Question:
Disucss about the effectiveness of Distribution and Transportation in fulfilling the Objectives and Goals of Nestle.
The movement of raw materials, finished products animals, and people highlight the concept of transport and distribution. With the help of transport and distribution, the business organizations move the product from one to another using various modes of transportation. Space, cable, rail, pipeline, water, and road are the major modes of transportation. Management of people, operations, infrastructure, and vehicles are the key features of transport and distribution. From the industrial perspectives, transport and distribution are defined as the delivery of products and materials at the right time to the customers (Payaud, 2014).
This report highlights the effectiveness of distribution and transportation in fulfilling the objectives and goals of Nestle.
Nestle is one of the internationally recognized Health, Wellness and Nutrition Company that dates back its origin in 1866 in Switzerland. Since the establishment, the company has expanded globally to countries such as the United Kingdom, the United States, Canada, and Asia. Considering the mission of the company “Good Food, Good Life”, the company provides highly nutritious food and beverage to the customers. Frozen desserts, meals, pet care food, chocolates, ice creams, coffee, wafers, beverages, and confectionery are some of the most popular brands of Nestle. The company generated an annual revenue of 9.066 billion in 2015 that was comparatively lower from the profit generated in 2014, that was, approximately 14.456 (“Nestle”, 2017).
Within the cultural category, Nestle ranked within the top 10 as one of the most admired and popular companies in 2013. Since the establishment of the company, the company has always strived to enhance the life of the customers by providing them with highly nutritious and healthy food. The company has developed their products with the aim of helping and caring for the customers and their family. Therefore, the main motto of the company is to support and encourage people in leading a healthy life. One of the core values of Nestle is respect. The company believes in respecting their customers, the future generation along with the surrounding environment, global diversity and culture. However, Mondelez International Inc. Danone, Mars, and Cadbury are the major competitors of Nestle (“Nestle”, 2017).
Analysing the effectiveness of transport capability of Nestle
From the daily perspectives, from over 1600 warehouses, Nestle transports and distributes an estimated 140,000 tons of products to the consumer markets (Sethi, 2012). Nestle distributes and transports the raw and finished products in collaboration with the logistics that travels approximately 270 times regularly around the world. The Nestle products are generally transported to the customers in the end after being distributed from the factory to the distribution centres. Nestle is able to analyse the environmental performance and enhance the efficiency of the network by decreasing the level of noise, traffic congestion, emission of greenhouse gases, mileage and consumption of fuel (Pfitzer, Bockstette & Stamp, 2013).
Distribution and Transportation Approach by Nestle
Nestle has developed the distribution and transportation approach according to the environmental sustainability. The main concern of the approach includes:
Increasing the use of vehicles, analysing the network of the strategic distribution along with minimizing the rate of empty transportation are some of the methods of optimizing the performance of the company (Smith, 2012). However, route planning is one of the ongoing processes of optimizing the fleet operations for Nestle. Based on the sustainable business approach by Nestle, the company aim towards eliminating the traditional modes of transportation and use rail or short-sea freight (Biswas et al., 2013). For example, Nestle aim towards mitigating the use of fossil fuels but increasing the use of natural gases in order to reduce the adverse environmental impact of transportation. From the warehouse perspective, Nestle aims towards reducing the rate of energy consumption along with selecting an alternative source of renewable energy. Additionally, Nestle also aims towards developing and implementing new distribution and transportation technologies that includes unique and innovative ideas that will help the company to ensure effective environmental improvements (Rahman, 2017).
Free Onboard Vessels are used by Nestle to transport and distribute their products from warehouses to respective destinations. The International Chamber of Commerce defines Free Onboard Vessels a mixture that enforces the seller to bring the goods from the port along with clearing the goods for export and confirming that the products are loaded onto the ship that will take it to the buyer (Dolley-Sonneville, Romeo & Melkoumian, 2013). The buyer is able to determine the risk only when the goods have cleared the railing process. According to the concept of Free Onboard Vessels, Nestle transports the product that needs to be exported which is then loaded onto the vessel selected by the buyer. All the costs and risks are transferred to the buyer, once the products are loaded to the vessel by Nestle.
Figure 1: Incoterms used by Nestle
(Source: Rojas-Rueda et al., 2012)
Nestle selected the carrier for transportation of the raw and finished products based on three main factors. The factors include increasing the efficiency of transportation, reduction the emission greenhouse gases and decreasing the cost of transportation and distribution. The significance of the aforementioned factors in selecting the most suitable factors are discussed below.
Nestle aims towards implementing a more sustainable business approach by reducing the emission of greenhouse gases while transporting and distributing their raw materials or finished products (Rabl & Nazelle, 2012). Therefore, Nestle has decided to the long distance transportation and distribution of their products through sea or rail instead of roads. This approach or modal shift will allow Nestle to reduce the emission of greenhouse gases along with avoiding traffic congestion and increasing the efficiency. By 2016, according to the EU Marco Polo Project initiated by Nestle, the company aim towards transporting and distributing 360,000 tons of pet care, water, and cereal products through rail instead of the road. This initiative will allow Nestle to withdraw almost 5000 trucks annually. In accordance with the initiative, Nestle is going to take the advantage of the rail connections between Italy, Germany, Slovakia, and France. Successful and effective execution of the strategy will allow Nestle to save approximately £2.8 million in the coming three years (Maizlish et al., 2013).
