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Problems and Challenges in Nestle

Nestle has faced several problems and challenges: 1) Child labour issues in its cocoa supply chain in West Africa, where over 1.8 million children are at risk of abuse through dangerous work on cocoa farms, often working from a very young age. 2) An ethical boycott was launched against Nestle in the 1970s over its aggressive marketing of breast milk substitutes, and the boycott continues today based on various business practice concerns. 3) Managing production capacity and raw materials given seasonal variations in milk production from farmers and fluctuating demand for products like chocolate through the year poses challenges for capacity planning.

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Atiqah Dalik
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33K views

Problems and Challenges in Nestle

Nestle has faced several problems and challenges: 1) Child labour issues in its cocoa supply chain in West Africa, where over 1.8 million children are at risk of abuse through dangerous work on cocoa farms, often working from a very young age. 2) An ethical boycott was launched against Nestle in the 1970s over its aggressive marketing of breast milk substitutes, and the boycott continues today based on various business practice concerns. 3) Managing production capacity and raw materials given seasonal variations in milk production from farmers and fluctuating demand for products like chocolate through the year poses challenges for capacity planning.

Uploaded by

Atiqah Dalik
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problems and Challenges

1) Child labour issues


Nestle has been accused of using child labour and other abuses against children in part of its
cocoa supply chain. According to a report made by an independent auditor, the Fair Labor
Association (FLA), Nestle has committed "multiple serious violations" of the company's own
supplier code. Clauses on child labour, safety and working hours are included in the code.
Cocoa is the most important raw material that makes chocolate and worth billions of dollars.
Earlier reports found that 1.8 million children in West Africa are at risk of abuse through
dangerous child labour. It is such a pity that the children of Western Africa are surrounded by
intense poverty. Most of them has to begin working at a young age to help support their families.
Some of them end up on the cocoa farms because they need work and traffickers tell them that
they will get paid handsomely. Other children are sold to traffickers or farm owners by their
own relatives, who are unaware of the dangerous work environment and the lack of any
provisions for an education. Often, traffickers abduct the young children from small villages in
neighboring African countries, such as Burkina Faso and Mali, two of the poorest countries in
the world. Once they have been taken to the cocoa farms, the children may not see their families
for years, if ever. Most of the children laboring on cocoa farms are between the ages of 12 and
16, but reporters have found children as young as 5. In addition, 40% of these children are girls,
and some stay for a few months, while others end up working on the cocoa farms through
adulthood.

2) Ethical and boycott issues


The first boycott against Nestle was launched in the United States in 1977. It spread in
the United States, and expanded into Europe in the early 1980s. It was due to the concern about
Nestl's "aggressive marketing" of breast milk substitutes, particularly in the third world
countries. Since then, the boycott has been renewed based upon scrutiny of the business practices
of Nestl and other substitute manufacturers monitored by the International Baby Food Action
Network (IBFAN). The boycott is based on the claim by the organizers that the use of the breast
milk substitutes represent a health risk for infants as they encourage breast milk for newborn

nutrition. As of 2013, the Nestl boycott is coordinated by the International Nestl Boycott
Committee, the secretariat for which is the UK group Baby Milk Action.
Some universities, colleges, and schools have also banned the sale of Nestl products from
their shops and vending machines in the period since the revelations. In the United Kingdom, 73
students' unions, 102 businesses, 30 faith groups, 20 health groups, 33 consumer groups, 18 local
authorities, 12 trade unions, education groups, 31 MPs and many celebrities support the Nestl
boycott.
3) Raw materials and capacity planning
While the demand for Nestls milk products is relatively constant throughout the year,
milk production varies very significantly from season to season. A further complication is
that the content of milk obtained from farmers also varies. Hence Nestl is faced with the
problem of managing its production capacity in the most efficient way based on both major
supply side constraints and demand side variations. Seasonality and demand fluctuations of
products also increased the difficulty for capacity planning. For example, demand for
chocolate increases mainly during the winter season (around Christmas and Easter holidays)
and drops off during the summer.

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