HISTORY 4

HISTORY NESTLE PAKISTAN LTD. 5

VISION STATEMENT 7

MISSION STATEMENT 8

OBJECTIVE 8

NESTLE CORE VALUES 8

NESTLE CORE VALUES 9

NESTLE PAKISTAN PRODUCTS 11

MILK INDUSTRY IN PAKISTAN 16

ORGANIZATIONAL STRUCTURE 19

SUPPLY CHAIN PROCESS 20

SUPPLY CHAIN VISION 21

SUPPLY CHAIN MISSION 21

SUPPLIER’S SUPPLIER 22

PARTNERSHIP WITH SUPPLIERS 24

MILK COOLING TANKS 26

MILK COLLECTION SYSTEM 27

INBOUND LOGISTIC 28

NESTLE FACTORIES 29

SCOR MODEL 31

PLANNING 31

MANUFACTURING 33

MILK PROCESSING:- 33

PACKAGING MATERIALS 34

OUTBOUND LOGISTICS: 35

DISTRIBUTION: 36

OBJECTIVES OF NESTLE’S DISTRIBUTION CENTERS OR WAREHOUSES: 38

STORAGE OF MILK AT WAREHOUSES: 38

LOADING, UNLOADING, HANDLING AND TRANSPORTATION CONDITIONS: 39

SHELF LIFE OF NESTLE MILKPAK: 40

RETURN POLICY OF NESTLE MILKPAK: 40

GLOBE 41

(GLOBAL BUSINESS EXCELLENCE) 41

MIGRATION TO AN ERP 41

INFORMATION SYSTEM AND PURCHASING 41

BULL WHIP EFFECT 42

FINANCIAL OVERVIEW 43

Bibliography 45

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NESTLE LTD.

3

HISTORY

In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.

In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s; the company was operating factories in the United States, Britain, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestlé's production had more than doubled.

After the war Government contracts dried up and consumers switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestlé's first expansion into new products, with chocolate the Company's second most important activity.

The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1960, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L’Oreal in 1974.

The first half of the 1990s proved to be favorable for Nestlé: trade barriers crumbled and world markets developed into more or less integrated trading areas. Since 1996 there have been acquisitions including San Pellegrino (1997), Spillers Pet foods (1998) and Ralston Purina (2002). There were two major acquisitions in North America, both in 2002: in July, Nestlé merged its U.S. ice cream business into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc.

History Nestle Pakistan Ltd.

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As a consequence of joint venture arrangement between Nestle S.A. of Switzerland and Milkpak Ltd. in 1988, the existing production facility of Milkpak in Sheikhupura became a part of Nestle Milkpak. The Milkpak Sheikhupura factory commenced operations in 1981 as a producer of UHT milk. By 1988, it had expanded its operation and was also producing butter, cream, desighee - all under the brand name of MILKPAK and juice drinks under the brand name FROST. To meet the demands of the large food market that Pakistan offered, Nestle Milkpak reorganized and reinforced the production of existing brands and gave shape to new production lines. The first to come was a milk powder plant, which not only began producing NIDO in 1990 but was also critical to the production of several milk-based products in the future.

With the installation of the roller dryer in 1990, the first such product to come was CERELAC - an internationally recognized brand of infant cereal. This was followed by LACTOGEN 1 & 2 in 1991. The year 1992 saw the introduction of tea whitener EVERYDAY and milk powder in bulk packing named GLORIA. MILO and NESLAC came under production in 1994 and MILO RTD in 1995. Local packing of imported coffee under the name of NESCAFE 3 in 1 commenced the same year.

In 1996, Nestle Pak Ltd first confectionery plant of POLO Mint was installed and the production of NESTLE PURE ORANGE JUICE commenced.Packaging of coffee under the brand name of NESCAFE CLASSIC was undertaken the same year.

In 1997 NESTLE WHEAT and two variants of POLO viz. Strawberry and Orange was introduced. In 1998 a substantial capital investment was made to launch several products and install two new state-of-the-art technologies.

SWEET TREETS were launched in early 1998. The addition of two flavors of POLO: Blackcurrant and Strong Mint increased the number of POLO variants to five.

A new variant Lemony was added to the range of popular FROST fruit drink flavors and a new 1-liter packing of FROST was introduced.

