SEU Supply Chain Management and Logistics Services Through Business Nestle Case Study

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Supply Chain Management and Logistics Services through Business Case Studies Nestlé case study. Introduction Today, a pitcher of instant coffee can be found in 93 per cent of British homes, and more and more consumers are trying different types of coffee, such as cappuccino, espresso, mocha and latte. Increasing consumer demand for product choice, quality and value has increased the production of coffee for the discerning audience. 'Value' is the way the consumer perceives an organization's product in comparison to competitive offerings. So how does coffee go from growing on a tree perhaps 1,000 meters tall on a mountainside in Africa, Asia, Central or South America, to a cup of Nescafe in your home, and in millions of homes around the world? This case study shows why Nestlé needs a first-class supply chain, with highquality links from where the coffee is grown in the field, to the way it reaches the consumer. Supply chain The supply chain is the sequence of activities and processes required to bring a product from its raw state to the final goods sold to the consumer. For coffee, the chain is often complex, varies in different countries but usually includes: Farmers - they usually work on a very small plot of land that does not exceed one or two hectares. Many of them do some preliminary processing (drying or peeling) themselves Intermediaries - Intermediaries may be involved in many aspects of the supply chain. They may purchase coffee at any point between the cherries and green beans, or they may do some initial processing, or they may combine together sufficient quantities of coffee from several individual farmers to transport or sell to a processor, other intermediary, or a dealer. There may be up to five intermediate links in the chain Processors - individual farmers who have the equipment to process coffee, a separate processor, or a farmer's cooperative that pools resources to purchase equipment Government Bodies - In some countries the government controls the coffee trade, possibly by buying coffee from processors at a fixed price and selling it at auctions for export Exporters - they buy from cooperatives or auctions and then sell to dealers. Their expert knowledge of the local area and producers in general enables them to guarantee the quality of the shipment Merchants/brokers - supply the roasters with coffee beans in the right quantities at the right time and at a price acceptable to the buyer and seller Roasters - people like Nestlé who have a lot of experience turning green coffee beans into products that people will enjoy drinking. The company also adds value to the product through marketing, branding and packaging activities Retailers - sellers of coffee products ranging from large supermarkets, to hotel and restaurant establishments, to small independent retailers. The supply chain is only as strong as its links. Various relationships exist between the organizations involved in the separate stages of the chain—whether in structuring product distribution, payment and handling arrangements, or in product storage. At the heart of these relationships is the way people treat each other. Long-term trade relationships must be based on honesty and fairness - the parties to the trade agreement must feel they are getting a fair deal. Coffee cultivation and processing Coffee grows best in a warm, humid climate with a relatively constant temperature of around 27°C all year round. Therefore, the coffee plantations of the world are located in the so-called coffee belt that runs on the equator between the tropical regions of Cancer and Capricorn. Processing Coffee from the tree goes through a series of processes to end with the salable product - green coffee beans. 1. Picking - The coffee is picked by hand. Coffee cherries turn bright red when ripe, but unfortunately not all cherries ripen at the same time. Only picking red cherries at harvest time results in better quality coffee, but it is more labor intensive as each tree must be visited several times during the harvest season. So many growers strip the tree of ripe and immature cherries in one pick. 2. Drying And Peeling - Each cherry contains two cherries that must be separated from the surrounding layers - the skin, the pulp and the "pulps" - by peeling. The grains must also be dried, usually in the sun but sometimes with mechanical dryers. 3.Sorting, grading and packing – The grains are sorted by hand, sieves and machines to remove stones and other foreign matter, removing damaged or broken grains, and sorting grains into different types or “grades”. Coffee is packed in bags, usually 60 kg. 4. Breeding - Roasters, such as Nestlé, will need to purchase large quantities of coffee of a certain grade, so exporters in the country of origin will bundle several small batches of coffee together to make up the necessary amount of the desired grade. 5. Blending - In roasters, experts with refined tastes and long experience decide which blend of coffees of various origins to use in making coffee products to meet consumer tastes. 