In The Name of ALLAH The Most Beneficial, The Most Merciful.

LAUNCHING A NEW PRODUT

(DIET ORANGE JUICE)
OPERATIONAL MANAGMENT
PROJECT

Presented To,

Mr. NAVEED MUSHTAQ

University of Sargodha

Presented By,

M.B.A. Regular “A”

University of Sargodha

1
 DEDICATION

We would like to thank our professor Mr. Naveed Mushtaq who was always there to
help and guide us when we needed help. His perceptive criticism kept us working to make this
project more full proof. We are thankful to him for his encouraging and valuable support.
Working under him was an extremely knowledgeable and enriching experience for us. We are
very thankful to him for all the value addition and enhancement done to me.

No words can adequately express my overriding debt of gratitude to my parents whose support
helps me in all the way. Above all I shall thank my friends who constantly encouraged and
blessed me so as to enable me to do this work successfully.

2
 ACKNOWLEDGEMENT

“To Him belongs the dimension of the Heavens and the earth, it is He who gives Life and
death and He has power over all things.”
(Al-Quran)

All acclamation to Allah who has empowered and enabled us to accomplish the task
successfully. First of all we would like to thank our Allah Almighty who really helps us in every
problem during the project. We would like to express our sincere and humble gratitude to
ALLAH almighty who‟s Blessings, help and guidance has been a real source of all our
achievements in our life. We would like to admit that we completed this project due to parents
who pray for our success. We also wish to express our appreciation to our supervisor Mr.
Faheem Athar Haqani who help us a lot and introduce us to new dimensions of knowledge. And
we would like to acknowledge all our work to our parents and friends who guided to accomplish
this never forgetting task. Last but not the least our team efforts, support, cooperation and
encouragement showed by each members in the group with each other.

3
 TABLE OF CONTENTS

Contents Page No
CEO‟s message 10
Management of company 11
New product launch project 12
Project director 12
Project period 12
Flow chart 13
Project management team 14
Nestle introduction 15
Background of company 15
Mission statement 16
Vision statement 16
Corporate strategies 16
Objectives of executive department 18
Nestle competitive advantage 19
Gantt chart 20
Sales and research department 21
Design department 32
About design department 33
Strategic objectives 33
Duties and functions of design department members 37
Core abilities of diet orange designer 37
Designing Software 38
Quality Function Deployment 38
House of Quality Matrix 40
The major features of diet orange 41
Product Quality 42
Style 42
Design 42
Taste 43
4
Colour 43
Freshness 43
Uniqueness 43
Price 44
Healthful ingredients 44
Branding 44
Packaging 44
Labeling 45
Packaging machines used for design 44
Major ingredients in the product 35
Carbonated Water 36
Fresh Oranges 36
Aspartame 36
Phosphoric Acid 37
Citric Acid 37
Natural flavors 37
Salt 37
Tops 37
Xotica 37
Process view 39
Goals 40
Strategies 41
SWOT Analysis 49
Activity on node approach 50
Gantt chart 52
Production department 53
Finance department 76
Duties and responsibilities 76
Analysis of financial statements 79
Pricing 82
Ingredient cost 82
Product cost 83
Breakeven analysis 84
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Financial plan 85
Sales forecast 86
Detail budget 86
Production budget 87
Material budget 87
Labor budget 87
CGS statement 88
Marketing budget 89
General& Admin expenses budget 89
Budgeted financial statement 89
Budgeted income statement 89
Estimated retained earning 90
Capital expenditure budget 90
Change in fix assets 90
Working capital 91
Project cost 91
Budgeted balance sheet 91
Inventory control department 94
Ranks and responsibilities 95
Strategic objectives 96
Inventory control system 97
Inventory control technique 97
Economic purchase order quantity 97
Cost of ordering 97
Cost of carrying 98
Reorder level 98
Minimum inventory or safety stock 98
Requirements for effective inventory management Inventory 100
function
Classifying system 101
Inventory ratios 102
Liquidity of inventory 102
Day’s sales in inventory 102
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Inventory turnover 103
Operating cycle 103
Flow chart 104
Inventory control counting system 105
Production process 105
Inventory costing method 105
Inventory ledger control 106
Quality control department 107
Quality assurance department 128
Quality assurance mission 128
Quality assurance objectives 128
Policies and procedures 129
Methods 138
Sigma levels 137
Functions of Q.A department 146
Training of quality assurance 146
Marketing Department 149
Company Profile 150
Product 152
Promotional Activities 153
Market Survey 164
Feasibility Plane 167
Supply Chain Department 175
Objectives 176
Key Critical Supply Chain process 177
Decision On three Levels 181
Supply Chain Management Flow 182
Characteristic of Leanness 185
Selection of Transportation Mode 187
Gantt Chart 188
Questionnaire 189

7
 EXECUTIVE SUMMARY
Nestle Pakistan is the subsidiary of nestle company, the main challenge of nestle Pakistan
is to provide; innovative products to its target customers. At Nestlé, we believe that research can
help us make better food so that people live a better life. Good Food is the primary source of
Good Health throughout life. We strive to bring consumers foods that are safe, of high quality
and provide optimal nutrition to meet physiological needs. In addition to Nutrition, Health and
Wellness, Nestlé products bring consumers the vital ingredients of taste and pleasure. As
consumers continue to make choices regarding foods and beverages they consume, Nestlé helps
provide selections for all individual taste and lifestyle preferences.

Research is a key part of our heritage at Nestlé and an essential element of our future. We know
there is still much to discover about health, wellness and the role of food in our lives, and we
continue to search for answers to bring consumers Good Food for Good Life. Nestle Pakistan has
determined to add a new product in its product line beverages, named diet orange juice. Nestle„s
product lines and brands are Beverages, Bottled Water , Baby Foods, Breakfast, Cereals,
Chocolate & Confectionery, Coffee, Dairy products ,Drinks, Ice Cream, In the Kitchen Nestlé
,Professional, Nutrition &Health, Pet care.

After conceiving idea from sales and research department, all the relevant departments gave their
acceptance to that idea, that was diet orange, it has healthful ingredients, the core competence of
diet orange is its freshness, it taste, its quality, its diet and fizzy juice, that‟s was really amusing
product for youth and old. Youth is very conscious for its health and they are also trendy, this
product provides both things at a time. As its diet means sugar free and carbonated so its new
and unique in all ways. Market location is Pakistan and international zones are in their vision.
Our entrepreneurial teams are sales and research department, floor operations department, design
department, quality assurance and control departments, finance department, inventory control,
marketing department. All the departments take active part in the creation of diet orange. We
hope for better profitability as our financial summary by finance department indicates.

8
 REPORT ON COMPLETION OF PROJECT
Our project is a complete documentation on the product development. It covered all the
phases which Nestle took while it‟s going to launch a new product. Our product that was “diet
orange”, was idea from our sales and research department. That conceived idea was highly
appreciated and then converted into realistic creation by the entire cross functional teams of the
firm Nestle. CEO, project director, managers and all the departmental heads have
foresightedness that it will be really a new product regarding all aspects, as far its design is
concerned its unique, its taste that‟s carbonated plus fizzy its amusing, we hope this diet juice
will be liked by our target consumers, they will rely upon it even it‟s a new product, but because
of Nestlé‟s image. So at the end we are finally hopeful to say we are successfully going to launch
it and hope for better results, on the back up of facts collected from our different departments.
Consumers expect such a product, as manifested by the questionnaire survey and like to buy it as
they trust on Nestle quality, truly we wish for good food good life. And Nestle has assurance it
will really a good profitable add to our product line, CEO and finance department have judgment
and forecasted about its profitability. Our communication channels and distribution channels are
well functioning, so it work as good mean to boost up the spread of new product in different
geographical areas. We set the price initially low its cost plus profit margin, but we have vision
to increase the price in future with addition in diet orange. We have other different visions about
its styling and distribution. In this way we pick hope for prosperous product that definitely
enhance goodwill of our firm.

9
 CEO`s Message
Assalam-O-Alikum!

Wishing you best regards on the great success our company and on worldwide
recognition for his good and quality products. We are gaining more and more
customers by continuously improving the quality of our products and maintaining best
quality control system. For this I welcome all of our employees working in and
outside the organization.

Our primary goal is to provide superior services to our customers and fully
going through innovative ideas. Our aim is to provide good food, good life to our
customer. Innovation is the main strength of our company by which we are
continuously improving our standards. We are focusing more deeply on customer
demanded products that‟s why we are more successful.

I am very much pleased on the performance of our research and development

department which enables us to quickly launch our products. Performance of our
research department is much more better then all other competitor companies. We are
able to launch many new products due to its good performance.

