Nestle Case Study

Introduction

Nestle ranks number 18 on the Gartner Supply Chain Top 25 list for a second year in a rom. "Nestle is also highly advanced and integrated in its raw material sourcing strategies, and has invested significantly in supply development and innovation" (Hoffman et al). Nestle is the only company within its industry that appears on the list. The goal of this paper is to discuss how Nestle Company can continue to beat their competition using Vendor Managed Inventory (VMI), becoming an extension of their customers supply chain, and decreasing warehouses across all markets and replacing them with manufacturing centers.

Analysis

Company profile

Nestle Global started in 1905 when a German pharmacist, Henri Nestle, merged with the Anglo-Swiss Mil Company. During the First World War, with new demands placed on dairy products, Nestle purchased factories in the United States which expanded their total number of factories to 40 worldwide. In the 1920's, Nestle acquired Kholer Swiss Chocolate Company, and expanded their product lines to include chocolate bars and other confectionary delights. In the 1930's and 1940's, Nestle introduced the world to Nescafe and Nestea which become instantly successful. In 1970's, Nestle Company branched out of the food industry and became a major shareholder in L'Oreal, a cosmetic company, and Alcon, a manufacturer of pharmaceutical and ophthalmic products. Nestle returned to the food industry in the 1980's by acquiring Carnation and Buironi. As Nestle reached the new millennium, a few more acquisitions were in order. Nestle merges with Ralston Purina Company in 2001 and in 2002, Nestle acquired Dryers and Chef America. In 2003, Nestle acquired Movenpick Ice Cream, Jenny Craig and Uncle Toby's in 2006, and Novartis Medical Nutrition, Gerber, and Henniez in 2007. Today, "Nestle is the world's number one foods company in terms of sales" (Hoovers.com)

Competitor Analysis

Nestle operate within the packaged foods and beverage industry. "Packaged foods include shelf-stable, refrigerated, and frozen products, and can be packaged in bags, bowls, bottles, boxes, brick packs, cans, cartons, crates, jugs, packets, pouches, spray or pump dispensers, tins, tubes, and tubs, among other packaging formats" (MarketResearch.com). Their closest competitors are Kraft Foods Inc. and Mar's Inc. In 2010 it was reported that Nestle held 33% of the global market Share (Wikinvest) while Kraft held 15% (Trefis Team) and Mars, Inc held 11% (Elfes). Over the last three years, Nielson data shows that Nestle has consistently lost market share in the United States (Lucas).

Recommendations

Vendor Managed Inventory (VMI) is a practice in which the manufacturer is responsible for maintaining the customers inventory levels. In this case, Nestle would have access to its client's inventory data and provides purchase orders as needed. This approach offers numerous advantages to Nestle. First, Nestle would gain a better understanding of how their clients operations work and lets Nestle improve their scheduling of inventory deliveries to the client. Additionally, knowing how to schedule inventory delivery to their clients, Nestle would be able to manage its own operations schedules better allowing for greater productivity. "VMI