6. Roasting - Upon leaving the farm, the color of the coffee becomes a pale green - hence the name "green coffee" for the rolling product. Only when it is roasted does it turn brown with its distinct flavor and aroma. It is the roasted beans that are used to make the coffee product. Price - equilibrium supply and demand Coffee prices are set day after day in global commodity markets in London and New York and with so many intermediaries between producer and consumer, how can we ensure that coffee growers get a fair reward for their labor? Is the answer - as some believe - for coffee manufacturers to cut out the middlemen, buy their coffee directly from the farmers and guarantee a minimum price? The price of coffee is determined by the relationship between the amount of coffee available for sale (supply) and the amount people are willing to buy (demand). If there is more coffee available than people are willing to buy at current prices, the price will fall. Thus, the market ultimately determines the price that the farmer gets. There are circumstances in which farmers can get more than the market price, for example: • If the quality of their coffee is high • If they perform some or all of the stages of processing that someone else might be paid to do • If they can sell directly to the manufacturer instead of intermediaries. Farmers can also reduce their costs if they are able to share processing and transportation facilities with other farmers. Coffee growers may sell their coffee in many ways • They can sell to the next link in the traditional supply chain - the collector or the processor • May sell to government agencies in countries where the coffee trade is under government control, although this is becoming less common • Or they may sell directly to a manufacturer such as Nestlé. However, farmers usually cannot choose how they sell their coffee. Selling directly to manufacturers is attractive as farmers are likely to get a higher price than the market price. However, it would be impossible for all the coffee in the world to be purchased directly by manufacturers from individual farmers a few bags at a time. Although buying outright is attractive, it is only one of many ways to trade, all of them have their advantages and none of them are necessarily fairer than the others. In the end, it is the market price that determines how much farmers get. Nestlé Trading Methods Nestlé is a leading company in purchasing coffee directly from farmers. An increasing proportion of the company's coffee is purchased directly from the producer and is now one of the largest direct buyers in the world. In countries where this is not possible, Nestlé works in such a way that it is as close to farmers as possible. Direct purchase In countries that grow coffee where Nestlé also manufactures for export or local consumption, it has a policy of buying coffee directly from the farmers. The company offers a fair price to the farmers and thus guarantees a regular supply of guaranteed quality to its own factories. Higher quality commands a higher price - a premium that Nestlé is happy to pay, because higher quality raw materials are essential to its business. In countries where direct purchase is made, there is a widely advertised Nestlé price, and a minimum base price. By providing a benchmark to farmers, other traders are forced to keep their bid prices competitive. Nestlé started the direct purchase policy in 1986 and the amounts involved have been steadily increasing. In 1998, about 15 percent of its green coffee purchases were purchased directly. For example, in the Philippines, farmers bring their products to Nestlé purchasing centers located in coffee growing regions. Quality is analyzed while they wait and farmers are paid instantly. In 1998, direct purchases accounted for more than 90 percent of green coffee destined for instant coffee makers in the country. Buying from merchants In countries like the UK, it is impossible for companies like Nestlé to buy from the hundreds of thousands of farmers who ultimately supply the company, and so the coffee is bought from merchants who use the international market. However, Nestlé visits and gets to know as many people in the supply chain as possible. The company oversees the relationship between the merchant and the exporter and often invites shippers to the UK for training along with its Quality Assurance staff. Nestlé agrees on procedures for everything from pest control to packaging to ensure that everyone works to the highest quality standards. Conclusion Making great coffee cups is not just Nestlé's business, it's the business of everyone involved in the supply chain. It is in everyone's interest - farmers and Nestlé - that farmers get a fair income from their coffee. This ensures that they will continue to grow coffee, investing in increasing their production and quality, which in turn ensures that they provide the high-quality coffee that companies like Nestlé demand. Nestlé | Coffee - Supply Chain Questions 1- Summarize the four main ideas of the Nestlé case study. 2- Evaluating the concepts and principles of supply chain management and logistics in the case study, and evaluating the effectiveness of supply chain management and logistics in supporting competitiveness? 3- Explain the role and contribution of logistics services in achieving the goals and objectives of the supply chain. 4- Evaluation of site models and analysis factors that influence the optimal selection of country area, location and procurement methods. 5- Analysis of current issues in international transport and logistics and their impact on Nestlé.
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Nestlé Case Study Paper
Question-1 Answer
The four main ideas discussed in the Nestlé case study are related to its supply chain process, cultivation
and processing, pricing related to supply and demand, and its trading method.
