Supply Chain – Case Study
Creating a wonderful cup of coffee is not only Nestlé’s business, but it is the business of everyone involved in its supply chain (The Times 100, Coffee- the Supply Chain). Today, Nestle is heading the worldwide movement of promoting sustainable agriculture for the entire food industry. The company’s role in the future global food system is going to be very critical. Since farmers come first in the supply chain of the food system, Nestle has started providing “extension services” to thousands of farmers who are its direct suppliers in many markets. Through its SAI (sustainable agriculture initiative) platform, the company had already created an amalgamation of best principles and practices for sustainable agriculture of certain crops. This would address several key issues relating to environmental, social and economical topics related to agricultural production systems and would make Nestle, a key player in shaping the future of global food system.
Nestle must definitely partner with its competitors, there are following reasons that support this stand:
– Nestlé has successfully tied up with its competitors such as Danone and Unilever in the past for the development of SAI.
– Since Nestle buys coffee mostly through its suppliers, tying up with competitors can ensure that the suppliers do not overcharge and vary the quality of their supplies from one customer to other.
– It would bring a greater transparency in the supply chain and would promote healthy competition along with the quality of supplies.
– Nestle must think of tying up with the competitors, especially in markets where supply chain goes through various dealers and middle men.
Nestle must also tie up vertically with the suppliers, following reasons support this argument:
– In some countries, it is not possible to buy directly from the farmers.
– Although Nestle is one of the world’s largest direct purchasers of coffee, it has to tie up with the local dealers, where it is not possible to buy directly.
– Nestle will purchase coffee at international rates in these markets, and would ensure that the coffee meets its international standard and health regulatory norms.
– The dealer and shippers involved in the supply chain will be adequately trained along with Nestlé’s quality assurance staff, assuring that quality would be maintained all across the supply chain.
The fact that Nestle is a leader in the chocolate, dairy, and coffee industries may conflict with the company’s sustainability and health priorities. Identify some potential conflicts.
Through its SAI platform and Creating Shared Value (CSV) program, Nestle has put its principles and practices together and has collaborated with other member companies like Danone and Unilever through SAI to create a sustainable effort in addressing several issues related to agriculture production systems. These issues consider factors such as health risks related to pollution, bio diversity, environment, rural development and teaching good farming practices to farmers in the developing nations.
However, being a market leader in chocolate, dairy and coffee industry, the group can come under scrutiny from some agencies and environment groups that can give rise to the following potential risk conflicts:
- Wrongly accusing the company of promoting deforestation in some countries and causing harm to the environment. A similar case happened when Green Peace accused us of promoting deforestation in Indonesia.
- Company can be accused of promoting ‘unhealthy’ products such as chocolates which promote obesity.
- Activists creating videos that allege wrong doings and accuse Nestle of being an irresponsible company. (Greenpeace case)
- The resulting heat from the accusations could affect the supply chain, as the supply of coffee might reduced in certain regions due to protests.
- This might cause the price of coffee to go up in the international markets.
- The resulting speculation in the Wall Street will further put pressure on the prices, and this would put a lot of strain in the supply chain.
- In the regions, where Nestle buys through dealers, there might be some supply concerns.
- There might be some conflicts between the farmers and the Nestle team, when they think that they are being ‘exploited’ by Nestle due to false propaganda.
- Nestlé’s social media pages might be targeted by groups such as Greenpeace, as they did in the past.
However, these are only concerns. Nestle brand is strong enough to face any oppositions, and the company is confident of defending itself against any group.
CASE STUDY QUESTIONS:
- Which one of the ten risks impacts Nestles the greatest, by evidence of the case study? Student is to list the risk element and then explain why they chose it in 500 words.
- What is Nestlé’s largest coffee risk? How would you mitigate it.
- Student must respond in 500 words.