THE NESTLE STORY

Nestle S.A. the present Switzerland based international food group, originally consisted

of two companies and two products: Henri Nestle and his baby food in Vevey, and the

Anglo-Swiss Condensed Milk company and its condensed Milk Company and its

condensed milk in Cham, both in Switzerland. In 1866 the Page Brothers form the

United States set up a new industry in Cham, making condensed milk from a raw

material that was available in abundance in the region. In 1867 Henri Nestle a chemist in

Vevey, created a milk and cereal based food for babies. The companies competed

vigorously until 1905, when they merged and became the starting point of the present

food group.

MEANING OF NESTLE:

Henri Nestlé endowed his company with the symbol derived from his name. His family

coat of arms, the nest with a mother bird protecting her young, became the Company's

logo and a symbol of the Company's care and attitude to life-long nutrition. The Nestlé

nest represents the nourishment, security and sense of family that are so essential to

life.

BRIEF HISTORY OF NESTLE:

1866 -1905

In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable

to breastfeed.

1905-1918

In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early

1900s, the company was operating factories in the United States, Britain, Germany and

Spain..

1918 -1938

. The 1920s saw Nestlé's first expansion into new products, with chocolate the

Company's second most important activity.

1938 -1944

Nestlé felt the effects of World War II immediately. Profits dropped from $20 million in

1938 to $6 million in 1939. Factories were established in developing countries,

particularly Latin America. Ironically, the war helped with the introduction of the

Company's newest product, Nescafe, which was a staple drink of the US military..

1944 -1975

In 1947 came the merger with Magi seasonings and soups. Crosse & Blackwell followed

in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came

with a shareholding in L'Oréal in 1974.

1975 -1981

Nestlé made its second venture outside the food industry by acquiring Alcon

Laboratories Inc..

1981 -1996

Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's improved bottom

line allowed the Company to launch a new round of acquisitions, the most important

being American food giant Carnation.

1996+

The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled

and world markets developed into more or less integrated trading areas. Since 1996

there have been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998)

and Ralston Purina (2002). There were two major acquisitions in North America, both in

2002: in July, Nestlé merged its U.S. ice cream business into Dreyer's, and in August, a

USD 2.6bn acquisition was announced of Chef America, Inc

NESTLE TODAY

Nestle is now the world’s largest food company. It is present on five continents, has an

annual turnover 70 billion Swiss francs ,runs 522 factories in 81 countries, 200operating

companies, 1basic research center and 20 technological development group and more

than 231,000 employees the world over. The Nestle factories are operating in the region

of

Africa

America

Asia

Europe

Oceania

Being a company dedicated to food from the beginning, Nestle remains sensitive to

culinary and eating habits, and responds to specific nutritional problems, whilst also

setting and matching new trends such as growing out-of-home consumption and caring

about the well being of its consumers.

MISSION STATEMENT

Nestlé, believe that research can help them make better food so that people live a

better life. Good Food is the primary source of Good Health throughout life. Nestle

strive to bring consumers foods that are safe, of high quality and provide optimal

nutrition to meet physiological needs. In addition to Nutrition, Health and Wellness,

Nestlé products bring consumers the vital ingredients of taste and pleasure. As

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

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

Research is a key part of heritage at Nestlé and an essential element of future. There is

still much to discover about health, wellness and the role of food in lives, and continue

to search for answers to bring consumers Good Food for Good Life

VISION STATEMENT

The Nestlé global vision is to be the leading health, wellness, and Nutrition Company in

the world.

NESTLE BRANDS

At Nestlé, products are developed keeping consumers, their preferences and health in

mind. Millions of consumers the world over trust Nestlé products for good reason: when

they choose a Nestlé product they have the satisfaction of choosing quality, taste,

variety, convenience and the good nutrition.

With over 140 years of experience and expertise, Nestle take great pride in bringing us a

portfolio of health and wellness because happy, healthy consumers are important to

Nestle.

The ten principles of business operations

Nutrition, Health and Wellness

Nestle core aim is to enhance the quality of consumers’ lives every day, everywhere by

offering tastier and healthier food and beverage choices and encouraging a healthy

lifestyle. Nestle express this viatheir corporate proposition Good Food, Good Life.

Guided by their commitment to Nutrition, Health and Wellness, they work to increase

the nutritional value of their products while also improving taste and enjoyment. Nestle

also develop brand communication and information that encourages and empowers

consumers to make informed choices about their diet.

Quality assurance and product safety

Everywhere in the world, the Nestlé name represents a promise to the consumer that

the product is safe and of high standard. Nestle commitment is never to compromise on

the safety of any product. Their Quality Policy summarizes the essentials of their passion

for excellence:

• to build trust by offering products and services that match consumer expectation and

preference;

• to comply with all internal and external food safety, regulatory and quality

requirements.

Quality is everybody’s commitment. Nestle continuously challenge theirselves in order

to constantly improve and achieve the highest levels of quality. It maintain the same

high food safety standards in all countries in which they operate. They ensure the

delivery of high quality products through their Quality Management System.

Consumer communication

Nestle is committed to responsible, reliable consumer communication that empowers

consumers to exercise their right to informed choice and promotes healthier diets. They

respect consumer privacy. Their core business strategy is built around helping

consumers to have a balanced, healthier diet. The Nestlé Consumer Communication

Principles contain mandatory rules on marketing communication to all consumers,

including accurate representation and portrayal of foods in a way that does not

encourage over‑consumption. In addition, specific principles guide their communication

to children including no advertising or marketing activity to children under 6 years of

age. Advertising to children from 6 to 12 years is restricted to products that meet

predetermined nutritional profiling criteria, including clear limits on energy and health-

sensitive ingredients such as sugars, salt, saturated fat and trans fatty acids.

Human rights in business activities

Nestle fully support the United Nations Global Compact’s (UNGC) guiding principles on

human rights and labor and aim to provide an example of good human rights and labor

practices throughout nestle business activities.

Leadership and personal responsibility

Nestle success is based on their people. It treat each other with respect and dignity and

expect everyone to promote a sense of personal responsibility. Nestle recruit

competent and motivated people who respect their values, provide equal opportunities

for their development and advancement, protect their privacy and do not tolerate any

form of harassment or discrimination.

Nestlé Management and Leadership Principles

Nestle Management and Leadership Principles describe the culture and basic values

they expect their employees to uphold, as well as the attributes needed to be successful

in management and leadership

Safety and health at work

Nestle is committed to preventing accidents, injuries and illness related to work, and to

protect employees, contractors and others involved along the value chain. Nestle Policy

on Safety and Health at Work establishes safety as a non-negotiable priority of their

culture. They recognize and require that everyone play an active role in providing a safe

and healthy environment, and promote awareness and knowledge of safety and health

to employees, contractors and other people related to or impacted by their business

activities by setting high standards. Nestle monitor their performance through the

Nestlé Occupational Safety and Health Management System to assure a safe and

healthy life.

Supplier and customer relations

Nestle require their suppliers, agents, subcontractors and their employees to

demonstrate honesty, integrity and fairness, and to adhere to their non-negotiable

standards. In the same way, they are committed to their own customers. The Supplier

Code includes requirements such as business integrity, sustainable operating and

agricultural practices, labor standards, safety, health and environmental .practices.

Agriculture and rural development

Nestle contribute to improvements in agricultural production, the social and economic

status of farmers, rural communities and in production systems to make them more

environmentally sustainable.

To ensure that their factories obtain raw materials competitively and at required quality

and safety specifications

• Nestle engage in developing sustainable agricultural practices and systems that

contribute to long-term production efficiency, viable incomes for farmers and the

transfer of agricultural knowledge to suppliers;

• Nestle support the application of new technologies and advances in agricultural

science, including the opportunities offered by bioscience when their positive effect on

food safety, environment, agricultural practices and production efficiency are

scientifically confirmed and accepted by consumers.

