P a g e | 1 Supply chain management Nestle Bangladesh limited is one of the largest private organizations in Bangladesh. Nestle is

operating not only in Bangladesh but also in other countries of the world. Nestle is operating in

our country with lots of well-known brands of food products and Nescafe is one of the parts of

their business. Nescafe is very much successful in our country as because it has already covered

almost whole market share of our country in case of coffee consumption. In our term paper we

have basically focused on “The supply chain management of Nescafe of Nestle Bangladesh

Ltd.”

1.1 Objective

The main objective of our term paper is to analyze the supply chain management of Nescafe. If

we describe it more specifically it will be as follows-

To find out from where and how the company collect raw materials.

To describe the supply chain management of Nescafe

To get the understanding of the distribution strategy.

To find out the effectiveness of supply chain management.

To outline the necessary modification if necessary of supply chain management.

1.2 Scope

In our term paper we mainly focused on the primary and secondary supply chain management of

Nescafe for the Bangladeshi market. For the supply chain management we basically focused

from manufacturer to consumer and we considered only those products of Nescafe which are

available in Bangladesh.

1.3 Methodology

Project Design: At first we got the project design and structure from our Course Instructor and

moved for the next steps.

Data collection: To prepare this term paper we had to collect data both from primary and

secondary sources. We followed various ways to collect data from primary and secondary

sources.

Primary data: To prepare this term paper we mainly collected data from primary source

like- interview of the officials of the Nestle Bangladesh limited. We talked with an executive of

Demand & Supply Planning department of Nestle Bangladesh Ltd. On behalf of our group we,

the two group members visited the office of Nestle Bangladesh Ltd twice to collect data. In total

we took one and half hour interview of that executive of Demand & Supply Planning department

P a g e | 2 Supply chain management of Nestle Bangladesh Ltd. We took the interview based on the questionnaire that we developed

to collect relevant information regarding our term paper topic. In the interview we mainly asked

question regarding the Nescafe products which are available in Bangladesh, primary and

secondary supply chain management of Nescafe. We wrote all the information that we got from

the interview and that helped us a lot in preparing the term paper.

We also had to visit shops to know about the price of different Nescafe products. It also helped

us to understand the position of Nescafe over its competitors.

Secondary data: we also collected data by browsing websites, particularly from the

websites of Nestle South Asia, bd jobs and Nescafe. All these websites were recommended by

the officials of Nestle Bangladesh Ltd.

Data Analysis: Finally we have analyzed all those cohesive information to prepare the term

paper

1.4 Limitation

The study was limited by a number of factors. Some constraints are given below: ----

Limited source of data, only the website and the interview of Nestle official.

It was difficult to get the real picture of the raw material processing because processing

plant is not located in Bangladesh

Lack of Co-operation from the official from confidential point of view.

P a g e | 3 Supply chain management

2.1 Supply Chain

A supply chain is a network of facilities and distribution options that performs the

functions of procurement of materials, transformation of these materials into intermediate and

finished products, and the distribution of these finished products to customers.

In other words, the interconnected set of linkages between suppliers of materials and

services that spans the transformation of raw materials into products and services and delivers

them to a firm’s customers is known as supply chains. An important part of this process is

provision of the information needed for planning and managing the supply chain. An essential

task is to co-ordinate process linkages.

2.2 Supply chain management

Supply chain management is the combination of art and science that goes into improving

the way a company finds:

The raw components it needs to make a product or service,

Manufactures that product or service and delivers it to customers.

2.3 Components of Supply Chain management

The following are five basic components for supply chain management:

1. Plan: This is the strategic portion of supply chain management. We need a strategy for

managing all the resources that go towards meeting customer demand for our product or

service. In SCM, the most emphasis is given to this component as it determines most of

the cost.

2. Source: We have to choose the suppliers who will deliver the goods and services to

create our product or service. Then we need develop a set of pricing, delivery and

payment process with suppliers and create matrix for monitoring and improving the

relations.

3. Make: This is the manufacturing step. We have to schedule the activities necessary for

production, testing, packaging and preparation for delivery. As the most metrics intensive

P a g e | 4 Supply chain management portion of the supply chain, measure quality levels, production output and worker

productivity.

