271618 Warehouse individual 2

FIRST SEMESTER SESSION 2022/2023 (A221)
BPMG3133 WAREHOUSING MANAGEMENT

INDIVIDUAL ASSIGNMENT 1
NESTLE MALAYSIA
GROUP A
PREPARED FOR:

DR. FARIZA BINTI AHMAD MAHYADIN@MAHIDIN
PREPARED BY:

NUR NAJWA ADHA BINTI BASRI
271618

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TABLE OF CONTENT PAGE
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NO ITEM 4
1.0 BACKGROUND OF NESTLE COMPANY
2.0 SWOT ANALYSIS 4-5
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2.1 STRENGHT
2.2 WEAKNESS 5-6
2.3 OPPORTUNITIES 6-7
2.4 THREAT
3.0 6 KEYS QUALITY INDICATORS 7
3.1 SHIPMENT ACCURACY 7
3.2 INVENTORY ACCURACY 7-9
3.3 ORDER FILL RATE 9-10
3.4 PICKING ACCURACY 10-11
3.5 PUT AWAY ACCURACY 11-12
3.6 PRODUCTIVITY RATIO 12-14
4.0 REFERENCES 15-16

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1.0 BACKGROUND OF NESTLE COMPANY
Nestle is a multinational company and is of the world’s largest in food and beverages industry.
In 1866, Heinrich Nestle often known as Henri Nestle founded the Nestle Company, whose
headquarters are in Vevey, Switzerland. Anglo-Swiss Condensed Milk Company was the
original name of Nestle Malaysia which was founded in Malaysia in 1912. The current location
of the Nestle Malaysia main office which includes 6 sales offices with more than 5000 people
nationally is Mutiara Damansara in Petaling Jaya, Selangor. In addition, nestle promotes
approximately 300 Halal items across the country and produces its own products in 7 factories.
Nestle is a company that specializes in the food and beverage business. A handful of the
many well-known brands that Nestle has in Malaysia are Maggi, Nescafe, Milo, Kit Kat, and
nestum. Nestle vision is to be the leading company in the nutrition, health, and wellness
industries by assembly point goods that are consistent, convenient and of the best quality, all
while maintaining the highest standards of business excellence. The mission of Nestle is to
improve people's quality of life by providing healthy foods and beverages worldwide so they
can lead better lives.

Figure 1: Nestle Factory

Figure 2: Nestle Product
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2.0 SWOT ANALYSIS

SWOT analysis are strength, weakness, opportunities and threat for Company Nestle Malaysia.

2.1 STRENGHT OF NESTLE MALAYSIA COMPANY

1. Particularly Proficient at Strategic Marketing

For instance, Nestle Maggi instant noodles have a strong patent and are well-known throughout
the world, particularly in Australia and Malaysia. This is so that Maggi instant noodles can be
easily distinguished from rival brands like cintan instant noodles. Due to aggressive promotion,
nestle has also established a very strong brand name for Maggi instant noodles. As a result,
most people now refer to other brands of instant noodles as Maggi instant noodles rather than
the company's original name.

2. Maintains Excellent Leadership Qualities

It is the responsibility of the leaders including the top executives, branch managers and others
to develop organizational competency. For instance, the Chairman and Chief Executive Officer
of Nestle places a strong emphasis on internal growth globally which refers to achieving higher
sales volumes through the addition of value to the products, renovation of existing products
and the development of new products in order to keep up with the industry due to the rapidly
shifting expectations of consumers.

3. Digital Transformation

Nestle has grown more data-driven as a result of its investments in digital transformation across
industries such as marketing, social media, e-commerce, manufacturing and supply chain. This
helps them to adapt to the unique needs of their customers and increase satisfaction. With the
aid of artificial intelligence, nestle has transformed 70 ecosystems in 2019 and 20% of their
customer interactions are now individualized.

4. Effective Operations for Research and Development

It can assist the business in achieving cross-border synergy including packaging its
international goods according to local preferences. Nestle also emphasizes the use of modern
information technology which Nestle believes will give them a long-term potential to
streamline business processes or boost packaging efficiency among other business operations.

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As a result of realizing that consumer centered innovation and renovation is the most crucial
pillar of Nestle global strategy, the company also has better technological capabilities such as
the ability to renovate existing products to make them more innovative, higher quality and
much healthier products. This would help Nestle move faster from "good" to "better" products.

2.2 WEAKNESS OF NESTLE MALAYSIA COMPANY
1. Difficulties with Product Marketing
Nestle has often received harsh criticism from customers all over the world for improperly
positioning and promoting their products. One well-known instance is the promotion of nursing
baby formula to residents of developing countries. High rates of illness from the same were
caused by uneducated moms using the product with tainted water.
2. Minimal Marketing Efforts
Nestle makes less effort in marketing and instruction about its products. The brand relies
heavily on traditional advertising modes such as print ads, TV ads and social media. For this,
they allocate a high budget while the risk is linked to the return.
3. Organizational Structure
The divisions within Nestle's present organizational structure are focused on its product
offering rather than its location. This prohibits operations from being responsive and generates
a huge power distance when making decisions. This always proves to be a significant obstacle
when trying to extend its business.