Environmental sustainability

Nestle commit themselves to environmentally sustainable business practices. At all

stages of the product life cycle they strive to use natural resources efficiently, favor the

use of sustainably managed renewable resources, and target zero waste. They invest

continuously to improve their environmental performance.

Water

Nestle is committed to the sustainable use of water and continuous improvement in

water management. It recognize that the world faces a growing water challenge and

that responsible management of the world’s resources by all water users is an absolute

necessity. Water is a particular area of focus for Nestlé. The Nestlé Commitments on

Water set out their priorities and objectives on responsible water usage. These are to

continue their efforts to reduce the amount of water used in their operations, ensure

that activities respect local water resources, ensure that the water they discharge into

the environment is clean, engage with suppliers to promote water conservation,

especially among farmers, and reach out to others on water conservation and access.

Nestlé is a founding signatory of the United Nations Global Compact CEO Water

Mandate. It monitor and improve water efficiency through their water resources

management specialists and in their factories with their environmental Nestle specialists

in line with the Nestlé Environmental Management System. It recognize the right of all

people to have access to clean water to meet their basic needs.

SWOT ANALYSIS:

Strengths:

The first and the most important strength of Nestle is the name of company itself. They

never compromise on quality. They produce quality products according to the

specification of customer. Their system of sale & sale promotion is also one of the

strength of Nestle. In the area in which they want to sell the product they hold seminars

and shows. In this area they monitor the sale and increase the production. They try to

convince ultimate consumer.

The milk collection procedure of Nestle is also one of its strength. They collect milk from

selected people and check its purity at the location. Then special trucks take it to

factory. Where they boil milk at 140 degree centigrade and then cool it. This process is

repeated for 3 to 4 times. There milk contains 3.5% fat, which is recommended

internationally.

Weaknesses:

One of the weakness of nestle is the product range of Nestle. As there product line is

very vast, so they cannot give equal attention toward the promotion of each product.

We can take the example of candies produced by Nestle, they give absolutely no

attention toward promoting them despite the fact that if we consider the trust people

have on nestle brand there is a large market for candies, While they are promoting their

milk products effectively. The reason behind this discrepancy is that they have limited

budget to promote their products.

The other weakness of Nestle is that the company has a very limited number of sales

staff in the southern Punjab due to which they are losing some market.

Opportunities:

Nestle can increase their share if they focus on lower middle class. We can take the

example of small pack of Every Day tea whitener whose introduction increases the sales

of nestle tremendously. The reason for this was that the price of Every Day tea whitener

was with in the range of lower middle class. So, Nestle can increase its share by focusing

on lower middle class.

The other opportunity for Nestle is that if they introduced milk bottle like Candia and

sell them directly to the customers they can increase their share. By selling directly to

customers means that they provide milk to the people at their doorsteps.

Threats:

In Pakistan Nestle face threats from lower companies. We can take the example Haleeb

and Dairy Queen. The sales of these products have badly affected the sale of Nestle Milk

Pack. Haleeb is well promoted than the Nestle Milk Pak.

Nestle also face threat from Cadbury, which is multinational company. Cadbury sell

candies and chocolates and it affect the sale of Nestle products in the field of candies

Research & Development

Nestlé's research and development centers have two primary objectives: to create new

products and manufacturing processes and to improve those that already exist. Along

with product quality and safety, the conservation of resources and the preservation of

the environment form an integral part of the development criteria for new projects.

Research and development encompasses a wide range of environmentally-related

activities with emphasis on:

environmentally sound production techniques and sourcing criteria

for agricultural raw materials;

processing methods that minimize water and energy consumption, as well as

waste generation

packaging designs that reduce total waste and enable environmentally sound

disposal options while safeguarding product safety and quality

innovative ways to recover by-products and thus generate secondary raw

materials and energy.

For important product or process innovation and renovation, Nestlé's research and

development centers prepare an environmental impact study. This covers significant

aspects in the product life cycle, from the sourcing of raw materials, through processing,

to the packaged consumer product and the end-life of the packaging material. This

study is carefully evaluated, in conjunction with detailed information on the potential

manufacturing site, to ensure that new projects meet Nestlé's environmental standards.

Of the 807 million Swiss francs spent in 1998 on Nestlé R&D throughout the Group, a

good part went towards enhancing the wholesomeness of our products. Additionally,

these expenditures improved our production process, created better packaging, and

avoided waste and unwanted residues.

R&D IS MAKING A DIFFERENCE

As an example, significant progress has been made in recent years in energy and water

intensive blanching and cooking operations. At the end of these processes water must

be removed which resulted in wasted energy and raw materials — vegetables or pasta

for example.

Now water is replaced by steam at low pressure. As a result, water consumption was

reduced by 80% and product losses during cooking were more than halved. This means

lower costs for energy and for wastewater treatment, while at the same time increasing

the product yield by 6%. In another example, extraction residues from the production of

chicory-based instant drinks, which were expensive to dispose of, have been turned into

a valuable animal feed ingredient.

A recent processing improvement for french fries showed product quality can be

significantly improved while also saving energy. One conclusion of R&D is that what is

good for the environment is often synonymous with good industrial practice.

Preserving Species

The disappearance of many species and varieties of animals and plants is a reality. Over

the past few years, this issue has attracted increasing recognition and much is being

done today to preserve the earth's biological diversity. Industry plays an important role

in these efforts since many business sectors depend on nature's diversity for their

sustainable success. Nestlé, as the world's largest single buyer of coffee and cocoa, lives

up to its responsibility by developing the most advanced preservation techniques for

many different coffee and cocoa varieties threatened by extinction. In addition, Nestlé

collaborates with public research institutes to share its experience and makes its results

freely available.

In the future, Nestlé R&D units are determined to build environmental protection into

products and processes right from the start. High on the agenda are integrated farming

techniques involving minimal use of fertilizers and chemicals, and recourse to biological

pest control methods whenever possible.

SUPPLY CHAIN

Agricultural Raw Materials

In general, Nestlé is not directly involved in the production of raw materials. Wherever

possible, locally available raw materials are used. They are either obtained directly from

producers or purchased through trade channels. Nestlé applies the following principles

when sourcing raw materials:

all raw materials must meet both legal and internal quality criteria, including

limits on possible environmental contaminants;

whenever possible, preference is given to raw materials that are produced by

environmentally sound farming methods (e.g. integrated crop management);

and;

farmers are encouraged to apply sustainable farming methods and, where

appropriate, are provided with assistance in crop production and dairy farming.

Such assistance includes the provision of recommendations for the conservation

of natural resources (soil, water, air, energy, bio-diversity) and techniques for

reducing environmental impact.

Manufacturing

Manufacturing comprises all processes that are necessary to transform perishable raw

materials into safe and convenient food products for consumers. Nestlé strives to

achieve optimal performance in its manufacturing activities, including the

environmental aspects. As such, the manufacturing practices of the Group:

respect natural resources by emphasizing the efficient use of raw materials,

water and energy;

minimize the use of environmentally-hazardous substances;

continuously seek improvement in the efficiency of production facilities; and

reduce waste generation and emissions as much as possible, consider recycling

of waste a priority and dispose of non-recyclable waste in an environmentally

sound manner.

Regular environmental assessments of Nestlé's manufacturing practices are conducted

to:

evaluate factory performance;

review factory compliance with applicable legislation and Nestlé's own

standards;

fully investigate incidents that could affect the environment and take relevant

measures; and

compare results with previous targets and set new improvement objectives.

In addition, Nestlé exchanges information on environmental protection technology and

practices in order to ensure a wide use of best practices.

Nestlé encourages its contract manufacturers to use environmentally sound

manufacturing practices.

Environmental Performance of Our Factories

Minimizing the environmental impact of our factories has always been a prime

consideration. Therefore, we periodically review environmental performance of the

entire Nestlé Group. The results are very encouraging:

Nestlé has no major environmental problems.

Nestlé complies with relevant regulations or, in a few exceptional cases, has

initiated action to do so.

Measures taken are proactive and often anticipate future regulations. Many

times, measures taken to improve the environment also reduce costs.