4. Deliver: This is the part many insiders refer to as “Logistics” coordinate the receipt of

orders from customers. Develop a network of warehouses and pick carriers to get

products to customers and setup an invoicing system to receive payments.

5. Return: The problem part of the supply chain. Create a network for receiving defective

and excess product back from customers and supporting customers who have problems

with delivered products.

2.4 Old versus New Supply Chain

P a g e | 5 Supply chain management

2.5 SUPPLY CHAINS:

Supply chain exists in both service and manufacturing organizations, although the complexity of

the chain may vary greatly from industry to industry and firm to firm. To survive in the present

global competitive environment organization need to show a heightened awareness to customers’

needs.

In this figure we can see that each supplier has its own suppliers. That means one company’s

finished product is another company’s raw material.

Developing the supply chains:

Successful supply chain requires a high degree of functional and organizational intergration such

integration does not happen overnight. Traditionally, organizations have divided the

responsibility for managing the flow of materials and services among three departments:

P a g e | 6 Supply chain management 1. Purchasing,

2. Production,

3. Distribution.

Purchasing:

It is the management of acquisition process which includes deciding which suppliers to

use, negotiating contracts and deciding whether of buy locally. It is usually reasonable for

working with suppliers to ensure the desired flow of materials and services both short and long

terms.

Production:

It is the management of the transformation process devoted to producing the product or

service. It is responsible for the determining production quantities and scheduling the machines

and employees directly responsible for the production of goods and service.

Distribution:

It is the management of the flow of materials from the manufacturers to customers and

from warehouses to retailers, involving the storage and transportation of products. It may be

responsible for finished goods inventories and the selection of transportation service providers.

Typically, firms willing to undergo the rigors of developing integrated supply chains

progress through a series of phases as illustrated in the figure.

In Phase 1, starting points for the most firms, the external suppliers and customers are

considered to be independent of the firm. The relationship between these entities are formal and

there is little sharing of operating information and costs.

Internally purchasing, production and distribution act independently, each optimizing its

own entity without considering the older entities. Because of organizational and functional

boundaries, large amounts of inventories exist in the supply chain and the overall flow of

materials and services is ineffective.

In phase II the firm initiates internal integration by creating a materials management

department. Material management is concerned with decisions about purchasing materials and

services, inventories, production levels, staffing patterns, schedules and distribution.

P a g e | 7 Supply chain management The focus is on the integration of those aspects of supply chain directly under the firm’s

control to create an internal supply chain. Firms in this phase utilize seamless information and

materials control system from distribution to purchasing, integration marketing, finance,

accounting and operations. The firm still considers its suppliers and consumers to be independent

entities in this phase.

2.6 Developing an integrated supply chain

Internal integration must precede Phase III, supply chain integration. The internal supply chain is

extended to embrace suppliers and customers, thereby linking it to the external supply chain,

which is not under direct control of the firm. For its customers, the firm must develop a better

understanding of their products, culture, markets and organizations, capacities and strength and

weaknesses. Phase III embodies what we can supply chain management and seeks to integrate

the internal and external supply chains.

Phase I

Independent Supply

Chain entities

Phase II

Internal

Integration Internal Supply chain Material Management Department

Phase III

Supply-chain

Integration Integrated supply chain

Suppliers Purchasing Production Distribution Customers

Suppliers Purchasing Production Distribution Customer

Suppliers Internal Supply chainCustomer

P a g e | 8 Supply chain management

2.7 Managing the customer interface

The term customer refers to an entity to the firm for which it (firm) is trying to serve,

which could be a consumer or business. To manage the customer two things are important.

1. Order-placement process

2. Order-fulfillment process.

Order-placement process:

The order placement process involves the activities required to register the need

for a product or service and to confirm the acceptance of the order. These activities are

initiated by the customer but consummated by the firm producing the product or service.