Flavored milks under the brand FRESH & FRUITY came under production on the new Tetra Filling Machine equipped with the modern "slim" format. MILO RTD and UHT

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Cream were also shifted over to this new format. A new flexible confectionery line enabled the manufacture of a wide range of high and low boiled sweets and toffees, including TOFFO and two variants of SOOTHERS' Menthol Eucalyptus and Honey Lemon.

Nestle Milkpak also contracted to supply dairy mixes to McDonald's, for its popular soft serves and milk shakes.

And to top it all, the most prestigious project, NESTLE PURE LIFE was also commissioned in December. Based on the latest water treatment and bottling technology, this marked the entry of Nestle Milkpak in the Pakistan water market and that of Nestle in the world water market. The expansion of high boiled sweet line continued in 1999 with the introduction of Fruit Drops and BUTTERSCOTCH. The year 2000 saw the production of some exciting products. First came NESCAFE Frothe Original, followed by its two other flavors: Mocha and French Vanilla. NESCAFE Frappe RTD was to come next.

The fruit juice range was expanded by the production of Mango and Orange-Mango Mix. On the confectionery side, Tutti Fruiti was added under the umbrella of POLO and Wild Cherry was added to the SOOTHERS range.

The success of NESTLE PURE LIFE in PET bottles encouraged the commissioning of 5-gallon bottles production line for home and office in June.

And the last product line of the year to be commissioned in November was that of NESTLE Plain Yogurt, a high quality product with special Stay-Fresh Seal. To meet the needs of safe and quality storage for the ever expanding product range and their volumes, a National Distribution Center (NDC) was completed and became functional in June, 2000.Spread over 6614 square meters; it has the capacity to store up to 8300 pallets (approximately 8000 tons).

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VISION STATEMENT

The strategic priorities of Nestle Pak Ltd are focused on delivering shareholder value

through the achievement of sustainable, capital efficient and profitable long term growth.

Improvements in profitability will be achieved while respecting quality and safety

standards at all times.

In line with this objective, Nestle Pak Ltd envisions to grow in the shortest possible time

into the number one food company in Pakistan with the unique ability to meet the needs

of consumers of every age group - from infancy to old age, for nutrition and pleasure,

through development of a large variety of food categories of the highest quality.

Nestle Pak Ltd envisions the company to develop an extremely motivated and

professionally trained work force, which would drive growth through innovation and

renovation.

It aspires, as a respected corporate citizen, to continue playing a significant role in the

social and environmental sectors of the country.

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MISSION STATEMENT

Nestlé’s mission is to provide the best food to people throughout the world.

OBJECTIVEAt the threshold of this new millennium, Nestlé’s objective Is to consolidate and

strengthen its leading position at the cutting edge of innovation in the food area in

order to meet the needs and desires of customers around the world, for pleasure,

convenience, health and well being.

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NESTLE CORE VALUES

“The Nestlé global vision is to be the leading health, wellness, and nutrition company in the world. Nestlé Pakistan

subscribes fully to this vision”.

In particular, NESTLE envision to:

Lead a dynamic motivated and professional workforce – proud of its heritage and bullish about the future.

Meet the nutritional needs of consumers of all age groups – from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality.

Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country.

We have profitable and diversified high quality food and beverage product portfolio, delivering 60:40+ advantage to consumers, available across all sales channels.

Our brands are the preferred choice in their categories. Consumer insight drives all aspects of our marketing and communication efforts.

Our communications to the consumer are relevant, cutting-edge, and adhere to the highest standards of responsible communication.

Our company is seen as the No. 1 career destination for talented, motivated and ambitious professionals.

Our result-oriented organizational structure ensures effective communication and empowered self-management.

Our milk collection and agri services will continue to play the primary role in development of the dairy sector in rural Pakistan.

Our proactive innovation and renovation culture is the key to our success in the marketplace.

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Fully integrated systems (Nestlé Pakistan, suppliers, customers) ensure efficient business processes.

Non-strategic activities and products are outsourced or discontinued.

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NESTLE PAKISTAN PRODUCTS

We believe that food plays a key role in achieving a well-balanced person. And so our philosophy is Good Food for a Good Life! At Nestlé, our products are developed keeping our consumers, their preferences and health in mind. Millions of consumers the world over trust Nestlé products for good reason: when they choose a Nestlé product they have the satisfaction of choosing quality, taste, variety, convenience and the good nutrition.

With over 140 years of experience and expertise, we take great pride in bringing you a portfolio of health and wellness because happy, healthy consumers are important to us.

