Nestle Sustainability Reporting Suppliers -Myassignmenthelp.Com

Question: Discuss About The Nestle Sustainability Reporting Suppliers? Answer: Introducation A network of facilities and options related to the distribution which helps in performing various functions like materials procurement, then turning these materials into intermediate and finished products, and later making these products available to the end customers by distribution process is known as supply chain. It is also known as logistics network and it includes manufacturing centres, suppliers, distribution centres, warehouses, retail outlets, etc. and also include raw materials, inventory related to work in process and finished products. It is a complex chain of management and its complexity vary from one industry to another and one firm to another (Ganeshan Harrison, 1995). In order to understand the concept of supply chain management in more detail and clearly, we will analyze the case study of Nestles Palm oil crisis and the companys supply chain management. Nestle is more than 140-year-old company which is one of the leading company for healthcare, nutrition and wellness. The company mission is Good Food, Good Life. It has acquired many companies under its ownership and is operational in more than 72 countries with a workforce of 260,000 globally (Nestle, 2017). It has almost 450 equipped factories and operations globally. With a market capitalization of nearly Swiss Francs 220 Billion, it is the market leader in the food industry. It produces dairy products, baby food, breakfast cereals, snacks, beverages, etc., among which KitKat, Nescafe, Maggi are its highest selling products. The company is in a PR battle with the Greenpeace, who claims that Nestle is, to source palm oil, one of its main ingredients used in food, from Sinar Mars an Indonesian company, who were its main supplier. Sinar Mars temperature of peatland clearance, illegal deforestation and illegal child and human labor. While other companies suspended their contract with the Sinar Mars, but Nestle was still using its supplier's services. The company said that supply chain full review will take a year or so. Nestle is trying to improvise its palm oil supply chain transparency and reporting (CSCMP, 2017). Role of Supply chain in operations: Supply chain management forms an integral part of the day to day operations of a company as well as it is very essential to the companys success and providing satisfaction to the customers. It is like the backbone of the company wherein it manages issues which are very critical from an organization point of view and are directly or indirectly related to the corporate strategy, like its rapid growth, expanding globally and issues related to the environment. Few of its 140-year-old roles are making goods available to the users, helps in efficient manufacturing strategy etc. At Nestle, the supply chain management has a critical role where it makes sure that only quality products are reached to its customers and consumers. The company collaborates with its team and forecast the demand which is then provided to the suppliers, so that they can provide materials. Inventory levels are balanced with the operations so that exact supply of products can be done. The supply chain of Nestle, after the production, is responsible for its safe storage and transportation to customers and consumers demands on time. Nestle is an organization which is agile and aligned kind of organization, which promise to deliver results with an effective supply chain management and overall growth of the company (Lazarus, 2017). Goals of Supply Chain Management in the Nestle: To promote customer service and improvement in bottom line are the main important goals of Nestles supply chain management. The delivery of right product assortment and quantity on time is made, it is done by boosting the customer services. After sale services and customer support, availability of products at the right location is also one of the goals of supply chain management. Apart from this, the supply chain management has a huge impact on the Nestles bottom line. Usage of fixed assets which are large is reduced and the cash flow increase due to the supply chain management, which in turn lead to the companys overall profitability (Team, 2017). The company has made it a strong point that it will focus only on responsible sourcing and timely analysis of the supply chain need to be done post analysis. There are around 650,000 farmers who are associated with Nestle and the company has made its goal to act towards the betterment of the farmer families as well as towards the agricultural communities and nature itself. Now it is one of the main goals of the Nestle to track the origin of its food products and to make ensure that whether they are being procured ethically, thus by gaining its suppliers and consumers loyalty and trust in the long run. Post the palm oil crisis, Nestle became fully committed in its supply chain, towards responsibly sourcing palm oil, and through its Responsible Sourcing Guideline, it makes sure that all the companys suppliers comply with it (Tabacek, 2010). It is the goal of the company to take into account every stakeholder interests and concern and the suppliers of the palm oil should work with the company to attain this goal. In Malaysia, where the crisis happened, the company and its suppliers started working towards the restoration of the environment by associating with c Impact of Supply Chain to Nestles Operations: Nestle consumes palm oil for production of its food items and due to consumers and investors