Since the order placement process generates demand for the supply chain, it is the firm’s

advantage to make is simple and fast. For example, a traveller may arrive at a tourist spot

and looking for a room in a hotel. He may go the reception desk to know about necessary

information regarding the room. Another thing he could do a week back. He could search

the internet and confirm a booking for his room in the desired hotel paying the money by

credit card. The internet provides the following advantages for a firm’s order-placement

process.

i. Cost reduction

ii. Revenue flow increase

iii. Global access

iv. Pricing flexibility

Order-fulfillment process:

The order fulfillment process involves the activities required to deliver a product or

service to a customer. This process might be called upon to address any of the competitive

priorities falling under the categories of cost, quality, time or flexibility. Although order-

placement process and order-fulfillment are different, they occur simultaneously. For example, in

a book store a customer goes to purchase a book. Actually he finds it in the inventory and the

store delivers the book when he checks out the service desk. If the order of the book was placed

through internet then the customer had to accept the delay which the book store wants to

minimize in its supply chain. A better order-fulfillment process can be obtained through sharing

information, proper placement of inventories.

P a g e | 9 Supply chain management

2.8 Managing the supplier interface

Managing the supplier interface selection includes purchasing of goods, selection of

suppliers and their certification, supplier relations, outsourcing, centralized and localized buying

and value analysis. We will concentrate on supplier selection and out sourcing.

Supplier selection:

To make supplier selection decisions and to review the performance of current suppliers,

management must review the market segments it wants to serve and relate their needs to supply

chain. Three criterions most often considered by firms selecting new suppliers are price, quality

and delivery.

As firms spend a large percentage of their total income on purchased items, finding suppliers that

charge low prices is a key objective.

However the quality of a suppliers’ material is also important. The hidden costs of poor quality

can be high. For retailer poor merchandiser quality can mean a loss of customer goodwill and

future sales.

Finally shorter lead times and on times and on time delivery help the buying firm maintain

acceptable customer service with less inventory. The benefits of fast, on time deliveries also

apply to the manufacturing sector. Many manufacturers demand quick, dependable deliveries

from their suppliers to minimize the inventory levels. This constraints forces suppliers to have

nearby plants or warehouses.

A fourth criterion is becoming very important in the selection of suppliers-environmental impact.

Suppliers are being asked to be environmentally conscious when designing and manufacturing

their products and chains such as biodegradable, green, natural and recycled must be

substantiated when bidding on a contract.

Outsourcing:

A special case of the cooperative orientation is outsourcing. The decision to outsource an

activity, sometimes referred to as the make-or-buy decision, has implications for supply chain

management because it affects the number of activities under the direct control of the firm in its

internal supply chain.

P a g e | 10 Supply chain management

2.9 Simple and Extended Supply Chain Structure:

P a g e | 11 Supply chain management

2.10 Measurement of Supply Chain Performance:

Supply-chain management involves managing the flow of material that creates

inventories in the supply chain. This flow of materials and involves various financial measures of

concern of the firm. So managers closely monitor inventories to keep them at acceptable level.

Inventory Measurement:

All methods of measuring inventory begin with a physical count of units, volume or

weight. Measures of inventory are reported in three basic ways:

1. Average Aggregate Inventory Value

2. Weeks of Supply

3. Inventory Turnover

Average Aggregate Inventory Value:

The average aggregate inventory value is the total value of all items held in inventory of a

firm.

How to Measure Aggregate Inventory Value:

We express the entire dollar values in the inventory measure at cost because we can then

sum the values of individual items in raw materials, work in process and finished goods.

P a g e | 12 Supply chain management The key to success of a company is their ability to co-ordinate the key supply chain. Since food industry

posses the nature of manufacturing so the supply chain management of food industry will contain the

features of manufacturing firms. During the execution of our project we closely observed the supply chain

management functions of food industry. After observation we have discovered the nature of food

industry’s supply chain management. Now the structure and the aspects of food industry’s supply chain

management are described as follows.

3.1Buy/purchase:

Basically in food industry, the management deals with the acquirement process of raw materials

in this stage. The acquirement process basically involves the decisions of which supplier to use,

negotiating agreements and choose whether to buy locally or abroad. To ensure the desired

stream of raw materials the food industry firms generally identify the sources of suppliers first.

