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Operations Management Script

Nestle Indonesia is a subsidiary of the multinational Nestle company based in Switzerland. It produces a wide range of popular consumer goods for the Indonesian market. The presentation discusses Nestle Indonesia's operations management approach in key areas: product design focuses on market needs and wants; distribution is outsourced to local partners for efficiency; employee satisfaction is promoted through engagement programs; capacity and inventory use forecasting to balance production; supply chain integrates commercial and warehousing partners; and corporate social responsibility programs provide nutrition and education.

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128 views

Operations Management Script

Nestle Indonesia is a subsidiary of the multinational Nestle company based in Switzerland. It produces a wide range of popular consumer goods for the Indonesian market. The presentation discusses Nestle Indonesia's operations management approach in key areas: product design focuses on market needs and wants; distribution is outsourced to local partners for efficiency; employee satisfaction is promoted through engagement programs; capacity and inventory use forecasting to balance production; supply chain integrates commercial and warehousing partners; and corporate social responsibility programs provide nutrition and education.

Uploaded by

michelle
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Introduction

Before we start the presentation, We want to ask some questions. Who has never tried or
doesn’t know *KitKat, *Milo, Koko *Crunch? It seems like all of us are so familiar with these
products. *Another product that is quite popular, especially in Medan since the pandemic period
is Bear Brand sterilized milk. Nowadays, We believe that most of us are encouraged to drink
Bear Brand milk everyday since it is believed that it can help to boost our immunity and
neutralized toxins in our body. Now the next question is where do all of these products come
from? *True, it is Nestle. Nestle itself is a multinational company with the slogan of Good Food,
Good Life that came from Switzerland. In Indonesia, the brand of Nestle Indonesia itself has
also been successful in penetrating into indonesian market with a wide range of products that
we consume day to day. With that being said, we, from Design group, will provide information
regarding the overview of Nestle Indonesia’s operations management based on our interview
with Mr Partogi Simanjuntak as Nestle Indonesia’s Head of National Account Manager.
Presentation will cover the discussion of product design, distribution channel, human resource,
capacity and inventory management, Supply chain and Corporate Social Responsibility.

*Product Design
As one of the most important steps to start in operations management is product design, we can
see that Nestle Indonesia as one of the multinational consumer goods companies has provided
us with a wide range of products despite differences of culture and lifestyle in different countries
that are included in Nestle’s target market. According to Mr Partogi, one of the key points in
achieving this is to continuously focus on what market’s needs and wants and be flexible in
designing products so that higher customer satisfaction can be achieved.*Few concrete plans
that can reflect this concept is *the design of plant based food products that are made from
soybean such as patty for burgers as millennials nowadays are starting to be concerned about
healthy lifestyle. *Moreover, Nestle has also launched its soft serve dessert base that can be
used to produce ice cream. Design of this product is conducted based on observation of
prospect in the dessert market. *Another example is the recipe renovation of Milo product
towards a less sugar concept in order to adjust to the dynamic interest of Nestle’s market. As
we can see, in designing products, Nestle Indonesia has gone through process screening such
as feasibility, acceptability and vulnerability.
*Distribution Channel
As a company with a wide range of markets all over the country, Nestle Indonesia is required to
have its distribution channel in order to deliver its products to the final consumer’s hand. Nestle
Indonesia* only has a few factories and warehouses in Indonesia, located in Java Island. Nestle
Indonesia prefers to outsource its warehouse and distribution to local companies in order to
distribute the products throughout the country before it arrives to the retailer or final customers’
hand. This strategy is applied by Nestle Indonesia for the purpose of cost efficiency at which the
company might save and economize several specific costs for the warehousing and its
personnel. Outsourcing the warehouse to local companies is also considered helpful for Nestle
Indonesia, in which it enables Nestle to have wider capabilities of warehouse as the local
companies have more and better understanding regarding conditions and changes in their own
cities. For example, *Nestle Indonesia has been cooperating with PT Samudera Logistics to
distribute the goods from Pelabuhan Belawan to the retailers all over Sumatera and Aceh, for
example *Mikie Holiday Resort, CGV, Berastagi, and others.

