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Nestlé Company’s Supply Chain for Nescafé Research Paper

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Updated: Jun 13th, 2020

Abstract

The primary goal of this research paper is to examine the level of importance of supply chains in the industry. Such networks are discussed in great detail, and it is focused on a brand of coffee that is known all over the world, Nescafé. The data that has been collected is presented in a comprehensive manner to ensure that it can be used to get a better understanding of such aspects as efficiency, sustainability, and others. Possible issues that the company has to deal with at the moment were also identified, and possible ways in which some of these problems may be addressed are also listed.

The methodology for this research paper has consisted of a review of the literature on this topic and analysis of the data about supply chains of the company. It is imperative to mention that it was able to establish numerous networks that are incredibly efficient, but several issues that need to be addressed are also present and should be taken into account. The firm operates all over the globe and is capable of meeting the expectations of consumers thanks to well-developed supply chains.

The problem is that some of the approaches that are used by the company are frequently criticized, and it may not be an easy task to address all of the problems because many processes have already been established. Overall, the company should be recommended to focus increasing sustainability, social responsibility and others. The fact that the company does not provide information that is regarded as essential by many may be quite problematic and leads to issues with trust, and many consumers are lost because they are worried about such problems as child labor and safe workplace environment for employees.

Introduction

Nescafé is a well-known brand of coffee that is produced by Nestlé, a transnational company with headquarters in Switzerland. The mission of the company is to become an enterprise that is inspiring and focused on growth. It is determined to provide customers with creative and innovative products that would meet their needs and expectations. This mission statement indicates that the company wants to build long-term relationships with its suppliers, and is ready to offer support and other benefits. The fact that the company suggests what technologies and approaches should be used by their suppliers to increase the efficiency of operations is also vital, and helps to develop trust.

Significant amounts of resources are devoted to marketing and advertisement. The introduction of modern technologies such as the Internet and social media was also critical, and the company may utilize them to their full potential to promote their products. The role of online advertising has also been increasing, and enterprise frequently partners with other firms to support promotional activities. It is also necessary to maintain the image of the company as one of the most well-known producers of coffee. The company understands that it is necessary to be socially responsible, and tries to ensure that its operations do not damage the environment. The enterprise acknowledges that both farming and production should be rational to make sure that the harm that may be caused in the long-term is reduced. The fact that the firm has won numerous awards also should not be disregarded, and it indicates that the business devotes significant amounts of resources to improve the quality of their products and sustainability.

Topic Statement

The primary objective of this research paper is to examine Nestlé, S.A., and the supply chain that the company uses to support Nescafé, its well-known brand. The fact that the role of supply chains has been increasing over the years should not be disregarded, and it is evident that they have become an essential part of the industry. Also, it is imperative to understand that it includes several processes. First of all, supplies are delivered to the manufacturer, and the product is produced. The final stage that should not be disregarded is the distribution with a use of networks that have been established. The role of a well-developed set of supply chains is critical most of the time.

Also, it is imperative to understand that it is necessary to reduce any possible risks that are associated with supply chains. For instance, disagreements with one of the suppliers can be quite problematic and may affect an ability of the company to produce products promptly. Also, one of the most significant aspects that should not be overlooked is that many businesses have started to devote enormous amounts of resources to sustainability because it is viewed as an essential step by enterprises that value opinions of its consumers. The overall efficiency of current supply chains that are used by the company will be examined in this paper because it may be viewed as one of the core indicators of a successful firm. The most attention should be devoted to such aspects as social responsibility, influence on the environment and others factors that affect opinions of clients.

Methodology

The set of methods that was chosen for this research paper will consist of two approaches. First of all, a broad range of literature on this topic will be reviewed to determine current trends in the industry and possible improvements that may be considered in this particular case. It is paramount to note that many scientists have focused on problems that are associated with sustainability, and various approaches were suggested. Also, another aspect that should not be disregarded is the examination and analysis of current supply chain, and its unique aspects. The most significant factor that needs to be considered is the determination of advantages and possible weaknesses. It is imperative to focus on such issues as effectiveness and sustainability because they frequently determine the level of efficiency of operations.

Descriptive research method will be used in this case because it has proven its effectiveness. Also, it is imperative to mention that issues that are related to the validity of the information that is received are not expected because only trusted sources such as peer-reviewed journals will be used. Overall, this approach will help to make a list of suggestions that should be considered by the company based on the information that is available. It is necessary to mention that it will be incredibly efficient in this case because the information that is provided by the enterprise is limited, and it is not possible to get a full understanding of all the processes that take place in the organization because of its policies.