Then according to the process, they offer the suppliers to involve in the bidding process by

representing a quotation. The quotation basically involves the price and warranty conditions of

the product. After receiving all the quotations from their suppliers, they evaluate each of the

quotations very carefully. In the end, the firms basically accept that order which will contain

lowest possible price. But the firm also considers the quality of raw materials whether the raw

materials are meeting the customer standards or not. Sometimes the food firms also quote a price

to the suppliers. If the price is satisfactory to the suppliers then they make the deal. But if the

price is not satisfactory then the suppliers negotiate with food company owner. The purchase

department also decides the nature of buying the raw materials. Buying process can be of two

types, one way of doing the buying process is to collect the raw materials from the local sources.

Another way is to import the raw materials from abroad. Basically in Bangladesh, most of the

food companies collect the raw materials from the local sources rather than importing it from

abroad.

P a g e | 13 Supply chain management

3.2Make:

In this stage, the food firms basically determines the quantities needed for production, and also

makes scheduling and planning for these production units. After making the purchase of raw

materials, the food firms basically sets the quantities of production which are required to meet

the customer demand. After making the quantity target, they schedule and plan that target on the

basis of their production capabilities. In this stage they also make an aggregate production plan.

After that, they shape, schedule the machines and employees according to their aggregate

production planning. They also make some testing in order to ensure the quality of raw materials

in this stage. At this stage, the firm also makes their proceedings towards processing the raw

materials in to finished goods. The firm also transforms the collected raw materials in to finish in

this stage. For transforming the raw materials they also do refining, cutting, boiling, heating etc.

this how they transforms the raw materials in to finished goods. They also do blending; grinding,

mixing and finally they finish this stage by doing packaging.

3.3 Move:

This stage basically performs the role of distributing the finished goods to the final customer.

The management basically controls the flow of materials from manufacturers to customers and

from warehouse to retailers involving the storage and transportation of products. The food firms

store their finished goods in to the storeroom and also use internal or external transportation

system to distribute their finished products to final customers. Most of the food companies do

have their own transports to carry the finished goods.

3.4 Sell:

At this stage, the food companies sell their finished goods to the final customers. For selling the

finished goods, they can use different distribution channels to reach their finished products to the

final customers. They use middle man and a huge number of retailers to sell their product.

Sometimes the company makes direct interactions with the customers to sell their products.

Since the numbers of customers are huge in this industry, so the distribution intensity is also

P a g e | 14 Supply chain management intensive. To ensure large volume of sales they usually appoint a huge number of retailers and

middle mans. This is how they sell the finished products to the customers.

P a g e | 15 Supply chain management

3.1 Company Overview: Nestle Bangladesh Ltd.

In 1867 when Henri Nestle, the pharmacist, launched his product Farine Lactée Nestle, a

nutritious gruel for children then the history of Nestle began in Switzerland. Henri used his

surname, which means “little nest”, in both the company name and the logotype. The nest, which

symbolizes security, family and nourishment, still plays a central role in Nestlé’s profile.

Since it began over 140 years ago, Nestlé’s success with product innovations and business

acquisitions has turned it into the largest Food Company in the world. As the years have passed,

the Nestle family has grown to include chocolates, soups, coffee, cereals, frozen products,

yoghurts, mineral water and other food products. Beginning in the 70s, Nestle has continued to

expand its product portfolio to include pet foods, pharmaceutical products and cosmetics too.

Today, Nestle markets a great number of products, all with one thing in common: the high

quality for which Nestle has become renowned throughout the world. Currently they have nearly

500 factories and 283000 work forces around the globe. Nestlé’s headquarter is situated in

Vevey, Switzerland.

Logo:

Slogan: “Good food, Good life”

Corporate mission:

“At Nestle, we believe that research can help us make better food so that people live a better

life. As consumers continue to make choices regarding foods and beverages they consume,

Nestle helps provide selections for all individual taste and lifestyle preferences.

P a g e | 16 Supply chain management Research is a key part of our heritage at Nestle and an essential element of our future. We know

there is still much to discover about health, wellness and the role of food in our lives, and we

continue to search for answers to bring consumers Good Food for Good Life.”

Corporate Vision

“Nestle has an aim to meet the various needs of the consumer every day by marketing and selling

food of a consistently high quality.”