These surveys also allow us to put concrete figures to our efforts: Over the past years,

Nestlé has invested an average of some 100 million Swiss francs per year in specific

measures to protect the environment. This amounts to approximately 3% of total capital

expenditure and includes only readily identifiable environmental investments. In

addition, substantial amounts were expended as part of regular capital investment

projects and factory environmental operating costs. Examples of these additional

expenditures include environmental aspects related to factory construction and

renovation, environmental training of personnel, and maintenance costs for wastewater

treatment facilities.

Packaging

Packaging serves a major role in our daily lives. It protects food products from spoilage

and ensures safety from manufacture through storage, distribution and consumption.

Packaging may also provide tamper-evidence features. It communicates information,

including nutritional information and serving instructions, and provides the convenience

demanded by today's consumers.

Nestlé is committed to reducing the environmental impact of packaging, without

jeopardizing the safety, quality or consumer acceptance of its products. It is Nestlé's

objective to develop safe and wholesome packaged foods using the most efficient and

appropriate packaging materials available, while, at the same time, satisfying consumer

requirements and expectations.

Nestlé seeks packaging solutions that:

result in the lowest possible weight and volume of packages;

take into account new packaging materials and processes that reduce the impact

on the environment;

avoid the use of substances that can adversely impact the environment during

packaging production and disposal;

decrease packaging waste at all stages, including package manufacturing, use

and disposal;

increase the use of recycled materials wherever possible; and

increase the recyclability and compatibility of its packages with existing

packaging waste management schemes.

Regular assessments of Nestlé's packaging are carried out and action plans are

implemented.

Nestlé supports industrial and governmental efforts to promote integrated waste

management that takes into consideration matters such as source reduction, reuse,

recycling, composting, energy recovery, and landfill.

Nestlé encourages suppliers of its packaging materials to adopt sound environmental

practices.

Packaging Source Reduction

Packaging waste is one environmental issue that affects the entire consumer goods

industry. However, the gap is wide between reality and perception: While food

packaging accounts for less than 1% of total solid waste in most countries, it is highly

visible to consumers. Even if the problem of food packaging is small in relation to overall

environmental problems, it is nevertheless an important issue for Nestlé.

The most direct opportunity to reduce the scale of the problem is to use as little

material as possible. This is not a recent effort by the food industry. Over the last four

decades, between the 1950s and 1990s, the weight of a glass milk bottle has been

reduced by 36%, a steel food can by 66%, and an aluminium beer can by 81%.

Even though packaging source reduction has always been a consideration, we decided

to reinforce these efforts in a more systematic way. The first world-wide environmental

packaging survey was completed in 1991 for the Nestlé Group and has been repeated

annually ever since.

The last survey revealed that by the end of 1998, Nestlé, without compromising product

quality, reduced our use of packaging materials by nearly 150,000 tons compared to

1990.

A few recent examples that underline Nestlé's efforts:

In Australia the Easter Egg Novelty cartons were reduced in size by altering the design to

provide support for the egg. The new design resulted in a 31% reduction in use of paper

board.

In Pakistan the Nestlé NIDO package, which consisted of 4 bags in a display box, was

replaced by an aluminium stand-up pouch. This resulted in a 39% reduction, or 47 tons,

and saves 290,000 Swiss francs per year.

In Indonesia the Nestlé Dancow 200 and 400g display boxes were reduced in size by 18

and 25%, respectively. This resulted in a waste reduction of 38 tons and saved nearly

100,000 Swiss francs per year.

In Columbia the display box for Maggi bouillon tablets was eliminated. This resulted in a

reduction of 303 tons of packaging material and represented a savings of over one

million Swiss francs per year.

While important progress has already been achieved, we strive to continuously identify

opportunities for further reduction.

Distribution

Distribution of products from the factory to the customer involves transport and

storage. Efficient management of the distribution system is essential to preserve the

safety and quality of Nestlé's products, to ensure a high level of customer service, and to

meet its commitment to environmentally sound business practices.

To this end, Nestlé:

selects appropriate transportation modes, with particular attention given to

optimum unit loads (pallets), vehicle-capacity utilization, route planning, and

consolidation with outside partners, scheduling, and fuel conservation;

optimises warehouse and distribution center locations and environmentally

efficient operational systems; and

identifies and implements measures to reduce energy consumption and waste.

Nestlé encourages its distribution service providers to use environmentally sound

practices.

Distributing our goods from factory to retail centers consumes some 400 million liters of

fuel each year. While we undertake every effort to reduce this, it is useful to put this

figure into perspective: the distribution of 10 kg of our products from factories to retail

outlets in Europerequires an average of 0.25 liters of fuel. To transport the same

amount from the supermarket to home, consumers burn, on average, one to two liters

of fuel.

Efficient Container Loading

Improving transport efficiency benefits the environment, but it also makes economic

sense. Seemingly simple measures, such as replacing bulky wooden pallets by thin,

carton-type slip-sheets, have the potential to save more than 600 international truck

journeys a year in our European operations alone. Optimizing shipping cases to fill

transport vehicles without leaving gaps between differently shaped containers, together

with optimal route planning, Nestlé has already achieved substantial savings.

Pioneering Rail Transport

In countries with competitive railways, moving goods from road to rail is an effective

option to reduce road congestion. For example:

Vittel has developed a specially adapted block train concept to supply its regional

terminals in France. Vittel transports nearly half of its production, or over 930

million bottles per year, by rail.

Our Swiss, and later the Austrian subsidiary, convinced the railways to offer

overnight trains to bring goods from the national distribution centers to terminal

stations for local deliveries by road.

Marketing

Marketing is based on the principle of satisfying consumers' needs. The overall trust of

consumers in Nestlé's brands and products comes from a quality image that has been

continuously strengthened for over 130 years. Nestlé strives to increase this trust

through its commitment to environmentally sound business practices.

For this reason, Nestlé:

opposes short-term, opportunistic "green marketing" that can mislead the

consumer;

bases environmental claims in advertising, promotional material, labelling, and

corporate communications on solid scientific evidence; and

selects materials and printing methods for merchandising materials such as

consumer offers, in-store promotions, display materials, leaflet, and printed

materials in light of environmental considerations.

No "Green Marketing"

Nestlé adheres to the Code on Environmental Advertising established by the

International Chamber of Commerce. This Code is based on the principle of self-

regulation and self-discipline and is intended to assist companies in making responsible

use of environmental claims in advertising.

Sustainable Development

For Nestlé, respect for the environment is part of a broader perspective on sustainable

development. Nestlé has adhered to The Business Charter for Sustainable Development

of the International Chamber of Commerce (ICC) since its publication in 1991. Measures

for environmental protection often trigger beneficial economic and social effects, and

vice-versa. Since the Rio Summit in 1992, all of society, be it governments, industry,

NGOs or others, have tried to translate the sustainable development concept into

reality. As part of this effort, we participate in the work of several organizations dealing

with this subject: For example, we are a founding member of the World Business

Council for Sustainable Development (WBCSD) in Geneva, and we contribute actively in

the Working Group Sustainable Development in the City of Vevey.

Nestlé Working with Communities

South Africa

Nestlé is supporting several community-based organizations in putting sustainable

development into practice. Recently, in South Africa, we have given support to Eco Link

and LEAP to finance and help manage programs which clean up the environment and

improve hygiene in rural areas.

The Eco Link project is aimed at providing assistance through education. People are

taught to collect litter such as paper, cardboard and cans, which when put in a trench

and covered with a compost can then be used to plant vegetables. The litter provides

the necessary drainage and moisture retention. The project has dual advantages: it

cleans up the environment and provides fresh vegetables for the family, as well as

providing an income when surplus food is grown. This program is now being presented

to school children who are encouraged to grow small gardens at school.

In rural areas water supply is a major problem. Women can spend almost 5 hours a day

collecting water for the home. In addition, the springs from which they take the water

are often used by animals and can be polluted. Nestlé is taking part in a project to help

villagers establish a supply of clean water near to home.