Mainly focusing on our vision we want to be creative organization with great

values and till now we have achieved that standard. Employees of the organization are
our strength and we have to utilize that strength. I will welcome every person of that
company with creative skills which can give more better ideas and exceed its
innovative skills. I will welcome every one with innovative and skillful persons to be
part of that great company. Best luck for the future!

MR. AAMIR RAZA

(PRESIDENT & CHIEF EXECUTIVE OFFICER)

10
 MANAGEMENT OF THE COMPANY

PRESIDENT & CEO OF THE COMPANY

MR. AAMIR RAZA

(PRESIDENT & CHIEF EXECUTIVE OFFICER)

BOARD OF DIRECTORS

MR. WAQAS ANWAR

(S.E.V.P SALES & MKT)

MISS SHAN-E-ZAHRA
(S.E.V.P RESEARCH & DESIGN)

MISS UFAQ QAISER

(S.E.V.P QUALITY & INVENTORY CONTROL)

COMPANY SPOKES PERSON

SHAN-E-ZAHRA

11
 NEW PRODUCT LAUNCH PROJECT

PROJECT DIRECTOR

UFAQ QAIESR & WAQAS ANWAR

PROJECT PERIOD

We have completed proper research on this idea and after complete

research and clearly defining the customer needs. Our research and development team
suggested that there is great need to launch new product because of demand of that
product.

We have designed a proper roadmap of launching that product. Our total time
frame of launching that project is 30 days within which we can launch that product. We
have sent the copies to product design, inventory management, finance and company
executives.

Research team has fully approve the idea and suggested that it will be more
beneficial for us how early we will launch the project to capture the vacant market.

12
DEPARTMENTAL HIRERCHY

13
 PROJECT MANAGEMENT TEAM
PROJECT DIRECTOR

WARDA YAQOOB

DESIGNE ENGENIER

SADIA GUL

CHIEF FINANCIAL OFFICER

NASIR KHAN

INVENTORY MANAGER

RABIA MANZOOR

FLOOR OPERATIONS MANAGER

ZAINAB NADEEM

CHIEF QUALITY CONTROL

MARRIUM ANWER

MANAGER QUALITY ASSURANCE

BABER SULTAN

MARKETING MANAGER

SAIF-UR-REHMAN

SUPPLY CHAIN MANAGER

USMAN UL HAQ
14
 INTRODUCTION OF NESTLE

Nestlé is the world's leading food company. Since it was set up by Henri Nestlé to
provide an infant food product, it has been associated with providing high quality, customer and
consumer focused products. In recent years it has focused on becoming a nutrition, health and
wellness company. Wellness is about supporting people to live more healthy lives e.g. through
the development of probity yoghurts that help maintain the balance of the digestive system. The
company is a world leader in research and development, and Nestlé's scientists work in all areas
to create healthier and more nutritious foods.

BACKGROUND OF THE COMPANY

Nestlé Company had started off from a single man's idea, and developed into a giant
corporation. In 1866 Henri Nestlé, a pharmacist, developed a milk food formula for infants who
were unable to tolerate their mother milk (Nestle.com). His product became a success, and it
created a demand throughout Europe. As Nestlé‟s popularity grew more businesses wanted to
merge and become partners with Henri Nestlé's business. From 1866 to 1947 the Nestlé
Company had gone through several name changes. In 1905, Anglo-Swiss Condensed Milk Co.
and Farine Lactee Henri Nestlé merged, and the company‟s name became Nestlé & Anglo-Swiss
Condensed Milk Co. Then in 1929, Peter-Cailler-Kohler Chocolates Suisse‟s S.A. merged with
the company. The name was then changed to Nestlé & Anglo-Swiss Holding Co. Ltd, on
November 27, 1936. In December 1947, Co. acquired all the shares capital of the Alimentana
S.A. Company in exchange for fifteen Nestlé shares and fifteen Unilac shares for each of
Alimentana S.A. share, so this point the name was at Nestlé Alimentana S.A. And then finally,
the last name change that the company would endure was in 1977, where it adopted the name
Nestlé SA (Mergent Online). Along the way Nestlé‟s company remain successful, which allowed
them expand to new region and territories throughout the world, making them the world‟s
biggest food and beverage company. Nestlé‟s headquarters are located in Vevey, Switzerland,
but the Nestlé Company has factories or operation in almost ever country in the world. In
addition, to the increase in the size of the Nestlé Company.

15
 MISSION STATEMENT

“Nestle is dedicated to providing the best foods to people throughout their day,
throughout their lives, throughout the world, with our unique experience of anticipating
consumers need`s and creating solutions, nestle contributes to your well-being and
enhances your quality of life”.

Vision
“Nestlé's aim is to meet the various needs of the consumer everyday by marketing
and selling foods of a consistently high quality.”

VISION AND STRATEGY

The Nestlé global vision is to be the leading health, wellness, and Nutrition Company in
the world. Nestlé Pakistan subscribes fully to this vision. In particular, they envision to:
Lead a dynamic motivated and professional workforce – proud of its heritage and bullish
about the future.
Meet the nutritional needs of consumers of all age groups – from infancy to old age, from
nutrition to pleasure, through an innovative portfolio of branded food and beverage
products of the highest quality.
Deliver shareholder value through profitable long-term growth, while continuing to play
a significant and responsible role in the social, economic and environmental sectors of the
country.
Nestlé has profitable and diversified high quality food and beverage product portfolio,
delivering 60:40+ advantage to consumers, available across all sales channels.
16
 SWOT ANALYSIS
Strengths:
Very long history (over 140 years)
Operated factories in 77 countries (all six continents), a
Truly global company.
Considered the innovation leader in the global food and
nutrition sector(3500 scientist in company R&D network)
Low cost operators (beat the competition by producing
low cost products, edging ahead with low operating costs)
Offering thousands of local products.
Have a great CEO, Peter Brabeck, and a very strong workforces.

Weaknesses:
Not as successful as they thought they
would be in some market (i.e. France)
Some of their product were positioned as
too scientific, and consumers didn‟t quite understand (i.e. LC-1 was a food and not a
drug)

Opportunities:
Well-known company and strong brandname
Health-based products are becoming more
popular in the world, including in the United
States
Ranked first in nearly all the product
segments in which it operated (market leader)
Unaffected by current economic conditions
(its share of the UK confectionery market rise to 15.6 per cent with a 0.5 per cent
growth this year)

Threats:
Some markets they are entering are
already mature
Global competitors.
17
 There are intense competitions in the
United States, especially yogurt market (General Mills)
Business-level strategy
Nestlé business-level strategy is
integrated cost leadership/differentiation
Wide range of products (over 20
categories: coffee, milk, mineral water, pet foods, cereals…)
Low cost operators.
Competitors
Many competitors
The same qualities
The same prices
Unilever, Kraft, Master foods…
High pressure
Strategic Leadership
To force the businesses to become more
Efficient.
To create a regional manufacturing

Objectives of Executive Department

• To crystallise specific business leadership in a market (e.g. diet orange juice)

• To place P&L responsibility in market at the product category level
• To improve communication with the Centre (more direct interactions between Markets and SBUs) and
with the Clusters and PTCs
• Reports to the CEO.
• Alignment with management and leadership principles
• Coordination of cross- Business HR matters in:-
• Succession planning
• Compensation & benefits policies
• Training (selected)
• Achievement of Zone yearly targets and performance objectives
• Global Business Strategy
• Market Business Implementation Plan
• Mergers, acquisitions, divestments
18
 • Achievement of Market/Regional Business yearly targets and performance objectives
• Implementation Group policies of /principles
• Concentrate SBU resources on critical tasks (e.g., strategy, Innovation/Renovation, brand equity
mgt., consumer insights, HR)
• Long term profitability and return on invested capital
• Leverage other Centre functions for ancillary tasks

Nestlé‟s Competitive Advantage:

Strong innovation heritage
140 years of success in research
We have strong Nutrition Business at the core of our Food and Beverage Business
to strengthen
 our science-based development
 the reach of Nestle Research

•Clear vision for the future

Nestle Vision
Nestles Research Vision To be the Nutrition, Health and
To create the future, move faster Wellness company
and go beyond what consumers
tell us •Innovation driven by superior
science and technology
•Science and technology as
•Understand consumers’ nutritional
the engine of innovation and emotional needs