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Bharpoor nashvonuma!Sehatmand mustakbil ka behtrin aghaaz!

Doodh ki qudrati ghizayatPure, Nutritious Goodness of Milk

Pure, rich and delicious NESTLÉ® MILKPAK® standardized UHT milk benefits from Nestlé’s expertise in bringing consumer the very best life has to offer and benefits from 140 years of consumer trust.

Nestlé’s extensive milk collection system ensures that the milk you get is of the finest

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quality.

Encourage your family to exercise regularly, eat a healthy, well-balanced diet and drink pure, nutritious milk for good health. Milk is a must-drink for your children as it is a rich source of Calcium that helps in the growth and development of strong bones and teeth. It is equally beneficial in keeping grown-ups bones strong. So live to the fullestand enjoy the pure, wholesome goodness of milk withNESTLÉ® MILKPAK®!

A 250 ml glass of NESTLÉ® MILKPAK® fulfills your daily requirement of 27-30% of Calcium, 15-18% of Protein, 31-34% of Phosphorous, 6-9% of Vitamin A and 160-169 Kcal of energy, as Recommended Dietary Allowance by the National Academy of Sciences, USA.

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MILK INDUSTRY IN PAKISTAN

Pakistan is the 5th largest milk producing country in the world with an annual milk production of 27 billion liters. The total urban milk consumption is 6.86 billion litres. In cities, milk is largely consumed for tea whitening (2.3 billion litres), drinking (2.3 billion litres), and desserts etc (2.2 billion liters). In Pakistan, loose milk still occupies 96% of the total milk market share. While buying loose milk, a consumer may pay less than that of UHT milk, but there is serious health risk, and the consumer is also paying for milk containing up to fifty per cent of water.

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15

ORGANIZATIONAL STRUCTURE

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Manager Procurement

Manager Purchase

Logistics Officer

.Manager Plant

Manager Q.C

Q. Assurance Officer

B.O.D.s

Head Of Marketing

Head of Sales

Head of Technical

Head of supply chain

Head of H.R.

Head of Legal affairs

Managing Director

SUPPLY CHAIN PROCESS

Nestlé Pakistan's supply chain makes sure that Nestlé products are available, no matter where you are in Pakistan.

We integrate processes from the farm to markets, and ensure products are delivered to you at the right time, the right cost and in the right quantities. In the first quarter of 2006 alone, we delivered an astonishing 136 million kg of Nestlé products in Pakistan.

Supply chain was established as a separate department in 2001. Since then, we've achieved a number of milestones, including a cold-chain in 2002, centralized demand and supply planning in 2003, and implementation of GLOBE in 2005.

We were selected for a Best in Class repository study, and three of our best practices were subsequently incorporated into the Best Practices Library.

SUPPLY CHAIN VISION

Our ambition is to achieve high level of customer satisfaction through low cost, highly efficient operations driven by value creation and

continuous improvement

SUPPLY CHAIN MISSION

Optimize and consolidate resources and processes for a low-cost but efficient

Develop and manage simplified and effective supply network to achieve a high level of service

Create a continuous improvement culture driven by performance measures and reward

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SUPPLIER’S SUPPLIER

Improving Feed 

Even before calling Nestlé in, Milkpak Ltd. had tried to ensure that milk cows were given fresh fodder during the summer.

Our teams are always prepared to offer practical advice. We have planted a variety of fodder crops, which we demonstrate to farmers on field days.

We also provide training on best practices in animal husbandry. For instance, we stress the importance of giving cattle enough water, and train farmers in hygiene and milking.

Livestock Breeding & Health

Pakistan's vast milk production comes largely from buffaloes, despite their small yield. Our agronomists have shown that with artificial insemination we can actually triple milk production. Yet artificial insemination is still not widely used.

In 1996, our vets and agronomists independently formed an NGO to promote artificial insemination using high quality semen.

Today, with help from Nestlé and others, they have established a training programme for inseminators, and provide high quality imported semen at low cost to farmers.

We concentrate on preventative measures against the most common diseases that afflict cattle in Pakistan. Farmers know that they can call on our trained vets whenever necessary.

Better Equipment

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Our agricultural services staff have drawn up technical plans for cowsheds, which are provided free of charge.

Our mechanics have also developed prototypes of machines to cut fodder quickly and inexpensively.

Starting 2004, we went a step further and proposed a system of small loans for farmers who wanted to make improvements to their farms, such as building cowsheds.

