MGN 562 – Managing OperationsGroup WorkThe Supply Chain of KitKat in IndiaSubmitted byKhin Myo Kyu (1706140002)Phyu Phyu Win (1706140003)Thu Thu San (1701260004)Pwint Zar Thin Khine (1702070013)Aye Mar Kyi (1706230002)The History of KitKatOur group has selected to present the supply chain process of KitKat chocolate in India. KitKat is the bestselling chocolate of UK. In 1935, KitKat was created in England with the name, “Rowntree’s Chocolate Crisp”. In 1937, the name was changed to “KitKat Chocolate Crisp” as the original name was difficult to remember. Because of the milk shortage in World War II, the packaging was temporarily changed to the blue color. A few years later in 1988, KitKat was bought by Nestle, Swiss Company. Internationally KitKat manufactures in Canada, Germany, India, Malaysia, China, Japan, Australia, South Africa and US. KitKat is available in more than 100 countries all over the world.As KitKat is owned by Nestle, it has the common mission and vision with the Nestle mentioned below. Nestle MissionGood food, good life – is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categoriesNestle VisionNestle is the largest food company in the world. But more important to them is to be the world’s leading food company.The supply chain of Kit Kat in IndiaIn 1961, KitKat manufacturing operations set up in India. There are altogether 7 Nestle factories in India; 3 in north and 4 in south. Here is the comprehensive supply chain process of KitKat in India. There are 5 main ingredients needed to produce chocolate which are milk, sugar, wheat flour and coca. Sugar, milk and wheat flour are locally produced in India but, palm oil and coca come from Indonesia. According to the findings in 2012, Indonesia is the second top coca beans producers in the world. KitKat works together with Non-Government Organizations (NGOs) to maintain the quality of the raw materials. NGO partners conduct supplier audit and farm assessments to ensure the procurement of top ingredients.
After the raw materials production, suppliers buy and collect them and send to the factory to make chocolate. The chocolate and waffle are produced separately in the factory and then combine and put them into the proper packaging. Later, KitKat chocolates are sent to the Nestle warehouse. Nestle manages the warehouse with Radio Frequency Technology. Chocolates need to be kept under the special temperature 70°F (ideally between 65 and 68°F), and at a humidity of less than 55%, the emulsion of cocoa solids and cocoa butter will stay stable for months. In Nestle India, most of the transportation and logistics is outsourced to third parties. Nestle links with carrying and forward agents to distribute KitKat chocolates in and outside of India. These agents link with distributors, then wholesalers and retailers to reach to the consumers. Sometimes, distributors link with retailers to sell KitKat to end users. Moreover, Nestle India also realizes the importance of e-retailing and continues to successfully engage with the leading e-retailers. Risk analysis of the supply chainChild labor is an issue on Nestle especially at the cocoa farms. Children younger than 15 continue to work at the farms even though Nestle stop using child labor in their supply chain process. According to the findings from researchers, Nestle do not have sufficient effort to educate farmers about the code of conduct. Farmers, themselves, are not interested to join the awareness and training sessions. Moreover, there is no proper age verification system for workers to stop child labor. Another problem faced is during packaging. Because the biscuit is actually a wafer, it can break easily and consumers end up getting a broken piece of KitKat chocolate most of the times. It is not a good image of KitKat. Therefore, warehouse and logistics process need to be careful not to break the KitKat.
KitKat, the popular chocolate brand, has a rich history dating back to its creation in 1935 in England, where it was initially known as "Rowntree’s Chocolate Crisp." The name was later changed to "KitKat Chocolate Crisp" in 1937 for better memorability. During World War II, due to milk shortages, the packaging temporarily changed to a blue color. In 1988, KitKat was acquired by Nestle, a Swiss company, and it is now manufactured in various countries, including Canada, Germany, India, Malaysia, China, Japan, Australia, South Africa, and the US. KitKat is available in over 100 countries worldwide.
As KitKat is owned by Nestle, it shares the company’s mission and vision. Nestle’s mission is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories. Their vision is to be the world’s leading food company.