People were taught how to identify sources of underground springs and to channel rain

water and store it in reasonably hygienic conditions. The team taught villagers how to

construct a tank to catch the rain water using corrugated iron and wire mesh as a

"mould" which is then plastered with a cement, stone and sand mixture. With a wooden

cover on top and a tap at the base the villagers have the means to store clean, drinkable

water.

Information, Communication & Training

Nestlé provides information on its activities, including those related to the protection of

the environment. Within this context, Nestlé:

communicates its environmental efforts, both inside and outside the Company,

to build understanding concerning its environmental commitment;

fosters strong environmental awareness and responsibility among its employees

through training programs; and

shares environmental information with governments, local communities,

industry, consumers and other interested stakeholders.

We do this through a wide variety of means. For example, our factory environmental

surveys involve thousands of people at all levels, from top management to the factory

floor. These practical exercises are reinforced by in-house magazines, specialized

newsletters, and videos.

To help educate the public, Nestlé works with organizations that produce films on

environmental issues, sponsor re-forestation programs, or create educational materials

for the public. These activities are also important to our role in sustainable

development.

At our international training center in Switzerland, environmental issues are now a

regular part of courses attended by Nestlé's international executives. These efforts are

multiplied by countless training sessions organized by our Group companies.

Internal communication and training are a priority for Nestlé. As a people-driven

company, employees are our most important asset. Thus, we emphasize all measures

that help them act in an environmentally responsible manner.

Legislation

Nestlé complies with all laws and regulations which apply to its activities, including

those involving the environment. To promote an effective regulatory system with

respect to the environment, Nestlé:

participates in legislative and regulatory discussions between international

organizations, government representatives, industry, the scientific community,

and consumer associations;

supports appropriate voluntary initiatives designed to protect the environment;

fosters rational environmental laws and regulations;

opposes unjustified prohibitions and other discriminatory measures; and

favors the harmonizing of environmental laws, regulations and standards in

order to eliminate existing and future trade barriers.

Nestlé Environmental Management System

Nestlé has made systematic efforts to account for environmental concerns of all its

activities. In particular, we have appointed environmental officers, issued policies,

conducted environmental surveys, reinforced training efforts, developed environmental

communications, and made many innovations in our packaging.

To complement and integrate these efforts, we created and implemented Nestlé's own

Environmental Management System.

The Nestlé Environmental Management System (NEMS) is an essential corporate

management tool that consolidates all organizational and technical measures taken by

the Group to achieve environmentally sound business practices. The NEMS objectives

include the following:

to provide a systematic approach that ensures compliance with Nestlé's

environmental policy, applicable legislation and Nestlé's operational standards;

to ensure the continuous improvement of Nestlé's environmental performance,

for example, through the conservation of natural resources and minimizing

waste;

to achieve compatibility with international voluntary standards on

environmental management systems, such as ISO 14001 and the European

Union Eco-Management and Audit Scheme; and

to build mutual trust with consumers, governmental authorities and business

partners.

The Nestlé Environmental Management System is being implemented throughout

Nestlé's entire operation.

We believe NEMS will enhance our global performance and contribute to our

competitiveness in the world market.

NEMS in Action: Germany

First EMAS Registration of a Nestlé Factory at Weiding, Germany

On December 19, 1995, our factory in Weiding, Germany became the first Nestlé factory

in Europe to be registered in the European Eco-Management and Audit Scheme (EMAS).

This means that Weiding's environmental management system and public

environmental statement have been examined and validated by an external, accredited

verifier.

Weiding Factory Greatly Reduced Disposed Waste

Even Prior to EMAS

Employing around 900 people and producing more than 550 high-value products

ranging from infant foods to condensed milk to chilled deserts, the Weiding factory is

one of largest plants in Germany. The existence of a comprehensive waste management

scheme at the factory was of great assistance in developing the new environmental

management system. As part of the development of the environmental management

system, environmental manuals were prepared both for the factory and

Nestlé Germany. These manuals provide the foundation of the system setting policies,

principles, and management procedures related to the environmental aspects of the

operations.

In addition, a site-related environmental statement was published that included an

"invitation to dialogue" addressed to employees, authorities, clients, suppliers, the

media, and neighboring communities. The EMAS registration has been successfully

repeated in 1998 and complemented with an ISO 14001 certification.

Following Weiding, several other Nestlé factories throughout the world have succeeded

in obtaining ISO 14001 certification and EMAS registration.

NEMS in Action: USA

In 1996, the Danville, Virginia, USA factory was the first Nestlé US factory to fully

implement NEMS - which is based on and consistent with ISO 14001

Danville has shown that good environment is also good business. In the first year of

implementing NEMS, the factory reduced solid waste by over 10% resulting in savings of

$370,000 and reduced its wastewater impact and concentrations by 8%.

These successes were made possible through the dedication of the factory employees

and a strong emphasis on training and awareness. The factory implemented an

environmental training program as part of the new employee orientation and the semi-

annual environmental training for all employees.

Waste Reduced Through NEMS

NEMS Supports the Environment and Business

Cumulative Savings

The continuing nature of NEMS has facilitated similar accomplishments annually. To

date, factory savings related to NEMS have exceeded $800,000 and solid wastes have

been reduced by 41%.

NEMS in Action: Philippines

Part of NEMS is ensuring a high degree of employee environmental awareness. As an

example, Nestlé Philippines, in implementation of NEMS, prepared through an

interdisciplinary task force, a highly regarded environmental training program. This

program is continuously provided to groups of employees and highlights specific issues

related to their job functions and protection of the environment.

The success of this program is evidenced by the numerous awards received by

Nestlé Philippines manufacturing facilities. Most notable of these are:

"Outstanding Healthy Workplace Award" given by government agencies

including the Department of Health, Department of Environment and Natural

Resources, and the Department of Labor and Employment, to

the Cabuyao and Lipa Factories in 1998.

"Mother Nature Award" given by the Pollution Control Association of

the Philippines in 1998.

"Anvil Award of Excellence" given by the Public Relations Society of

the Philippines for Nestlé's efforts in enhancing the environmental awareness of

the public.

"Most Environment-Friendly Company" Award given by the Laguna Lake

Development Authority to three Nestlé factories (Cabuyao, Aurora, and Alabang)

in 1996.

One of the "Greenest Company" Awards given by the DENR to the Aurora factory

in 1996.

The water discharge from these facilities is of very high quality. Tilapia, a fresh water

fish, often harvested for food, abundantly grows in the clarifying ponds and discharge

canals of their treatment facilities.

Nestle Pakistan

Nestlé MilkPak Limited (NESTLE MILKPAK LTD.L) was incorporated in Pakistan under the

Companies Ordinance, 1984 & listed on Karachi and Lahore stock exchanges since 1980.

Joint venture between Nestle Switzerland and MilkPak Limited came about in 1988.