Nestle aims towards launching another project named Green Alps Project under which the company proposes to distribute the raw materials and products between Italy and France solely through the train. The successful execution of the project will help in reducing approximately 2.3 million greenhouse gases, as 2800 trucks will be taken off the road thereby saving £750,000 (Rojas-Rueda et al., 2012).
Nestle currently has approximately 2000 fleet of trucks that are used for distributing and delivering pizza and ice cream to the customers along with using several technological advancements that are used for the freezer cabinets. Eutectic freezer plates are used while constructing the new trucks. This allows the trucks to cool overnight when the trucks are stationed in the distribution center. Additionally, for reducing the idling time of the trucks GPS system such as Telematics are installed within the trucks. The installation of Telematics has helped Nestle to reduce the idling time of the trucks by 32% in the last two years thereby, saving almost 250,000 gallons of fuels. Additionally, the company has also increased the environmental and safety efficiency programs for the drivers (Ellison, Greaves & Hensher, 2013).
With the aim of reducing the emission of greenhouse gases such as carbon dioxide, Nestle has continuously explored other means of using environmentally friendly fuels. In accordance with the aim of reducing the emission of greenhouse gases, the water segment of Nestle in North America has approximately 28 trucks that are powered by gas. By the end of 2016, Nestle is also aiming towards maximising the propane driven trucks by 200. Moreover, in Italy, Nestle has agreed that an estimated 15 trucks will use liquefied natural gas while distributing and transporting the products. By the end of 2016, the Nestle Waters of Thailand aims towards maximising the number of trucks that will use natural gas (Lee, Speight & Loyalka, 2014).
The main components of carrier relationship management include optimizing the use of vehicles and planning of the route along with reducing the cost and adverse environmental impact by mitigating the use of empty trucks. As commented by Han & Murphy (2012), trucks with limited loads are inefficient and costly. Therefore, Nestle is aiming towards utilizing the entire capacity of the trucks while distribution and transportation of products. The maximum volume and weight of the product limit the total load carried by the truck at any time. However, exceeding the total weight of the load thereby reduces the distribution and transportation cost by $5 million. This eventually reduces in decreasing an estimated 29,000 tons of greenhouse gases annually. Nestle is aiming towards ensuring that each vehicle leaving the loading site are completely full in order to decrease the emission of greenhouse gases by making an effort of reducing the environmental pollution. In order to increase the backhauling, Nestle has combined the outbound and inbound trucks along with optimizing the loads planning and routes by the distribution and transportation management. Additionally, Nestle shares the transportation facilities with partners such as suppliers, manufacturers, and retailers (Lee, Speight & Loyalka, 2014).
Effective use of the delivery vehicles is ensured by Nestle with adequate cooperation from the suppliers and the customers. Therefore, the company has ensured that after delivering the product, the delivery trucks of Nestle does not travel empty. As a result, Nestle has installed transport control centres. The installation of transport control centres provided an opportunity for Nestle to visualize the transportation circuits thereby, preventing the travelling of empty trucks after delivering the products. Additionally, Nestle has installed the circuit at a global scale in order to enhance the use of delivery trucks and containers. After installation of the transport control centre, 10 distribution channels of Nestle has been redesigned globally in order to enhance the efficiency of the distribution and transport efficiency. For example, Nestle has established only one company for packaging of the raw materials, distribution centre and import and export warehouse in the Middle East. This gave rise to synchronized transportation along with reduced empty trips by the trucks. Approximately 2000 tons of emitted carbon dioxide is reduced due to Nestlé’s redesigned distribution and transportation networks (Rodrigues et al., 2014).
Nestle is the owner of the largest fleet in the United States. This is because Nestle directly distributes, delivers and transports frozen products and water to offices, stores, and residents. Considering the optimization perspective, pizza and ice cream are directly transported from the store. The implementation of the approach is aimed towards recognizing new distribution and route planning thereby, saving the fuel consumption by 3.7 million litres annually (McKinnon, 2012).
Conclusion
In this paper, it can be concluded that transport and distribution aim towards delivering the products and materials to the target customers, business and government. The effective warehousing, trained workers and managing the distribution appropriately determine the success of transport and distribution. The transport and distribution system includes the combined effort of the various stakeholders such as the carriers, planners, transport managers and the employees. Therefore, the distribution and transportation system implemented by Nestle is both effective and efficient. It can also be concluded that Nestle has successfully invested in various programs and projects in order to enhance the transportation standard. Reducing the emission of carbon dioxide along with the operational cost are some of the steps undertaken by Nestle to increase the efficiency of the distribution and transportation method. Moreover, Nestle has undertaken several other initiatives of improving the distribution and transportation. The initiative includes optimizing the using of the vehicle capacity along with cutting down the environmental pollution by prohibiting the use of empty trucks. Nestle has also taken suitable measures for cutting down the operational costs by improving the distribution networks and optimizing the planning route of distribution of the goods
References
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