Results

The supplier code that is available on the website suggests that the demands of the company are incredibly high. The fact that the company understands that there is a need of improvement also should not be overlooked, and it indicates that the enterprise values opinions of its customers and does not want the brand to be affected by any issues because it may lead to severe complications most of the time.

It is imperative to mention that all the operations are performed by trained professionals, and the company is determined to make sure that each employee is competent and meets the expectations of the enterprise. Each one has a broad range of responsibilities and is focused on a particular area. Nestlé uses only the latest technologies that have proven their efficiency to ensure that the speed of operations is sufficient, and most attention is devoted to quality of the products. Also, it is necessary to note that the role of engineering teams should be taken into account, and they are responsible for maintenance of valuable equipment.

Also, the company invests enormous amounts of resources in innovations because it recognizes that some technologies and techniques may be disruptive. The development of new products is also vital because demands of consumers are always growing. An understanding of the process of coffee production is essential. Cultivation is the first stage in the process of development, and it is followed by processing. Also, such stages as blending and roasting should be mentioned. The first one is critical because the company tries to select correct proportions of seeds to ensure that the taste of the product is outstanding. Roasting is viewed as one of the essential stages because any mistakes should be avoided at this point.

The enterprise tries to ensure that temperature is monitored to guarantee that taste of the coffee is not lost, and different techniques allow creating unique flavors. The role of extraction is also critical, and the primary objective of this process is to achieve highest possible concentration. Drying also needs to be controlled, and unique techniques help to preserve qualities of the product (How coffee is made, n.d.). Agglomeration and aromatization are also vital, and it is followed by the process of filling. The core objective of this technique is to avoid deterioration, and the final one is focused on making the coffee soluble (see Figure 1).

Product development process.
Figure 1. Product development process. This figure illustrates what tools the company uses to develop its products.

It is also necessary to mention that Decaffeination is a core stage in the production of various types of coffee that contain no caffeine. Significant percentages of consumers prefer such products because of numerous reasons, and it is valued by customers because the taste is not lost.

It is imperative to understand that the company uses various supply chains, and the process is different in some regions. However, one of the approaches may be discussed (see Figure 2).

Nescafé supply and manufacturing chain.
Figure 2. Nescafé supply and manufacturing chain. This figure indicates how the company uses the resources to produce products.

It can be seen that farmers are regarded as primary sources of resources most of the time. Organizations are frequently established to make sure that the process of production is much easier to conduct. The role of intermediaries also should not be overlooked, and Nescafé has built relationships with professional ones. Exporters and importers are also incredibly important and are viewed as core links of many supply chains. The process is monitored to ensure that there are no issues with quality, and everything is going according to the schedule. It is paramount to mention that the business was able to master this process, and it is performed with a use of computer technologies to guarantee precision and consistency. Also, it is necessary to mention that the enterprise pays a lot of attention to delivery to consumers. The fact that products may be purchased online is also vital and indicates that the firm takes advantage of the technologies that are available to ensure that its customers are satisfied.

It is also paramount to note that the company has revealed its plans to optimize supply chains in 2010. It is expected that the enterprise will invest enormous funds into coffee projects. The Nescafé Plan is particularly interesting and needs to be discussed. The company has recognized that the demand for the product has been increasing, and it is expected to grow in the future. The enterprise attempts to make sure that its suppliers are capable of meeting the expectations and understands that it cannot be achieved without support, and other activities that would be helpful, and would be beneficial in the long-term.

The fact that some of the products are produced directly on the territory of the countries in which the company operates should not be disregarded, and the enterprise was able to build relationships with local suppliers to increase the efficiency of operations. It is necessary to mention that it complicates the management most of the time, and it is especially problematic to control the quality of supplied resources, but the company has developed a range of techniques that would help to address this issue.

The fact that the company creates numerous jobs every single year also needs to be discussed. Also, Nestlé attempts to increase the overall capacity of some of the factories, and it can be incredibly helpful in most cases. Currently, there are thirty facilities, and they are located all over the globe, and the most significant ones are on the territory of Brazil and Mexico, and such placement may be regarded as incredibly efficient and has numerous advantages. Competitiveness is one of the aspects that influence the decision-making process of the company, and it highly valued by the enterprise. It is necessary to mention that this factor is especially important because resources are managed very carefully, and the firm is determined to maintain the spot as one of the leaders in the industry.