4.2 Nestle in Bangladesh

Nestle Bangladesh was established in 1992 and started its first commercial production in

Bangladesh in 1994. First, it was a subsidiary of Transcom Ltd which is a renowned industry in

our country. In 1998, Nestle was separated from Transcom Ltd and emerged as an individual

entity. On that time Nestle S.A. took over the remaining 40% share from local partner when

Nestle Bangladesh became a fully owned subsidiary of Nestle S.A.

Nestle Bangladesh's vision is to be recognized as the most successful food and drink Company in

Bangladesh, generating sustainable, profitable growth and continuously improving results to the

benefit of shareholders and employees.

Factory Location: Their factory is situated at Sreepur, 55 km north of Dhaka; the factory

produces instant noodles, cereals and repacks milks, soups, beverages and infant nutrition

products.

Today Nestle Bangladesh Ltd. is a strongly positioned organization. The Company is

continuously growing through its policy of constant innovation and concentrating on core

competencies and commitment to high quality, with the aim of providing the best quality food to

the people of Bangladesh.

P a g e | 17 Supply chain management

4.3 Product profile of Nestle in Bangladesh

Nestle already have about 8000 brands all over the world. However, in Bangladesh Nestle also

have a large number of products for Childs and adults. Nestle actually produce nutrition,

prepared food, dairy product, chocolate etc. They always very much concern about the standard

quality of their product. Some of the products are produced locally like- Cerelac, Nido, Maggi

Noodles etc. Some products are locally reprocessed like- Nescafe, Maggi Soup. Other products

of Nestle which are available in Bangladesh are mainly imported like- Fox’s Fruit, Coffee Mate,

Lactogen, Corn Flakes etc

Image: Some well known Nestle brands.

4.4 About Nescafe

Nescafe is one of the world's top-selling brands of instant coffee, made by Nestle. The name is a

combination of the words "Nestle" and "coffee". The beginning of NESCAFE can be traced all

the way back to 1930. Nestle’s powdered coffee product was introduced in Switzerland on April

1, 1938 after being developed for seven years by Max Morgenthaler and team.

P a g e | 18 Supply chain management

Nescafe is one of the appealing products of Nestle in Bangladesh. It is no more new in our

country. People have become familiarized with this product and it has been turning to be very

popular among youngsters now a days.

4.4.1 Products of Nescafe in Bangladesh

There are three types of products of Nescafe which are available in Bangladesh. Such as-

Nescafe Classic Jar

Nescafe Classic Sachet

Nescafe 3 in 1 Coffee Mix

Other than these three products Nescafe have some other products like- Coffee mate, Nescafe

200 gm pillow pouch etc. These products are imported and

available in some big

chain stores.

Nescafe Classic Jar:

Nestle Coffee

Nescafee

P a g e | 19 Supply chain management

50 g 100 g 200 g

These Products of Nescafe are available in glass made jars. It is available in three different sizes

of jars including 50g, 100g & 200g and it costs TK. 125.00, TK 225.00 & TK 395.00

respectively. All these jars are easy to carry and made in such a way so that it can keep the

Coffee fresh for long time. Normally, 200g and 100g jars are mainly preferred by large family

and offices. On the other hand 50g jar is preferred by small family. One can make 200 cups, 100

cups, 50 cups of Coffee from 200g jar, 100g jar and 50g jar respectively.

Nescafe Classic Sachet:

0.9 g Sachet of Nescafe Classic

It is one of the popular products of Nescafe which are available in Bangladesh. It is available in

0.9g Sachet and its price is TK. 02.00. It is popular among customers because, it is highly

available that means one can find it even in the road side tea stalls and it is really cheap. Nestle

have launched this sachet to introduce the test of Nescafe Classic among the consumers.

Nescafe 3 in 1 Coffee Mix:

14g Nescafe 3 in 1 Coffee Mix

P a g e | 20 Supply chain management Nescafe 3 in 1 Classic is available in 14g stick size packet and its price is TK 07.00. This product

of Nescafe is very popular among young generation because it is easy to carry and one can make

a cup of coffee very easily by simply pouring a cup of boiled hot water with the coffee mix. This

product can give taste of coffee without any hassle.

