Nestle Organizational Structure

INTRODUCTION

Nestle is a Swiss multinational nutritional and health-related consumer goods company headquartered in Vevey, Switzerland. It is the largest food company in the world. Nestle’s products include baby food, coffee, confectionery, bottled water, breakfast cereals, dairy products, ice cream, pet foods and snacks. 29 of Nestle’s brands have annual sales of over 1 billion CHF (about US$ 1.1 billion), including, Nescafe, Kit Kat, Nespresso, Smarties, Nesquik, Stouffer’s, Vittel, and Maggi. Nestle has around 450 factories in 86 countries, and employs around 328,000 people all around the world. It is one of the main stockholders of L’Oreal, the world’s largest cosmetics company. Nestle was formed in 1905 by the merger of the Anglo Swiss Milk Company, established in 1866 by brothers George Page and Charles Page. The company grew significantly during the First World War and again following the Second World War, increasing its offerings beyond its early condensed milk and infant formula products. The company has made a number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby’s in 1971, Rowntree Mackintosh in 1988 and Gerber in 2007. In 2011, Nestle was listed Number one in the Fortune Global 500 as the world’s most profitable corporation. With a market capitalization of $ 200 billion, Nestle ranked Number 13 in the FT Global 2011. (Nestle2011)

Henry Nestle (1814-1890)

Nestle System and Organization Structure

A company’s organizational chart typically demonstrates relations between people within an organization. Such relations might include managers to sub-workers, directors to managing directors, chief executive officer to various departments, and so forth. When an organization chart grows too large it can be split into smaller charts for separate departments within the organization.

The different types of organization charts include:

Hierarchical

Matrix

Flat (also known as Horizontal)

Nestle Company is a decentralized organization that is organized according to the matrix structure. Nestle as a decentralized organization permits to subordinate branches to enjoy a proportionately high-level of independence. Although it still makes major strategy decisions at the headquarter level, daily operations are left up to subordinate branches to derive and perform. The responsibility for operating decisions is push down to local units (Broeckx & Hooijberg 2008).

In organization structure, Complex system is a system that is comprises a large number of entities that display a high level of nonlinear interactivity. There are number of basic observations that have been made through the examination of complex systems, mainly using computer simulation and the mathematic of non-linearity. (Unden 2001)

Complex systems are usually open systems. Nestle, over its long historical development from a small village operation to the world’s leading food Company, has illustrate an excellent capability to adjust to an ever-changing external environment, without losing its basic beliefs and core values, so important for long-term success. Over the years to come, this capability will continue to be challenge even more as Nestle is growing in size and complexity up to a dimension, which demands a continuous development of its organisation and of the way in which it run (Christopher & Yannicrumar 2008).

(D.Rigby 2009)

Nestle Organization Chart

In Organization chart, we can see that the management of Nestle is also divided into 3 types’ top-level management, middle level of management and low-level management.

Top Level of Management:

It contains of board of directors, chief executive or managing director. The top management is the final source of authority and it manages aims and policies for an initiative. It dedicates more time on planning and coordinating functions.

The role of the top management can be summarized as follows:

Top management broad policies of the enterprise and lays down the objectives.

It issues necessary instructions for preparation of subdivision procedures, schedules, budgets, etc.

It prepares strategic policies & plans for the initiative.

It appoints the executive for middle level for instance departmental managers.

It coordinates & controls the activities of all the departments.

It is also responsible for maintaining a contact with the outside world.

It provides direction and guidance.

The top management is also responsible towards the stockholders for the performance of the initiative.

Middle Level of Management

The branch managers and departmental managers constitute middle level. They are responsible to the top management for the operative of their department. They devote more time to directional and organizational functions. Their role can be highlighted as:

They execute the plans of the organization in accordance with the policies and directives of the top management.

They make plans for the sub-units of the organization.

They participate in training & employment of lower level management.

They understand and explain policies from top-level management to lower level.

