1. Supply Chain of Nescafe in India
– A Study
Term Paper submitted
In partial fulfilment of the requirement for the Degree
of
Master of Business Administration
By
Bhaskar Kumar
Admission No. 14MB000001
Department of Management Studies
Indian School of Mines, Dhanbad
July 2015

2. DECLARATION
I, the undersigned, hereby declare that the Project Report entitled “Supply Chain of Nescafe
in India – A Study” written and submitted by me to the DEPARTRMENT OF
MANAGEMENT STUDIES, INDIAN SCHOOL OF MINES, DHANBAD in partial
fulfilment of the requirements for the award of degree of MASTER OF BUSINESS
ADMINISTRATION , is my original work and the conclusion drawn therein are based on
the material collected by myself.
Place: Dhanbad (Bhaskar Kumar)
Date:

3. ACKNOWLEDGMENT
I am a student of 4rd semester of Masters of Business Administration in INDIAN SCHOOL
OF MINES, DHANBAD. Term Paper is a golden opportunity for learning and exposure. I
would like to express my heartfelt gratitude to faculty members, as without their active
guidance, cooperation and encouragement, this project would not have been a success.
.
Bhaskar Kumar

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CHAPTER 1
1.1 INTRODUCTION
Supply chains are basic functions to trade for movement of raw materials, intermediate and
finished products efficiently from origin to destination and thus enabling firms to compete in
markets successfully.(Shister, 2005).
In order to achieve and maintain competitive advantage firms adopted outbound logistics
during the 1960s and 1970s. The focus of physical distribution was on set of interrelated
activities that included warehousing, transportation, distribution, inventory levels, materials
handling and distribution packaging to ensure the efficient delivery of finished goods to
customers (Langley et al., 2008). In 1980s the firms also started focusing upon inbound
logistics (materials management). Thus business logistics encompassed inbound as well as
outbound logistics. It provided firms an opportunity to plan and execute operations for
procurement of raw materials from suppliers to delivery of finished goods to the consumers.
Since around 1990, companies across a wide variety of industries have become increasingly
interested in exploring the opportunities for competitive advantage that can be gained by
leveraging the core competence and innovative capabilities to be found among network of
business partners.
In order to create competitive advantage through supply chain efficiency for improving their
market shares, the problem arises whether all functions should be carried out by a single
organisation (vertical integration) or whether each function should be outsourced to other
specialist firm in order to strengthen core competencies. Various firms in supply chain enjoy
specialization and economy of scale through segmentation of supply chain activities (Trkman
et al., but they often tend to maximize their own profitability without considering overall
performance of entire supply chain.
For example, in Indian context, several supply chains include private sector as well as public
sector firms.The main goal of the private sector is to maximise profit, while that of public
sector is social welfare , and so achieving overall efficiency becomes complex and difficult.
Maintaining efficiency and effectiveness is management’s main objective. The effectiveness
of a supply chain can be defined as “The degree to which the desired level of service is