We drew up the sample specifications for a model farm to be presented to the banks disbursing the loans. The Service even helps farmers fill out applications for loans.

Partnership with Suppliers

In our efforts to provide pure, high quality milk to consumers in distant towns, Nestlé entered into an unprecedented partnership with local farmers.

Today, 14 years after Nestlé first entered the milk district in force, the hard work and determination of our milk collection & technical assistance teams and their dedication to Corporate Social Responsibility have raised the bar for dairy concerns in Pakistan.

1000 small village diaries

An agent runs the diary. It occupies a small room of about 20 to 30 m either in the agents house or in a building that nestle’ rents.

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The milk collected on average is two times 150 liters per day. The agent does a quick tasting test on the milk before recording the

delivery in the farmer’s personal milk logbook. The dairy is open two or three hours morning or evening. The agent transports the milk to one of the 972 secondary receptions and cooling

station before closing.

972 secondary reception and cooling stations

These generally occupy about 40 m, divided into two rooms. One of these houses an electrically powered milk-cooling tank with a capacity of

600 to 2500 liters. Power cuts are frequent, so 95% of the stations have their own generator. An agent who also works as a milk inspector to run quality tests runs each

secondary station.

Main reception and cooling stations

These constitute the final stage in milk collection before it is delivered to factories. It also fitted high capacity milk tanks. 8 of them are equipped with plate heat exchangers for getting the milk re cooled

before transported to the factories. The quality analyses run as each tanker of milk arrives are more thorough than in

the secondary station. The 23 main stations also stores the laboratory supplies needed in the secondary

stations and village diaries. Link to the two factories by telephone and Internet, the main stations act as the

communication and administration centers for the entire collection system.

Maintenance and breakdown service

Looking after more than 1000 generators with the same number of water pumps and ancillary equipments demands a systematic approach.

Each of the 23 main stations employs full time mechanics/electricians. For more complex problem mechanic/electrician can immediately calls one of the

five Nestle maintenance service station located in five of the main reception stations.

The Nestle repair service was originally based in shaikhupura factory. But over the period of time it was transferred to the fresh milk-purchasing department.

Number of farmers selling their milk to nestle

Year Number of

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farmers1994 39,2051996 53,6931998 65,5682000 68,2772002 89,3942004 121,2592006 137,784

Milk Cooling Tanks

Milkpak set up reception centers with cooling facilities where farmers and dodhies, small-time milk merchants, could bring their wares.

It was a simple solution, but difficult in practice: importing the stainless steel chilled containers required was prohibitively expensive. By 1988, the company purchased 120 tons of milk a day from 26,000 farmers.

After acquiring a share in Milkpak Ltd in 1988, Nestlé immediately began investing in milk cooling tanks. Between 1988 and 1992, 100 milk tanks were installed.

1992 onwards, with full support from the Nestlé headquarters in Switzerland, reorganisation of the milk collection operation and the provision of agricultural technical assistance became top priorities.

The investment paid off. Within a decade, Nestlé's purchase of fresh milk had quadrupled, and the number of small farmers selling milk to Nestlé tripled.

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Milk Collection System

Follow the story of Nestlé's dairy products, from humble beginnings on tiny farms in Sheikhupura district, all the way to your table!

Step 1A small farmer in rural Sheikhupura district milks his buffalo twice a day and takes about 4 liters to one of Nestlé's 500 Village Milk Collection Centers.

Step 2At the Village Milk Collection Centre the farmer's milk is poured into aluminum churns. The agent checks the milk's freshness and purity, and enters the quantity into the farmer's logbook. He takes it to one of Nestlé's 1308 Secondary Reception and Cooling Stations, about 2-4 kilometers away.

Step 3The Secondary Reception Station has a large electrically powered cooling tank. A milk inspector measures the fat content, the non-fat solids content, and the milk's acidity. Once satisfied, he takes the milk to one of 27 Main Reception and Cooling Stations.

Step 4At the Main Reception and Cooling Stations the milk is poured into huge tanks and is thoroughly checked for quality. The milk is dispatched to the factories.

Step 5At the Sheikhupura and Kabirwala factories, the milk is processed and packed into the familiar Nestlé cartons you can find in your grocery store. It is checked for quality thrice before being released for sale. Some is processed into yoghurt, powdered milk, or other dairy products.