2.3 OPPOTURNITY OF NESTLE MALYSIA COMPANY
1. Acquiring More Transparency
The customer is more knowledgeable than ever. It will be advantageous to promote openness
as the internet becomes more and more common. The customer would be more aware of the
source, timing and identity of the raw ingredients if there was greater transparency. The
customer is more attached to the brand and has greater interest in it.

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2. Cooperating with the Sustainable Development Goals

The implementation of sustainable strategies which Nestle Malaysia has planned to undertake
such as water management, reducing solid waste, optimizing product packaging, addressing
climate change, practicing environmental conservation and protecting biodiversity can help
Nestle Malaysia make a positive contribution to society. With a view to building a healthier
better future for everybody it is intended to contribute to solving Malaysia's most important
sustainability issues.

3. Online Retail Business

Despite Nestle size and the large geographic area it must cover they must classify its products
according to location in order to maintain product quality. They can focus on internet
commerce instead which will enable businesses to increase sales. In some and our countries,
Nestle operates online stores. They can also partner with online retailers to sell their products
abroad. They will be able to reach more people, which will improve their sales.

4. E-commerce and Online Advertising

For Nestle Malaysia, e-commerce and online advertising present a significant opportunity. It
can engage customers, extend its reach, and reach a broader customer base. As more people
shop online due to increased internet usage, social media can be utilized for promotions,
customer interaction, supplier and staff engagement, as well as for customer engagement.

2.4 THREAT OF NESTLE MALAYSIA COMPANY

1. Economic Condition

After being affected by the pandemic scenario, the global economy is still improving. People's
purchasing behaviors can be impacted by situations like unemployment. They might switch to
essential but less costly products. Some Nestle products may see a reduction in sales as a result,
indicating a general decline in sales.

2. Increased Competition

Global brands are entering the market as a result of the rising demand for packaged foods and
beverages. Local and foreign businesses are entering the market at an increasing rate. It
increases the chance of losing customers.

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3. High Competition
By supplying products at low prices and increasing its promotional costs, the corporation may
be forced by intense market competition to increase product differentiation and drive up
operating costs. Due to the identical products they offer, businesses like F&N and Dutch Lady
are direct rivals of Nestle Malaysia.

3.0 6 KEYS QUALITY INDICATORS
3.1 SHIPMENT ACCURACY
a) Units of the Products are correctly packed and packaged in compliance with the
Specifications, and each shipment intended for delivery to a customer is complete with regard
to the items Asyst requested be included.
b) Shipment accuracy = Number of perfect orders shipped X 100 %

Total number of orders shipped
c) A 60,000 cartons of milo is using 54,000 cartons of milo.

( 54,000 / 60,000 ) x 100%
= 90%
d) Number of perfect orders shipped is 54,000 divide total number of orders shipped is
60,000 then multiply with 100%. So that the answer can get 90%.

3.2 INVENTORY ACCURACY
a) The discrepancy between our stock records and our real physical inventory is what is known
as inventory accuracy. Inventory accuracy typically involves comparing what is listed in your
inventory management system to what is actually available at our warehouse locations.
b) There are 3 types of Inventories accuracy

Inventory accuracy = Total physical quantity verified X 100%
Total system quality

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c) Manually count the number of units you currently have on hand in order to determine the
accuracy of your inventory. Multiplying by 100 after dividing by the value in your inventory
management system (IMS). Let's assume that you found 400 units in your storehouse after
counting. Your digital records indicate that you should have 450.

( 400 / 450 ) x 100%
= 88.89%
d) Total physical quantity verified is 400 divide with total system quality is 450, then multiply
with 100%. So that can get 88.89%.

1. Inventory Locations Accuracy ( ILA)
a) The total number of inventory locations counted divided by the number of inventory
locations for which the amount physically counted or validated at a particular inventory
location equals the amount shown on an on-hand inventory report for that location.
b) ILA = Total number of storage locations without discrepancies X 100%

Total number of storage locations verified
c) Let's assume your business sells fast food, and your warehouse has 2,000 of the items. Your
records indicate that you should have 2,560 fast foods on stock.

= ( 2,000 / 2,560 ) x 100%
= 78%
d) The number of storage locations without discrepancies is 2000 item and divide the number
of storage locations verified is 2,560 unit. Then multiply with 100%. So, the answer can get
78%.