4.4.2 Customer profile of Nescafe

For different kinds of Nescafe products such as Nescafe Classic Jar, Sachet and Nescafe 3 in 1

Coffee Mix the customer profile is as follows:

Target Customer: Nestle have targeted customers for Nescafe depending on Stock

keeping Unit (SKU) like 0.9gm, 14gm, 50gm, 100gm & 200gm.

o 0.9 gm Sachet- Retail stores and tea stalls

o 14 gm Nescafe 3 in 1 Coffee Mix- Busy professionals and student

o Nescafe Classic 50 gm Jar- Household (for one month)

o Nescafe Classic 100 & 200 gm Jar- Offices, large families.

Target area: All over Bangladesh.

Age group: Teenage and above

Gender: Male, Female

Income: People from different economic background.

Education: Both educated and uneducated people

Religion: People of different religion

In Nestle Bangladesh Ltd. Supply Chain Dept. works as a harmonized body with all other

departments like Finance & Control, Marketing, Sales, Nutrition and Human Resources. Supply

Chain has another internal body named as - Demand and Supply planning (D&SP). The main

objective of this department is to ensure the availability of finished goods to optimize customer

service at the lowest total supply chain cost.

P a g e | 21 Supply chain management

5.1 Primary Supply Chain Management

There are certain steps which are followed to produce Nescafe. They are as follows:

For Nescafe products, Nestle Bangladesh collects raw material from Nestle Malaysia. As raw

material, Nestle Bangladesh import Coffee bulk where, each container contains 25 kg of grinded

coffee. They also import finished Nescafe products like Nescafe Classic Jar and Nescafe 200 gm

pillow pouch directly from Nestle Malaysia. The main reason of collecting from Malaysia is that

cost is relatively low and taste preference of Malaysian people is more or less similar to our

countries people in case of coffee consumption.

Supply chain department of Nestle Bangladesh conduct MGR (Monthly Gap Review) meeting

where they decide how much raw material or finished Nescafe products should they import from

Nestle Malaysia.

There are two main types of commercially grown coffee such as Arabica and Robusta.

Arabica beans account for around 70% of total coffee production, Robusta make up the rest.

Nescafe products which are available in Bangladesh are made from both Arabica and Robusta

Collection of raw materials by Nestle Malaysia

Processing of raw materials by Nestle Malaysia

Reprocessing and Packaging by Nestle Bangladesh

P a g e | 22 Supply chain management Arabica: it is considered to be the best quality coffee beans it have lighter and aromatic

flavor

Robusta: Have a bitter flavor

Nestle do not compromise with quality for this reason, only the best quality coffee beans are

used to produce the Nescafe products. For Nescafe products Coffee beans are collected by Nestle

Malaysia. They take coffee beans from different country but majority comes from Brazil,

Thailand. They take coffee beans from different suppliers sequentially so that the supplier cannot

create monopoly market of coffee beans but they do not compromise with quality.

Nestle always help their suppliers and farmers by providing Education and training facilities.

These things help them to produce the good quality coffee beans because educational program

and training give the idea about cultivation techniques, coffee beans sorting etc. Nestle do have

agronomist to conduct these educational and training programs. Use of fertilizer and chemical is

always harmful for the environment for the environment. For this reason Nestle always

encourage their farmers to use compost of coffee husks.

When the farmers or the suppliers of the coffee beans give the guarantee about the quality of the

beans then Nestle is ready to pay more to their suppliers. Nestle always try to buy the coffee

beans directly from the farmers that means they try to avoid middlemen.

5.1.1 Collection of Coffee beans

Collection of coffee beans involves the following steps:

Plantation:

Normally coffee is grown in small evergreen trees. Cultivation of coffee trees is very much labor

intensive. Young coffee trees demand constant care from farmers like regular watering,

fertilizing weed control and right amount of shaded sunlight. It takes up to 5 years for a coffee

tree to begin producing good fruit. A good coffee tree can give fruits up to 15 years but if

properly maintained it can be extended to 40 years.