*Human Resource
As we know, human resources are one of the most important assets in a company at which they
are the one that executes all of the operational plans and resources given in a company. Thus,
it is so crucial for companies to take into account employees’ motivation and productivity. *In
Nestle Indonesia, we can see that there are several approaches that have been taken in order
to maintain productivity of employees’ *The first is external employee satisfaction surveys in
order to have deeper understanding towards factors that affect employees’ motivation and their
satisfaction degree. External parties are used in order to maintain an objective view. *Moving on
to the next strategy is to provide employee clubs such as photography, yoga, swimming and any
other clubs as one of the facilities given to employees of Nestle Indonesia. *And also Nestle
Indonesia has a Nestle birthday event. These actions are to be done because of issues that
frequently occur as Nestle is a multinational company that gathers people with different cultures
and races. This makes employee engagement an important matter, especially between
colleagues and their superiors. Thus, these programs are done in order to strengthen bonding
between employees so that teamwork can be built and employee turnover can be lower since
we believe that employee turnover can cause decrease of efficiency in operations itself.

*Capacity and Inventory Management


It is inevitable to say that in multinational fast moving consumer goods companies such as
Nestle, capacity and inventory management plays a crucial role in its business operations. Both
capacity and inventory management are interrelated parts of operations that cannot be
separated in its implementation. *Nestle Indonesia itself applies several main strategies in order
to have good management in their production capacity and inventory. *Level of production
capacity and inventory comes from dynamic forecasts that do data collection continuously from
salesman to distributor and then proceed to region. *Data collected to the region is then
processed by a specific demand planner team that focuses on analyzing optimum adjustment
towards production capacity and inventory needed. Despite flexible adjustment towards
production capacity, Nestle Indonesia also has its limitation in optimizing its production capacity
in which it has quite a long inventory lead time for imported raw materials. Sudden outbreak of
pandemic has given us a chance to observe Nestle Indonesia’s capacity and inventory
management because demand from each of Nestle products fluctuate a lot, bear brand milk that
increases significantly and other products that decrease significantly. As a solution from
overproduction during the sudden outbreak of covid-19 pandemic, Nestle Indonesia performed
inventory liquidation action at which certain discounts are given to distributors in order to sell
remaining overproduction products before they reached their expiry date. However, that does
not mean that Nestle Indonesia do not have a good quality control on their inventory because
one of inventory management strategies that is performed by Nestle Indonesia is the quarantine
concept. The company requires the fresh produced products to be quarantined for at least two
weeks to be checked before released to the market in order to do the inspection by manual
control and technology control to make sure that the products are released to the market in
good quality. Within those two weeks, there are several personnel in charge to do the inspection
by analysing and recording the quality of the products.
*Supply Chain
Nestle Indonesia has obtained the authority to build its own system and strategy and decision-
making by considering the situation of the country. In this case, satisfying the wants and needs
of customers has been considered as the most crucial part in Nestle Indonesia’s operation. By
taking the consideration of customer’s satisfaction, Nestle Indonesia has designed its supply
chain system which also collaborates with several commercial teams in order to create demand
forecast and planner, also with several local companies in terms of warehousing and
distribution. Nestle Indonesia has taken the B2B business model which means Nestle Indonesia
have to cooperate with several retailers in order to deliver the products to the final customers.

*Corporate Social Responsibility


Nestle all over the world has held the principle of “Creating Shared Value”, including Nestle
Indonesia. *Moving in food manufacturing industries has driven Nestle’s mission to improve
people’s lives now and in the future by the products it produces and the actions it takes.
Bringing benefits not only for the business, Nestle Indonesia also considers the importance of its
contribution for the society especially for the future generation. Nestle itself believes that a
healthy and educated generation has brought effect towards the growth of a country. *Nestle
Indonesia has implemented the “Nestle Healthy Kids” programs to support the young generation
to fulfill the company’s mission, which is “Nurturing Healthier Life for Indonesians”. By this
program, Nestle Indonesia provides comprehensive nutritions and education for Indonesian
children so that someday the children might bring contribution to the growth of Indonesia. Other
than contributions to society in terms of providing health nutrition and education for children,
Nestle Indonesia also realizes that running its business has brought many negative effects
towards the environment that might harm life of society. One of the effects is the increasing cow
dung as the result of significant increase of cow milk’s production. *Nestle Indonesia built the
system which processes cow dung into biogas energy and used as the source of cooking and
lightning by the society.

*Thus, we can see that despite its complexity of operations management needed in Nestle
Indonesia because of geographical barriers and large market size, Nestle Indonesia can still put
customer satisfaction as their main consideration in operating the business proved by their
excellent result in performing operations activity starting from product design until corporate
social responsibility.

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