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provided to meet stated goals and objectives” (Pienaar, 2009a), while efficiency may be
expressed as “a measure of the way that allocation of resources maximises outputs with the
given inputs and technology” (Pienaar,2009a).
Supply Chain management becomes one of the vital functions of business organisations
venturing in food and beverage sector due to short lead times rendered by spoilage of
products. For Example, In Nestle 90% of operational (handling) cost is incurred by Supply
Chain Department. F&B sector is a part of FMCG industry, so Supply Chains must be
responsive as well as efficient. Responsiveness of supply chain affects Sales of product
directly. According to an estimate about half of all food grown is lost or wasted before and
after it reaches the consumer (Lundqvistet al. 2008). Robust and responsive supply chain is
required to minimise wastage raw materials for the industry. Efficiency affects landing cost
of goods for various firms of supply chain.
1.2 Supply Chain of FMCG Sector in Indian Context
The Indian logistics sector comprises the entire inbound and outbound segments of the
manufacturing and service supply chains. Although holistic approach of infrastructural
development has been initiated by the government but still it is one of the most prominent
causes of bottlenecks in growth of Industries. Proper supply chain management provides
capabilities to overcome the disadvantages of logistic infrastructure in short run while
enabling the businesses to develop competitive advantages in long run.
Logistics in India typically strives for reducing transportation costs primarily due to
concentration of manufacturing in small geographical regions and distribution of goods in
scattered and large areas. Apart from this, lack of technology and inadequate infrastructure
also adds to the cause. Movement of fright is now slowly shifting to Roads from Rail. The
rise of large third party logistics (3PL) carriers like DHL and FedEx and the expansion of
domestic networks of Indian firms like Gati and Shreyas Shipping is also transforming the
nature of services and the business practices across the sector. These firms provide end to end
solutions for supply chain partners for various industries. Typically in FMCG Sector,
Manufacturing firms have started to reduce the number of Distributors so as to increase the
reach and capacity and consequently the returns to distributors. This has resulted in increase
in capability and investment in production technology and leveraging effective managerial
practices.

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Technology in supply chain has been upgraded over time enabling FMCG firms like Nestle to
monitor customer Take-Offs in a better way. But still lack of penetration of IT for
management of Rural and semi-urban markets implies that scope for change is immense. Of
late, companies have successfully implemented penetration of hand held devices for order
processing and tracking, materials handling and product tracking in downstream supply chain
that has resulted in better use of IT in decision making. Mobile technologies is being used for
better coordination between upstream and downstream part of supply chain, it also renders
vital information for real time decision making.
The agri-business sector’s supply chain, has witnessed significant changes with increase in
investment for cold-chains across the country. By cold-chains, vegetables, fruits, processed
milk products are being transported across the country. Milk grid is capable of picking up
and delivery of liquid milk from and to remote and rural areas frequently. Here MNCs like
Nestle and cooperatives like AMUL are significantly increasing the size of the distribution
network and also investing in CSR activities to build social capital – a must for growth in
developing economies like India (Chandra and Tirupati, 2003).
Proper warehousing plays an important role in ensuring quality of products to consumers.
FMCG firms faces challenge of maintaining proper storage of finished/semi finished products
at various points in supply chain as warehousing is generally provided by third party which
have lack proper facilities due to lack of investment and infrastructure. Typical warehouses in
india lack capacity and technology for monitoring, stacking and handling products. Cold
storages and allied machinery are not available as per requirement. Still most of operations
are carried out manually as deployment of technology and mechanisation of operations is not
feasible due to poor and irregular power supply.
1.3 Overview of supply chain of coffee Industry
Coffee is one of the world’s most valuble agricultural commodities and is widely traded
across the globe. (Giovannucci et al., 2008) and is a source of livelihood for around 60
millions of smallholders and farm workers worldwide (Ponte,2002). Corporate firms face
challenge of operating global supply chain profitably and CSR (corporate social
responsibility) plays important part to ensure it. While the market and demand for
differentiated coffees is still growing (Petit, 2007; Weber, 2007), to ensure healthy and
sustinable producer-buyer relationship speciality coffee trade requites short global value
chains (GVC) (Lewin et al., 2004).

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Coffee plant requires hot and tropical weather conditions for growth. Coffee farms are
generally small (3 hectares or less) and is owned and managed by small holders.
The supply chain of coffee is complex and generally involves many stakeholders. It is varies
form country to country but typically includes:
 Growers – These are farmers usually working on a very small plot of land of just one
or two hectares. Most of them also perform primary operations such as drying
themselves.
 Intermediaries –In coffee supply chain intermediaries are involved at various stages.
They buy coffee beans after the harvest and do some primary processing before
selling it again to other intermediaries. Some intermediaries collect small volume of
product and sell or transport sufficient quantity to processors or dealers. Thus there
may be five types of intermediary links in the chain.
 Processors – Processors convert coffee cherries to green coffee beans. A processor
may be a individual farmer or a farmer’s cooperative that pools resources from
farmers to buy processing equipment and machinery.
 Government agencies - In some countries government act as intermediary by buying
produce from farmers and then selling it at regulated rates to other supply chain

