Nestle and Vertical Supply Chain

904 Words2 Pages

• Introduction: Since mid-90, technology changed procedures for evaluating supplier’s relationships. Before technology, Suppliers relationships used to be an isolated activity disconnected from others companies’ activities highly influenced by conflict of interest. But when technology started to provide accurate data, companies begin the focus on inventory management activities increasing the importance of procurements departments’ evaluation as a way to reduce supply chain cost. With data, procurement can evaluate suppliers and their benefits for the company. In today business environment, the company dilemma is evaluating if the supply chain should be vertical, full outsourced of mix, considering industry maturity impact and price competition (Chopra & Meindl, 2007; Slack & Lewis, 2011). • Vertical Integration: In 2002 Nestle decided to develop a vertical supply chain as strategy for increasing brand names value and revenues with selected suppliers. The reason behind vertical integration was scarcity of natural resources. For example coffee suppliers and farmers’ activities decreased in the last ten years requiring Nestle actions for supporting farmers’ activities in a more efficient way creating value for both sides as win-win solution. As a result, vertical supply chain supported Nestle increase demand for new coffee products and selected farmers supports coffee beans production required for exclusive brands such as Nespresso (Nestle, 2012). • Suppliers relationships: On the opposite side, Coca Cola invested in suppliers relationships. More than thousands of Coca Cola suppliers make Coca Cola distribution activities more efficient comparing with peers. For Coca Cola vertical integration is not a solution as expensive mode... ... middle of paper ... ...ola News [Online]. Available from: http://www.coca-cola.com (Accessed: 04 04 2014). Nestle. (2012) Nestle News [Online]. Available from: http://www.nestle.com/asset-library/documents/library/documents/about_us/nestle-in-switzerland-en.pdf (Accessed: 04 04 2014). Sethi, S, Yan, H, & Zhang, H. (2005) Inventory And Supply Chain Management With Forecast Updates New York, NY : Springer. Sharif, K. (2008) 'Impact of information and communication technologies on sales representative internal and external relationships — A study of the UK pharmaceutical sector', Journal of Medical Marketing, 8 (4), pp.341-55. Slack, N. & Lewis, M. (2011) Operations strategy. 3rd ed. Harlow : Financial Times Prentice Hall. Xia, M. & Xia, N. (2008) 'The Complementary Effects of E-Markets on Existing Supplier--Buyer Relationships in a Supply Chain', J.Manage.Inf.Syst., 25 (3), pp.9-64.

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