•Being consumer centric

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Leveraging research into products and services:

 weight management
 growth and development
 protection

GANTT CHART
Tasks Duration Start Finish
in days
Project was assigned 1 30OCT 30OCT
Team was created 1 30OCT 30OCT
Meeting was held 1 30OCT 30OCT
Ranking of members 1 1STNOV 1STNOV
Assignment of duties 1 1STNOV 1STNOV
Define corporate strategies 1 5NOV 5NOV
Received initial data from sales and research dep‟t 1 20NOV 20NOV
Meeting was held regarding proceedings of project
Establishment of criteria regarding project 1 21NOV 21NOV
completion &information flow.
Analysis of criteria/parameters are determined 1 21NOV 21NOV
Supervision and guidance by executives to depts. 1 21NOV 21NOV
SWOT analysis of company 1 22NOV 22NOV
Meeting was held 1 24NOV 24NOV
Initial work received and gave presentation to head 5 25NOV 30NOV
of co.
Data received from sales, marketing and research 1 31DEC 31DEC
department
Data received from quality control department 1 31 DEC 31 DEC
Data received from supply chain department 1 31 DEC 31 DEC
Data received from quality assurance department 2 31 DEC 31 DEC
Data received from inventory control department 1 31 DEC 31 DEC
Data received from finance department 1 31DEC 31DEC
Data received from design department 1 31DEC 31DEC
Data received from floor operations department 1 31DEC 31DEC
Compiled the whole data by executives 2 31DEC 2JAN
Debugging of flaws 1 2JAN 2JAN
Report to CEO 1 3JAN 3JAN
Approved 1 4JAN 4JAN
Project given to sir 1 6JAN 6JAN

20
 Sales & Research Department

Duties & Responsibilities of sales & Research Department

Sales Department:
Sales department consists of following personnel;

 Sales Manager.
 Assistant Sales Manager.

Duties of Sales Manager:

1) Developing sales strategies, goals and plans

2) Reviewing sales information both historical and current.
3) Forecasting for senior management.
4) Looking at competitors and evaluating strategies to compete.
5) Sales meetings and sales calls with team members.
6) Measuring results.

Duties of assistant sales manager:

1) To collect data about potential sales market.

2) To regularly report his progress to the sales manager.
3) To suggest and implement ways & techniques of selling the new product to the customers.

Research Department:
Research department consists of following personnel;

 Research Manager
 Research Assistant manager
Duties of Research manager:

1) To monitor the conducting of surveys regarding the existence of new product demand.
2) To analyze through research techniques the suitable product features to be added to the new
product.
3) To overall manage the work of assistant research manager.
4) To research which processes will be the optimal one for product development and manufacturing.
21
Duties of Assistant Research Manager:

1) o conduct the research surveys in the market regarding the acceptability of the new
product.
2) To gather other research data from multiple sources like Government published reports,
market statistics etc.

PRODUCT CHARACTERISTICS BY
SALES AND RESEARCH DEPARTMENT
New Product;
Our organization NESTLE is going to launch a new product named

as “ Diet Orange”.

General Characteristics;
The general characteristics of our new product are as follows;

1. It will be a sugar free carbonated orange drink.

2. It will try to emerge as a diet carbonated fruit drink against carbonated

drinks like diet Coke and diet Pepsi.

This product will basically rely upon its orange flavor, colour and its

Quality as well.

3. It will develop a new trend in the market to bend towards the use of
fruit fizzy drinks instead of long existing non-fruit fizzy drinks.

4. The drink will be available in standard quality plastic bottles with

colorful labeling upon it.

22
 Competitive Edge:
As current ly t here is alr eady almost no such product available in t he
market which mat ches t he feat ures of our new product „diet orange‟, it is a big
edge for us. Thus, sugar free fruit -co lor and flavor car bonat ed juice is t he
co mpet it ive advant age for our new product . There is no sugar in our product and
t hus, is not har mful for diabet ic pat ient s.

The cust omers can enjo y t he co mplet e nat ural t ast e of orange fruit
t hrough our product wit hout any fear o f rais ing t heir sugar level as it has no
sugar in it . Our product is also ver y appropr iat e for healt h conscious yo ung
people i.e. Those who have much concer n about t heir healt h. Our product is t he
want of consumer, because t he consumer is paying not for only t o fulfill t heir
appet it e but also to maint ain a good healt h.

Objectives of sales and research department:

The objectives of Sales and Research department are as follows;

To go get customers to maintain or increase their purchase of

a product.
To establish and maintain consumer loyalty.
To develop new business products.
To obtain the opinion of consumers after the product usage.
To gauge the potential demand in the market by conducting
surveys before issuing the product.
To suggest product features to the design departm ent.
To decide upon the competitive edge of a new product to be
launched.

23
 SWOT ANALYSIS OF „DIET ORANGE‟

(By SALES and RESEARCH Department)

STRENGTHS:

Our biggest st rengt hs are undoubt edly t he fact s t hat :

1: Sugar free \ Low calorie content:

We are offer ing sugar free dr ink in a market where

upco ming generat io n is paying more at t ent ion t owards it s hea lt h and fit ness.

2 : No Direct Substitution in accordance with our quality:

We also enjo y no direct subst it ut es because t he fact t hat t here are

present ly no ot her company which produces t he sugar fr ee, car bonat ed fruit
dr ink.

3 :Good for diabetic patients;

As t here is no sugar in t his produc t comparat ively so it is t he

best alt er nat e so ft drink for diabet ic pat ient s.

Other Strengths:
High- qualit y food offer ings t hat exceed compet it ors‟ offer ings in
co lor, flavor and qualit y.
High cust o mer lo yalt y.
Excellent st aff who are highly t rained and ver y cust omer at t ent ive.

24
 WEAKNESSES:

Our biggest weakness is t he fact t hat :

1: New product

As our DIET ORANGE juice is a new product and in t he

int roduct ory process, it would obviously t ake t ime t o reach mat ur it y and beco me
a purely est ablished product .

2: Strong Hold of other Carbonated Drinks

The diet dr inks ma rket is largely occupied by t he diet

car bonat ed giant s like diet Coke and diet Pepsi. Despit e t he exist ence of an
opport unit y t o int roduce a new fruit flavored diet drink, t he new product will
have t o face t ough co mpet it ion in t he beginning.

Other Weaknesses:

o The st ruggle t o cont inually sust ain t he cut t ing edge.

OPPORTUNITIES:

1: Positive position

Since our company Nestlé is already est ablished so we are hoping

t hat our new product DIET ORANGE juice will soon occupy a posit ive posit io n
in t he mar ket .

: Trend towards health

As t he people now beco me mor e healt h co nsc ious and t he awareness

towards healt h incr ease s day by day, so t his will increase our sales in fut ure.

25
Other Opportunities:
o Increas ing sa les opport unit ies due to sugar free dr ink.

THREATS:

1: New product introduction

We fear t hat t hough a st rong co mpany Nestlé st ands behind t his

new product , st ill it will face a t ough co mpet it ion fro m it s co mpet it ors.

2: Political instability

The po lit ical inst abilit y is a big t hreat for us as t he at t ent ion o f t he
t arget market get s divert ed fro m t he food st uff t o polit ical cr is is on hand.

3: Economic regression

Due to current econo mic regressio n, t he expect ed profit o f our new

product might not be achieved due t o low purchasing power of people and
current overall low pro fit enviro nment

Other Threats:
Co mpet it io n fro m present co mpanies in t his indust r y t hat respond t o
Nestlé‟s super ior offer ings.
A slump in t he eco no my and a boo m in t he inflat io n, in our count r y,
will reduce cust omer 's disposable inco me spent on eat ing.
Nestle Sales Structure:
Nestle Global:

Nestle‟s widespread global network presents opportunities to learn from innovative

techniques used in faraway countries.

26
In terms of sales, the world has been divided into different Zones by Nestle which are as follows;

I. Zone America
II. Zone Europe
III. Zone Asia, Oceania and Africa

Nestle Pakistan:

In PAKISTAN, it has developed an intensive distribution strategy that brings its products
to consumer‟s door, through effective communication, door-to-door sampling, and exciting
consumer promotions.

Nestle focuses especially on Pakistan's smaller towns, where activities such as town storming,
distribution drives and intensive distributor training ensure that products are easily accessible and
visible, giving it a strong competitive edge.

Sales Situation of Nestle in its Zones in earlier 9 months of 2009:

Nestlé‟s sales from January to September of 2009 in its different zones are as follows;

Jan-Sept 2009 Jan-Sept 2009 Jan-Sept 2009

Sales Organic Growth Real Internal
in CHF millions (%) Growth (%)

Zone Americas 23 393 + 6.4% + 2.3%

Zone Europe 16 514 0.0% - 1.5%
Zone Asia, Oceania, Africa 11 713 + 5.8% + 3.0%

(All calculations based on non-rounded figures.

Globally managed Nestlé Professional activities have been taken out of the Zones and included
in “Other Food & Beverages”. )

Zone Americas:

There was sales of CHF 23.4 billion, 6.4% organic growth and 2.3% real internal growth. In
North America, the real internal growth of petcare, ice cream, soluble coffee and chocolate
accelerated in the third quarter, but slowed for frozen food. Brazil continued to build on the

27
positive momentum, mainly due to growth in the ambient dairy category. Mexico and the rest of
the region also showed improvement in the third quarter.