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entities. This is done by government to regulate trade and control prices of coffee.
This is not applicable to coffee industry in India.
 Exporters - Exporters buy from local cooperatives or auctions and then sell it to
dealers. Their knowledge about crop and local area enables them to guarantee the
quality of coffee.
 Brokers/ Dealers – They are responsible for supply the coffee beans to the roasters.
They ensure timely supply of shipment and quality and quantity of product. The price
is determined by negotiation and agreement between Broker and rosters.
 Roasters – roaster are generally firms which processes green coffee beans to products
for consumers. Companies like Nestle, Bru, CCD buy coffee beans from brokers,
process it and add value to the product by advertising packaging branding and
marketing it.
 Retailers – Sellers of coffee product to consumers. They may be retail outlets, hotel,
catering organisations, etc.
Apart from entities mentioned above there exists more of them between roasters and retailers.
A supply chain of coffee industry is efficient and effective only when various factors related
structuring and planning of product distribution, terms and conditions for payment and
arrangements for handling, and storing the product. Long term business relationship can
foster only if fair to stakeholders are taken into consideration. Different and complex
relationships exists between organisations involved in the separate stages of the chain -
whether it is in the trading agreement is implemented ensuring that parties are getting a fair
deal. Apart from this information flow must be timely and transparent. MNCs like Nestle
stress upon rural development and support local society to achieve corporate objectives.
Business practices needs to ensure environmental sustainability for achieving profitability
goals in long run.
1.4 ReasonFor Selecting the Topic
Nescafé coffee was launched in India in 1963.Itis the leading soluble coffee brand in the
country. Products are available in different sizes and at different price points, from affordable
single serve sachets to premium blends.

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As an employee of Nestle India ltd. , I am working for value addition to sales and distribution
of various products of Nestle. Nescafe is sourced, manufactured and sold in India as well as
exported to many other countries. The supply chain forms the backbone for success of the
brand. Nescafe does not have exclusive downstream supply chain, that is, Nescafe reaches its
consumer in the same way as other products of nestle. Nestle supports upstream part of
supply chain by executing various programs that supports farmers and local small scale
coffee businesses. The Supply Chain of Nescafe is affected by various factors. It needs to be
more effective and efficient in order to reduce wastage, maintain quality , and penetrate more
markets.
1.5 Objective of the study
The objective of the study is based on the strategy adopted by Nestle India Ltd. for managing
supply chain processes of Nescafe. Supply chain function forms backbone of coffee business
for the company in fulfilling the customer demand. Various steps taken and activities carried
out by company for making is SCM function more efficient and effective is discussed in this
paper.
Primary Objective:-
 Analysis of Supply chain Management of Nescafe in India.
Secondary Objective: -
 Process views of Supply Chain.
 Social welfare programs for sustainability of Supply Chain.
 Major issues and challenges with coffee supply chain.

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CHAPTER 2
2.1 LITERATURE REVIEW
References from various related projects and journals were taken into consideration.
Supply chains are fundamental to businesses in order to move raw materials, semi-finished
and finished products efficiently from origin to destination and thus enabling firms to
compete successfully (Shister, 2005). Chow & Heaver (1999) defines supply chain as “the
collection of all producers, suppliers, distributors, retailers and transportation, information
and other logistics providers that are involved in providing goods to end consumers. A supply
chain includes both the internal and external participants for the firm”.
The integration of key business processes from original supplier through to end user, to
provide products, services and information that add value for customers and other
stakeholders. (The Global Supply Chain Forum, 2009). One of the most important objectives
is to improve company’s competitive position in the market and to sustain that position in
spite of fierce competition and changing customer needs (Langley et al., 2008).
Simchi-Levi & Kaminsky(2008) states that supply chain integration is best achieved by
integrating the front end of the supply chain, customer demand, to the back end of the supply
chain, the production and manufacturing portion of the supply chain.
One of the trends observed in global transportation is that many countries have been
deregulating and liberalising various aspects of their transport systems.(Department of Public
Enterprises, 2000). Indian government initiated liberalisation in 1991, and after that many
policies were implemented to liberalise logistics sector.
Push-based supply chain systems stresses upon deciding when and how much of a given
product must be kept in storage onto the manufacturing firm. Inventory and transportation for
manufacturing and distribution decisions are based on long-term forecasts of demand and the
current levels of stock on-hand. The manufacturing firm controls and determines the core
factors in the supply process in a push-based supply chain (Pienaar, 2009c).
In a pull-based supply chain, warehousing function controls and determines when and how
much of a given product is required. The manufacturing and distribution decisions are