Nestlé Pure Life was launched in Pakistan in 1998

REGIONAL SALES OFFICES

Nestle has 10 Regional Sales Offices in all over the Pakistan.:

Karachi F - 77/1, Block 7,Clifton, KDA Scheme 5,Karachi, Sind, Pakistan Phone: (021)

5833935-6 Fax: (021) 5833937

Hyderabad 178, Block C, Unit 2Latifabad, Hyderabad, Sind, Pakistan Phone: (0221)

860403Fax: (0221) 863202

Sukkur F - 33/5 - CWorkshop RoadSukkur, Sind, Pakistan.Phone: (071) 615946Fax: (071)

615946

Lahore 29-B, Main Gulberg,Lahore, Punjab, PakistanPhone: (042) 5754335-6,

5761484Fax: (042) 515061

Quetta 63 B - D, Chaman Housing Scheme, Opposite Askari Park Quetta, Baluchistan,

Pakistan Phone: (081) 834887Fax: (081) 822297

Islamabad 74-W, Yaseen Plaza, 1st Floor, Blue Area, Islamabad, Pakistan Phone: (051)

271874-75,824328, 824384, 274376

These offices work under their respective zonal offices

Registered & Corporate Office Is in Lahore 308 - Upper Mall, Lahore PABX: 5757082-95

Fax: 5711820

Faisalabad House No. 24-Y-103 Madina Town,Faisalabad, Punjab, Pakistan Phone:

(041)726993Fax: (041) 47438

Gujranwala Plot No: 144-A, First Floor Satellite-Town Market, Gujranwala, Punjab,

Pakistan.Phone: (055) 3733415 Fax: (055) 3733415

Peshawar 201, 2nd Floor, City Tower, Jamrud Road, B Block,Peshawar, N.W.F.P.,

Pakistan Phone: (091) 840859, 842415Fax: (091)45516

Multan Surij Miani Road, Chungi No.1,Multan, Punjab, Pakistan Phone: (061)

515061Fax: (061) 515061

Quetta 63 B - D, Chaman Housing Scheme, Opposite Askari Park Quetta, Baluchistan,

Pakistan Phone: (081) 834887Fax: (081) 822297

Islamabad 74-W, Yaseen Plaza, 1st Floor, Blue Area, Islamabad, Pakistan Phone: (051)

271874-75,824328, 824384, 274376

These offices work under their respective zonal offices

Registered & Corporate Office Is in Lahore 308 - Upper Mall, Lahore PABX: 5757082-95

Fax: 5711

SALES ORGANIZATION HIERARCHY

Managing Director

IAN Donald

Sales Director

Zafar Hussain Shah

Zonal Sales Manager

Ammad Malik

Regional Sales Manager

Abdul Mateen Khan

FACTORIES

Nestle has two factories in Pakistan for the production of different food items. One

in Sheikhupura near Lahore and other in Kabirwala near Multan

Product Design

Product design can be defined as the idea generation, concept development, testing and

manufacturing or implementation of a physical object or service

Area Sales Manager

6 ASM

Territory Incharge

TI 14

Order Booker

250

The Nestle Pure Life water bottles themselves have a shaped design, sort of a hour-glass

shape with larger top and bottom with indented waist. The bottom 1/3 of the bottle has

ridged lines to help with hold and grip on the bottle There is a bright blue label strip that

runs around Unique bottle design, developed by designer’s team, catchy self-adhesive

and glossy label, and trendy name, give to the product the edge that is needed to be

spotted on the shelves

INFLUENCES UPON DESIGN

Service Expected.

Appearance

Shipping Costs

Cost to Manufacture

consumer preferences

Nestle Milkpak Ltd.

As a consequence of joint venture arrangement between NestleS.A. of Switzerland and

Milkpak Ltd. In 1988, the existing production facility of Milkpak in Sheikhupura became

a part of Nestle Milkpak.

The Milkpak Sheikhupura factory had commenced operations in1981 as a producer of

UHT milk. By 1988, it had expanded its operation and was also producing butter, cream,

Desi ghee – all under the brand name of MILKPAK and juice drinks under the brand

name FROST.

Conscious of the large food market that Pakistan offered, Nestle Milkpak drew up

ambitious expansion plans. While re-organizing and re-enforcing the production of

existing brands, it lost no time in giving shape to new production lines. The first to come

was a milk powder plant, which not only began producing NIDO in 1990but was also

critical to the production of several milk-based products in the future. With the

installation of the roller dryer in1990, the first such product to come was CERELAC – an

internationally recognized brand on infant cereal, followed by LACTOGEN 1 & 2 in 1991.

The year 1992 saw the introduction of tea whitener EVERYDAY and milk powder in bulk

packing named GLORIA.MILO and NESLAC came under production in 1994 and MILO

RTD, In 1995.Local packing of coffee mixes under the name of NESCAFE 3 in

1commenced the same year. In 1996, Nestle Milkpak Ltd. first confectionery plant of

POLO Mint was installed and the line of NESTL’E PURE ORANGE JUICE was also added.

Packaging of coffee under the brand name NESCAFE CLASSIC was under taken the same

year. In 1997 NESTL’E WHEAT and two variants of POLO viz. strawberry and Orange

were introduced.

1998 has been, by far, the most outstanding year for Nestle Milkpak. As a result of the

timely implementation of major expansion plans, involving a substantial capital outlay,

no less than 17 products were launched during the year. Significantly, the factory now

houses three new flavors of POLO in addition to two flavors of POLO, namely Black

current and Strong Mint brought the number of POLO variants to five. A new variant

Lemony was added to the range of popular FROST fruit drink flavors and a new 1-liter

packing of FROST was introduced. Three flavored milk – Vanilla, Strawberry and Mango,

under the brand FRESH & FRUITY, came under production on the new Tetra Filling

Machine equipped with the modern “slim” format. MILO RTD and UHT Cream were also

shifted over to this new format. A flexible confectionery line for the manufacture of a

wide range of high and low boiled sweets and toffees was commissioned, with TOFFO

and two variants of SOOTHERS – Menthol Eucalyptus and Honey Lemon, being the

maiden products. Nestle Milkpak also contracted to supply dairy mixes to McDonald’s,

for its popular soft serves and milk shakes. And to top it all, the most prestigious project,

NESTLE PURE LIFE was also commissioned in December1998. based on the latest water

treatment and bottling technology, this marked the entry of Nestle Milkpak in the

Pakistan water market.

In the past, Indus Fruit Products Ltd. has been co-processing fruit pulping for Nestle

Milkpak. In view of the growing needs of fruit pulp for its products as well as for exports,

Nestle Milk pak entered into a 5-year lease agreement with the management enables

Nestle Milkpak to put in place its own systems to ensure better product quality and

capacity utilization. The new cold sauces production line has been established at this

plant.

ESTABLISHMENT OF NESTLE MILKPAK, KABIRWALA

FACTORY

In 1986 Milkpak Ltd. acquired the services of Kabirwala Dairy Ltd. For co packing of UHT

milk under the brand name MILKPAK. Nestle Milkpak acquired KDL in 1990 as a

subsidiary and began installation on a MAGGI NOODLES plant in 1991. this production

line became operational in 1992 with two flavors: Chicken and Masala. This second milk

powder plant was commissioned in September 1996. the plant produces NIDO, GLORIA

and skim milk powder. The UHT line was discontinued in June 1996 and the same year

witnessed the launching of the MAGGI YAKHNI linewith 3 flavors: Chicken, Masala and

Chatpata.

With the merger of this factory with Nestle Milkpak in April 1997,Kabirwala Factory, as it

is now called, is a fully owned unit of Nestle Milkpak Ltd.

In February 1999 the newly installed evaporator came on stream in Kabirwala Factory,

doubling the output of the spray dryer. Alongside, the warehouse capacity at Kabirwala

to handle the increased volumes of finished products was proportionately increased.

1999 also saw the installation of a pouch-filling machine, making Kabirwala Factory

independent from Sheikhupura

.

YEAR PRODUCT NAME

1981 UHT Milk

1983 Butter

1986 Milk Pak Cream

Desi Ghee

Frost Juice

Milk Pak UHT Milk

1990 Nido

Cerelac

1991 Nestum

Lectogen

1992 Everyday Tea Whitener

Gloria

Maggis Noodles

1994 Milo

Neslac

1996 Nestea

Polo

Nescafe Classic

Maggi Yakhni

1997 Nestle Wheat

1998 Toffo

Soothers

Nestle Pure Life

1999 Maggi Sauces

Fruit Drops

Butter Skotch

2001 Nescafe Creamy Flavors

Cream milk powder

Nestle Milkpak Ltd. Market Leader

Nestle Milkpak Ltd. is the market leader in food and beverage industry. They are

producing high quality well known brands. There is no such competitor that can

compete Nestle Milkpak Ltd .in its total product mix. There are a few local competitors

of the company in different product item. These competitors are:

Rafhan

Rafhan is competing Nestle in infant and follow up cereals.

Shezan and Bambino

Shezan and Bambino is competing Nestle Milkpak’s local

brand “Frost”.