Zone Europe:

There was sales of CHF 16.5 billion, 0% organic growth and -1.5% real internal growth.
Germany, France, Switzerland, the Iberian region and Italy saw a rise in real internal growth.
The Great Britain region delivered a strong performance, although the third quarter was weaker.
Eastern Europe presented a mixed picture with weaker third-quarter real internal growth in
Russia and the Czech and Slovak Republics, while Poland and the Ukraine enjoyed stronger
growth. By category, sales volumes were good in soluble coffee, chilled culinary, powdered
beverages and petcare.

Zone Asia, Oceania and Africa:

There was sales of CHF 11.7 billion, 5.8% organic growth and 3.0% real internal growth. All
the emerging regions contributed to improved volumes, although real internal growth in Oceania
and Japan was unchanged. There was strong real internal growth in China, the Philippines, South
Asia and Africa. The Middle East continued to improve. By category, real internal growth in
ambient dairy improved and remained strong in ambient culinary, soluble coffee, powdered
beverages and chocolate.

Nestlé‟s Target Markets:

To launch its new carbonated orange-flavor
diet drink called “DIET ORANGE”, Nestlé has focused the following target markets as the
most feasible ones;

I. Diabetic Patients.
II. Health conscious Younger Generation.
I. Diabetic Patients:
Usually in the Pakistani market, diet drinks are available for the sake of
diabetic patients but they are of Non-fruit nature like diet giants of Diet Cola & Pepsi.
We bring for such patients “DIET ORANGE” which is not only a carbonated diet drink but is
also close to nature as has an Orange flavor & color. Thus, Nestlé is targeting such potential
consumers for successful launching of its new product.

II. Health Conscience Young Generation:

Most of the current younger generation is health conscious &
wishes to prefer the diet drinks to avoid excessive usage of sugar. That is why Nestlé is
focusing upon college & University going younger generation as its second important
28
 target market for the new product. It is hoped that the new Fruit-diet carbonated drink
will immediately make its place in the hearts of young Pakistanis as “DIET ORANGE”
brings along with it, a slight deviation from other companies‟ diet drinks.

Nestlé‟s sales Strategies:

For the sale of its new product called DIET ORANGE Nestlé will rely upon already well
established Sales & Distribution Network in Pakistan.

Nestlé‟s Network in Pakistan:

The Headquarter is in Lahore, the company operates five production factories. Three of
its factories in Sargodha, Seikhupura and Kbirwala are multi product factories. One factory in
Islamabad and two in Karachi are working. Through its effective marketing and a vast sales and
distribution network thought out the country, Nestlé ensures that its products are made available
to consumers whenever, wherever and however.

The value delivery network:

In general Nestlé uses locally available raw materials and purchases them either
directly from producers or through existing trade channels. In Pakistan, its strategy has been to
acquire local companies in order to form a group of autonomous regional managers who know
more about the culture of the local markets than other countries.
Nestlé‟s Main Sales Strategy:

Nestlé is making full efforts to supply its product to ultimate consumers as efficiently as
possible. Before understanding what type of sales strategy Nestlé uses, its important to know
what kind of Distribution channels are being used by the company to carry out such sales
strategy.

Nestlé `s channel of distribution: The organization must distribute the product to the user at
the right place at the right time. Efficient and effective sales & distribution are important if the

29
organization is to meet its overall marketing objectives. For this purpose, the company uses two
types of channel of distribution.

I. Direct distribution.
II. Indirect distribution.

I. Direct distribution:

Direct distribution involves distributing direct from a manufacturer to the

consumer. Clearly direct distribution gives a manufacturer complete control over their product.

II. Indirect Distribution:

Indirect distribution involves distributing the product by the use of an

intermediary. Direct distribution involves distributing direct from a manufacturer to the
consumer. Clearly direct distribution gives a manufacturer complete control over their
product.

Above indirect distribution (left) and direct distribution (right)

Thus, the company also uses the conventional marketing channels of

distribution to supply the product.

By adopting two types of distribution channels, Nestlé uses the basic

Sales Strategy of Direct selling.

30
Direct selling:

Direct selling involves selling directly to the customer; retailing, door-to-door,

mail order and ecommerce, all directly sell to customers. The advantage of deciding to directly
sell would mean the company is in direct contact will its customers and can easily detect the
subtle changes which are occurring and adapt to the changes; i.e. demand for price changes or
overall demand for its products.

However, direct sales can come at a price; storage facilities or retail premises to sell products
directly are needed. Due to its huge profit, market share & capital backup, Nestlé is able to
maintain a strong sales structure.

In Pakistan, Nestlé maintains a well-developed network of retailers which provide its

products to its consumers in nearly every city of Pakistan.

Sales & Research Depatment‟s Gannt chart:

Tasks:- Duration Start Finish
in days.
Team was created 1 30OCT 30OCT
Ranking of members 1 2ndNOV 2ndNOV
Assignment of duties 1 3rdNOV 3rdNOV
Work on idea 17 3rdNOV 19NOV
Send information to design deppt 1 20NOV 20NOV
Define Product characteristics 1 21NOV 21NOV
Define competitive edge 1 23NOV 23NOV
Develop FAQ‟s 2 24NOV 25NOV
Conduct survey 7 26NOV 02DEC
Approval of FAQ‟s from Project director 2 02DEC 03DEC
SWOT analysis of product 4 04DEC 07DEC
Define current sales situation 1 08DEC 08DEC
Develop sales strategies 6 09DEC 14DEC

31
 DESIGN DEPARTMENT

Product Design department Hierarchy:

Product designer

Assistant Product designer

Product design feasibility manager

Product design approval manager

32
About us:-
We are “design department”, our purpose is to design a product as per proposal by our
CEO and characteristics mentioned to us by “sales and research department”. Sales department
of our company told us about the idea of “diet orange juice”, they do research upon it and after
some other formalities like approvals by CEO and Board of directors we now start design phase
in the product development.

The general characteristics which we receive from sales and research department about “diet
orange” are:

1. It will be sugar free carbonated drink.

2. It will try to emerge as a diet carbonated fruit drink against carbonated drinks like diet coke and
diet Pepsi.
3. This product will basically rely upon its orange flavor, color and its quality as well.
4. It will develop a new trend in the market to bend towards the use of fruit fizzy drinks instead of
long existing non-fruit fizzy drinks.
5. The drink will be available in standard quality plastic bottles with colorful labeling upon it.

Strategic objectives of our design department

Creation of well connected communication network, it‟s the objective of our design team;
we have good communication with all other departments to share information about new
product design.
Create customer-oriented design which adds more value to brand. As Nestlé's business
objective is to manufacture and market the Company's products in such a way as to create
value that can be sustained over the long term for shareholders, employees, consumers,
and business partners. thus design considerations plays a vital role in this regard.
Follow suggestions of other departments regarding design.
Long run profit through design considerations, also Nestlé does not favor short-term
profit at the expense of successful long-term business development.

33
 Intelligent and effective design, we give such a product design when used by customers
got good experience.
To create the design more and more attractive so that customer feel good as he will scan
our products in the store listed in one site.
The product design fits our brand and the products of other product lines.

Duties and functions of design department members

1. Product designer (Sadia Gull)

The core abilities of diet orange designer:

Our Product designer will create the user-centered design of a product and will add
ingredients in the product according to voice of customer.
The role of our “diet orange” designer encompasses many characteristics of the
marketing manager, product manager, industrial designer and design engineer.
The role of the product designer combines art, science and technology to create tangible
three-dimensional “diet orange”. This evolving role has been facilitated by digital tools
that allow her to communicate, visualize and analyze ideas.
She is equipped with the skills needed to bring products from conception to market.
She has the ability to manage design projects.

The product designer follows series of steps those are written under as:

1. Designing and prototyping

2. Mixing of ingredients with different quantities
3. Pre production design/initial design
4. Review of Design
5. Final design with amendments

34
 Designing software
Designer used adobe photo shop software for the purpose of design, it has many tools and
menus for design purpose. For the purpose of product design, we will use house of quality matrix
to convert customer voice i.e. sugar free carbonated orange drink into technical specifications,
means in the words of engineers.

2.Assistant Product designer:- ( Sadia Kiran)

Provides her assistance to designer regarding design and check the quality of design via
QFD and house of quality matrix.

Quality function deployment

She searched 6 questions in this regard:

a) Voice of customer
b) Competitive analysis
c) Voice of engineer
d) Correlations
e) Technical comparisons
f) Trade offs

The four phases of QFD

She gave her views on design. And gave help of documentation.