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INBOUND LOGISTIC

Inbound logistics used for milk collection from different milk collection centre is centrally owned by nestle Pakistan limited. In Pakistan, logistics has always been a problem specially for sensitive product like milk in the hot weather. Initially the supplier who supplied there milk

Nestle Factories

Our products are manufactured in five facilities scattered around the country, from Islamabad in the north, to Karachi in the south.

Two state-of-the-art multipurpose factories are located in the agricultural heartland of the Punjab, and the remaining three are dedicated to producing our trusted brands of bottled water.

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As citizens of Pakistan, we consider it our duty to make sure that our manufacturing processes are clean, hygienic and safe.

We are constantly working to reduce emissions at our factories, reducing and treating wastewater, and making our packaging environmentally friendly. Regular audits have confirmed that our factories' environmental management meets the Nestlé international standard.

Sheikhupura Factory

The factory commenced operations as part of Milkpak Ltd in 1981. At the time it produced only UHT milk, but by 1988 had expanded to produce butter, cream and ghee, as well as fruit drinks.

Milk filling machine TBA-22 (most modern and effiecient and high speed equipmentr available in dairy industry)

National distribution centre was also constructed in 2000 with capacity to store 8300 pallets.

Kabirwala FactoryIn 1990, Nestlé Milkpak acquired the Kabirwala factory, located in Khanewal district of the Punjab, as a subsidiary. By 1997 it was a fully owned unit of Nestlé Pakistan Ltd.

.2006 has seen the commencement of Kabirwala Extension Project that would be completed in April 2007 at a cost of about Rs. 4.0 billion. The project has seen expansion of milk processing capacity to triple its current size, both for powder and liquid.

In 2005 Fresh milk capacity was increased from 676 to 800 tons per day. in 2007 an additional raw and packing and semi finished product stored and a

bigger distribution

centre, a stick pack filling machine and 1000 gr. Powder filling machine will be added.

Islamabad factory:AVA water factory Islamabad was acquired by Nestle Pakistan in 2001 and was subsequently merged with it. Thereby becoming a fully owned unit of Nestle Pakistan in 2003.

The production capacity of the factory is approximately 8000 bottles per day.

AVA Karachi

FONTALIA Karachi

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Customers

Suppliers

PlanPlan

Source Make Deliver

Return

Source

Return

Deliver

Enable

SCOR MODEL

Planning

The successful execution of a planning strategy demands that the analysis has been performed with:

Confidence in the accuracy of the information provided; Clarity in the way the information is presented;

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Completeness of the information to be considered.

Planning must also address the resources and expertise that will be needed to implement the chosen purchasing strategy. The trend to outsource (see Subcontracting/ Outsourcing) both the initial conversion of raw materials, the manufacture of certain semi-finished or finished products and some services, requires that the original expertise in purchasing these materials and services is now needed to manage suppliers fulfilling a higher added-value process. In addition, consideration must be given to decide the specific value drivers of the subcontracting

initiative for which Nestlé needs to control either the sourcing or pricing (or both).

The realization of the importance of the S&IM spend categories will result in Purchasing allocating more attention to them. The task of planning a S&IM purchasing initiative may well require a different skill set and knowledge base to that traditionally expected of a Strategic Buyer.

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MANUFACTURING

Manufacturing is very important part of supply chain. In our factories, the objective is to maximize eco-efficiency – that is to maximize the production of goods, while at the same time, minimizing of consumption of resources and reduce wastage and emissions. The factories are equipped with complete testing and monitoring facilities for wastage and emission enables them to stringently monitor the gaseous environments and ensure that these are in accordance with environmental standards (NEQS).

Milk Processing:-

The Milk Reception Unit receives milk and liquid milk products for a milk processing plant. The unit measures and pumps the product for buffering or further treatment.

Tetra performs in-line mixing for a wide range of powders and liquids for dairy applications such as reconstituted and recombined milk, yoghurt milk, flavored milk, evaporated milk, recombined concentrated milk, ice cream mix, chocolate slurries, dairy desse

Heating and cooling are basic processes within dairy processing and take place in plate or tubular heat exchangers. Tetra Pak heat exchangers have high thermal efficiency for low energy consumption.

Automatic direct in-line standardization of milk and cream. Accurate control of fat, fat/solids and non-fat ratio gives better utilization and control of the production parameters

Along with correct cooling, pasteurization is one of the most important processes in the treatment of milk. If carried out correctly, these processes will supply milk with longer shelf life.