As per the case study, the supply chain process of Nestlé coffee involves eight different steps. Nestlé
coffee supply chain begins from the Farmers who typically farming on a tiny land that doesn't surpass a
couple of hectares. A considerable lot of them do some primer handling (dry or peel coffee beans)
themselves. The second step of this supply chain process are the intermediaries that buy coffee anytime
between the cherries and green beans, or they might do some underlying preparing, or they might
consolidate together adequate amounts of coffee from a few individual ranchers to ship or offer to a
processor, another middle person, or a seller. The third step of this supply chain process includes
processors who are individuals who have the hardware to handle coffee processing. The fourth step of
this supply chain process involves government authority that regulates the coffee exchange, conceivably
by purchasing coffee from processors at a proper cost and selling it at barters for send out. The fifth step
of this supply chain process is exporters who purchase from cooperatives or sales and afterward offer to
sellers. The sixth step of this supply chain process includes merchants/brokers who supply the roasters
with coffee beans in the ideal amounts at the ideal time and a value satisfactory to the purchaser and
merchant. The seventh step of this supply chain process includes roasters who people are having a ton
of involvement becoming green coffee beans into items that individuals will appreciate drinking through
showcasing, marking, and bundling exercises. The final step of this supply chain process includes
retailers that are supermarkets, restaurants, and so on selling the final Nestlé coffee product to the
consumers.
As per the case study, coffee cultivates in the warm and humid places of the tropical regions of the
world. For coffee processing, there are six steps involved in the making of final products. These include
the first step of picking coffee fruit from each tree by hand at gathering time brings about better quality
coffee that is the more work concentrated work. The second step is to peel the coffee fruit and sundrying it. The third step is to sort, grade, and packed in bags of mostly 60 kg weight. Then in step four,
the breeding process is started that involves Nestlé company buying enormous amounts of coffee of a
specific grade, so exporters in the nation of beginning will package a few little clumps of coffee together
to make up the essential measure of the ideal grade. In step five, the Nestlé Company does blending for
refining tastes of the coffee and develops making coffee items to meet buyer tastes. In the last step,
Nestlé Company does coffee roasting to change the coffee bean into brown to make a roasted coffee
product or may keep it as a pale green bean to develop it as their green coffee product.
Regarding pricing related to supply and demand, the case study provided that the coffee costs are set
for quite a while in worldwide ware advertises as per the presence of a number of the intermediaries
between producing agents and end buyers. The cost of coffee is dictated by the connection between the
measure of coffee ready to move (supply) and the sum individuals will purchase (demand). When there
is more coffee free than individuals will purchase at current costs, the cost will fall. In this manner, the
market, at last, decides the value that the breeder gets. However, many ways enable the producing
agents that are farmers to receive more pricing benefits and reducing their costs during this overall
process. Such as, growing high-quality coffee plants and selling directly their coffee beans to the

manufacturer can help them to earn more pricing benefits. Farmers can likewise lessen their expenses in
case they can impart preparing and transportation offices to different breeders.
Lastly, the trading method of the Nestlé Company involves two routes that are direct purchase and
buying from merchants. For direct purchase trading route, in nations that develop coffee where Nestlé
additionally produces for fare or nearby utilization, it has an arrangement of purchasing coffee
straightforwardly from the ranchers. The organization offers a reasonable cost to the ranchers and in
this way ensures an ordinary supply of ensured quality to its own production lines. For buying from
merchants trading route, Nestlé Company adapt the policy to buy coffee beans from the merchants in
the places where its direct manufacturing plant or rare production houses are established like the
United Kingdom and other international markets.
Question-2 Answer
Supply chain processes are engaged with moving the items from the provider to shoppers. It is an
organization of associations, individuals, assets, exercises, and data engaged with upstream and
downstream. Supply chain the board (SCM) is the most common way of dealing with the progression of
labor and products. The exercises required from procuring crude materials to the last conveyance of the
item to shoppers go under SCM. Supply chain the executives limit the waste, cost, and time devoured in
the creation cycle.
As per the concepts and principles discussed in the case study related to the supply chain management
and logistics process, there are eight different phases involved in the supply chain and logistics of the
Nestlé coffee products. The first phase involves Farmers who typically farming on a tiny land that
doesn't surpass a couple of hectares. A considerable lot of them do some primer handling (dry or peel
coffee beans) themselves. The second phase of this supply chain process are the intermediaries that buy
coffee anytime between the cherries and green beans, or they might do some underlying preparing, or
they might consolidate together adequate amounts of coffee from a few individual ranchers to ship or
offer to a processor, another middle person, or a seller. The third phase of this supply chain process
includes processors who are individuals who have the hardware to handle coffee processing. The fourth
phase of ...

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