35
There are five key points to QFD which enable it to understand and develop products to suit
consumers and be practical to produce at the same time as providing a competitive advantage.

Understanding Customer Requirements

Quality Systems Thinking + Psychology + Knowledge
Maximizing Positive Quality That Adds Value
Comprehensive Quality System for Customer Satisfaction
Strategy to Stay Ahead of The Game

QFD‟s primary goal is to overcome three major problems in traditional methods: disregard for
the voice of the customer, loss of information, and different individuals and functions working to
different requirements. In QFD, these issues are addressed by answering the following questions:

What are the product qualities the customer desires?

What functions must the product serve and what functions must we use to provide the
product or service?
Based upon the resources available, how can we best provide what our customer wants?
A disciplined approach to quality

36
 House of Quality Matrix:-

Voice of customer:-
Freshness
New taste
Diet

Voice of engineer:-
Fresh oranges
Fizzy plus diet
Sugar free

3.Product design feasibility manager (Muhammad Javed)

 Check the feasibility according to his experience and expertise.

 The determination and specification of the parts of a diet orange and their
interrelationship so that they become a unified whole.

37
  He will decide that the design must satisfy a broad array of requirements in a
condition of balanced effectiveness.
 He will check whether diet orange is designed to perform a particular function or
set of functions effectively and reliably, to be economically manufacturable, to be
profitably salable, to suit the purposes and the attitudes of the consumer, and to be
durable, safe, and economical to operate.
 For instance, the design must take into consideration the particular manufacturing
facilities, available materials, know-how, and economic resources of the Nestle.
 The diet orange needs to be packaged; it will also need to be shipped so that it
should be light in weight.
 The diet orange should appear significant, effective, compatible with the culture,
and appear to be worth more than the price.

.Product design approval manager (Qalb-E-Abass)

Receives design and its feasibility from relevant members, Contact to manufacturing and
engineering department, finance department,sales and research department,quality control, and
assurance department for further approval and also for rectification of any discrepancy in design
requirements.These costs estimates are done by design, manufacturing, floor, and finance
department.

The major features of diet orange

1. Product Quality
2. Style
3. Design
4. Taste
5. Color
6. Freshness
7. Uniqueness
8. Price
9. Healthful ingredients

38
 10. Branding
11. Packaging
12. Labeling

Product Quality
Our diet orange will definitely satisfy our customer‟s requirements. People are now
health conscious whether they are young or in maturing age; they care for their health so this diet
orange will be their exact need.

Style
our diet orange looks attractive. We have used quality bottle

Design
As the product designers think less about product attributes and technical specifications
and more about how customer will use and benefit from the product. We use Adobe photoshop
for the purpose of bottle design. Definitely our good design of diet orange will improve customer
value, cut costs and will create strong competitive advantage. Nestle has been working with art
students and emerging-market researchers to develop new products and branch out to new
audiences.

39
 Taste
The major attribute of diet orange is its juicy fruity taste.its fizzy drink, sugar free,juicy
plus carbonated. Nestlé is the world's leading Nutrition, Health and Wellness company. We are
committed to increasing the nutritional value of our products while improving the taste.

Color
We use natural colors in it nothing is artificial. Fresh orange color creates more value and
a attractive look.

Freshness
Nestle creates place and time utility that is availability of products in time and at required
place.

Uniqueness
Our diet orange is unique in terms of its 2 in 1 feature that is diet plus carbonated.

So our product‟s competitive edge is

“Diet orange flavor and color plus carbonated drink”

40
 Price
We set price as follows:

250 ml with price RS.20/ and

450 ml with price RS.30/

We receive cost analysis from production department and floor and marketing, and finance then
we set the competitive price on design.

Branding
We do branding as Nestle is our brand. Our brand name speaks about quality and consistency. So
nestle brand name is the story we can say on which all the diet orange juice gains value.

Packaging
We store our diet orange in standard plastic bottles.

Packaging machines used for design

o Cartoning
o Sealing
o Coding / Marking
o Filling, liquid
o Labeling Machines
o Capping
o Check weigh
o Container handling/orienting
o Filling, dry
o Flow wrappers
o Inspection
o Metal detection

41
 o Multi packing
o Overwrapping
o Pouching
o Stretch wrapping
o Testing / measurement
o Vacuum packaging

Labeling
The labeling of diet orange includes:

 Name of company: Nestle

 Name of product: Diet Orange
 Weight: 250ml and 450ml
 Expiry date: within 12 months
 MRP “ maximum retail price”
 Manufacturing date
 Universal production code
 Ingredients
 Company‟s address and site
 Coloring and drawing
 Pieces of orange, Sun; represent it as breakfast need

Major ingredients in the product are

 Carbonated Water
 Fresh Oranges
 Aspartame
 Phosphoric Acid
 Citric Acid
 Natural flavors
 Salt
 Tops
 Xotica

42
 Carbonated water

Also known as sparkling water, fizzy water, seltzer, and water with gas, (collectively as
an aerated beverage), is plain water into which carbon dioxide gas has been dissolved, and is the
major and defining component of most soft drinks.
The process of dissolving carbon dioxide gas is called carbonation. It results in the
formation of carbonic acid (which has the chemical formula H2CO3).Carbonated water, also
known as soda water,. Club soda may be identical to plain carbonated water or it may contain a
small amount of table salt, sodium citrate, sodium bicarbonate, potassium bicarbonate, potassium
citrate, potassium sulfate, or disodium phosphate, depending on the bottler. These additives are
included to emulate the slightly salty taste of homemade soda water.

Aspartame (or APM): artificial sweetener

Aspartame is the name for an artificial, non-saccharide sweetener. Aspartame is the
methyl ester of a phenylalanine/aspartic acid dipeptide. Although some question its safety, the
weight of existing scientific evidence indicates that aspartame is safe at current levels of
consumption as a non-nutritive sweetener.[3] Aspartame is also one of the main sugar substitutes
used by people with diabetes. Because sucralose, unlike aspartame, retains its sweetness after
being heated, it has become more popular as an ingredient. Aspartame is an artificial sweetener.
It is 200 times sweeter than sugar in typical concentrations, without the high energy value of
sugar. While aspartame, like other peptides, has a caloric value of 4 kilocalories (17 kilojoules)
per gram, the quantity of aspartame needed to produce a sweet taste is so small that its caloric
contribution is negligible, which makes it a popular sweetener for those trying to avoid calories
from sugar. The taste of aspartame is not identical to that of sugar: the sweetness of aspartame
has a slower onset and longer duration than that of sugar.

Phosphoric acid
Also known as orthophosphoric acid or phosphoric (V) acid, is a mineral (inorganic) acid
having the chemical formula H3PO4. Orthophosphoric acid molecules can combine with
themselves to form a variety of compounds which are also referred to as phosphoric acids, but in
a more general way. it is used to acidify foods and beverages such as various colas, but not
without controversy regarding its health effects. It provides a tangy or sour taste and, being a
mass-produced chemical, is available cheaply and in large quantities.
The low cost and bulk availability is unlike more expensive seasonings that give comparable
flavors, such as citric acid which is obtainable from lemons and limes. (However most citric acid
in the food industry is not extracted from citrus fruit. Phosphoric acid, used in many soft drinks
(primarily cola)
43
On the other hand, a study funded by Pepsi suggests that low intake of phosphorus leads to lower
bone density. The study does not examine the effect of phosphoric acid, which binds with
magnesium and calcium in the digestive tract to form salts that are not absorbed but rather
studies general phosphorus intake.
Citric acid
Citric acid is a weak organic acid, and it is a natural preservative and is also used to add
an acidic, or sour, taste to foods and soft drinks. In biochemistry, it is important as an
intermediate in the citric acid cycle and therefore occurs in the metabolism of virtually all living
things. It can also be used as an environmentally benign cleaning agent.
Citric acid exists in greater than trace amounts in a variety of fruits and vegetables, most notably
citrus fruits. Lemons and limes have particularly high concentrations of the acid; it can constitute
as much as 8% of the dry weight of these fruits. For soft drinks and orange juice the best measure
of sweetness is the sugar/acid ratio. Recently, the use of infrared sensors has allowed
measurement of both Brix (sugar content) and acidity by detecting sugars and citric acid through
their characteristic molecular vibrations; this gives an accurate assessment of a drink's sweetness.
As a food additive, citric acid is used as a flavoring and preservative in food and beverages,
especially soft drinks.
Salt
Salt is a dietary mineral composed primarily of sodium chloride .Salt flavor is one of the
basic tastes, making salt the oldest, ubiquitous food seasoning. Salt is also an important
preservative.
Salt for human consumption is produced in different forms: unrefined salt (such as sea salt),
refined salt (table salt), and iodized salt. It is a crystalline solid, white, pale pink or light gray in
color, normally obtained from sea water or rock deposits. Edible rock salts may be slightly
grayish in color because of mineral content.
Chloride and sodium ions, the two major components of salt, are necessary for the survival of all
known living creatures, including humans. Salt is involved in regulating the water content (fluid
balance) of the body. Overconsumption of salt increases the risk of health problems, including
high blood pressure. Salt is a dietary mineral composed primarily of sodium chloride that is
essential for animal life, but can be toxic to many land plants. Salt flavor is one of the basic
tastes, making salt the oldest, ubiquitous food seasoning.
Salt is also an important preservative. Salt for human consumption is produced in different
forms: unrefined salt (such as sea salt), refined salt (table salt), and iodized salt. It is a crystalline
solid, white, pale pink or light gray in color, normally obtained from sea water or rock deposits.
Chloride and sodium ions, the two major components of salt, are necessary for the survival of all
known living creatures, including humans. Salt is involved in regulating the water content (fluid
balance) of the body. Overconsumption of salt increases the risk of health problems, including
high blood pressure.