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demand driven. Coordination of pull-based supply chains is determined by actual demand
and not by forecasted demand. It results in a substantial reduction in inventory level. (in a
pure pull system, the firm strives to carry zero product inventory and only starts working as
soon as orders are received) (Pienaar,2009c).
Supply chain of FMCG industry requires close integration of internal functions within a firm
and efficient and effective linkages with channel member’s external operations.(Lee, 2000).
The supply chains must not remain static, rather chains must evolve continuously in
accordance with the changing customer needs and market (Little, 1999).
Availability of road infrastructure (it includes paths, tracks and feeder roads), transport
services and storage facilities increases mobility and improves production. (Gebresenbet and
Oodally, 2005).
The reduction of spoilage and damages improves the marketing value of the product. To
minimise damages, it is necessary to facilitate exclusive management for each variety of
product, adequate processing, and storage facilities (Gebresenbet and Oodally, 2005).
For ensuring food safety and quality, development, implementation and maintenance tracing
system is very important. It can be achieved by increasing in transparency of food supply
chain. (Gebresenbet et al., 2011, Smith et al., 2005).
Since 1990’s, flow of goods has tremendously increased, not due to the increase in the
amount of goods, but due to other factors such as centralization and specialization of
production systems. Apart from these cause, Globalization of marketing has also contributed
to the fact. (Gebresenbet and Ljungberg, 2001).
In addition to geographical distance, locally produced food is also considered as food which
meets a number of criteria such as employment, fair trading relations, cultural and
environmental issues, producer profitability, and health. (Bosona et al., 2011).
Currently it is observed that customers are more inclined to purchase the local food as it
gives them pleasure (hedonistic reason) and also satisfies their quality needs and contribute to
their satisfaction as they feel contributing positively to the ecosystem (altruistic reason)
(Brown et al.2009; Bosona and Gebresenbet, 2011).

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CHAPTER 3
3.1 Nestle Continuous Excellence (NCE)
Nestle India Ltd. strives for execution of NCE throughout the supply chain of its businesses.
It was introduced by CEO of Nestle, Mr. Paul Bulke. Its objective is to engage everyone’s
heart and mind in order to focus upon consumer driven war on waste.
Objective of NCE is - 0 Waste, 1 Team, 100% engagement.
3C’s of NCE:
 Delight Customer
 Deliver Competitive Advantage
 Excelling in Compliance
Nestle strives to follow NCE throughout the supply chain to enable the organisation and
channel partners to achieve the 3 C’s
3.2 Upstream Supply Chain of Nescafe
The NESCAFÉ Plan
Nestlé launched the NESCAFÉ Plan, as part of its global initiative, in India in the year 2012.
The plan aims to bring under one leaf Nestlé’s commitment on coffee farming, production
and consumption. The launch was followed by an inauguration of a Coffee demonstration
farm in Coorg. This coffee demonstration farm in India intends to help farmers improve the
quality, productivity and sustainability of their crops across the states of Karnataka, Kerala
and Tamil Nadu to develop their agricultural practices as demand for NESCAFÉ soluble
coffee grows in the country. Furthermore, Nestlé's research and development teams aim to
provide farmers with high-yielding, disease resistant plantlets suitable for Indian conditions.
By working closely with Indian coffee farmers for training and development and ensuring
competitive prices, transparency and traceability, we are seeking to source coffee sustainably.
Under this plan more than 1200 farmers were given training. Coorg and Chikmagalur in
Karnataka and Waynad in Kerala
Nestle sources coffee beans from 26 (2010) suppliers in India.