2. Inventory Discrepancy Accuracy ( IDA )
a) To a scenario where the quantity of inventory actually on hand changes with the records
currently kept about it. Even though inconsistencies in inventory levels are a typical
occurrence, they can result in a loss of profit, thus it's critical to have a system that monitors,
documents and enhances the inventory procedure.

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b) Inventory accuracy = Total no. of line items without discrepancies x 100%
Total of line items stored

c) Let's say you charge Rm 5 for each milk. The worth of the 1,020 milk you should have is
Rm 5,100 and the valuation of the 1,000 milk you already have is Rm 5,000.
Divide RM 5,000 by RM 5,100 using the same inventory accuracy rate formula. The result by
100. You achieve the same 98% inventory accuracy rate by using this technique.

3. Inventory Liability Accuracy ( ILA )
Inventory liability = Total value of discrepancies x 100%

Total value of products stored
Let's say you sell each health food for Rm 20 each. Then, the same 3,000 products you have
are worth Rm 7000, and the valuation of the 3065 items you should be is Rm7,100.

= ( 7000 / 7100 ) x 100%
= 98%
Using formula total value of discrepancies is 7000 divide with total value of products stored is
7100. After that, multiply with 100% then you can get 98%.

3.3 ORDER FILL RATE
a) The percentage of customer demand that are quickly filled from stock on hand. Because
customer happiness is strongly related to how many orders can be satisfied by stock on hand,
it is often known to as the demand satisfaction rate. A happy customer will see that all or the
majority of their orders are filled and delivered right away.
b) Order Fill Rate = Total of orders fulfilled by existing inventory x 100%

Total number of orders shipped
c) The percentage of wholesale orders that are successfully filled is known as the order fill rate.
For instance, if a customer requests 100 products from you and 20 of them are unsold.

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= ( 100 – 20 ) x 100%
= 80%
d) The total of orders fulfilled by existing inventory is 100 products then minus with total
number of orders shipped is 20 products. So, the answer is 80%.
Line Fill Rate
a) The percentage of order lines that are fully filled to all order lines. Any specific line item on
an order bill is considered to as an order line.
b) Line fill rate = Number of lines where order is filled x 100%

Total number of lines
c) As an example, you could have 8 orders out of a total 16 order lines. Once multiplied by
100%.

= ( 8 / 16 ) x 100%
= 50%
d) The number of lines where order filled is 8 and divide with total number of lines is 16. Then
multiply with 100%. So, you can get 50%.

3.4 PICKING ACCURACY
a) The percentage obtained by dividing the total number of orders picked over the same period
of time by the total number of orders that were picked and checked for accuracy before being
shipped.
b) Picking rate per labor hour = Total no. of line items picked for shipment

Total no. of labor hours
c) You have selected 4,000 orders in April. Of these, 3800 orders were correctly selected and
200 orders were incorrectly selected.

= ( 3800 / 4000 )
= 0.95

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d) The total no of line items picked for shipment is 3800 and divide with total no of labor hours
is 4000. Then can get the answer is 0.95.

3.5 PUT AWAY ACCURACY
a) The percentage of inventory you put away properly the first time. Because it can affect your
picking strategy and how accurately orders are fulfilled, this KPI is important to stick to.
b) Putaway Accuracy = Total Inventory Put away Correctly

Total Inventory Put away
If total inventory put away correctly is 100. Then total inventory put away is 200.

= ( 100 / 200 )
= 0.5

3.6 PRODUCTIVITY RATIO
a) A quantitative figure that represents output over a given time frame. Production is the total
amount of goods or items that a company produces in relation to the work that is put in. This
ratio measures elements of a business like labour, materials, sales, and customer loyalty while
taking into account both input and output.
b) 1) Units handled per labor hours
Units handled per labor hour = Total number of units handled (in and out)

Total number of labor hours
For example, if it takes 10 hours to produce 20 items, it takes one direct labor one finished
product.
= ( 20 / 10 )
=2
Total number of units handled is 20 then divide with total number of labor hours with it 10
hours. The answer is 2.

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2. Order Processing Rate
Line items processed per labor hour = Total number of line items processed (in and out)

Total number of labor hours
If total number of line items processed is 300 and divide the total number of labor hours is 13
hours. You can get, 23.

= ( 300 / 13 )
= 23

3. Inbound turnaround performance
Order Fill Rate = # of orders that meet agreed turnaround time x 100%

Total number of orders received
Find out how many orders customers made overall throughout the measurement period.
Assume that customers placed 4,920 orders using the sample value of 4,300 total completed
orders. Accordingly, the rate is the percentage of orders that are completed out of a total of
4,920 orders.
= ( 4,300 / 4920 ) x 100%
= 87%
Order fill rate is orders that meet agreed turnaround time is 4,300 and divide with total number
of orders received is 4920. Then multiply with 100%. So, you answer can get 87%.