44
 Oranges

Nutrition Information
Nutritional value per 100 g of orange (3.5 oz)

Energy 192 kJ (46 kcal)

Carbohydrates 11.54 g

Sugars 9.14 g

Dietary fiber 2.4 g

Fat 0.21 g

Protein 0.70 g

Thiamine (Vit. B1) 0.100 mg (8%)

Riboflavin (Vit. B2) 0.040 mg (3%)

Niacin (Vit. B3) 0.400 mg (3%)

Pantothenic acid (B5) 0.250 mg (5%)

Vitamin B6 0.051 mg (4%)

45
 Folate (Vit. B9) 17 μg (4%)

Vitamin C 45 mg (75%)

Calcium 43 mg (4%)

Iron 0.09 mg (1%)

Magnesium 10 mg (3%

Phosphorus 12 mg (2%)

Potassium 169 mg (4%)

Zinc 0.08 mg (1%)

Process view

o Information receiving process

o Team generation process
o Planning process
o Designing process
o Approval process
o Selection process

1. Information receiving process:-

We received request for new design for this purpose we receive

information about customer‟s need and requirements.

Nested processes:-

 Internal information receiving

46
  External information receiving

 Internal information receiving :-

From firm‟s various departments we receive information about diet orange; and
capacity of the company to produce diet orange.

External information receiving:-

We collect information from other sources like from competitors. We analyze

their products and in this way we search h out ingredients which we finally used.

2. Team generation process:

Nested process in it:-

Ranking
Assignment of duties
Communication

3. Planning process:-

We planned two phases for design purpose:

Internal design
External design

Internal design:-

For it we select ingredients.

External design:

Here we did planning about packaging and labeling.

In planning we think about these two phases.We established GOALS.

47
 Goals
User centered design
Quality design
Brand identification; design
Quality material
Quality ingredients

For these goals we established strategies:

To achieve user centered design we considered healthful, unique ingredients

For quality design creation we used adobe photo shop software.
We used different packaging machines and labeling machines.
We used QFD „S house of quality matrix for checking the quality of design.
We used standard plastic bottles and lid.

4. Designing process:

In this process we designed the product, by taking the above mentioned inputs and got the out put of
diet orange.

Steps to design diet Orange:

Information received: We received information from Sale and research department.
After that we established the criteria for design.

Criteria elaborate:
1. Orange juice
2. Carbonated drink/Fizzy drink
3. Diet sugar free.
4. Quality plastic bottle.
5. Colorful labeling
6. Attractive and standardized packaging

After it we analyze the criteria on the following parameters.

48
 1. Quality
2. Price
3. Demand
4. Taste

SWOT Analysis
Strengths:
We contact the finance department to know that we are in position to develop new
product.

We contact sales and research department to discuss;

Feasibility of product idea.

Their Analysis regarding product “diet orange “Suggests that Nestle in A position to develop and
launch new product.
We contact inventory control department.
We contact production department.
We contact quality Assurance department to know their strengths.

Our internal analysis of design department shows;

 Nestle brand is good at designing customer oriented products

 We design product with respect to customer needs, experience with respect to target market and
also our other brands. so that all products shows Nestle image.
 We have all relevant technology.
 Good communication system to get approval for design from design approval manager.

Weaknesses:
Product is new so require great attention with respect all parameters like Quality, design,
price etc.

Opportunities:
We expect due to healthful ingredients and attractive design, due to its weakness and diet
plus carbonated feature it will be successful and enhance goodwill of our other nestle brands.

Threats:
We face threats from diet coke and Pepsi. They are already famous so time and effort is
required on making its design that speaks quality and customer needs.

49
 Check feasibility with respect to all criteria, its parameters and market trend his
experience and forecast

Activity on node approach:

Activity Description

A Team was created

B Ranking of members

C Assignment of duties

D Receiving of information from sales and research deptt

E Establishment of criteria regarding design

F Analysis of criteria/parameters are determined

G SWOT analysis of diet orange

H Check feasibility of design

I Criteria is analyzed

J Actual product features are determined

K Determination of cots

L Initial designs were made

M Approval by manager

N Survey was conducted

O Approval from departments was received

P Selection of design

Q Final review of design

R Feasibility checked

S Cost estimation with relevant department

T Price set

U Approved

50
V Send design features and all other paper work to production deptt for production

ACTIVITY ON NODE
Start NETWORK

A B
A
F H
C G
E

I J K

M N O

Q R S T

V Finish

51
 GANTT CHART
Tasks:- Duration Start Finish
in days.
Team was created 1 30OCT 30OCT
Ranking of members 1 1STNOV 1STNOV
Assignment of duties 1 1STNOV 1STNOV
Receiving of information from sales and research deptt 1 20NOV 20NOV
Establishment of criteria regarding design 1 21NOV 21NOV
Analysis of criteria/parameters are determined 1 21NOV 21NOV
SWOT analysis of diet orange 1 22NOV 22NOV
Check feasibility of design 1 23NOV 23NOV
Criteria is analyzed 1 23NOV 23NOV
Actual product features are determined 5 24NOV 28NOV
Determination of costs 1 28NOV 28NOV
Initial designs were made 2 29NOV 30NOV
Approval by manager 1 30NOV 30NOV
Survey was conducted 2 24DEC 25DEC
Approval from departments was received 1 25DEC 25DEC
Selection of design 1 25DEC 25DEC
Final review of design 1 26DEC 26DEC
Feasibility checked 1 26DEC 26DEC
Cost estimation with relevant department 1 30DEC 30DEC
Price set 1 31DEC 31DEC
Approved 1 31DEC 31DEC

5. Approval process

We got the approval from our CEO and heads of all departments after the approval from our
approval manager.

6. Selection process:

We selected 4 designs with little amendments. From approval data we did selection. This process was
internal. As nestle find no requirements for out side survey.

Conclusion
Our job was relating to product design, for the purpose of diet orange design we established two
design elements:

External design that are packaging and labeling

52
Internal design, Its ingredients.

Hope for good feedback from all members and respected teacher!

Diet Orange Juice

53
 GOALS OF PRODUCTION DEPARTMENT

1. Deliver the product

Efficiently convert inputs into finished goods or marketable state according to

the customer‟s need.

2. Maximizing Value

Give the customer what they need and when they need.

3. Minimizing Waste

Eliminate any thing not needed for delivering value.

4. Pursuing Perfection

Never stop striving to better achieve the lean ideal.

5. Minimize Production Time

A main goal of production planning is to ensure that production processes are

completed in as little time as possible, freeing up resources for additional
production. Gantt charts is utilized as means of determining the most efficient
start and end times for each production activity, and as a way of determining
when specific activities are behind schedule. These techniques can also pinpoint
which production activities experience slack times, creating the possibility for
additional capacity utilization.

6. Minimize Costs

To minimize the cost of process and product by using efficient methods and
techniques.

7. Use Resources Efficiently

54
 Capacity Requirements Planning is a method of decreasing raw materials
inventory on hand, and ensuring that each production department has exactly
the right materials at the right time.

8. Customer Satisfaction

The over-riding focus of production planning systems is on increasing customer

satisfaction. By creating a lean, cost efficient production system, our
organization will be able to minimize defects, reduce prices, and quicken
throughput, making more reliable products at lower prices available more
quickly to your customers.

OBJECTIVES OF PRODUCTION DEPARTMENT

 Production capacity

Provide the details of factory plant and equipment to be used in the

manufacturing process

 Output Levels

Prepare a schedule of monthly production output for each year of plan. This is
critical success factor.