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Nestle India Ltd. buys’ green coffee beans from roasters’. It is itself a processed product.
Primary operations that are coffee are carried out by farmers and smallholders are discussed
below.
 Growing
Coffee plant grows best in a humid, warm climate with a relatively stable temperaturearound
27ºC all year round. In India coffee plantations are therefore found in south Indian states of
Karnataka , Kerala, and Tamilnadu and North-eastern states. Mainly Arabica and Robusta
species are sourced by Nestle.
 Processing
For the fruit to ripen in to red coffee ³Cherries´It takes about 6 to 8 months for Arabica
Coffee and 11 months for Robusta Coffee after the coffee trees begin to produce fruit, for
fruit to ripen in to red coffee Cherries. Coffee cherries picked from the plant goes through
many processes to end as the saleable product - the green coffee bean.
1. Picking
Coffee is picked up by hand. Coffee cherries become red when they are ripe, but all cherries
do not ripen at same time. So, an only red cherry has to be picked up at harvest time to get
better quality coffee. This job is highly labour intensive as farm has to be visited repeatedly
for getting red cherries. Therefore some farmers prefer to strip both ripe and unripe coffee in
one visit thereby compromising over quality of overall produce.
2. Drying and hulling
A coffee cherry consists of bean, skin, and pulp. Bean has to be separated from rest of cherry.
One cherry contains two beans. The operation carried out to separate beans is known as
‘hulling’. After hulling; beans has to be dried either by sun rays or by mechanical dryers.
Small farmers dry beans naturally by sun.
3. Sorting, grading and packing
After drying; broken beans, sieves and other unwanted matter are separated by sorting.
Sorting is done manually or by machines. Then beans are again segregated according to their
physical characteristics. This is known as ‘grading’. Then similar graded beans are packed

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together in a sack. 1 sack usually weights 60 kg. Nestle procurement professionals always
collect coffee beans which are of good quality. They do not accept insect damaged beans,
immature beans and broken beans.
4. Bulking
After performing initial operations farmers and small holder sell sacks of coffee to a
middleman. These are generally coffee merchants who are having small godown for storage
of sacks. Nestle buys large quantity of beans from merchants. Coffee Merchants bulk
together many small sacks of beans and form a batch of necessary amount. Bulking of only
same grade of beans is done together.
All these steps are carried out by the suppliers according to the desired standards and
requirement of Nestle. At Nanjangud Factory, four more operations are carried out on coffee
beans before they are ready for being used in production of various coffee products. These
operations are fully automated and are carried out by machines under supervision of experts
and machine operators.
5. Blending
Coffee blending is done by experts which have experience to decide which grade of coffee
are to be mixed together in order to meet the taste of customer. Quality and taste of each and
every variety of coffee mix has to be same and as per standards. As coffee beans are from
various origins and every batch is not same, so proper blending is very important.
6. Roasting
The coffee beans reaching factories are green and unfit for preparation of a coffee mix. Green
beans are roasted under controlled environment. Roasting is very important to have desired
aroma out of green beans. Green beans are roasted within 180 degree C to 240 degree C for
3 to 12 minutes. Different time intervals and temperature of roasting are used to prepare
different types of coffee products. When the desired aroma and is achieved, the beans are
removed from the heating machines and left to cool. Roasted beans are brown in colour and
have characteristic aroma of coffee. Roasted coffee beans are ready to be processed further
for making variety of coffee products manufactured by nestle under the Brand Nescafe.
7. Grinding:

