Submitted To;

Adil Razeek
Present By;

Fazal Raheem

Safdar sab

Waqas shah

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 INTRODUCTION OF SUPPLY CHAIN
The movement of materials as they flow from their source to the
end customer. Supply Chain includes purchasing, manufacturing,
warehousing, transportation ,customer service ,demand
planning
, supply planning and Supply Chain management. It is made up of
the people, activities, information and resources involved in
moving a product from its supplier to customer. Although this
Supply Chain definition sounds very simple, effective
management of a Supply Chain can be a real challenge.

EXAMPLE OF A SUPPLY CHAIN:

Raw materials Manufacturer Distribution Center Customer

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Introduction of Supply chain of Milk

Milk is the most perishable and fast moving customer good. The very first and
initial requirement or feed for any human being is milk. Milk is complete diet
as it contains every nutrient except iron. Fortunately Pakistan is the fourth
largest producer of milk in the entire world and its annual production is
surprisingly 45 billion litres which is very high. But unfortunately only 27
billion litre of milk is available for human consumption. Therefore most of
the milk is lost and Pakistan cannot fulfil its demand. Despites of these facts
and figures Diary Industry is playing a very crucial role in the Pakistan
economy and contributing 14% to the country’s overall GDP. More than 20%
of the entire population of Pakistan is involved in this sector directly or
indirectly. If we talk about the Dairy Supply chain management of Pakistan,
we can divide it in to two categories one is formal and 2nd one is informal
sector. The share of formal sector is 4% whereas the rest of 96% of share is
taken by the informal sector. In the formal sector Nestle is the market leader
in Pakistan and contributing 60% of market share as per fact and figure of
2008. In formal sector, milk is collected by different milk collection centre.
Then it is taken in to the processing plant where milk is stored in cooling
towers. In the processing plant, milk is processed and packed and then it is
distributed to the retailer and finally milk is reached to the ultimate consumer.
In formal sector we can divide it in to two sectors. In first category farm milk
is collected by gawalas (milkmen) who sell the milk directly to the
consumers or the milk collectors. In second case, farm milk is collected by
different milk collectors who sell their milk to the retailers and these retailers
provide it to end consumers.

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INTERDUCATION OF NESTLE PAKISTAN LTD.

Nestle Pak works as a subsidiary of Nestle

S.A. Nestle Pak started working in Karachi
since 1988 under a joint venture with Milk
Pak Ltd. With its headquarter in Lahore,
Nestle Pak. has four production facilities.
Two of its factories are in the heart of Punjab
province; Sheikhupura and
Kabirwala which are multi-purpose
factories, one in Islamabad and the other in
Karachi,
Sindh which produces bottled water. Nestle Pak is the biggest milk collector in
Pakistan. Currently, it collects milk from 190,000 farmers over 145,000 square
kilo meters in Punjab and Sindh. With its 8000 brands world-wide, Nestle is the
leading brand in beverages and food industry. It has a separate department for
supply chain management which was founded in 2001. The objective behind
the creation of separate department of supply chain management is to ensure
the smooth running operations from the supply of raw materials from farms or
other sources to the supply of finished products into the markets.

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Supply Chain Process of Nestle MILK PAK Pakistan

Nestle Pakistan has a wide range of products from nutrition to beverages, as so we chose
MILK PAK to explain the supply chain of Nestle Pakistan. Milk is collected from more than
2000 village milk centres and 500-600 sub centres and then milk is transported to 25 main
centres. In both stages the temperature of the milk is kept at 4C to keep the quality of milk
up to standard. After whole process of milk collection, it is transported to the Sheikhupura and
Kabirwala factories. In the processing stage milk is passed through different stages i.e
standardization, pasteurization UHT treatment and packaging. After processing, milk is then
reached to the factory warehouse which is near the premises of the factory. Finally milk is
transported to the south, north and central regions. Then finally distributors of MILPAK carry
it and transport it to the super marts and retail shops so that it’s available to the end
consumers. Supply Chain of Nestle MILKPAK guarantees environmental friendly practices
and for this they are continuously making their contributions in the society for keeping the
environment safe and secure. Their ultimate objective is to make sure that the green supply
chain is in practice while keeping their benefits, profits and business activities intact.

Supply Chain Vision

Nestle’s 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.

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 Operations of Nestle MILKPAK
The operations performed in the Nestle milk are explained as follow.

Process Flow Diagram for Nestle Milkpak

Milk Reception Testing

Rejection Quality Approved

Chilling 4 c

Standardization

Homogenization

Balance Tank

Filling/Packing in
the customers

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 Filling/Packing in
the customers

Transportation

Warehousing

Wholesalers Distributors

Retailers

Final Consumers

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Nestle Milk Collection

Nestle has the biggest milk

collection network in the country
which is collected from both cows
and buffaloes. Nestle has a very
wide and vast network of village
milk centre (VMCs), sub centres
which is widely spread in the
country approximately more than
2000 VMCs and 500-600 sub
centres. Milk contains low sodium,
high fat and solid not fat (SNF) and
very low in bacterial count. If the
milk is not up to these standard
that milkis rejected. As we know
that milk is a perishable commodity
in this connection to ensure milk
as per quality standards different chillers are installed at the collection centres
which will save the milk from bacteria development.