 Production Method

Indicate what production method will be used including production process

time

 Production Quality Controls

Describes what methods will be adopted to ensure the desired final product
quality is achieved to meet the overall manufacturing objectives.

55
 Applying Lean Principles to Product
Development
In the manufacturing of our product Nestle Diet Orange Juice,

LEAN MANUFACTURING.

TWith the help of lean manufacturing we try to manage, standardize and continuously improve
the product development process as long as there is a solid understanding of, and allowances are
made for, those characteristics of the product development environment that are indeed unique.

Lean Manufacturing is a unified, comprehensive set of philosophies, rules,

guidelines, tools, and techniques for improving and optimizing discrete processes
that results in,

1. Sales $ per employee 10 x higher

2. Overhead operating costs reduced 30%
3. Sales doubles
4. Profits 4 x
5. Lead time cut by 50% to 90%
6. Process queues cut by 70%
7. Less frustration on-the-job

Principles of Lean Manufacturing in NESTLE

1. Voice of the Customer

2. Continuous improvement

3. Recognize & Eliminate waste everywhere:

How is Lean Manufacturing Achieved by our organization

1. Assessing the current process
2. Understanding the customer's true desires & future market trends
3. Training & buy-in by management
4. Developing profound knowledge of the manufacturing process
5. Applying Lean tools and techniques at the most critical processes

56
 6. Spreading out the Lean implementation to all auxiliary areas until a
fully integrated manufacturing process is obtained

Kanban System
Kanban is the one of the most popular techniques of lean manufacturing and
it defines different dimensions, which are adressed by our company in the
production of Nestle‟s diet orange juice,

1. what parts to manufacture,

2. when to start manufacturing,
3. when to stop manufacturing,
4. how many to manufacture, and
5. where to deliver them to”

Lean Manufacturing

57
 Total Quality Management (TQM)
Total Quality Management is…
Our management system used to continuously improve all areas of a
company's operation. TQM is applicable to every operation in the company and
recognizes the strength of employee involvement that ultimately results in

1. Improved customer satisfaction and product quality

2. Increased production throughput
3. Improved communications within the company
4. Reduced operating costs
5. Decreased scrap and rework defects

Principles of TQM in Prodction:

The main principles that underlies in the production of NESTLE‟S Diet Orange
juice as TQM are summarized below:

Prevention is better than cure. That‟s why we are using TQM in our
Prevention Production. It is cheaper to stop products defects than trying to find
them

The ultimate aim is no (zero) defects - or exceptionally low defect

Zero defects levels if a product or service is complicated. So we try to minimize the
defects as much as possible.

Getting things right We avoid to produce defective product because better not to produce at
first time all than produce something defective.

Quality is not just the concern of the production or operations

Quality involves department - it involves everyone, including marketing, finance and
everyone human resources. So our organization believe in quality operations of
58
 all departments.

Businesses should always be looking for ways to improve processes to

Continuous help quality. So we continuously examine our techniques, methods,
improvement processes, machinery and whole setup.

Those involved in production and operations have a vital role to play in

Employee involvement spotting improvement opportunities for quality and in identifying
quality problems. That‟s why our organization encourage employee
involvement in decision making and operations.

Strategy
We used the Make to stock strategy

59
 Product Process Matrix

The product-process matrix is a tool for analyzing the relationship between the product life cycle
and the technological life cycle. Diet orange juice‟s production is Batch Process and Bottling is a
continuous process. In which we analyzing the entry and exit of product.

60
 Flow Chart
Oranges

Inspection

Is orange is good?

Cleaning & Grading

Extraction of Juice

Concentration

Mixing process & Blending

Pasteurization
61
 Carbonation

Sterile tank

Aseptic Filling process

Packaging

Storing

Delivering

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 Ingredients of Diet Orange Juice

1. Carbonated Water
2. Fresh Oranges
3. Aspartame
4. Phosphoric Acid
5. Caffeine
6. Citric Acid
7. Natural flavors
8. Salt

The Manufacturing Process

1. Harvesting/collection

Oranges are harvested from large groves. When the mature fruit is ready to pick, a crew of
pickers is sent in to pull the fruit off the trees. The collected fruit is sent to plants for juice
processing.

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1. Cleaning

The fruit is inspected and graded before it can be used. An inspector analyze in order to
make sure the fruit meets maturity requirements for processing. The certified fruit is then
transported along a conveyor belt where it is washed with a detergent as it passes over
roller brushes. This process removes dirt and reduces the number of microbes. The fruit is
rinsed and dried.

2. Grading
Graders remove bad fruit as it passes over the rollers and the remaining quality pieces are
automatically segregated by size prior to extraction. Proper size is critical for the

64
 extraction process.

3. Extraction
Proper juice extraction is important to optimize the efficiency of the juice production
process as well as the quality of the finished drink. There are two automated extraction
methods commonly used by the industry. The first places the fruit between two metal
cups with sharpened metal tubes at their base. The upper cup descends and the fingers on
each cup mesh to express the juice as the tubes cut holes in the top and bottom of the
fruit. The fruit solids are compressed into the bottom tube between the two plugs of peel
while the juice is forced out through perforations in the tube wall. At the same time, a
water spray washes away the oil from the peel.

65
4. Filtration
The extracted juice is filtered through a stainless steel screen before
it is ready for the next stage. At this point, the juice can be chilled or concentrated if it is
intended for a reconstituted beverage. If a NFC type, it may be pasteurized.

5. Concentration
Concentrated juice extract is approximately five times more concentrated than
squeezed juice. Concentration is useful because it extends the shelf life of the juice and
makes storage and shipping more economical. Juice is commonly concentrated with a
piece of equipment known as a Thermally Accelerated Short-Time Evaporator, or
TASTE for short. TASTE uses steam to heat the juice under vacuum and force water to
be evaporated. Concentrated juice is discharged to a vacuum flash cooler, which reduces
the product temperature to about 55.4° F (13° C). The pulp is separated from the juice by

66
ultra-filtration and pasteurized. Juice concentrate is then stored in refrigerated stainless
steel bulk tanks until is ready to be packaged or reconstituted.

1. Mixing Process
In this procedure we blend the individual components or a prepared premix direct prior to
the following processing. Using this technology the available capacity of the ingredients
or final product can be increased.

A mixing plant that is optimised and matched to customer requirements increases the
efficiency and reliability of the product mixing process. This enables customers to react
with a high degree of flexibility to the rapidly devel-oping requirements of the market
and to achieve considerable cost reductions. Our aim is to create and offer optimised
plant designs to meet individual customer requirements.

67
1. Tank form
2. Small volume mixing system:-

3. Valve matrix for mixing

68
4. In lining dosing

5. Blending Machine

69
6. Pasteurizations
Pasteurization is required to inactivate enzymes and destroy microbial
contaminants.Fruit juices as well as beverage bases require a long shelf life. Conservation of the
product shall be achieved by efficient processing without affecting the product quality. This task
is achieved by thermal treatment of the product using a pasteurizer. In a short time heating plant
(STHT plant) the product is heated for a short time to the required temperature and rapidly
cooled down. Plate or tubular heat exchangers at choice are used to heat the product to the
required pasteurization temperature.

7. Vacuum Deaeration
For not affecting the quality through oxidation, the product undergoes a vacuum-deaeration
which partly takes place during the pasteurisation process.
Via an especially designed cascade valve, the product is conveyed at a temperature between 55°
and 60° C into the deaeratorvessel where the major part of the total gas amount is removed from
the product. The aroma substances entrained by the degassing procedure are recovered in a
tubular heat exchanger and returned to the product.

70
8. Carbonation
When producing beverages containing CO2, carbonation is integrated into the overall line
concept. Gaseous CO2 is added to the product. This continuous process can be integrated into
the overall process either upstream or downstream of the thermal treatment

71
9. Sterile tank
In aseptic process technology, product safety takes top priority. Food processors use sterile tanks
as storage or buffer tanks. Aseptic storage prevents recontamination of the product and helps to
ensure a long shelf life and stability. After pasteurization, hygienic treatment of the product is
required. Sterile tanks can perform a buffer function in the process upstream of the filling line.

Juice is then pumped into filler tanks and rapidly filled into
bottles and cans.

10. Filling
To ensure sterility, the pasteurized carbonated juice should be filled while still hot. Juice must be
filled in a sterile environment. Instead of heat, hydrogen peroxide or another approved sterilizing
agent may be used prior to filling. In any case, the empty packages are fed down a conveyor belt
to liquid filling machinery, which is fed juice from bulk storage tanks. After filling, the
containers are cooled as fast as possible. This process include washing, filling and capping into
one unit, it can be used for glass bottle juice hot-filling production. These machines are preferred
equipment for juice beverage makers because they are convenient to operate

72
The straight line filling equipment

11. Capping
1. It can seal bottle which matches plastic positions, various sizes of mouth screw
2. It is made of production line with washer and filler.
3. It is the ideal line for production of drink.

