percent to 62.90 francs,
underperforming a flat European sector

Training, Motivating, Compensating

Training
Setting high expectations and giving employees the tools they need to meet them
is one of the most important facets of motivation. No matter how its conducted
online, through special training shifts, or through shadowing more experienced coworkerscomprehensive new-employee orientation and training are crucial.
One independent operator, in an effort to stem a rising tide of turnover, instituted a
Page 13 of 26

four-day paid training program that covers every aspect of operations. The session
begins with a discussion of the restaurants mission statement, and moves on
through a variety of different job skillsso employees also know what their
colleagues are doingmenu tastings, information on recipes and ingredients, and
even allows employees to look at their employers books if theyre interested.
Within months of instituting the practice, service improved, tips increased, and
ultimately annual turnover was reduced to just 20%.
Training is not a one-shot deal. An ongoing program not only makes for more
valuable employees, it also helps with retention.
Employees who are always learning new skills are continuously challenged to
grow, and consequently work better as both individuals and team members.
Many managers conduct regular weekly or even preshift meetings. In
addition to keeping staff members up-to-date on specials, menu changes,
and 86ed items, regular meetings are a great vehicle for new skill building,
such as wine tastings, discussions of trends, or an opportunity to share news
about the business.

Motivating
Enthusiastic employees are not only more satisfied with their jobs; they also deliver
better customer service and higher sales.
When it comes to motivating employees, there is simply no downside. Empowering
and encouraging staff members to do the best job theyre capable of helps create
job satisfaction, lowering turnover in an industry that has a reputation for burning
through its employees. And a happy, stable workforce not only delivers better
customer service, it is also more effective at building sales and attracting repeat
business.

Compensation
Perks and other rewards are an important part of any compensation package, so in
times of economic stress when monetary rewards may not be in the cards.
According to the National Restaurant Association, positive reinforcement is actually
one of the most effective ways to motivate employees. This includes such simple
tools as Employee of the Month recognition, calling attention in a staff meeting to
an employees job performance or recent achievement, and using and crediting
staff members ideas when instituting changes or new policies.
Apart from these soft tactics, there are other ways to reward performance without
actually increasing pay.
Consider offering additional time off or a more flexible schedule option to top
performers and other loyal employees.
Offer a chance to take additional training or attend an industry event.

Page 14 of 26

 Throw a party and give everyone the day off to attendmany operators bring
in a crew from another location to cover the shifts.
Many employers offer discounts on everything from their own food and
beverage items to spa memberships or admission to a nearby movie theatre.

Marketing Mix
Marketing Mix is defined as a set of controllable tactical marketing tool that firm
blends to produce the response it wants in the target market. The marketing mix
consists of everything the time can do to influence the demand for its products. The
many possibilities can be collected can be collected into four groups of variables
known as the four Ps that are as follows:

Product

Price

Place

Promotion

Product
Product stands for goods and services that the company offers to target market.
Nestle Kit Kat in four sizes including K.K chunky, while Polo in three sizes. The
shape and the color of the Kit Kat and Polo are quite attractive for the customers.
The Labeling, packaging of the Kit Kat and Polo includes the Nestle brand and logo.
The packaging includes and expiry date and time along with a manufacture date.
Second part of labeling includes the quantity of product in grams along with
ingredients and contents of chocolates and candies.

Price
The amount of money charged for a product or services, or sum of the values that
consumers exchange for the benefits of having or using the product or services. The
price of Nestle Kit Kat and Polo varies increases with the increase in its size.

Page 15 of 26

 Placing
Placing stands for companys activities that make the product available to the target
consumer. Nestle distribution is using the direct distribution channel to supply
confectionary products weekly to the retailers

Promotion
Producing a quality product, pricing it attractively and making its available for the
target consumer is not the only problem companies need to solve. Modern era is
the era of communication with the target customer satisfaction demands for
personal and non-personal communication with target customer to build a
relationship with them. In an area-storming activity giving out products free gift
hampers attracts new customers; Kites depending on the seasons are given. The
basic purpose is to explore the area that is being unexposed and to bring
awareness in the people.

Distribution Channel
We deliver our products via a network of road, rail and sea to an increasingly
urbanized population. Every day, more than 125,000 tonnes are transported to
customers from our factories and distribution centers, delivering the products in
highest quality and on time from the factory to the consumer.