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After roasting coffee beans, it is ground to convert coffee in powder form. Like other
processing, grinding is also important as taste and aroma of coffee depends on grinding.
8. Evaporation and spray drying:
It is the last operation carried out on coffee before packaging. Evaporation and spray drying
is done to eliminate extra moisture from the grinded coffee beans.
3.2.1 Ensuring Supply of Quality Coffee Beans in India
Taste is the major attribute that consumers expect when they are enjoying a cup of Nescafe.
Consequently Nestle Factories perform cup tasting on each batch of green coffee supplied
and only accept coffee beans for processing when cup taste meets the expectations.
Nestle coffee factory in India, Nanjangud, was facing a serious problem: taste of coffee
supplied was not consistent, rejections were high, and suppliers were dissatisfied, not
understanding the Nestle requirements and getting reluctant to sell to Nestle.
Coffee for Nestle India is supplied by 25 traders who buy dried coffee cherries from
middlemen and farmers, then hulling and grading the beans in their curing plants. Like this,
the coffee batches are heterogeneous in quality.
The traders do not have facilities or experts to carry out cup tasting or to educate farmers
about good post-harvest practices. Therefore, in March 2007, Nestle Nanjangud set up 3
small field laboratories in the main coffee procurement districts and asked suppliers to get
their coffee batches pre-tasted at Nestle Field laboratories before supplying to Nestle.
This worked to a certain extent but most traders were still reluctant to pass their coffee
through the field lab and did not understand why Nestle was imposing this, while their other
customers do not care. Nanjangud Factory started a supplier development function for green
coffee by allocating dedicated staff. The experts are regularly visiting and educating
suppliers, giving feedback in case of rejections, encouraging suppliers to pass through Nestle
Field Labs and explaining root causes of cup taste deviations to traders and even to supplying
farmers
3.2.2 Sourcing of Chicory
Apart from coffee, chicory is an important ingredient for various coffee drinks. (For example,
Nescafe Sunrise has 30% chicory content). Chicory is a root crop used in various Nescafe

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blends. In India, the root is harvested in April/May, washed and cut to cubes, then dried in the
sun before being stored for year-round roasting. Chicory is supplied to Nestle by roasters /
extraction plants either as roasted cubes or liquor extract. The crop does not have a ready
market besides its usage in coffee, which is why contract farming organized by roasters is
very successful. Chicory is bought in India mostly by Nestle.
Gujarat had been the traditional area of chicory growing with a few key players controlling
the market. Supply disruption due to local weather conditions was a constant risk.
Therefore, in 2001 Nestle started developing new areas to cultivate chicory. This was no
easy task, since local farmers did not know the crop and chicory is competing for land with
wheat, garlic and tobacco.
The suppliers were trained on sowing, drying and roasting of chicory. Workshops were held
with farmers on good agricultural practices. One more region was then developed in Punjab.
Support was given to Paras Spices in 2005 to diversify into chicory roasting and to start
cultivation with local farmers. Line sowing was successfully introduced in Punjab as an
innovation in farming.
Currently Nestle is connected to more than 7500 farmers and 7 suppliers for procurement of
chicory.
3.2.3 Packaging
Green coffee
Beans from
suppliers
Warehouse
(Nanjangud)
Factory at
Nanjangud
(Packaging&
processing)

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Figure: Packaging and processing of Nescafe
Packaging protects food products from damage due to external environment and keeps them
safe till consumption by customer. Coffee is packaged by Nescafe in attractive jars and sachet
of various sizes. Basic objective of packaging is to ensure convenience in transportation,
protect product from damage, and Utilization of casing space. Apart from these objectives
packaging of coffee is done in such a way that it is attractive and easy to use for customers.
Nescafe sources jars and sachet from third party suppliers. Nestle does use any preservatives
not use any preservative for their coffee, so air tight foiling is done for keeping the coffee
fresh for long time. After packaging, labelling of jars is done.
3.3 Supply Chain of Nescafe - Process View
1. Cycle view
There are four cycles followed by Nescafe.
a) Customer order cycle: customers purchase Nescafe from Retailers.
b) Replenishment cycle: Retailers purchase Nescafe from cash distributors.
c) Manufacturer cycle: Manufactured Nescafe products are transported to Distribution centre
after invoicing.
Local Suppliers
(label,jar, sachet,
etc)