Also, the company wants to ensure that its influence over supply chains is increased, and several alterations may be made if it is necessary. Such approach is going to be incredibly beneficial in the future because flexibility is essential in this industry. The standards that are used by the company have already been improved, and the company is determined to implement numerous other improvements to guarantee the quality of the product that is delivered to the consumers. The fact that the company has incredible control over direct purchases is also critical, and the company uses this advantage to ensure that sustainability standards that have been set are maintained. The cooperation with such globally-known organizations as 4C Association and the Rainforest Alliance is also vital because the information that is provided by experts is regarded as valuable, and it helps to develop the vision of the company (Lo, 2013). The fact that there is a particular entry point is vital, and it guarantees that the resources that are used for production are of highest possible quality.

Discussion

Another core aspect that should not be overlooked is that the company supports a significant number of farmers to ensure that it has access to resources of highest possible quality. Cooperation with other organizations also plays a vital role most of the time and helps to develop efficient approaches. The company is determined to be able to distribute close to two hundred and twenty million of coffee plantlets that will meet current sustainability standards. It is also paramount to note that Nestlé tries to develop distribution routes that would be much more efficient. The issue is that many farmers do not have access to local training, technical assistance, and markets, and it can be quite problematic most of the time.

However, it needs to be mentioned that it should be viewed as an outstanding opportunity for development. It is understandable that the management of supply chains may be regarded as a significant issue that needs to be addressed, and a broad range of approaches have been developed. However, it is important to mention that it is especially problematic for such companies like Nestlé because of the high level of complexity of operations. The role of cost-saving also should not be overlooked, and it is necessary to limit any unnecessary expenses if it is possible because the core goal of the company is to increase profits.

It is understandable that the range of products is incredibly broad at the moment, and it complicates the process of production because it is not an easy task to establish efficient supply chains. Aspects that are related to ethics also should be considered, and their role in the industry has been increasing because a significant percentage of the population is worried about the environment. It is imperative to mention that the improvements that are implemented by the company are meaningful most of the time, and their impact is quite significant. The role of sustainability reports also should be discussed. The company expects that suppliers will be capable of providing high-quality coffee, and this approach would help them to look for opportunities for development and improvement (Moyano, 2010). The enterprise has managed to earn an excellent place on the market, and it is regarded as one of the most influential brands in the world.

It is paramount to note that various distribution centers are involved in the process. They can be described as particular buildings that contain the necessary equipment such as refrigerators and air conditioners. Also, the fact that there are many types of such warehouses should not be overlooked. For instance, some of them are focused on retail distribution, and some on order fulfillment. Facilities that are used to transport the products to many other destinations are also incredibly important and should be mentioned. The company provides wholesalers with a range of benefits such as discounts if they make bulk purchases.

It is necessary to note that the enterprise has managed to build valuable relationships with many companies, and it leads to significant profits. The role of retailers also should not be overlooked, and they ensure that the product is delivered to consumers through various shops. Also, it needs to be mentioned that business with companies that are related to modern trade may be incredibly efficient because it helps to reduce expenses on channel distribution most of the time. It is necessary to understand that the firm uses a broad range of approaches to make sure that the products are distributed, and it is dependent on the region and location in most cases. Direct delivery from warehouses to retailers is regarded as the most efficient approach because supermarkets are extremely popular at the moment.

The role of packaging also should not be overlooked, and the enterprise ensures that coffee does not lose its qualities with a use of glass and plastic containers that have proven to be incredibly useful. It is evident that the enterprise is not happy with the current situation, and understands that numerous improvements should be made to ensure that the products that are produced meet all possible standards because opinions of society and its consumers are highly valued by the enterprise. It is paramount to note that the situation has been improving over the years. For example, the enterprise was able to increase the volume of coffee that is responsibly sourced by twelve percents in 2013. Also, the percentage of resources that meet the standards that were developed by 4C have increased from 48 to 70 percents in 2014, and it is expected that the company will be able to accomplish its current goals in 2020 (Nescafé Plan, n.d.).

Recommendation

It is necessary to mention that the industry has to deal with numerous issues at the moment. For instance, Climate change may also be considered as extremely problematic, and may affect the business in the long-term. It is imperative to understand that possible shifts could lead to significant changes, and it should be expected by companies that produce coffee because the ones that are ready to deal with such problems are expected to gain enormous competitive advantages. The fact that current supply chains are well-developed should not be overlooked, and the enterprise has managed to establish relationships with firms all over the world.

However, issues that are related to flexibility may still occur, and it could lead to numerous complications. Economic aspects also should not be disregarded, and it may be hard to deal with global crises. The company may struggle if key suppliers are lost, and it is necessary to develop a list of alternatives that should be considered in the case of emergency. Another critical issue that needs to be discussed is that the company does not provide an adequate list of suppliers on its website, and this may be regarded as a significant problem because customers should be able to have access to this information. Furthermore, the enterprise loses an enormous number of consumers because they are not able to make responsible decisions based on the data that is provided by the company.