What we stand for

Page 16 of 26

Were committed to improving the environmental performance of our transport and

distribution network. The Nestl Policy on Environmental Sustainability clearly
states our commitments to:
Reduce the amount of energy consumed per kilo of product.
Utilize sustainably-managed renewable energy sources, where
economically viable.
Control and aim to eliminate emissions, including greenhouse gases
(GHG), and
Recycle or recover energy from by-products.
Applying these commitments to our distribution network (transport and
warehousing), our goal is to ensure the most efficient use of our transport, thereby
reducing the distances travelled, minimizing our greenhouse gas (GHG) emissions
and reducing noise and congestion impacts.

Delivering our commitment

Tracking the environmental impact of our transport and distribution activities is key
to managing transport carbon impacts. As well as refining our tracking and
reporting, were expanding it to cover transport from distribution centre- tocustomer, as well as factory-to-distribution centre. In 2011, our reporting covered
40% of the overall volume transported, which we expanded to cover 50% in 2012.
We are also exploring more robust environmental reporting IT systems.

What we are doing

To enhance our efficiency and environmental performance in transport and
distribution, we:
Optimise distribution networks and route planning across all our
operations globally
Explore opportunities to promote transport shifts, for example by using
sea and rail instead of road
Expand driver training, both from a safety and environmental
efficiency perspective
Use telematics and the latest technology on our vehicles where
practical, and recommend our suppliers to do the same
Explore alternative engines such as electric cars
Support the development and use of safe and efficient natural
refrigerant solutions for commercial applications, and progressively
phase out HFCs appliances, and
Implement-energy saving initiatives in our distribution warehouses.
Page 17 of 26

Optimising distribution network and route planning

Smarter network and route planning and transport mode shifts have had a marked
effect on reducing air emissions, noise and road congestion. We are pleased to
report that in Poland, relocating a distribution centre resulted in a 25% decrease of
distribution costs, a 20% reduction in GHG emissions and a reduction of 60 km in
each domestic delivery journey. Furthermore, a new way of transporting finished
products, involving short-sea transport, has more than halved GHG emissions from
Poland to Portugal and halved the emissions from Hungary to Spain.
Promoting long distance transportation in Europe by rail and short-sea
We aim to shift long-distance transportation from road to either rail or short-sea
shipping, both of which result in significantly lower air emissions. In our European
operations, this shift has delivered a reduction of approximately 5,300 tonnes of
CO2 equivalent in the last year. Despite these achievements, much of our short-tomedium distance transportation continues to be by road. To mitigate its effects, we
are: optimising truck efficiency (with new engines, aerodynamic devices and ecodriving training), increasing the load factor to optimise transport capacity, avoiding
empty runs, and exploring alternative vehicles (smaller delivery vehicles, electric
engines, hybrid vehicles, alternative fuels such as compressed natural gas, liquefied
petroleum gas, methane or hydrogen).
Using telematic systems to monitor driving behaviours
Telematic systems similar to the black boxes in aeroplanes remotely collect data
on how vehicles are being driven and their engine's performance. In 2011, Nestl
Switzerland assessed five telematic systems in 66 trucks. The tests showed that
telematics encourages safer driving behaviours and improves environmental
performance, which in turn reduces our operational costs.
In parallel, Nestl Waters North America (NWNA) and our Direct Store Delivery in
the US carried out similar pilots. Based on NWNAs pilot results, reduction in idle
time could save as much as USD 1,000,000 in fuel costs and approximately 2,595
tonnes of CO2 emissions. The engine diagnostics information could lead to USD
150,000 in yearly maintenance savings. NWNA plans to install telematics across its
whole fleet of 1,600 route trucks in 2013. Similar savings are expected by our
Direct Store Delivery in 2013. Following these successful tests in North America and
Switzerland, telematics systems are now also being rolled out in other regions.
Electric trucks
In 2012, as part of our aim to reduce GHG emissions, we began testing electric
trucks for customer deliveries. Nestl Switzerland piloted two new electric trucks for
ice cream and frozen food delivery, and optimised delivery routes.
Optimising warehousing
Page 18 of 26

Were reducing energy consumption in our warehouses by using natural and lowenergy lighting, and better insulation, and are currently exploring options to use
solar panels. Photovoltaic panels, which generate electricity from solar energy, were
installed on the roofs of the Singen and Weiding warehouses in Germany. Both sites
have generated nearly 1.5 million kilowatt hours within one year, equalling the
annual amount of electrical energy consumed by 350 representative German
households. We estimate that approximately 357,500 tonnes of GHG emissions
(2010: 450,000 tonnes) were generated from our warehousing in 2011.