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Management of Milk Collection
Nestle has 24 regions and each region collects milk from
60-70 milk collection sub centres and VMCs. Each region
is headed by regional milk collection manager (RMCM)
who is responsible to coordinate all the activities within its
region. Territory in-charge (TIs) maintains the steady
supply line with the suppliers and farmers and collects
milk from 10 collection sub centres and he has some target
of milk collection which he has to achieve. Volume of milk
collection is calculated by national milk collection
managers (NMCM). These territory volumes of milk
collection are further divided in to sub centre that has to be
monitored on daily bases. TIs are also responsible to
ensure the best quality and hygienic practices, quality
testing and record keeping at the sub centres. Each sub
centre has assigned time so that truck collects the milk
and delivers to the chillers of
main collection centres. Each milk truck has capacity of maximum 8 to 10 tons. Milk is
pumped from the chillers to the truck holding area which is a very efficient method. From
the main distribution centre near mid night through large insulated tankers of minimum
capacity
20 to 25 tons shipped to factory. The insulated tankers and mid night time helps
in

maintaining the milk temperature below 4°C during the journey. At the factory all the milk
testing are once again repeated; if any of the test is not positive then milk is returned o the
collection centres

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 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. 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 efficient and high speed equipment
available in dairy industry)
 National distribution centre was also constructed in 2000 with capacity to store
8300 pallets.

KABIRWALA FACTORY

In 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.

 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.

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 MANUFACTURING OF NESTLE MILK PAK

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).

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 MILK PROCESSING:

 Milk Reception
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.

 Mixing
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 ghee.

 Heating and Cooling

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

 Standardization
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

 20% Iron
 41% Calcium
 18% Vitamin A
 20% Vitamin C
 Pasteurization
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.

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  UHT treatment
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.

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  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

Milk pak 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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Factory Warehouse of Nestle
The finished tetra pack is sent to the factory ware house which is 4 km
away from the processing plant. Factory ware house is located near the
plant to reduce the transportation cost. At Factory warehouse temperature
is controlled to ensure the condition of the milk is fresh when it reaches
the consumers. Milk is a very perishable item; therefore it requires very
effective storage conditions at warehouses to preserve milk in its real
condition.
For this Nestle milkpak warehouses contains very suitable temperature
that should not increase from 38C in order to keep preserved milk in its
fresh condition.

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l
Logistics is the management of the flow of goods between the
point of foundation and point of
consumption in order to meet some requirements of the customers
and corporations.
The following are the two classes of logistics.
 Inbound logistics.
 Outbound logistics.
INBOUND LOGISTICS
Inbound logistics is the receiving and warehousing of raw
materials, their distribution to
manufacturing as they are required. Inbound logistics for milk
collection from different milk
collection is centrally owned by Nestle Pakistan limited. In
Pakistan, logistics has always had been
a problem especially for sensitive product like milk in the hot
weather.
OUTBOUND LOGISTICS
Outbound logistics are the processes involved in moving the
products from the creating firm to the
firm’s customers. In Nestle MILKPAK outbound logistics are
concerned with finished milk
movement from factory to different warehouses located in different
cities.

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Warehouse of Nestle in Karachi

A warehouse is a commercial building used for storage of inventories. Nestle products have
been stored in different warehouse as the product move from upstream to downstream by
manufactures, importers, exporters, distributers, and by wholesalers. Manufactures usually
have large warehouse in industrial area near the processing plant where not only finished
goods but also raw materials are been stored. Importers and exporters usually have warehouse
near ports where they can easily access to products they often have cranes and forklifts but
distributers usually have different warehouse all over the city so they can easily reach to the
market similarly wholesalers have nearby they retail outlet.

Location of Warehouse

Nestle’s warehouse in Karachi is situated at Korangi Industrial area near Brookes round
about. This warehouse is not much populated. There was a supervisor, one assistant, 4
pickers, 2 loaders and 2 gates. It takes three days to arrive the goods in the warehouse from
the manufacturing plant.

Lay out of the warehouse

This warehouse has no shelving or racking system instead the goods are kept on pallets.
Information tags are placed on every carton as well as on the top of the pallets. The
warehouse’s height is about 17 feet. The building is divided into two sections; one for
carrying heavy weights products and the other for carrying lighter ones. There are two gates;
one for receiving the goods and the other for distribution. In this way, receiving and
dispatching of goods can be done at the same time which is a time saver. There is a room
used as check post to ensure the safety and security along with keeping track of what goes in
and out of the warehouse. The whole warehouse was divided into individual lanes; the lanes
were designed in such a way that it creates a “U shaped” flow of goods which makes easier
for the pickers to carry the goods to the trolleys using safe lifting and reduces the time and
motion wastage.