4. Warehouse order cycle performance
Order Fill Rate = # of orders that meet agreed order cycle time x 100%

Total number of orders shipped
To calculate order fill rate is orders that meet agreed order cycle time is 25. Then total number
of orders shipped is 60 then multiply with 100%.

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= ( 25 / 60 ) x 100%
= 41.67%

5. Storage cost per unit
= Total storage cost
Average units stored over the accounting period
200 units of an 80-pack premium cookie were created by the Nestle e-commerce company in
April 2022.
Their monthly fixed cost of production is based on salary, rent, and other overhead.
$7,000.
The variable cost in April 2022 was $3,000 and it consisted of labour, raw materials, and power.
Shortage cost per unit = 7000 + 3000 = 80 200; in April 2022, it cost $80 to create one of their
super large biscuits.

6. Handling cost per unit
= Total handling cost

Total throughput units over the accounting period

7. Order processing cost per line item
= Total processing cost

Total line items processed over the accounting period
Let's examine an example of how the cost per order is determined for a single month in which
the warehouse received 600 orders, each of which generated $35 in revenue:
Marketing/ads (CAC) – 6,000
Packaging – $280
Shipping costs – $1200

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Fulfillment costs – $300
Storage costs – $100
COGS – $2,000
Total costs = $ 9880
Order processing cost per line item = $ 9880

600
= 16.47 (cost per line item)
So,
$35– $16.47 = A total profit of $18.53 per line item
The cost per line item is 16.47 on profit 18.53

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4.0 REFERENCES
1. Brief History Of Nestle Malaysia. (n.d.). Brief History of Nestle Malaysia. Retrieved
November 27, 2022, from https://www.ukessays.com/essays/management/brief-history-of-
nestle-malaysia-management-essay.php

2. Contributor, P. (2015, October 14). SWOT Analysis of Nestle, the popular food brand.
PESTLE Analysis. Retrieved November 29, 2022, from https://pestleanalysis.com/swot-
analysis-nestle/

3. Company History And Background Of Nestle | ipl.org. (n.d.). Company History and
Background of Nestle | ipl.org. Retrieved November 23, 2022, from
https://www.ipl.org/essay/Company-History-And-Background-Of-Nestle-FKNZHFHESJP6
4. Ecommerce metric refresher—Order Picking Accuracy | Eshopbox. (n.d.). Ecommerce
Metric refresher—Order Picking Accuracy | Eshopbox. Retrieved November 24, 2022, from
https://www.eshopbox.com/blog/order-picking-accuracy#:~:text=accuracy%20(OPA)%3F-
,%E2%80%8D,of%20time%2C%20as%20a%20percentage.

5. Essay on Nestlé: Industrial and SWOT Analysis - Free Essay Example - Edubirdie. (n.d.).
Edubirdie. Retrieved November 30, 2022, from https://edubirdie.com/examples/essay-on-
nestle-industrial-and-swot-analysis/

6. Jurevicius, O. (2021, October 21). Nestle SWOT Analysis 2022 - SM Insight. Strategic
Management Insight. Retrieved November 25, 2022, from
https://strategicmanagementinsight.com/swot-analyses/nestle-swot-analysis/

7. Kane, M. (2022, May 23). What is Inventory Accuracy? Calculate & Improve This KPI.
Cogsy. Retrieved November 22, 2022, from https://cogsy.com/inventory-
management/inventory-accuracy/

8. Lopienski, K. (n.d.). Inventory Discrepancies: What Causes Them & How to Prevent Them.
ShipBob. Retrieved December 1, 2022, from https://www.shipbob.com/blog/inventory-
discrepancy/

9. Mahajan, T. (2021, February 16). SWOT Analysis of Nestle [Detailed] - Super Heuristics.
Super Heuristics. Retrieved November 27, 2022, from https://www.superheuristics.com/swot-
analysis-of-nestle/

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10. Nestle SWOT Analysis | EdrawMax Online. (n.d.). Edrawsoft. Retrieved November 26,
2022, from https://www.edrawmax.com/article/nestle-swot-analysis.html
11. Reid, H. (2022, June 25). What Is Fill Rate? (Definition, Types and How To Calculate) |
DCL Logistics. DCL Logistics. Retrieved November 30, 2022, from
https://dclcorp.com/blog/fulfillment/fill-rate/
12. SHIPMENT ACCURACY Definition | Law Insider. (n.d.). Law Insider. Retrieved
November 29, 2022, from https://www.lawinsider.com/dictionary/shipment-accuracy
13. What is order fill rate and why is it important for wholesalers? (2021, March 15).
Alibaba.com Seller Central. Retrieved December 1, 2022, from
https://seller.alibaba.com/businessblogs/pxno4212-what-is-order-fill-rate-and-why-is-it-
important-for-wholesalers

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