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d) Procurement cycle : Procurement of Raw materials (coffee beans) is periodic activity and
it is based upon inputs from Demand planning. Coffee beans are purchased from suppliers.
Ssupply occurs at the interface between two successive stages of the chain.
Fig: Cycle View
2. Push/Pull process
Nestle follows push based supply system. It is implemented through calculation of “Norms”.
Norms are discussed in detail later. Inventory level of Nescafe and other products at Cash
distributors and Distribution Centres are controlled by Nestle. Pull System is only prevalent
at penultimate node of supply chain i.e. retailers. As nestle is consumer off-take driven
organisation, so various merchandising and promotional activities are carried out by sales
team to increase demand dependent on pull system.

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Fig: Push/Pull View
3.4 Downstream Supply Chain of Nestle India
NESTLÉ India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by
its manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in
1989; Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997,
respectively; and Pantnagar (Uttarakhand), in 2006. In 2012, Nestlé India set up its 8th
manufacturing facility at Tahliwal (Himachal Pradesh).
The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales
and marketing activities. The NESTLÉ India’s Head Office is located in Gurgaon, Haryana.

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Fig: Location of Factories and Offices
There are 38 distribution centre located in every states capital and other big cities.
Distribution centre of Nestle operates on facilities provided by third party infrastructure.
More than 1600 Distributors are located in urban areas and rural and semi-urban areas are
covered by 6000 re-distributors.

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Fig: Downstream Supply Chain
Supply chain is relatively new function at Nestle India. It was formed in 1998. At Nestle
SCM have 6 sub functions. In eastern zone SCM department has 14 managers. Nescafe
Distribution is not exclusive. Nescafe products traverses through supply chain members just
like other products of Nestle (except chilled diary).
Supply chain department is divided into 6 sub-functions:
1) Category Demand Planner: It is responsible for demand forecasting of each
category of products. Over there are 7 CDP at head office. CDP of Beverages
looks after Nescafe. Demand is forecasted SKU wise for each distribution
centre.
2) Customer Service and distribution: It looks after key customer accounts and
facilitates distribution operation for them.
3) MIS Officer: It is responsible for handling SAP system and coordination with
IT department. Responsibility of MIS officer is generating various reports and
Analytics.
4) Distribution Resource Planner: DRP is responsible for allocation of unskilled
labour, Distribution Centre Staffing, DC layout, equipment and machinery
purchase planning.
5) Logistics And Budgeting: It is responsible for handling 3PLs (third Party
logistics)
6) Warehouse Manager: It is responsible for maintenance of warehouse facility.
Storage of products as per norms, maintaining FIFO , Implementation of
stacking rules, Safety standards for staff (Safe by Choice principles).