They are also responsible for inspiring lower level managers towards better performance.

Lower Level of Management

Lower level is also known as operative/supervisory level of management. It contains of supervisors, superintendent section, officers etc.. Their activities include –

Assigning of jobs and tasks to various workers.

They instruct and guide workers for day-to-day activities.

They are responsible for the quality as well as quantity of production.

They are also entrusted with the responsibility of maintaining good relation in the organization.

They communicate workers problems, suggestions, and recommendatory appeals etc to the higher level and higher-level goals and objectives to the workers.

They help to solve the complaints of the workers.

(Nestle 2012)

Nestle System Methodology and Objectives

Nestle objectives are to be known as a world leader in Nutrition, Wellness, Health, trusted by all its stakeholders and to be referenced for financial performance in its industry. The company believes that it is not just about size, it is also about behavior; and they recognized that trust is earned only over a long period of time by systemically delivering on their promises. These objective and behaviors are summarizing in the simple phrase: “Good food, Good life”, a phrase that sums up the company business aspiration.

The Nestle road map is intended the create alignment for workers behind the unified set of strategic priorities that will hasten the achievement of company objectives. These objective demands from workers a mixture of long-term motivation needed to build for the future and short-term business actions, delivering the necessary level of performance. The Nestle model is securing the progress today and ensuring success in future:

Achieving simplicity;

Investment of growth;

Scale benefits;

Driving performance

The Nestle road map includes three main parts:

Competitive advantages

Growth drivers

Operational pillars

(Hemingway 2002)

All these may define with one clear and simple chart:

http://www.nestle.lk/asset-library/PublishingImages/About%20us/roadmap_large.jpg

(Nestle 2012)

Nestle has its own company in many countries. The head office in Switzerland works very closely with them, and sets the overall strategy the overall strategy, which is managed through the strategic business units and management. Geographically, Nestle three zones (Europe; the Americas; Asia; Oceania; Africa and the Middle East) work closely with the local markets. Their primary role is that enablers, acting as the voice of the headquarters. All units and zones share Nestle vision so that everyone around the world understands the direction to take and how to get there with common tools, common values and strategic.

This ensure that people in a the world know how to act, and that there is a very strong frameworks of clear references and value for fast and efficient decision-making.

PROBLEMS AND CHALLENGES IDENTIFICATION

Nestle produces hundreds of products, has a global network of suppliers, and multiple selling channel and distribution. Therefore, to respond and predict in this rapidly changing in market demand condition is very difficult. When predicting a market demand, Nestle will need information to discover shifts in demand early so they could adjust for trends and send the right messages to the suppliers, shippers, and distribution centers before they are deluge with unwanted or defective goods or shortages. (Manhattan Associates. 2010)

However, every company has its weakest links, so is Nestle. The weakest links are matters they are unable to control (Labs. 2010). Firstly, the most usual problem is the sources of supply of raw materials. This is due to an unexpected and sudden increase in demand, which will cause extreme supply shortages for merchandises that will result in major price increases. For example, bad natural disaster and bad weather have always been an issue affecting incoming raw materials. Secondly, the mistakenness of orders received in record. No company can ever achieve the requirement of zero imperfections especially in foods and beverages industry. For example, when the purchasing department of Nestle ordered 15,000 of mixed yoghurt from its dealer, but what the retailer received was only 12,000 of them, or on another case they might receive lacking records. Another example is, when Nestle tells its dealer that they needed extra orders of a particular product to be shipped right away because of unpredicted increase in demand, but in fact, the supplier may already has orders from other customers. This usually happen during special occasion. (Mashabale2012)

