Operations management is crucial in development and mastering for current and aspiring leaders. Its main focus is on the design and management of products/services, processes and supply chains. I take a look at a Nestle case study, sustainability, and water. Nestle is the largest food and Beverages Company in the world with over 250,000 employees (Anderson, Anderson, & Parker, 2013). Regarding ownership, theres the Nestle SA that is equivalent to a public limited company, act as the holding company and pays dividends to the shareholders. Then here is the Nestle UK, private limited company, which is under Nestle SA but has its directors and management since it has a decentralized system of operation.
Nestle is guided by values in its path of attaining sustainability while still making profits. These values include the preference of long-term development over short-term profits, development of strong relationships with other parties, provision of necessary product information to consumers and encouragement to the employees in following these values (Anderson, Anderson, & Parker, 2013). It is through these values that Nestle has risen to the forefront in protecting the environment.
The sustainability and water case study can be related to demand, capability, inventory, and supply.
Human beings desire to have goods and services that seem important to them. Companies like Nestle come along to provide those products. As in this case, Nestle works towards sustainable development with the aim to increase worlds access to quality food without any compromise on the environment. The demand for food and water is always high given the increasing population in the world. There have been challenges in the process. However, Nestle Waters has grown organically and by acquisition. Demand for water and quality food products in some areas have seen Nestle get various acquisitions over the years such that Vittel, Perrier, and Pellegrino. This has facilitated the popularity expansion of Nestle Waters in over 130 counties and other states even for the other Nestle products.
In our case study, products have been grouped and sales made on the products in a given period of study converted into proportions. The beverages sales went up to 26% similarly to milk products, nutrition, and ice cream products. Prepared dishes and cooking aids took 18%, pet care 12%, chocolate, confectionary, and biscuits 12% while pharmaceutical products took 6% (Anderson, Anderson, & Parker, 2013). Different products have different demand. The sales today can be used to predict tomorrows but only if the right measures are used. If incorrect predictions are made, the company could count losses or disappoint the customers in case of low production. In the cases where accurate demand forecasts are given, the financial success of the business is attained.
Capacity is the maximum level of output that a company can produce. It is every companys desire to produce products that match the demand in the market. However, this is not always attained. The operations managers get involved in managing demand fluctuations in the process. Nestle produces various products, exceeding 100 brands that range from widely known products such as Nesquik and Nescafe to others like Golden Grahams and Friskies which are least known (Anderson, Anderson, & Parker, 2013). The demand for some of the products is high enabling huge turnovers.
During the production of goods, it is known if there will be an undersupply or oversupply of products. In our case study, the major products are water and food. If there is an over production of the food products, high losses would be encountered, since they have a short expiration period, which would minimize profits contrary to the companys objective. If there is more demand for the products such hat there is an under population, then to correct the capacity level of Nestle, time and money would be lost. This calls for a comprehensive study, balance of capacity and inventory, and development of a capacity plan.
In developing a capacity plan, certain issues need to be addressed. They include the variability of the customer demand, the amount of inventory a company can hold, the expenses of acquiring and maintaining capacity, the waiting period, the time period to build or expand a capacity (Anderson, Anderson, & Parker, 2013). If the waiting period is long, customers might change their perception on the products or even shift their preferences to other products such that even after providing the products after the waiting period, there would be no purchases made.
All forms of products intended for sale from any time are referred to as the inventory. The management of inventory is a way of managing variations in demand. When inventory is used d to manage the demand fluctuation, it is easy to keep the companys capacity steady and efficient. Maintaining an inventory is costly and even risky given that the inventory can spoil. In our case, if a retailer has to wait for long before getting the supply of Nestle products, he/she might consider other suppliers. For the inventory to be effective, certain policies could be used to minimize any losses. This include newsvendor, continuous and periodic review inventory policy. The Nestle group require primary products from the agriculturists. Keeping inventory will ease the process of agricultural supply to the company and the supply of manufactured goods to the distributors.
Balancing inventory help minimize losses and overinvestments. Since there can never be accurate predictions on demand, inventory and capacity can be used adjust the estimates. A company needs to have sufficient inventory and additional capacity whenever theres need for additional products. When inventory is held in the process, the products can be available when the customer needs them (Anderson, Anderson, & Parker, 2013). In the Nestle case study, there are areas where water is naturally available, but a consumer may need the Nester water. The capacity level could be low such that no water is available. This would disappoint the consumer but if an inventory was available, meeting customers demand. In another instance, a system in the manufacturing might fail. The supply chain can only continue if some functions in the company.
Given a supply chain, Nestle is in the secondary sector which is the manufacturing stage.
Distribution, retailing; tertiary production
Manufacturing; secondary production
Agriculture; primary products.
The first step in the agricultural produce where Nestle purchases primary products such as coffee beans from the farmers. These primary products are the most important part as the other sections are dependent them. Next is the manufacturing stage that Nestle covers. Once the products are acquired, they are processed in desired output in this stage. This include products like instant coffee from the coffee beans acquired earlier. The manufacturing stage requires other factors such as machinery, human resources and other infrastructure to make the process successful. The last stage is the distribution of the manufactured goods to the consumers. Nestle sells the manufactured goods to distributors and retailers who in return offer them to the consumers hence completing the supply cycle.
A strong supply chain is vital to profitability and survival of any business. Is ensure raw materials are available and accessible and that the final products have a market at the very end. Certain steps can be taken to improve the supply chain. Communication is key. The company can connect with the suppliers on the customer's demand and the amount of inventory present. This help to project the amount of production such that losses are eliminated, and profit maximized. A company could also use the vendor-managed inventory where the company preserve shelf space for the supplier but first provide customers point of sale data (Anderson, Anderson, & Parker, 2013). This helps the supplier deliver products just when necessary.
For this to work in the case study, there needs to be cooperation between those in the agriculture sector, distributors, and the Nestle Company. For instance, taking the Nestle Waters, water is a basic need in the world. It is known that there is enough water to cater for everyone in the world, but theres only one problem. Water is not always present where needed; some areas are in arid areas that water cannot be accessed easily. When Nestle Waters is in operation, it strives to cover this gap. The demand for water is high in those areas compared to others. For the areas where water is not much of a problem, the supply amounts need to be calculated. The communication between /distributors retailers and Nestle would help in estimating the capacity of water to produce and supply. One of Nestle values, developing long-term commitments and relationships with suppliers and customers, assist in ensuring a steady supply cycle since trust is built on all parties.
Anderson, M. A., Anderson, E. J., & Parker, G. (2013). Operations Management For Dummies.http://businesscasestudies.co.uk/case-studies/by-topic/operations.html
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