Picking the beans:

P a g e | 23 Supply chain management Once the coffee trees begin to produce fruit, it takes about 6 to 8 months (for Arabica Coffee)

and 11 months (for Robusta Coffee) for the fruit to ripen in to red coffee “Cherries”. These fruits

are picked manually from the trees. Nestle always instruct their suppliers to collect only the ripe,

red cherries for maintaining the best quality.

Preparing the beans:

The coffee beans are dried and prepared for roasting. There are two ways of preparing coffee

beans

1. ‘Dry’ method

2. ‘Wet’ method

Processing of the selected beans begin immediately after the fruit is harvested.

In case of dry method, freshly picked red coffee ‘cherries’ are spread across mats and left in the

sun for drying. Drying usually takes 2 to 3 weeks, after which the ‘cherries’ are put into special

‘hullers’ to release them from their dried shell

In case of ‘wet’ method, a ‘pulping’ machine is used to break the outer pulp away from the

‘cherries’. The beans are then washed in large tanks to remove any remaining pulp. These wet

beans are either machine dried, or laid out in the sun before being placed in a ‘huller’

Coffee Beans selection:

In this stage coffee beans have no smell or taste. These beans have greenish shade therefore these

beans are known as “Green Beans”. The quality of the beans depends on many things like- the

type of plant, soil, climate and care taken in handling beans after they are picked etc. Nescafe

always collect coffee beans which are of good quality. They do not accept immature beans,

broken beans and insect damaged beans.

All these steps are done by the suppliers but according to the requirement of Nestle. After doing

all these steps suppliers pack coffee beans to send it in the factory. Nestle do not use any kind of

preservative for this reason air tight container is used. Nestle Malaysia use water transportation

to take coffee beans to the factory of Malaysia for further processing.

P a g e | 24 Supply chain management

5.1.2 Raw material processing

For processing the raw materials following steps are followed:

Blending:

This stage is very much important for the production of Nescafe. Nestle have experts to closely

monitor the blending process. It helps them to maintain quality and consistent taste over the

years.

Roasting:

Roasting is very important to have desired aroma out of green beans. Green beans are roasted

within 180˚ C - 240˚ C for 3 to 12 minutes. Different degrees of roasting are used to deliver

different types of coffee. When the desired color and aroma is achieved, the beans are quickly

removed from the heat and left to cool.

Grinding:

Grinding helps to extract flavor out of coffee beans. Like other processing part grinding is also

very important because taste of coffee depends on grinding.

Evaporation and spray drying process:

It is the last and final stage before the coffee beans are packaged in different containers.

Evaporation and spray drying process involves drying out extra moisture from the grinded coffee

beans.

All these steps are done by the Factory of Nestle Malaysia. In all the steps they use automatic

machines. When all these processing are completed then they send it to Nestle Bangladesh for

further processing and packaging. Nestle Bangladesh also use water transportation.

5.1.3 Packaging and reprocessing

P a g e | 25 Supply chain management Packaging protects food products from spoilage and keeps them safe all the way from

manufacturing stage right through to storage, distribution and consumption. Nescafe is packaged

in such a way so that, it is attractive and convenient both for transportation and use.

Nescafe jars which are available in Bangladesh are packaged by Nestle Malaysia. These jars are

not made by Nestle itself. They have the suppliers for jars who design the jars, levels according

to the requirement of Nestle. They use temperature resistant glass which helps to protect the

coffee from moisture and oxygen. As Nescafe do not use any preservative for their coffee, so air

tight foil of the jar plays a vital role for keeping the coffee fresh for long time. Nescafe jars are

imported by Nestle Bangladesh from Nestle Malaysia. For jars only one packaging activity is

conducted here in Bangladesh that is labeling. Nestle Bangladesh only change the label of the

jars in the factory of Sreepur. But the Sachet and Nescafe 3 in 1 is packaged in Bangladesh. For

sachet and Nescafe 3 in 1 raw material such as coffee, Coffee mate are imported from Malaysia

and they use local sugar [United Sugar Mills Ltd, Abdul Monem Sugar Refinery (Igloo sugar)].