Hence, in order to solve these problems, it is critical for Nestle to engage with multiple dealers or suppliers in that specific region, so they could purchase inventories from multiple dealers, which will definitely reduction the risk of shortage due to incontrollable situation. Besides, Nestle should also base on their purchase and demand planning on last couple of years of sales to estimate current year of supply and demand. Other than that, mutual trust and strong relationship with all the dealers are needed in order to raise the flexibility of material supply management, as well as to improve the bargaining power of Nestle. However, if there is a extra, Nestle may need to plan a promotion to clear their inventories, otherwise Nestle will meeting a great loss such as waste of warehouse’s space, paying high material handling cost, or inventories that are not sold became defective and may need to be disposed which no profit will earn. Therefore, when there is a big event organized such as big Carnival. Nestle will set up a booth at the carnival to sell its products, which are close to the expiry date at lower price such as Maggi products, Nescafe, yoghurt drinks, Milo, Nestle ice creams and so on. People often buy the products in big quantity because of the lesser price than the market price. As a result, Nestle could clear their inventories rather fast and save some space in the warehouses which is a win-win situation.

Thirdly, although Nestle has a logistics department but it does not deal with transportation logistics. Nestle subcontracted its supply chain transport to the third-party logistics as Nestle tries to cut their supply chain costs and to concentrate more on their in-plant operations. Although Nestle does not have, a transportation logistics department but they do have a delivery team to cooperate with the third-party logistics in routing protocol. Nestle is using a Dynamic Source Routing (DSR), which is a simple and efficient routing protocol designed specifically for use in multi-hop wireless ad hoc networks of mobile nodes. The protocol is composed of the two main mechanisms of “Route Discovery” and “Route Maintenance”, which work together to allow nodes to discover and maintain routes on-demand to arbitrary destinations in the ad hoc network. (Maltz. 2003). Therefore, the delivery team is there to help Nestle and the third party Logistic that DSR is working as per company direction as well as DSR performance.

Then, it is the poor partnership relationship between consumer and dealership. Dealers need these capabilities because they in close partnership with manufacturers – Nestle, are a connecting hub of services for the consumers, and other stakeholders. However, Nestle solved this problem by using the Dealer Management Systems (DMS) as well as their dealers. DMS is a software solution that provides tools for managing service, sales, parts and inventory management, integration, business management, and core architecture. DMS help manufacturers and dealers create integrated marketing movements to offer inventory to goal markets. This will integrate innovations into traditional in-store sales and service processes and offer technologies for non-traditional merchandising, service and sales strategies through alternative channels for consumer engagement in-vehicle, via Web, or by phone. (Microsoft Corporation. 2008)

RECOMANDATIONS FOR PLOBLEMS

Afterward the reviews stated above, those were not the only solutions that are available. Nestle could acquire the inventories from the other outlets from the other region Instead of just finding or having multiple suppliers. Because some regions have different demographics, for example, race. If there is a surplus, and unable to clear the inventories at a short time, Nestle could consider donation for short-run purpose, this could help to clear the old stocks, as well as to help

Nestle could use both manual and automation system in managing service, sales, and others. This is because one cannot trust wholly to a machine, as it may not be documenting the steps in its own processor. Because some steps cannot be automated and may require operator intervention to stop the escapement processing steps, even though adapting advanced technologies could help saving cost as labor cost is decrease, but if there are still problems occur, it will affect the business such as loss of customers because of the mistake. Consequently, Nestle must update the system software regularly and full utilization of available technology as well as the manual operators, which will effectively increase the efficiency and dependability of the supply chain systems. (Tallin2011)

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Hemingway 2002, The Nestle sustainability review, Nestle S.A, Public Affair .8th April 2013, Neslte.uk

Manhattan Associate2010, “Planning and forecasting: Anticipate and Respond to Changes in Demand”, viewed 9th April2013, < www.manh.com >

Labs2010, “Supply Chain Efficiency Starts at the Top”, Food Engineering, Viewed 9th April2013, <www.foodengineeringmag.com>

Mashabale2012, Nestle, Viewed 1th April 2013, < http://mashable.com/category/nestle/>

Microsoft Corporation2008, Microsoft Offers the Dealer Management Solution”, viewed 9th April2013, <www.microsoft.com/automotive>

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