CDL and Adar-e-kisan:

These two competitors are competing in milk and milk

powder products.

In spite of this competition, Nestle Milkpak Ltd. is enjoying about

70-75% market share in Pakistan.

DIVISIONS OF NESTLE MILK PAK ltd.

OBJECTIVES OF NESTLE MILKPAK LTD.

The major objective of the company is to sell high quality, innovative and

superior products which satisfy needs and wants of consumers.

Nestle not maximize profit through high market share but use satisfaction of

consumer.

The health of consumer and employees is at primary priorities

Production Division

Quality asst Department

Brand wise production

departments

Marketing Division

Customer Relation Department

Distribution Department

Research & Development

HR Division

Personnel department

Finance Division

Treasury department

Milk Collection Division

Agriculture service Department

Logistic Department

Nestle provide the pollution free enviroNestle Milkpak ltd.ent and provide the

medical facilities

Nestle establish policies, programs and practices to conduct operation in an

enviroNestle Milkpak ltd.entally sound manner.

Nestle operate to achieve highest standard of ethical conduct, which acquire

company’s activities and relationship world-wide in each business sector.

Nestle aim to deal only with reputable suppliers who willing to apply Nestle

Quality Standard.

Nestle has been committed to enviroNestle Milkpak ltd.entally sound business

practices throughout the world.

EXTERNAL ENVIRONMENT NESTLE MILKPAK LTD.

The top management of Nestle MilkPak continuously carries on environmental scanning

and within the environmental trends. Opportunities & opportunities they carry on

required adjustments in their organization to remain variable and to survive in the face

of competition.

CORE COMPETENCIES

Nestle Milk Pak has the following core competencies.

WORK FORCE

Nestle Milk Pak has a small work force as their most of the operations are automated.

They have a very skillful and trained workforce.

FACILITIES

The NESTLE MILKPAK LTD.’s facilities i.e. offices stores and plants are very well located

and have the requisite capabilities, which is a big competitive advantage for them.

SYSTEM AND TECHNOLOGY

Nestle Milkpak ltd. is an organization which heavily depends upon new systems and

technologies to excel in the market. The organization is well equipped with new

developed systems and technologies especially in their operations

COMPETITIVE PRIORITIES

Following are the competitive priorities of NESTLE MILKPAK LTD..

Consistent quality

Development speed

Volume flexibility

QUALITY

Quality is the cone competitive priority of NESTLE MILKPAK LTD.. They take quality

in two ways. High performance design and consistent quality.

CONSISTENT QUALITY

NESTLE MILKPAK LTD. pays special attention for maintaining consistent quality. They

have special sort of equipments and process which facilitates in maintaining a consistent

quality. So the each and every unit of its product equally satisfies its customers.

DEVELOPMENT SPEED

As for as develop speed is concerned NESTLE MILKPAK LTD. is the industry leader not

only in Pakistan but all over the world. They have a team of very innovative people

which consistently focus on the development of new products and to improve the

already existing products.

VOLUME FLEXIBILITY

Volume flexibility is one of the competitive priority of NESTLE MILKPAK LTD.. When the

availability of Milk is high in winter season they increase their production as the milk

cannot be stored for longer period of time. In season when there is shortage of milk

their production rate dropped. So they can adjust their volume of production according

to their requirements.

FLOW STRATEGY

Flow strategy is one of the primary element of operations strategy. Based on

competitive priorities a flow strategy is selected. It specifies has the operations system

to be organized and handled. For different set of products different flow strategies can

be implemented.

LINE FLOW STRATEGY

NESTLE MILKPAK LTD. has adopted the line flow strategy here the system is organized

around the product. In this strategy all products follow linear pattern in facility. NESTLE

MILKPAK LTD. has high volume production with highly automated facility and huge

capital investment is there and the standardized products they produce. So they follow

the line strategy.

STRATEGIES BASED ON FLOW

Following are the flow based strategies adopted by NESTLE MILKPAK LTD..

MAKE TO STOCK STRATEGY

NESTLE MILKPAK LTD. follows the make to stock strategy. They have high volume

production and the demand for their products can be forecasted quite well, there exist

repetition of work and a consistent quality is maintained all these priorities lead to make

to stock strategy.

STANDARDIZED SERVICE STRATEGY

The products which are provided by NESTLE MILKPAK LTD. are standardized. Therefore

the standardized service strategy also exist in NESTLE MILKPAK LTD. Ltd. They have

standardized and consistent quality products.

PRODUCTION PROCESS

Milk Collection &

Reception

Standardization Storing

Evaporation Spray drying

Packing

Pasteurization

De-Creaming

Cooling

MILK COLLECTION

Milk Collection system of Industry is excellent. According to this system the companies’

trucks reach 140000 milkmen and collect milk daily. The milkmen provide milk on

contract basis. Prices of milk vary in case of self-collection and contract basis. On milk

center price of milks is paid at Rs. 5.80 per liter at 6% Fats. If the quality of fat is less

than required 6% then price will be paid less proportionately.

Percentage of FAT in Various Kinds of Milk.

Buffalo

6% Fat

Cow

3.5%

Goat

3%

Sheep

6%

Human 3.5%

At milk collection centers, Gerber Test in done for the determination of Fat. Companies

are bounded to maintain 3.5%Fats under pure Food Laws. It is legal requirement

throughout the world

Milk collection system of Nestle Milk Pak is excellent. According to this system milk is

collected from area of about 72,000 km .

Village Milk centers 2273

Sub centers 583

Main Centers 23

On milk centers price of milk is paid according to percentage offers. If the quality of fat

is less than required (6%) than price will be paid accordingly. At milk collection centers,

gerber test is performed for determination of fat. In milk collection centers temperature

of milk is kept at 4oC. Nestle purchase milk directly few frames, there is no middle man.

Collection Areas are in all over Punjab Nestle Milk Pak divide the

areas in following Categories:

Sahiwal, Burewala, Okara etc.

Pindi Bhattian, Chaniot, Sarghoda

Kabir Wala, Mian Channu, Shorkot, Kahane wal, Kacha KHU

Bahawalpur , Bahawalnagar, Chistian, Ahmadpur

There are Area collection managers, Milk collection Cocoordinators and Milk Collection

Supervisors in each Area for collection of specific amount of Milk in specific time.

RECEPTION

From milk collection centers milk is collected and delivered to factory daily seal of

tankers are properly decided. Receiving capacity of milk is 60,000 liters. At reception

following tests are performed before storing milk to assure the quality of milk.

1. Alcohol precipitation test

2- Clot an boiling

3- Fat (5.8% - 6%)

4- SNF (Solid non fat) (8.5-8.9)

5- PH test (6.8 – 6.9

Up to reception temp of milk is about 8-10oC, there is no rejection on temperature

basis.

Trollers are not preferred to stay more than 1.75 Hrs. in factory so that they can in time

collect milk for next day.

STORING OF MILK

Milk is stored in storage tanks called Silos. The capacity to store milk is 596 tons.

There are 5 Silos of100 tons each,

2 Silos of 10 tons each,

1 Silo of 70 tons.

Milk can be stored for 36 Hours in Silos.

STANDARDIZATION

All the animals have different composition of fats in their milk indifferent seasons.

Standardize milk according to the recipe milk is given temperature of 72oC for 15

seconds to reduce bacteria’s in milk, this process is called thermization life of milk is

increased by this process and in standardization composition of fats and SNF are

standardized.

DE-CREAMING

In this process dirt particles, SNF and cream is separated, milk is given temp of 60oC and

60,000 rpm in de-creamer. So that dirt particles cream can be separated. Cream is send

to butter section. Dirt is drained after 30 seconds milk is send for further processes.

PASTEURIZATION

In This Process milk is heated at 92 oC for 5 seconds to remove remaining bacteria’s.

Milk powder process activities

After pasteurization milk to treated for conversion into powder,

following activities are performed to milk:

Evaporation

(a) Low heat treatment

Milk is heated at high pressure of 889 milli bar so that it start boiling at about 70 oC .