pressure, to address the impacts of its supply chain, Nestle have taken steps by pledging that it will buy palm oil only from the sustainable sources. Due to the cutting of palm oil, it is resulting in deforestation, ecological imbalances etc. Thus the suppliers have decided that instead of burning the forests, they will grow palm tree on unused lands or lands that are approved by the concerned country government. When Nestle establishes needs and requirements for its suppliers, the suppliers choice is either to follow the rules of the company or there will be a loss of the big chunk of access to the market. Nestle has the power of purchasing and influence over its suppliers and their practices, which can change the entire supply chain. The palm oil traders have a very essential role in affecting any change in the operations of Nestle, as there are only handful of the suppliers have hold and control on the most of the palm oil globally. The palm oil traders can provide deforestation-free palm oil if Nestle will pressurize them. This can assist in supply chain unfolding and can completely change the entire supply chain of palm oil (Reusner, 2014). Wilmer is also one of the suppliers of Nestle, who supplies palm oil to the company. After the controversy, when these accusations were made public, Wilmer asked its sub supplier company to stop sourcing palm oil to them. It contacted all the operating suppliers within 50 km of the ecosystem, to start working towards No Deforestation, No Peat and No Exploitation Policy. Nestle Supply Chain Strategy: Farming practices, operating practices and agricultural production system that are sustainable are encouraged and promoted by the Nestle. It forms an integral part of the development of suppliers and strategy for supply. In the year 2016 alone, Nestle bought 430,000 tonnes of palm oil. Malaysia and Indonesia are the major suppliers of Palm oil to the Nestle. After the palm oil crisis, the company changed its strategy completely. Now it works with the suppliers to trace plantation level in all its products The company has prioritized assessments for using different mills and growers. With this, the company will be in a position to understand its supplier's practices and it can also suggest ways and methods in strengthening its systems, policies etc. against its guidelines (Moyani, 2010). From the perspective of supply chain model, an analysis of flows related to the in-bound and outbound, inventory issues, cost of transport, road links, factors related to the risk and services were included in the complex project of it. Implementation of Supply chain strategy in Nestle operation: In the year 2012, Nestle was accused by the NGO Greenpeace of procuring palm oil for its products produced by exploiting the natural flora and fauna and deforestation. Nestle immediately changed its policy and put an end to the relationship with the producer of palm oil who was involved in the deforestation activities (Manjusha, 2014). An assessment model has been created which analyze all the situation concerned with the supply chain of the company and implement necessary steps which are required at that point in time. For e.g. Analysis, related to the cost-benefit are done in the export and confectionery line, its quality assurance is done like what will be the right temperature and humidity for storing these items. Timely audit of the suppliers concerned with the distribution of palm oil is done to ensure that they are not involved in any kind of unethical practices. A no deforestation policy is implemented after the allegations made by the Greenpeace organization on its methods of obtaining palm oil. The company has made its goal to put an end to the waste in its upstream supply chain and by the year 2020 to become zero to waste landfill. Nestle has invested heavily in improvising its management of supply chain which will help in saving money without wasting any food (Kuzma, 2012). The overall analysis of Nestle shows that its business model is very effective and will help other companies as well. Nestle has a net worth of nearly 250 Billion dollars and it is due to the intense market research, diversity in products, sourcing responsibly and going waste-free methods (Wilson, 2017). Nestle Major Suppliers Nestle has been accused by the NGO Greenpeace in the recent past of procuring the supply of palm oil from its suppliers, namely, Sinar Mars an Indonesian supplier and Wilmar who are based out of Singapore, who is also accused of promoting illegal deforestation in the country like Malaysia and Indonesia. It also blames the company of purchasing the palm oil from other suppliers like, Cargill and IOI whose main supplier is Sinar Mars. After the scandal, Nestle published a statement saying that it will put an end to its relationship with the Sinar Mars and will stop using their services. Other than that, Nestle said it will work with the The Forest Trust a non-profit organization, to maintain and develop a supply chain which will be more sustainable (Dupont, 2010). It also said that all purchases of Palm oil from Sinar Mars will be put an end and it will replace the old supplier with another new supplier for further shipments after a proper audit and investigation into its own supply chain of Palm oil. Nestle and Wilmar are working very closely in the investigation of the accusations made and have stopped sourcing oil from its sub-suppliers like PT. Agra Bumi Niaga and etc. after the incident. All the suppliers who operated within 50km of the Leuser Ecosystem were contacted by the Wilmar and to implement No Deforestation, No Peat, and No