How weve performed

CO2 equivalent from transportation
(estimated million tonnes)
2012: 2.8

GHG emissions from warehousing

(estimated tonnes)
2012: 357,500

2011: 2.8

2011: 357,500

2010: 2

2010: 450,000

We have extended the scope of our

We are reducing energy consumption in
reporting in 2011 to include the transport
warehouses by using natural and lowfrom distributions centres to customer.
energy lighting and improved insulation.
2010 and 2011 figures are therefore not
Data reported is for 2011 only because
comparable. Data reported is for 2011
2012 data was not available at the time
only because 2012 data was not available
of publication.
at the time of publication.
CO2 equivalent savings from road to rail
and short sea shipping shift in Europe
Distribution facilities certified ISO 14001
(tonnes)
2011: 5,300

2012: 130

2010: 2,400

2011: 93

We continue making progress in shifting

long distance transportation from road to
either rail or short-sea shipping. Data
reported is for 2011 only because 2012
data was not available at the time of
publication.

In 2012,130 distribution facilities were

certified ISO 14001:2004 and we
continue to extend the environmental
certification programme.

What we plan to do
We will continue to optimise distribution networks and route planning. As reported
above, this involves exploring opportunities to improve transportation, for instance,
by using sea and rail instead of road, expanding driver training both from a safety
Page 19 of 26

and environmental efficiency perspective, and using telematics and latest

technology on our vehicles where practical, recommending that our suppliers do the
same.

Supply Chain Management

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:

1. 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.
2. 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.
Page 20 of 26

3. 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.
4. Government agencies - in some countries the government controls the
coffee trade, perhaps by buying the coffee from processors at a fixed
price and selling it in auctions for export.
5. 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.
6. 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.
7. 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.
8. Retailers - sellers of coffee products which range from large
supermarkets, to hotel and catering organizations, to small
independent retailers.
A supply chain is only as strong as its links. Different relationships exist between
organizations involved in the separate stages of the chain - whether it is in the
structuring of product distribution, arrangements for payment and arrangements for
handling, or in storing the product. At the heart of these relationships is the way in
which people treat each other. Long-term business relationships need to be based
on honesty and fairness - parties to a trading agreement need to feel that they are
getting a fair deal.

Logistics
In light of one of the contracts approaching review and the end of lease agreements
at two of the sites, Nestl decided to take the opportunity to review its warehousing
and distribution strategy in the UK, turning to Total Logistics to undertake a
thorough and independent assessment of its current and future supply chain needs.
Ian Hill, Director of Logistics at Nestl UK, explains the background to the project:
For many reasons we had reached a point where we were faced with various
options on our three-site strategy. The time was right to bring in a fresh pair of
eyes to review our distribution network. With our complex mix of dry and wet
goods, including water, coffee, confectionery and mix of perishable goods, we
wanted to explore what options were there for us and the Total Logistics team
was the obvious choice given our longstanding relationship with the consultancy.

The Challenge

Page 21 of 26

The main task facing the Nestl team and Total Logistics consultants was to
develop a meaningful model by which to really understand the pros and cons of
every option that was available. This already complex scenario was made even
more challenging due to the diverse and expansive nature of Nestls product range
and large number of end-markets.
While the York, Bardon and Scunthorpe sites handled foodstuffs including water,
confectionery, cereals and coffee, the latter also coped with the huge seasonal
demands for confectionery products during periods such as Easter and Christmas.
To add to the complex picture, Scunthorpe also used different technologies to
service the international export market, dispatching product to Europe and further
afield via deep-sea routes.
Whereas Scunthorpe was characterised by high density, drive-in racking, with
temperature and humidity controls, Bardon and York used automated high bay
storage units that did not require as sophisticated environmental management.
Peter Roan, Director at Total Logistics, said: This project was complex from a
supply chain modelling perspective, as it not only included an analysis of in-bound
and outbound flows, transport costs, road links and inventory issues, but also risk
and service factors created by any new network proposed.
Time was also a big factor here, given the fact that we needed to make
recommendations and support the implementation to ensure the client was ready
and able to satisfy the crucial peak demand period of Christmas. In short we had a
window of just six weeks to completely review and make recommendations on
Nestls UK distribution network strategy.
The Approach
Total Logistics set to work developing an assessment tool to look at the impact of
putting different business streams into the same or new facilities. For example, the
benefit of keeping seasonal and export confectionery streams in the same facility as
they have largely counter cyclical storage needs, was a major consideration.
Another key consideration was quality assurance, as a large number of
confectionery items had to be stored at a temperature of 80c and 65 per cent
relative humidity.
A further element to the assessment model included an analysis of transport and
warehousing costs, including inbound and outbound flows. Particular attention was
paid to the potential synergies that could be obtained by combining different
Page 22 of 26

