Nestlé links SAP with suppliers to respond to changes in demand

Technology is at the heart of the drive by UK manufacturing companies to increase efficiency in the supply chain and consolidate...

Technology is at the heart of the drive by UK manufacturing companies to increase efficiency in the supply chain and consolidate their business processes

The supply chain at the UK arm of consumer foods manufacturer Nestl' has been revolutionised over the past five years through a wide-ranging implementation of SAP's R/3 software.

Software modules that were developed jointly by the two companies have allowed Nestlé to reduce inventory levels by more than 50% in some areas and introduce more control into business processes, the manufacturer said.

Nestlé UK recouped the cost of the 6,000 user roll-out of R/3 in two years - a rapid return for a complex system. Nestl' is now driving benefits into its extended supply chain.

Last October, the company completed a trial of a groundbreaking supply chain project, which allows suppliers to view its production information and ensure it can meet fluctuations in demand for its products.

Nestlé connected its Newcastle plant to packaging supplier SCA, allowing a link between the SAP systems of the two firms. This means that SCA is automatically and instantly notified of Nestl''s packaging requirements.

The £200,000 project uses internet data standard XCBL to link the supply chains of the two companies. All stages of production and supply, from planning to finance, are shared.

Roger Thomas, e-procurement manager at Nestlé, said, "It has brought the supplier nearer in time to where Nestlé's demand is. It allows us to make the right decisions quickly and we can keep customer service levels high and respond quickly to fluctuations."

The project should remove about 20% of excess stock when it is rolled out to Nestlé's 10 UK plants and connected to its 12 suppliers. Thomas estimated it would save about £650,000 a year in time and stock reductions.

Nestlé is also involved in collaboration projects with supermarket chains including Sains-bury's and Co-operative Retail.

Last March, Sainsbury's rolled out supply chain software that alerts the supermarket and its suppliers when a problem arises and will suggest a management process to help resolve the issue.

Chris Tyas, supply chain director at Nestlé, said, "We have achieved a lot through collaborative working in recent years, with benefits to both parties."

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