Also, the information about the amounts of coffee that are purchased from sources that are trusted is not available, and this approach may seem suspicious most of the time. Another core aspect that is worthy of a discussion is that many regions suffer from the lack of investments, and the firm should look at it as an excellent opportunity for development that needs to be considered. The role of education is also vital because many farmers in some areas do not know how to regenerate crops, and it can be quite problematic.

The company has tried to address this issue, but the current program needs to be expanded. It is understandable that the business may not want to report such data because it has to deal with numerous competitors at the moment, but this approach damages the business in most cases. However, it is nearly impossible to know if the resources are bought from certified sources, and if the company provides its customers with a broad range of benefits. Living conditions and child labor are regarded as especially problematic.

The company acknowledges that the damage that is caused to the environment is significant, and this aspect needs to be considered during the development of new strategies. It is understandable that it may not be possible to address all the issues at the same time, but controversies should be avoided because they may be quite problematic in some cases. The company should be able to respond to such situations to avoid possible losses of profit and clients. Any significant changes to current supply chains are not suggested, but the company may have to review some of the approaches because satisfaction levels of consumers are affected. It is also suggested that the company needs to improve the way it manages its supply chains with a use of various modern tools.

For instance, a use of balanced scorecard may be considered because one of the recent studies suggest that this approach would help to increase the efficiency of operations (Tseng, Lim, & Wong, 2015). Another aspect that is worthy of a discussion is that it is necessary to keep track of latest trends in the industry to stay ahead of competitors, and most stakeholders have an understanding of the fact that operations should be sustainable for such business to ensure that it is profitable. Also, results of another research suggest that sustainable chains would help to reduce any possible financial risks and may be used to increase profits in the long-term (Mefford, 2011). Overall, it is imperative to mention that the strength of brand plays a vital role in this case, and the enterprise takes advantage of this fact.

It is understandable that the business is incredibly profitable at the moment, but sustainability levels are not sufficient, and there is a need for further improvement. Activities that are related to social responsibility and sustainability should be justified from the financial perspective to make sure that they are beneficial in the long-term, and the enterprise does not suffer from significant losses. The establishment of factories in several areas may also be suggested. Furthermore, current approach that is used by the company is incredibly efficient, but possible issues in the industry should also be considered because it may lead to complications that are hard to resolve in most cases. Such changes would help to increase the level of sustainability (see Figure 3).

Recommended changes for the company.
Figure 3. Recommended changes for the company. This figure illustrates the approaches that are suggested.

Overall, it is likely that the enterprise is going to improve supply chains that are currently available in the future, but numerous internal and external factors should be considered to reduce the possibility of issues and complications that may hurt the company.

Conclusion

In conclusion, it is necessary to mention that supply chains of Nestlé are well-developed, and the company is incredibly experienced in this industry. However, the issue that needs to be addressed is that the demand for high-quality products has been increasing, and the company is not able to meet the expectations of consumers at the moment. Another aspect that should be taken into account is that it has to deal with numerous competitors in the market, and it is imperative to provide suppliers with a range of benefits to avoid complications. It is necessary to understand that a well-developed supply chain may be considered as a significant competitive advantage most of the time, and it may have to be expanded in some cases.

It is also imperative to note that some of the approaches may be regarded as innovative, and ability to utilize modern technologies and techniques is valuable in most cases. The fact that the company does not provide any information about the use of child labor is especially worrying and affects the perception of many clients and image of the business. It is necessary to mention that it affects brand as a whole, and it can be incredibly problematic because the firm offers a broad range of products, and any damage to the reputation should be avoided.

Overall, it is evident that the strategy of the company has been incredibly successful so far, and the focus on sustainability was a vital decision that has been quite helpful, but it may have to be improved in the future because it has several weaknesses that should be addressed.

References

How coffee is made. (n.d.). Web.

Lo, C. (2013). . Web.

Mefford, R. (2011). The Economic value of a sustainable supply chain. Business and Society Review, 116(1), 109-143.

Moyano, C. (2010). Nestlé promotes sustainability reporting among suppliers. Web.

Nescafé plan. (n.d.). Web.

Tseng, M., Lim, M., & Wong, W. (2015). Sustainable supply chain management. Industrial Management & Data Systems, 115(3), 436-461.

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IvyPanda. (2020, June 13). Nestlé Company's Supply Chain for Nescafé. Retrieved from https://ivypanda.com/essays/nestl-companys-supply-chain-for-nescaf/

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IvyPanda. 2020. "Nestlé Company's Supply Chain for Nescafé." June 13, 2020. https://ivypanda.com/essays/nestl-companys-supply-chain-for-nescaf/.

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