In India, KitKat’s supply chain process begins with the sourcing of five main ingredients: milk, sugar, wheat flour, palm oil, and cocoa. Sugar, milk, and wheat flour are locally produced in India, while palm oil and cocoa are sourced from Indonesia. Indonesia is one of the top producers of cocoa beans globally. To ensure the quality of raw materials, KitKat collaborates with Non-Government Organizations (NGOs) that conduct supplier audits and farm assessments.
Once the raw materials are procured, they are sent to the factory for chocolate production. The chocolate and waffle components are produced separately and later combined and packaged appropriately. The finished KitKat chocolates are then transported to Nestle’s warehouse, where they are stored under specific temperature and humidity conditions. Nestle manages its warehouse operations using Radio Frequency Technology to ensure the stability of the chocolate emulsion.
In India, Nestle outsources most of its transportation and logistics to third-party providers. Nestle collaborates with carrying and forward agents, who work with distributors, wholesalers, and retailers to distribute KitKat chocolates both within India and internationally. Additionally, Nestle recognizes the importance of e-retailing and successfully engages with leading e-retailers to reach consumers.
However, there are some challenges and risks in KitKat’s supply chain. One of the major issues Nestle faces is child labor in cocoa farms. Despite efforts to stop the use of child labor in their supply chain, children under the age of 15 continue to work on these farms. Lack of sufficient farmer education about the code of conduct and farmers’ disinterest in joining awareness and training sessions contribute to this problem. Furthermore, there is no proper age verification system for workers to prevent child labor.
Another challenge lies in the packaging process. Due to the wafer nature of the biscuit, KitKat chocolates can easily break during packaging, leading to consumers receiving broken pieces. This negatively affects KitKat’s brand image. Therefore, careful handling and logistics processes are necessary to prevent breakage.
In summary, KitKat’s supply chain in India involves sourcing local and international ingredients, collaborating with NGOs for quality control, manufacturing in Nestle factories, managing warehouse operations with advanced technology, and outsourcing transportation and logistics to third parties. However, challenges such as child labor and packaging issues need to be addressed to ensure a sustainable and efficient supply chain for KitKat in India.
KitKat’s supply chain in India involves several key components. Firstly, the company sources both local and international ingredients for its chocolate production. This ensures that the product maintains its quality and consistency, while also supporting local farmers and suppliers.
To ensure the quality of the ingredients, KitKat collaborates with non-governmental organizations (NGOs) for quality control. These partnerships help in monitoring and verifying the sourcing practices, ensuring that the ingredients meet the required standards and are produced ethically.
Once the ingredients are sourced, the manufacturing process takes place in Nestle factories. These factories are equipped with state-of-the-art technology and adhere to strict quality control measures to ensure that the KitKat chocolates are produced to the highest standards.
After manufacturing, the next challenge lies in the packaging process. Due to the wafer nature of the biscuit, KitKat chocolates can easily break during packaging. This poses a significant challenge as broken pieces negatively impact the brand image and customer experience. To address this, careful handling and logistics processes are necessary to prevent breakage. This includes using appropriate packaging materials and ensuring proper handling and transportation throughout the supply chain.
In terms of warehouse operations, KitKat utilizes advanced technology to manage its inventory and distribution. This helps in optimizing storage space, reducing wastage, and ensuring efficient order fulfillment. By leveraging technology, KitKat can track and manage its inventory more effectively, reducing the risk of stockouts or excess inventory.
Transportation and logistics are outsourced to third-party providers. This allows KitKat to focus on its core competencies while leveraging the expertise of specialized logistics companies. However, it is essential to ensure that these third-party providers adhere to the same ethical and sustainability standards as KitKat to maintain the integrity of the supply chain.
While KitKat has made significant efforts to establish a sustainable and efficient supply chain in India, there are still challenges that need to be addressed. One such challenge is the issue of child labor. The chocolate industry has faced criticism for its involvement in child labor practices, and KitKat is not exempt from these concerns. To ensure a sustainable supply chain, it is crucial for KitKat to actively work towards eliminating child labor from its supply chain and promote fair labor practices.
In conclusion, KitKat’s supply chain in India involves various components, including sourcing ingredients, collaborating with NGOs for quality control, manufacturing in Nestle factories, managing warehouse operations with advanced technology, and outsourcing transportation and logistics. While the company has made significant progress, challenges such as child labor and packaging issues need to be addressed to ensure a sustainable and efficient supply chain for KitKat in India.