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Inventory Management in the warehouse

The inventory is managed by software called SAP (System

Applications and Products). Another method for managing
the inventory is “Manual Counts” that is done by the
“inventory clerk” on daily basis, who is specially hired for
this purpose. The counted stocks are recorded on a
whiteboard that’s placed inside the warehouse. It contains
not just the information about the name and no. of products
but also in which lane they are and in what volume they are
in. The whiteboard information is updated every time a
picker picks the order and also when the goods are loaded
on a truck for delivery.

For further verification, Barcodes are also placed to scan the cartons of the products every
time they enter or exit the warehouse.

Every batch of goods has a batch code like this

2 043 1382 1 Z
Which tells the following information:

 The year in which that product was Manufactured

 The day of the year in which it was Packed
 A plant code in which it was Manufactured
 The no. of times a good goes through the machine
 A machine code

How the goods are picked in the warehouse?

There are five pickers in the warehouse. The supervisor assigns 4 of them to pick products by
a list. The list contains information about the product batch number, quantity, lane number
and the pallet number. Two of them pick the goods, the third one gives instruction and the
fourth person rechecks it. The FIFO method is adopted in the warehouse because Nestle is a
FMCG company and most of its goods are perishable and have limited time span. So what
first goes into the warehouse should be dispatched first.

How the goods are ordered?

The goods are ordered on the basis of LIFO method. Orders are received from distributors
across the country. LIFO is used because it takes transportation cost, time to record and place
an order along with the delivery process. As for Nestle MilkPak, it has an expiry of 6months,

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so it needs to be delivered first.

How goods are delivered from the warehouse?

There is a gate in the warehouse from where the goods are delivered, once the picker picks up
the goods, the process of delivery from warehouse begins. The supervisor of the warehouse
rechecks the goods are picked in the right quantity, packed in the right way and loaded in the
right truck.

Distribution:

Distribution is the process of moving a product from its manufacturing source to its
customers. Nestle’s distribution is divided into three geographical zones:

North Zone Central Zone South Zone

Islamabad Lahore Karachi

Peshawar Faisalabad Hyderabad

Jehlum Gujranwala Quetta

Multan

Distribution process

The distributors have sales force to collect orders. There are two methods for distribution of
goods:

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 Ordering Booking Spot Selling

(Where sales force first (Where sales force is given

books orders from the a van full of Nestle goods
shops or retailers and then to sell)
delivers the goods)

Nestle Milkpak goes for indirect channel of distribution, that means there is a chain of
intermediaries through which a product moves through additional steps as it moves from
manufacturing business via distributors to wholesalers and then to retail stores or super marts.

The distribution strategy of Nestle MilkPak is intensive as it is covering wide market. There
are regional headquarters of the company in all big cities of Pakistan. In this report we have
covered distribution channel of Nestle MilkPak in Karachi. In order to reach remote areas the
company is linked with the main distributor and sub-distributors. The company is directly
linked with the main distributors; they provide the products inventory to the main distributor
that is further dispatched to retailers and sub- distributors. The targets differ from area to area
and set on the basis of history of the area sale and also from the monthly forecasting.

Customers of Distributors

The orders are taken from the following customers

Modern Trade / General Trade Institutions (Chaye

Key accounts (General Stores of Walas, Hotels,
(Super marts like the area) Motels, Ice cream
Imtiaz, parlors,
Hyperstar etc) Universities etc)

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Distributers in Karachi:

The company has transactional partnership (3rd party) with five big supply companies, for
diverse range of products.

S.No Name of distributors Products

1 Burque corporation Dry products

2 Galaxy corporation UHT milk, juices

3 Galaxy corporation Yogurt

(Separate)

4 Mehran motors Mineral water

5 Unique Sales and Marketing Nestle’s Imported products

Distribution Channels:
Nestle employs different distributors for different areas. Distributors employ their own sales
force and vans, which deliver Milk Pak to the doorstep of the retailers. Every distributer has
three territories per area. In the “A” territory, the distributor’s vans visit the outlets every
alternate day. In the “B” territory, the vans visit the retailers at least twice a week, while in the
“C” territory; the vans visit once a week.

Distributors’ sales target:

It is interesting to note that the distributors are given sales targets, which are then
communicated by the distributors to their sales team. The targets are usually like 15% annual
growth in sales. The distributors achieve this by selling more units to the existing clientele
(outlets in their region). In some cases the clients themselves ask for more stock. In other
cases they have to be persuaded to buy more. The norm usually is that if a retail client asks
for 12 pack the distributor’s sales team sells him 15. The reason is to leave no space available
for the competitors.

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  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.

SHELF LIFE OF NESTLE MILKPAK

Nestle milkpak has 3 months of shelf life.

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Over View of Supply Chain of Milk Pack

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