(b)4-effect falling film

Milk is evaporated in 4 effect system. Milk is evaporated about 56%, 62%, 67% and 75%

after 1st 2nd 3rd and 4th effect respectively. After 3rd effect Homogenization is done

which uneven composition of fats and SNF is homogenized

Spray drying

In this process there are 5 lateral high pressure nozzles which exert high pressure on

milk after that there which exert high pressure on milk after that there are about 50%

water and 50%solids are remained in milk. After this step about 320oC hot air is thrown

on milk, it is very quick process in which powder settle in base and moisture evaporate

in forms of vapors.

Central lecithination

Lecithinate is sprayed on powder so that it is converted into highly dissolvable powder.

That way Nestle Milk Pak say “ Nido is instant Milk” (easily dissolvable in hot ad cold

water).

Drying

After all these procuress still powder has 5.5 % moisture in it, Powder is dried through x-

Egran System to reduce moisture level up to 3.1%

Cooling

After drying there is a cooling process, in which powder is cooled before storing.

Storing of powder

Powder is stored in bins there are 40 bins.

Packing

Milk is packed in different packing according to the weight required, form tote tilting

station from bins.

Capacity

Capacity is the maximum rate of output for a facility. The operations manager must

provide the capacity to meet current and future demands; otherwise the organization

will miss the opportunities for growth & profits.

Capacity planning is duty of top management and it is long term .In flush season when

milk is abundantly available they utilize capacity 100% as cleaning time is just 4 hours

daily and 20 hours for working. Installed capacity in NIDO plant is 560 tons, it produces 4

tons / Hours & in 20 working hrs it can produce 80tons per day. In summer when

availability of milk is lower they have their annual shut down (June). They have training

session for employees and vacations in that time. There are certain standards for labor

utilization. Efficiency of employees is calculated daily.

LOCATION

Facility location is the process of determining a geographic site for a firm’s operations.

Nestle Pack has located one of its factories at Kabirwala

REASONS FOR SELECTING THIS LOCATION

PROXIMITY TO SUPPLIERS AND RESOURCES

This factory has been located in this area because here the supply of milk is more than

the requirement of the local area. This factory location is immensely surrounded by

Agricultural farms, villages and small towns. The people o f these areas have their own

animals and the feudal of the region have their own live stock farms. So there is

abundant milk available.

Furthermore, by locating one factor y at Sheikhupura and the other at Kabirwala the

Nestl MilkPak can cover the geographic area of milk collection very well, especially the

area of whole Punjab.

REPUTATION OF THE LOCATION

Placing of the factory at Kabirwala is also advantageous in this way that at the current

place there was actually the factory in the name of Kabirwala Dairies Ltd. (KDL).So the

place has thereputation of having a milk factory. The suppliers of milk are already

oriented with this location.

PROXIMITY TO NATIONAL HIGHWAY

Kabirwala factory is quite closer to National Highways so the transportation of Raw

Material and Finished Goods is also easier.

In the end we can say that the most important and critical factor for locating the facility

at this place is the availability of the milk in this area.

SUPPLY CHAIN MANAGEMENT

Supply Chain |Management seeks to synchronize a firms functions and those of its

suppliers to match the flow of materials ,services and information with customer

demand. A basic purpose of supply Chain management is to control inventory by

managing the flows of materials.

TYPES OF INVENTORIES

Following types of inventories are kept by Nestle Milkpak Kabirwala:

RAW MATERIALS

Raw Material inventory of Nestle MilkPak consists of milk. Their Raw Material is kept in

Silos .Silos are the big tanks, which are used to store the milk. Inventories of their raw

materials cannot be maintained in bulk quality and for a longer period of time.

The factory can store the milk up to 596000 liters. They have five silos for storing the

milk all have different capacities. The milk can remain there for the period of 36 hours

without loosing quality.

WORK IN PROCESS INVENTORIES

Work in process inventories are not to huge. Whatever they put into production they

stop production after its completion if there is no unusual break down.

The unpacked goods inventory can be considered as the WIP inventory. The condensed

milk is stored in Bins. Bins are the big boxes in which the milk powder is stored before

packing it.

hen through an automatic plant the milk is packed. The butter is stored in huge tubs.

From where that is packed through the automatic.

FINISHED GOODS INVENTORY

Inventories of packaging material can also be included in WIP inventories. The packing

material is purchase externally. The supplier of packing material is packages private

limited Pakistan.

Nestle Milk Pak maintains huge amounts of F.G. inventories. There is a huge warehouse

within the factory. In the warehouse they store the finished goods.

Especially when the availability of milk is high then the L.M. is produced and stock in this

warehouse and the same is released when the Milk availability is lesser and the

production is also low. Normally it’s the FG inventory the NM has RM & WIP inventories

not that huge.

MATERIALS MANAGEMENT

There is a separate department in the factory which is responsible for purchasing the

materials and managers its supply.

There is a centralized system of material management. The whole operations of which

are looked after by the operations managers. There is also a stores officer which also

looks after the materials management.

SUPPLIER RELATIONS

The nature of relations maintained with suppliers can affect the quality, timeliness and

price of a firm’s products and senior. There are two types of supplier relation

competitive orientation.

COOPERATIVE ORIENTATION

Nestle Milkpak SUPPLIERS RELATIONS

Nestle Milkpak follows the cooperative orientation. They have very friendly and

cooperative relations with their supplier’s one hand and here are the suppliers of Milk

and on the other hand the suppliers of packing Nestle Milkpak have cooperative

relations with both of its suppliers.

RELATION WITH MILK SUPPLIERS

Nestle Milkpak has very cooperative relations with its milk suppliers. Nestle Milkpak’s

people themselves look after the animals of the former who provide them milk and give

them useful tips.

Nestle Milkapk provides various facilities to its milk suppliers. Nestle Milkpak also

provides or facility to its suppliers. It also provides them consultancy facilities

consultations s provided for improving the milk quality looking after the health of the

animals.

PROGRESSIVE FARMERS

The progressive farmers are the farmers having lots of animals and supply milk to NM.

These are farmers which wish to further grow. Nestle Milkpak provides them loans for

improving their farms and for the purchase of animals. Nestle Milkpak provides medical

facilities to the animals. The Nestle Milkpak provides loans to these farmers for

expanding their farms. So that the milk requirements of Nestle Milkpak can be filled. In

turn the supplier of milk also cooperate with NM

PACKAGING MATERIAL SUPPLIERS

The packaging material is supplied to Nestle Milkpak by the packages (Pvt)Ltd. Pak NM

have very cooperative orientation with packages and they cooperate a lot with Nestle

Milkpak for maintaining high quality of final product.

Sole sourcing P is the only supplier who provides are the packing material. So Nestle

Milkpak use sole sourcing. So NM has very cooperative orientation with its suppliers.

INVENTORY CONTROL SYSTEMS

For controlling inventory the Nesltle Milkpak use Continuous Review

CONTINOUS REVIEW

Nestle Milkpak use continuous review system. They have the whole computerized

system. How much stock is in the store room how much stock has been further put into

warehouse and how much stock has been drawn from the stores? In this way they keep

continuous control over their inventory. The stores officer not only maintains records

but also makes visits at the warehouses to see the actual situation of materials. The

officer can review the inventory at any time. Operations manager and the auditing

people also check the inventory and its records so that the risks

of loss or manipulation may be minimized.

DISTRIBUTION

Distribution is the management of the flow of materials from manufacturer to customer

and from ware house to retailers. Involving the storage and transportation of goods.

PLACEMENT OF FINISHED GOODS INVENTORY

The fundamentals decision is where to stock an inventory of finished goods there can be

two alternates.

Forward Placement

Backward placement.

FORWARD PLACEMENT

In forward placement finished goods are stored closer to customer .Nestle Milkpak use

forward placement as they use to keep the stock of finished goods in their regional

offices and distribution centers. From the distribution centers the goods are further sent

to the retailers.