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3.4.1 Supply Chain Possesses
 OMC (Order Management System) is situated at every regional DC except Guahati.
(Delhi, Mumbai, Kolkata, Chennai, guahati). OMC is a centralized body which takes
order from DC’s SDS (SAR Distribution System Software) and uses SAP (ERP
system at Nestle). Order processing and billing for every State DC is done by OMC.
OMC generates orders based upon NORMS. Norms are prepared automatically based
mainly upon sales of every cash distributor.
 Nestle outsources its IT and networking functions to IBM worldwide. IBM is
responsible for providing network infrastructure, data warehouses and ERP
implementation and maintenance for nestle.
 Norms: Minimum quantity of stocks which needs to be there at CD pt. on the day of
Invoicing. . It is affected by factors such as LY, TY, Sales Plan, Festival, Season, etc.
 PED concept: Due to difference in taxes among states, cost of products varies from
state to state. So PED (price equivalent difference) is adjusted in invoice so as to keep
MRP of SKU equal throughout the country. It is implemented by OMC.
 MSP (Monthly Sales planning): MSP is planning for 5-18 months for each DC.
 Lead Time: Lead time calculation based upon availability of current stock at each DC.
It provides information for optimum dispatch timing of consignments from regional
DC to state DCs.
 OMC-DC-CD co-ordination:- It is ensured by Supply chain management department.
Timely delivery of order after invoicing is critical. It is also responsible for physical
loading stock to vehicles. It replenishes stock information (logical and automated
process).
 Generated Order = Norms – physical holding – In-transit
DC supply stocks to every CD. Timely and exact delivery of ordered stock is very
essential, it is ensured by CSP. CSP (customer service plan) is planning of next 18
days in advance. Order consignment is delivered at CD point from DC godown on
next day of invoicing.

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CHAPTER 4
Analysis
Nestle has adopted the policy of “Creating Shared value” (CSV) for development of Supply
chain partners.
Fig. Value Chain of Nescafe
CSV is applicable for Nescafe supply chain also. Nestle contributes to society and
environment by adopting fair and sustainable practices.
Like every cash crop, price of coffee bean is determined by market demand and regulated by
Coffee board of India. Nestlé India ltd is determined and willing to pay fair price for coffee
produce to farmers as good quality raw material is essential for business. Nestle advertises a
minimum base price for purchasing of coffee known as Nestlé price. It acts as a reference
level for farmers and compels middlemen to keep their prices competitive and fair for
farmers. Coffee farmers can sell their produce in many ways: they may sell to the next link of
the traditional supply chain, the collector or merchants, they may sell direct to manufacturer
like Nestlé. However, usually farmers in India are unable choose the method by which they

24. ii
sell their coffee as they have small farms and coffee beans are very less in quantity.Selling
directly to Nestle is attractive as farmers can receive above the market price. However, it is
not feasible for company to buy from individual farmers a few bags at a time.
Nestlé is pioneer of purchasing coffee beans directy from growers. In India, it is not possible
to purchase from most of smallholders due to procurement constraints. Nestlé operates in a
way that takes it as close to the farmers as possible.
Nestle promotes better agricultural practices, support rural development in line with local
priorities, and address supply chain issues from gender inequality to deforestation.
Apart from rural development, Nestle is also promoting Vender development by supporting
and training supply chain partners .
Issues and Challenges
- Overproduction
- Lead Time management
- Quality Maintenance throughout the SC
- Excess Inventory
- Seasonality
The Lean Supply Chain of Nescafe is ensured by NCE. NCE is generally used to identify
value- added activities. NCE is not only focusing on value- added and non value- added
activities but also improving cycle time of processes in supply chain.

25. ii
CHAPTER 5
Conclusion
Nescafe supply chain is well coordinated alignment between its supply chain partners. .
Coffee business is thriving because of strong distribution network, through which Nescafe
available in every part of our country. But Supply Chain of Nescafe in India is still in
developing stages as compared to that in developed Countries. This is mainly due to lack of
investment of other supply chain partners and poor infrastructure.
Findings
Nescafe is leading brand of country due to its robust supply chain. But it is facing stiff
competition from other brands and complexity of managing supply chain partners is
increasing. Although Creating Shared Values principal is fruitful in long run but it
also requires huge capital investment. CSV for coffee is still in initial stages as
compared to other businesses of nestle.
Limitation
 The study is restricted to a particular brand of a company.
 The facts and information are not sufficiently available as the company has not
been referred directly.
 The time was not sufficient to complete the study.
 The study is theoretical and qualitative.

26. ii
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 Minnich, Dennis. Efficiency and Responsivenessof Supply Chainsin theHigh-Tech Electronics
Industry-A SystemDynamics-Based Investigation.Diss.Universitätsbibliothek,2007.
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