Temperature and pasteurization time are very important factors which must be specified precisely in relation to the quality of the milk and its shelf life requirements etc. The pasteurization temperature for homogenized, HTST pasteurized, regular-grade milk is usually 72-75 °C for 15-20 seconds.

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UHT treatment is a thermal process for preserving liquid milk. UHT stands for Ultra High Temperature and by heating to 137 – 140 °C for a very short time (2-10 s) the micro-organisms are inactivated. If the milk is packaged under aseptic conditions it can be stored at room temperature for months.

Packaging Materials

Nestlé is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products.

As far as milk is concern packaging is very important, it is perishable item which requires special packaging to preserve it for few months. To meet this objective Nestle Milkpak use tetra Pak to deliver fresh milk to its customer without sacrificing in health measures. Nestle have following objectives in mind regarding packaging:

Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity;

Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation;

Avoid the use of substances that can adversely impact the environment during packaging production and disposal;

Decrease packaging waste at all stages in the supply chain, including package manufacturing, utilization and disposal;

Increase the use of recycled materials wherever possible, and increase the recyclables and compatibility of packages with existing waste management schemes.

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Outbound logistics:

Outbound logistics concerns finished milk movement from factory to different warehouses located in different cities.The logistics usually take 3 days to arrive at Nestlé’s warehouses in Karachi from their manufacturing factories at Lahore, kabirwala and shaikhupura

Size of item No. Of cartons1 liter 1092250 ml 18151.5 liter 1040500 ml 1750

DISTRIBUTION:

According to the distribution, Pakistan is divided into three geographical zones and then in further Regional Sales Offices.

North Zoneo Islamabad and north outstationso Peshawaro Jhelum

Central Zoneo Lahoreo Faisalabado Gujranwalao Multan o Sahiwal

South Zoneo Karachi

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o Hyderabado Quettao Sukker

DISTRIBUTION CENTERS OF NESTLE MILKPAK IN KARACHI

Nestle milkpak has four major distribution centers in Karachi zone these are:

1. S.A Interprise2. Burque Corporation3. Krafts Distributors4. Mehran Distributors

Karachi is divided into two zones i.e. East Zone and West Zone There are 16 total warehouses of Nestle Milkpak.

DAILY INCOMING AND OUTGOING LOGISTICS:

Minimum one or two nestle milkpak trucks daily being arrived at each ware house from the sheikhupura and kabirwala factories, and is distributed in the same amount to the retailers all over the city.

The logistics usually take 3 days to arrive at Nestlé’s warehouses in Karachi from their manufacturing factories at Lahore, kabirwala and shaikhupura.

Nestle milkpak has their owned and outsourced trucks.

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OBJECTIVES OF NESTLE’S DISTRIBUTION CENTERS OR WAREHOUSES:

There are three main objectives of Nestlé’s distribution centers.

Meeting the targets Distribution at Right time At Right place

STORAGE OF MILK AT WAREHOUSES:

Milk is very perishable item; therefore it is required very effective storage conditions at warehouses to preserve milk in its real condition.For this Nestle milkpak warehouses contains very suitable temperature atmosphere, temperature should not increase from 38 degree Celsius in order to keep preserve milk in its fresh condition.

INVENTORY MANAGEMENT AT WAREHOUSES:

Because of its perishable nature, the inventory management of Nestle milkpak is done on the FIFO (First in first out) basis.

CAPACITY OF TRUCKS:

Nestle milkpak has trucks which have the following capacity. The data is on the basis of cartons per truck.

Size of item No. Of cartons1 liter 1092250 ml 18151.5 liter 1040500 ml 1750

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LOADING, UNLOADING, HANDLING AND TRANSPORTATION CONDITIONS:

ACCEPTANCE LETTER

Acceptance letter is the conformance letter that ensures that the warehouse accepts or receives the inventory, it includes:

Invoice number Whom to sold Whom to ship Dispatch date From whom Product description Unit price

MAJOR ITEMS SALE

1 liter of Nestle milkpak has the major 55% of total sales. 250 ml of Nestle milkpak has 25% of sales 1.5 liter of Nestle milkpak has 10% of sales 500 ml pf Nestle milkpak has 10% of sales

NUMBER OF ITEMS PER CARTON

Type of carton No. Of item units1 liter 12

1.5 liter 8250 ml 27500 ml 12

SHELF LIFE OF NESTLE MILKPAK:

Nestle milkpak has 3 months of shelf life.

