A Nestle Case Study
A Nestle Case Study
Coffee-The Supply Chain
Critical Review:
Nestlé is a pioneer in purchasing coffee direct from growers. A growing percentage of the company's coffee is bought direct from the producer and it is now one of the world's largest direct purchasers. In countries where this is not possible Nestlé operates in a way that takes it as close to the growers as possible. Nestlé began its direct buying policy in 1986 and the amounts involved have steadily increased. In 1998, around 15 per cent of its green coffee purchases were bought directly. As an example, in the Philippines, farmers bring their produce to Nestlé's buying centers situated in the coffee growing regions. Quality is analyzed while they wait and growers are paid on the spot. In 1998, direct purchases accounted for over 90 per cent of the green coffee destined for its two instant coffee factories in the country.
Today, a jar of instant coffee can be found in 93 per cent of British homes and increasingly consumers are trying out different types of coffee, such as cappuccino, espresso, mocha and latte. The expanding consumer demand for product choice, quality and value has led to an increase in the coffees being made available to a discerning public. 'Value' is the way in which the consumer views an organization’s product in comparison with competitive offerings. So how does coffee get from growing on a tree perhaps 1,000m up a mountainside in Africa, Asia, Central or South America, to a cup of Nescafe in your home, and in millions of homes throughout the world?
This case study explains why Nestlé needs a first class supply chain, with high quality linkages from where the coffee is grown in the field, to the way in which it reaches the consumer. A supply chain is only as strong as its links. Different relationships exist between organizations involved in the separate stages of the chain - whether it is in the structuring of product distribution, arrangements for payment and
Coffee-The Supply Chain
Critical Review:
Nestlé is a pioneer in purchasing coffee direct from growers. A growing percentage of the company's coffee is bought direct from the producer and it is now one of the world's largest direct purchasers. In countries where this is not possible Nestlé operates in a way that takes it as close to the growers as possible. Nestlé began its direct buying policy in 1986 and the amounts involved have steadily increased. In 1998, around 15 per cent of its green coffee purchases were bought directly. As an example, in the Philippines, farmers bring their produce to Nestlé's buying centers situated in the coffee growing regions. Quality is analyzed while they wait and growers are paid on the spot. In 1998, direct purchases accounted for over 90 per cent of the green coffee destined for its two instant coffee factories in the country.
Today, a jar of instant coffee can be found in 93 per cent of British homes and increasingly consumers are trying out different types of coffee, such as cappuccino, espresso, mocha and latte. The expanding consumer demand for product choice, quality and value has led to an increase in the coffees being made available to a discerning public. 'Value' is the way in which the consumer views an organization’s product in comparison with competitive offerings. So how does coffee get from growing on a tree perhaps 1,000m up a mountainside in Africa, Asia, Central or South America, to a cup of Nescafe in your home, and in millions of homes throughout the world?
This case study explains why Nestlé needs a first class supply chain, with high quality linkages from where the coffee is grown in the field, to the way in which it reaches the consumer. A supply chain is only as strong as its links. Different relationships exist between organizations involved in the separate stages of the chain - whether it is in the structuring of product distribution, arrangements for payment and