streams to increase drop size, thus reducing the number of road miles and journeys
required.
In all, 16 different scenarios were developed based on the existing facilities and
other potential locations in the UK.
The Results
In the final analysis, it was decided that a twin site solution provided the greatest
cost saving to Nestl, while enabling it to improve flexibility and delivery
performance to supermarkets and other key retailers in the UK and further afield.
Although its delivery performance was already at 99.4 per cent, Nestl was
confident that concentration to two locations would allow the already high customer
service levels to be improved.
Due to its central location and existing potential for development, it was decided
that the Bardon site was the obvious choice to centralise supply chain operations.
However, this decision has meant the closure of the Scunthorpe site, with a major
investment programme in place at Bardon, which will increase its pallet capacity
from 50,000 to 110,000.
While there have inevitably been some job losses due to the closure of the
Scunthorpe site, it is expected that up to 40 new jobs will be created initially at the
Bardon site, with the possibility of more to follow in associated co-packing
operations on site.
Considerable investment has now gone into the Bardon site to enable it to handle
the array of Nestl food and drink products including Kit-Kats, Carnation, Buxton
and Nescaf. In addition to this focus, the area of risk management has been key to
the teams thinking as the site is updated and fully commissioned.
Peter Roan said: While our recommendation to consolidate much of Nestls food
and drink distribution under one roof has reduced the overall cost of distribution,
the move has enabled the company to combine its business stream and product
supply chains to create far greater flexibility.
Nestl now has a much more robust logistics operation that will enable it to meet
the growing need to deliver more frequent, lower volume drops to retailers. As well
as supporting the Nestl team through this crucial period, we were also able to
work with them on the risk management issues raised by a twin site strategy,
holding a risk assessment workshop.
Page 23 of 26

Accordingly, Nestl has worked hard to ensure the design of the new Bardon site
takes issues such as fire protection and security very seriously. The communications
infrastructure at the site has also been a key consideration during the
implementation phase that saw the successful commissioning of the extension in
May 2009 and completion to fit for purpose in July of that year.
Ian Hill is delighted with the final outcome of the project. He said: Given the tight
timescale and the perishable nature of our products, there was potentially a lot at
stake by migrating many of our famous brands to the Bardon site. The Total
Logistics team added significantly to the process, offering strategic insights and
practical support along the way.

Sales Promotion
It is the Multinational Company. It has so many product lines. It is originating in
1893. Here we are discussing the packed milk of Nestle, which includes.
1. Nido
2. Every day
3. Milk pack

Packed Milk
Every day
It is one of the most famous products by Nestle. It is spray dried, instant dairy
whitener, specially formulated to bring out the best taste of the tea. It is made from
the best quality fresh milk according to the Nestle International standards that
guarantee quality and purity. Basically everyday has no computer in tea whitener
market.

Milkpak
Milkpak is the product by Nestle which is available in liquid form. Nestl designed
this product because of greater demand of milk. Milkpak is more pure & hygienic
milk which stays fresh for quite longer time period. It is ideal for family use.

Nido

Page 24 of 26

It is full cream powdered milk enriched with vitamin A & D. Nido is made from
pure fresh milk and retains calcium. Vitamins, proteins, and other nutrients. Nido is
specially designated for the growing children.
Sales promotion, offers and extra incentive for the ultimate consumer, distributors,
or the sales force. Here we are only concerned with consumer-oriented sales
promotion. Sales promotional techniques used by nestle Pvt. Ltd. new for packed
mild are;

Sampling

Price off

Sweap stakes

Event sponsorship

Sampling
In this technique nestle offers small quantities of product for no charge to induce
trial. Now with in two years this activity has been reduced.
Nido
Small packs of Nido, mostly sufficient for making one glass, in given to prospects
residence, by door-to-door sampling. And also through mail for everyday and
Milkpak sampling technique is not used.

Price off Technique

In this technique, price of the product is reduced 10-25% off the regular price. This
technique used for the three products.
Mostly on Milkpak, 2-rupees off mostly offered.
Similarly, price reduction in everyday takes the form of BACHAT PACK its
polythene, one Kg. Pack is offered as BACHAT PACK
On the following page, the print ads, showing the sales promotional offers.

Sweapstacks
Page 25 of 26

Sweapstacks is a sales promotion, technique in which public is invited to enter in

lucky draw, entrants need only to submit their names for the prize drawing. Usually
some special events e.g. Eid, Millennium, are used for these lucky draws. Milkpak
used the Gold Earring Scheme this year on this Eid. In this scheme, 300 prizes of
gold earrings, was offered, entrance in draw, was simply to fill the upper part of
packets, with name and home address.

Event Sponsorship
This year, nestle MilkPak, used this technique for MilkPak. The Basant Mela was
sponsored by Nestle MilkPak in which a musical programme was sponsored.

Page 26 of 26