DEMAND FLUCTUATION OF NESTLE MILKPAK:

The demand of Nestle milkpak usually increases in the festivity season or any event such as.

Eid Ramazan and Moharram

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RETURN POLICY OF NESTLE MILKPAK:

Nestle milkpak has an efficient return policy for inventory in case of any defect.

Every carton and item has assigned a certain batch number. If any defect has found in item or carton then the batch number of that item or

carton is noted and disposes the defected item right on there.

GLOBE(Global business excellence)

In the year 2005 the successful launch of GLOBE remained probably the most significant achievement for Nestle Pakistan. It was recognized locally as well as in the Nestle world as the most successful implementation of GLOBE.GLOBE is a worldwide program/project designed to align Nestle Pakistan with other Nestle companies around the world and to learn and benefit from each other’s experience.The project has three main objectives;

Creation and adoption of common business practices across all countries where Nestle operates.

Standardization of data and, Standardization of information technology system.

Migration to an ERP

The final phase of the project entails migration of Nestle Pakistan to an ERP (Enterprise Resource Planning) called SAP (System Application Products), which is one of the most

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integrated business application software in the world. Nestle Pakistan achieved this final migration on February 7, 2005. On that date all Nestle sites including the head office, all factories, distribution centers and three zonal offices went live on the new application.

Information system and Purchasing

Purchasing task will be greatly facilitated by standard IS/IT infrastructure, common business applications and best practices, Visibility of standardized, real-time purchasing data/information will permit aggregated spend category analysis. This will help identify opportunities and define more effective purchasing strategies with the objective of achieving lower total cost.

BULL WHIP EFFECT

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Order Size

CustomerDemand

Production PlanProduction Plan

o There is a shortage of supply of milk during the pregnancy season of cows.

o Demand fluctuates due to Ramadan, moharram, eid, etc

FINANCIAL OVERVIEW

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Time

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Pakistan continues its journey of economic improvement in a relatively stable political environment during the year 2006. This combined with dynamic management across all functions. Enables the company to gain achieves accelerated growth and operation performance during the year under review, as reflected in the key financial results

PKR Million 2006 2005 changeSales 22031 17142 28.50%Operating Profit 2640 2121 24.50%% of Sales 12% 12.40%Net Profit 1363 1153 18.20%% of Sales 6.20% 6.70%Earning Per Share 30.06 25.42 18.20%

Export sales to Afghanistan increase by 35% to PKR 1.3 billion – as both the progressive climate for business and development of the retailing sector continuous strongly.

Growth in sales translates into a solid increase in operating profit of 24.5% to PKR 2640 million. The slight decline in operating profit margin was mainly due to:

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Investment in commercial and operational infra structure to support future growth, and

The industry wide shortage of fresh milk and the resulting inflationary impact on its cost.

Investment project

Total capital expenditure for the year reached PKR 3.6 billion, the highest spending recorded in the company history. The most significant projects are listed below:

Project Description PKR MillionKabirwala - new factory extension 2097Sheikupura - upgrading water retail line 280Sheikupura - Yogurt line 180Karachi - new bulk water line 209Milk collection - field development 191Sales and Distribution - infrastructure 107Information Technology - upgrading of equipment 41

These investments are part of long term infrastructure plans need to support our continued accelerated growth. Investments in 2007 at approximately PKR 3.1 billion are planned for capacity increases, milk collection, field development, and upgrading of existence production facilities.

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Bibliography

To collection information we have considered following source in order to gather authentic data:

www.nestle.pkwww.nestle.comwww.tetrapak.comwww.cia.gov.comwww.smeda.comwww.wekipdia.com

Books concerned

Nestle management report 2005Nestle management report 2006SEMIDA report 2005 for milk production and distributionEconomic survey of Pakistan 2006

Personnel concerned

Mr. Taimur Lodhi.Area Sales Manager Nestle Karachi

Mr. Eric FrancisH.R. DepartmentNestle Lahore

Mr. Hafiz Iqbal Territory Incharge Karachi Nestle Pakistan

Miss Rani SiddiqueHead of H.R. FONTALIA (Nestle Pakistan)

Mr. Farruq SiddiqueWarehouse ManagerS.A. Enterprise (Distributor Nestle Pakistan)

Mr. Malik Salman SaeedSupply Chain Manager BURQUE Corporation(Distributor Nestle Karachi)

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