Exploitation Policy (Burrows, 2016). Role of Suppliers: Supply chain management is based on the fact that if the end consumer is not happy and satisfied then nobody in the entire supply chain will be able to achieve its goal and can be happy. It is the role of the supplier of palm oil: To see that every sub-supplier and the main supplier itself are following the rules and regulations of the country. It is the role of supplier to keep a watch on methods of procuring palm oil and not promoting deforestation. Respect the Free, Prior and Informed Consent (FPIC) of indigenous and local communities (Vadis, 2010). It is one of the main roles of the suppliers to protect forests with high carbon value. To work for the protection of the Peatlands It is the also one of the roles of the suppliers to follow and comply the criteria and principles set by the Roundtable on Sustainable Palm Oil (RSPO), the certification organization of the concerned specific industry that helps in promoting the usage and growth of palm oil products which are sustainable in nature. Other than the above said roles, it is also one of the duty of the suppliers of the nestle to keep on conducting timely workshops for its employees and sub-suppliers of the concerned area to create awareness about the Leuser Ecosystem importance and why it is necessary to protect them and what is the need to do so. The suppliers of Nestle like Wilmar and other suppliers are working on initiatives related to the sustainability to address Deforestation kind of problems and issues. It will ultimately help Nestle in knowing the areas where deforestation is at extreme and which supplier is extracting palm oil from there so that strong actions can be taken towards them (Kokemuller, 2017). Performance of Nestle Palm Oil Suppliers: Every palm oil supplier of Nestle is required to meet the requirements laid down by the RSG. Nestle supports those suppliers who are unable to meet the requirements of RSG in the current timeline but are ready and willing to match it and can do commendable progress by working in that direction, by helping them to make such transformation relevant for both of them. In the year 2012, Nestle started working with the TFT which helped the company in developing an approach which was totally new and focussed clearly on the transparency. Nestle and its suppliers use this knowledge and transparency in the supply of palm oil. Since the year 2010, when the system of palm oil traceability was established, the suppliers, who are involved in sourcing 85% of the companys palm oil, engage directly with the Nestle. 40% of Nestles palm oil volume can be traced back to the mills from where it was produced an outsourced and the country to which it belongs. The volume of palm oil is sourced responsibly and it accounts for almost 14% of the volume, i.e. the plantation of its origin can be traced, it can be accessed under RSG, continuous improvement can be done. Nestles 5% of the volume is compliant, fully, which means that it can be traced to a particular level of the plantation and can be seen that it is in accordance with the requirements of the guidelines set up by the RSG. 100% of Nestles palm oil were certified by the RSPO in the year 2013 which included 15%segregation by the RSPO and an estimated 85% in the form of certificates of GreenPalm (Butler, 2010). To address the issue of transparency and to improve the performances of the palm oil suppliers, Nestle has developed Traceability Declaration Document, which every supplier of palm oil and other food and beverage items have to complete quarterly, to make a declaration about the kind and types of supply chain which is associated and linked with the companys products namely food and beverage. Though nothing is foolproof and there are certain hiccups in the system, but the company in collaboration with the suppliers is working towards removing it and working in the direction of attaining overall growth of the company and its stakeholders. This document helps in transparency, which is unprecedented and helps in promoting discussion with the palm oil and other suppliers to identify and eliminate those gaps. Conclusion: In the year 2010, an NGO Greenpeace accused Food and Beverage Conglomerate Nestle of sourcing palm oil, which is used in most of its products, from suppliers who were engaged in the deforestation of the areas located in countries like Malaysia and Indonesia, etc. The scandal caused a severe damage to the reputation of Nestle by destroying its public image and hurting its overall growth. After the scandal, Nestle did a three hundred and sixty-degree evaluation and analysis of its system and found the source of the problem. Later it dismissed a few of its suppliers who were not abiding the rules and regulations set up by the company. At the current time, Nestle has established Traceability Declaration Document for promoting total transparency in its supply chain management and is working with various organizations towards the betterment of the environment. The supply chain can enable companies like Nestle and others to mitigate risk and cost reduction as well as to minimize the competition by making decisions for the long term as well as from the strategic point of view to the tactical planning of production. In order to succeed and attain the objective of both Nestle and the suppliers, it is very essential that both work in coordination with each other and being transparent in the system. References Burrows, D. (2016, April). Major brands dump palm oil supplier IOI following RSPO suspension. 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