BACKWARD PLACEMENT

In backward placement finished goods are stored at the manufacturing plant where

they keep goods stocked. So in this way they use backward placement also. So for

inventory placement Nestle Milkpak uses a mix of forward placement and backward

placement in order to provide goods to the market on time.

DISTRIBUTION STRATEGIES OF NESTLE MILK PAK LTD.

Distribution plays important role in success and failure of any organization. The

organization may fail, if its distribution networks are not efficient and unable to provide

the necessary items at required place and at reasonable time.

Distribution system of Nestle is one of major source of competitive edge over its existing

rivals. Nestle has its own distribution networks equipped with all necessary

transportation facilities. They transport their products at major ten regional sales

offices, which are situated at different cities of Pakistan. These sales office (distribution

centers) have their own vans with sales people who sell and transport goods to the

small retailers .In general Nestle followed following sequence for distribution of its

products.

This figure indicates Nestle never sell directly is ultimate customers but follow above

sequence.

In general, Nestle has following two distribution strategies:

Selective distribution strategy

Extensive distribution strategy

For some products, Nestle adopt “selective strategy” in which firm distribute its

products on few selective retail outlets while for some products, Nestle people go for

“extensive strategy” in which they distribute their goods on all possible retail outlets.

SELECTION OF TRANSPORTATION MODE

Company Distrubition Center Retailers Customers

For transportation of goods to the regional offices Nestle Milkpak has it own vans and

other vehicles. For further distribution to retailer the distributor of each area uses its

own vehicles.

For the milk collection the Nestle Milkpak has their own tankers, which are made of

special material to maintain the quality of milk.

FORECASTING

Fore cast is a prediction of future events used for planning purposes.

Forecasts are needed to aid in determining what presences are needed, scheduling

existing resources and acquiring additional resources. Accurate for casts allow schedules

to use machine capacity efficiently, reduce productions times and cut inventories.

Forecasts are needed to anticipate changes in prices or costs or prepare for new laws or

regulations, competitors, resource shortage or technologies.

Forecasting methods may be based on mathematical models using historical data

available, qualitative methods drawing on managerial experience or a combination of

both.

Nestle Milk Pak forecast the demand of products on annually basis with mutual

understanding between planning and selling departments on the basis of historical data

and sales forecast estimates. They conduct monthly meetings and fine tune the forecast

on monthly basis. As in summer when availability of milk is scarce and demand is high,

they have stock in winter to meet this demand. They produce more in peak season (Jan,

Feb, and March) to meet the demand of lean seasons (June, July, August).

AGGREGATE PLANNING

Aggregate plan is a statement of production rates, work force levels, and inventory

holdings based on customer requirements and capacity limitations.

PRODUCTION PLAN

A manufacturing firm aggregate plan is called as the production plan which generally

focuses on inventory holdings and production rates.

Nestle Milkpak has its production plan which is generally developed by the planning

department

AGGREGATION

Nestle Milkpak aggregate their plan on the basis of total milk collection, total milk

requirements, total production etc.

TIME

The planning horizons of Nestle Milkpak are of two types one is the long term planning

horizon which covers the period of ten years. The other is the shorter planning horizon

normally one year.

LONG TERM PLANNING HORIZON

In long term planning horizon Nestle Milkpak plans for about ten years.

They plan how much production capacity to be achieved

. How much production rates will be required what will be the customer demand how

will they collect the milk. From where they will collect the milk. How many number of

animals would be there in a particular area and from there how much milk we will be

collecting. They got all the information and plan for a longer period of time.

SHORTER PLANNING HORIZON

In shorter planning horizon they plan usually for one year and then further decompose

that in seasonal plan How much to produce in a year. How much milk to be collected in

one year. How much milk to be collected in one year what is the deficiency or surplus. .

How much inventories we will be holding. This yearly plan is further divided into four

quarters. Targets are set for each quarter and the efforts are made to achieve the

targets.

QUALITY

Quality has no proper definition its vary from person to person. In general sense quality

may be defined as meeting or exceeding the expectations of customers.

In general business’s success depends on the accuracy of its perception of customer’s

expectations and its ability to bridge the gaps between those expectations and

operating abilities. Good quality can also pay off in high profits. High quality products

and services can be priced higher than comparable low quality once. And yields a

greater return for the same sales dollars. Poor quality erodes firm’s ability to compete in

market place and increase the costs of producing the product or service.

Nestle Milk Pak has quality as its top competitive priorities along

with availability of its products all over.

In quality they want to achieve consistent quality and even to improve it continuously.

In this regard the stress on customer satisfaction, continuous improvement and

employee involvement.

There is strict quality control by computerized system in control room, quality of

product are assured at each stage.

Customer satisfaction

Nestle take their customer on top of its hierarchical chart. Its top priority is to satisfy the

customer. They design the product in such a way that they confirm their speciation, fit

for use and give support to the company image.

Employee involvement

Nestle milk pak involves their employees in making decisions and changing in

organization. They have idea boxes in factories and offices, employees are encourages

to give ideas about improvement.

They conduct weekly meetings and discuss the ideas; good ideas are rewarded to

motivate employee’s involvement. There are formal training sessions for employees to

train them and enhance their capabilities. Employees are given rewards and incentives

to involve them more in organization.

Continuous improvement

Nestle Milk Pak try to improve the quality of products continuously they conduct

continuous improvement meetings to improvement the quality. They train the

employees for improving quality tools, build team work, employee involvement and

develop sense of operator ownership.

Improving quality through TQM

Programs for employee involvement and continuous improvement are aimed at

improving quality in general sense. However, TQM often focuses on benchmarking,

product and process design.

BENCHMARKING

Benchmarking is a continuous systematic procedure that measures a firm’s product and

process against industry leaders. As NESTLE is industry leader in food products, each

factory has its benchmark to improve quality. Nestle Milk Pak Kabirwala takes Nestle

Tambula factory Australia as bench mark, which is the best Nestle factory in all over the

world. Nestle Milk Pak Kabirwala is at 2nd number.

PRODUCT & PROCESS DESIGN

Nestle Milk Pak design the produce according to the customer’s satisfaction and process

is designed in such a way to maintain purity and nutrition’s of the products.

QUALITY CERTIFICATION

Nestle Milk Pak has its own quality standard certification which has much higher

standards as compared to ISO, called Nestle Quality Standards. Nestle Milk Pak

Kabirwala is approved by Nestle Quality Standards.

In which quality is maintained right from the purchase of raw material to the

distribution of the products to the ultimate consumers.

Quality of Materials

Quality of Process

Distribution

Continuous improvement

Customer satisfaction

Employee involvement

CONCLUSION

Nestle ambition is to achieve a high level of customer satisfaction through low cost,

highly efficient operations driven by value creation and continuous improvement .As the

worlds number one food company ,its challenge is to go beyond safe hygienic packaged

food. Nestlé’s evaluation capabilities are the most developed dimension of their

accountability ,while their participation capabilities are the worst. With the exception of

evaluation, Nestlé either does not have the necessary policies for fostering consistent

implementation of accountability, or has policies that lack key good practice principles.

In transparency, Nestlé is one of the only companies to have developed an information

disclosure policy. But the policy includes no good practice principles. To strengthen their

capabilities for ensuring consistent public disclosure of information across the company

Nestlé should identify narrowly defined conditions for non-disclosure and commit to

responding to information requests within a defined period of time. In participation,

Nestlé only make a general commitment to engaging with those outside the company

through their Corporate Business Principles. They should go further and develop a

detailed policy on external stakeholder engagement that identifies the conditions under

which stakeholder can expect to be engaged in company decision-making and commits

to incorporating stakeholder input into decision-making else providing an explanation.

Furthermore, Nestlé needs to strengthen their complaints and response capabilities; the

company needs to put in place a complaint mechanism that covers more than a single

product and allows both internal and external stakeholder to submit complaints for

issues of non-compliance in relation to all the company’s policies and practices.