In the factory of Sreepur they mix coffee, coffee mate, sugar to produce Nescafe 3 in 1. Nestle

have started this production from November, 2009

They have the local supplier of packaging material for these products. For example- Anmon

Packages Ltd. In total they have 15 local supplier of packaging material. These suppliers always

design the packaging material like- label, sachet etc according to the demand of Nestle

Bangladesh. Nestle use food grade plastic for packaging Nescafe 3 in 1 and Sachet. Nestle

always help these suppliers by giving them proper training. They also share resources with

packaging suppliers.

5.2 Secondary supply chain management

The distribution channel focuses on availability of Nescafe anytime, anywhere. A set of

intermediaries are involved in the process of making Nescafe available. After receiving raw

materials and finished Nescafe products from Nestle Malaysia in the sea port, Nestle Bangladesh

stores those raw materials and finished products in BMTF (Bangladesh Machine Tools Factory)

in Gazipur. BMTF is owned by Bangladesh Army. From BMTF, raw materials and finished

goods are transported to the factory in Sreepur. When all the packaging and reprocessing activity

is done then finished products are stored in the ware house of Factory and BMTF. There are

P a g e | 26 Supply chain management three transport agencies which help Nestle to carry raw materials and finished Nescafe products.

Three transport agencies are: 1. Sonarbangla

2. DACHSER

3. Shuvo.

Finally, finished Nescafe products are received by the distributors. But in this case, distributors

use their own transport to carry Nescafe products. For the distribution Nestle has divided

Bangladesh in five regions. They are-

1. Dhaka North

2. Dhaka South

3. Chittagong

4. Khulna

5. Bogra

Nestle have 78 distributors for distributing Nescafe along with other products of Nestle. These

distributors also distribute other products of Nestle. Through this strong distribution network

they are making the products available.

Distribution Channel of Nescafe:

P a g e | 27 Supply chain management

5.3 Effectiveness of Supply Chain Management of Nescafe:

After analyzing all the processes of Supply Chain Management of Nescafe we have identified

that their supply chain management is very much effective. The reasons behind our perception

are as follows:

Collection of raw material:

Nescafe is collecting raw materials from the suppliers who can guarantee about quality. Nescafe

is always conscious about the quality that’s why they are encouraging the suppliers not to use

more fertilizer and insecticides. These things are helping Nescafe to deliver quality products.

Processing of raw material:

In case of processing the coffee beans Nescafe is very much careful about quality. They are not

using any kind of preservatives which ensures better quality.

Packaging:

Their packaging is not only attractive but also helps to keep the coffee fresh for long time.

Nescafe is also helping their packaging suppliers to improve the packaging quality.

Distribution:

With their strong distribution network they are making Nescafe available all over the country.

They can reach any corner of the country with their distribution network but others like Mac

coffee may not be able to do so.

P a g e | 28 Supply chain management

6.1 Recommendations

After reviewing all the things we have come up with some recommendations for Nescafe which are as follows-

Coffee for rural areas of Bangladesh: For the product Nescafe Nestle Bangladesh

limited can target the huge rural population of Bangladesh. Because they have a very

strong distribution network and they also have different product categories of Nescafe.

They can introduce the Sachet of 0.9gm to the rural population and it will cost the urban

population only TK. 02. We think this initiative can help them a lot.

Establishment of Coffee processing plant and Packaging materials industry: Nestle

basically import Coffee bulk and other finished products of Nescafe from Nestle

Malaysia. They also rely on the outside suppliers for packaging materials. But we think

that, they can establish their coffee processing plant and packaging materials industry in

Bangladesh because of cheap labor price in Bangladesh and Nestle Bangladesh ltd also

get good support from the parent company.

6.2 Conclusion

Nescafe, which is a popular brand of Nestle, has become very popular among the mass

population of our country over the times. They are successful because of strong distribution

network, through which they are making Nescafe available in most part of our country. Good

product quality, taste and availability of different sizes of Nescafe products are other important

factors which helped them to cover almost the whole market share in case of coffee

consumption.

P a g e | 29 Supply chain management

Bibliography

http://www.nestle.com/

http://www.nescafe.com/worldwide/en/Pages/Home.aspx

http://nestle.bdjobs-server.com/

http://www.maccoffee.com/