73
 Screw Capping Machine

12. Packaging

Drive Pipe

74
13. From where Material is intake?
We get material from supply chain and inventory control department.
Production Depatment‟s Gannt chart:
Tasks:- Duration in Start Finish
days.

Team was created 1 30OCT 30OCT

Ranking of members 1 2ndNOV 2ndNOV

Assignment of duties 1 3rdNOV 3rdNOV

Work on idea 17 3rdNOV 19NOV

Receive information from design deptt 1 20NOV 20NOV

Receive information from inventory control deptt 1 21NOV 21NOV

Define core processes 1 23NOV 23NOV

Develop process matrix 2 24NOV 25NOV

Develop production flow chart 7 26NOV 02DEC

Apply lean manufacturing principles 2 02DEC 03DEC

Produce the product 4 04DEC 07DEC

Report to ceo 1 08DEC 08DEC

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 Production Budget:
Sales 25,00,000
Add: Ending inventory 500,000
Less: Opening Inventory 0
Planned Production 30,00,000

Once we have established our level of production. we can prepare a Materials Budget. The
Materials Budget attempts to forecast the level of purchases required, taking into account
materials required for production and inventory levels. We can summarize materials to be
purchased as:

Materials Purchased = Materials Required + Ending Inventory - Beginning Inventory

MATERIALS BUDGET
250ml 450ml
Material required for sale forecast 12,375,000 14,500,000
Desired Ending Inventory 24,75,000 29,00,000
Materials Required for Production 14,850,000 17,400,000
Less Beginning Inventory 0 0
Total Materials Purchased 14,850,000 17,400,000

Project Cost
Particular Amount in Rs.
Cost of new Machinery 1,100,000
Research & Development Cost 800,000
Inventory Cost 26,875,000
Required Working Capital 9,725,000
Total Cost of Project 38,500,000

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 Finance Department
DEPARTMENTAL HIERARCHY

Chief Finance Officer (CFO)

Senior Finance System Manager Account Manager (AM)

Finance Manager

FINANCE MANAGER

Major duties of Finance Department:

The Finance Department supports the firm on a day to day basis to assist in the delivery of the
business plan, national and local priorities and corporate objectives.
Specifically, the principal duties and responsibilities of the Finance Department are as follows:

1- To support to the firm in securing financial balance which will include the determination
and establishment of cash releasing efficiency savings required to ensure financial
balance and to advise the firm on strategic and operational matters relating to finance.
2- To contribute to the operational and business planning activities of the firm.

77
 3- To develop and review financial systems, procedures and controls to ensure that the
budgetary, accounting, income and expenditure systems operate efficiently to the highest
professional standards.
4- To play a key role in the interpretation of national policies and practices in assessing the
financial risks and impact of the implementation of these policies.
5- To generate the financial resources for the new products.

Now we will discuss the major duties of the Chief Finance officer, Account manager, senior
finance system manager and finance manager.

CHIEF FINANCE OFFICER:

The Chief Financial Officer (CFO) will direct the organization‟s financial planning and accounting
practices as well as its relationship with lending institutions. The CFO will provide direction for the
financial operations of the company, subsidiaries, and projects including both treasury and accounting
functions.

DUTIES AND RESPONSIBILITIES:

Oversees and directs treasury, budgeting, audit, tax, accounting, purchasing, real estate,
long range forecasting, and insurance activities for the organization.
Directs and coordinates the establishment of budget programs.
Appraises the organization‟s financial position and issues periodic reports on
organization‟s financial stability, liquidity, and growth
Analyzes, consolidates, and directs all cost accounting procedures together with other
statistical and routine reports.
Analyzes accounting practices impacting functional groups and the whole organization,
and determine their financial impact.
Communicates financial plans, policies and technology trends throughout the
organization, including management groups and professional staff.

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SENIOR FINANCE SYSTEM MANAGER:

DUTIES AND RESPONSIBILITIES:

Manages and supports the development, tracking, and implementation of process

efficiencies and technology projects on a national level.
Ensures that all project and process enhancements are in compliance with acceptable
accounting practices and applicable internal and external policies and regulations.
Gathers information from internal and external sources related to needed process
enhancements and technical/software efficiencies.
Recommends to senior management on enhancements/additions/changes on a wide
variety of technical, software and/or process-related projects. Manages the project(s)
from idea to implementation.

ACCOUNT MANAGER:

The Account Manager (AM) is responsible for all aspects of the response, including developing
installation objectives and managing all program roll-out operations.

DUTIES AND RESPONSIBILITIES:

Stabilize the firm by ensuring life safety and managing resources efficiently and cost
effectively.

Determine firm objectives and strategy to achieve the objectives.

Approve the implementation of a firm written Action Plan.

Make assure that all the accounting procedures are according to international accounting
standards.

Make the cost analysis of the new product

Make the budgets for forecasting the sales.

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FINANCE MANAGER:

DUTIES AND RESPONSIBILITIES:

Creates financial models and spreadsheets, assembles and manipulates financial and
operational data, and develops written and graphical reports; works with systems-
administration teams to develop reports, queries, and other data extraction tools.

Conducts special analyses on financial and management issues as assigned; prepares

reports covering complex financial and performance issues for a wide variety of
audiences, including management, the Board, and the general public.

Develops and implements departmental financial policies, procedures, and performance

standards related to primary assignments; coordinates with other departments to establish
appropriate corresponding District-level policies

Prepares program area policy and procedure alternatives and recommendations; develops
appropriate systems to implement recommendations.

Serves as project manager for assigned projects.

Analysis of Financial Statements Financial Year 2003 - Financial Year 2008

OVERVIEW:
Nestle Pakistan Limited (NPL), formerly known as Nestle Milkpak Limited, is a subsidiary of
Nestle SA. - a company of Swiss origin headquartered in Vevey, Switzerland. It is listed on the
Karachi and Lahore stock exchanges.

For five years in a row, the company has won a place among top 25 companies of the KSE. Its
principal activities include manufacturing, processing and selling food products and ancillary
equipment. The food products include dairy, confectionery, infant nutrition and culinary
products, coffee, beverage and drinking water.

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The major brands include Milkpak UHT, Nestle Everyday, Lactogen and Nescafe. Nestle has
been serving Pakistani consumers since 1988, when its parent company, the Switzerland-based
Nestle SA, first acquired a share in Milkpak Ltd In line with its parent company's global
philosophy, it is proudly committed to excellence in product safety, quality, and value.

FINANCIAL PERFORMANCE FY03-FY08

Total sales for Nestle Pakistan rose by 21% in FY08 from a previous Rs 28.2bn to Rs 34.2bn.
Increase in sales was contributed by all the three Nestle ventures: milk and nutrition products
(21.4% YoY rise), beverages (19.5% YoY increase) and other operations (16.9% YoY climb) as
exhibited by the chart above. An assessment of Nestle's profitability as demonstrated by the
diagram below shows a general declining trend in all profitability ratios. The profit margin fell
from 6.39% in FY07 to 4.54% in FY08, showing a YoY fall of 1.85%. The gross profit margin
fell from 28% in FY07 to 26% in FY08 delineating a 2% fall. This was due to the fact that
although the turnover rose by 21%, the cost of goods sold rose by 24% contributing to the
decline in the gross profit margin.

Operating profit margin also slid from 12.44% in FY07 to a 12.01% in FY08, which isn't a
substantial decline. An overview of the Return on Assets (ROA) and Return on Equity (ROE)
forged a similar downward trend thereby straining the profitability of Nestle. ROA fell from
11.4% in FY07 to 9.3% in FY08 attributed to a 14% slide in profit after tax accompanied by a
5.2% rise in total assets between FY07 and FY08. ROE statistics indicate a decline from 43.9%
in FY07 to 30.22% in FY08 as the total equity rose from Rs 4.1bn in FY07 to Rs 5.1bn in FY08.
This 25% spate in total equity was compounded by 14% fall in the profit after tax in FY08.

Quick ratio slightly fell from 0.47 in FY07 to 0.45 in FY08 and can safely be regarded as an
insignificant decline. The current ratio however rose from 0.94 in FY07 to 1.07 in FY08 as the
current assets rose by 1% against an 11% decline in current liabilities. This decline in liabilities
is registered on the back of a sharp decline in short-term borrowings (FY07: Rs 1.035bn to
FY08: Rs 0.3bn) and a decline in trade and other payables. Therefore, we can conclude that the
liquidity orientation of Nestle Pakistan is more or less the same between FY07 and FY08.
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The inventory turnover fell from 36 days in FY07 to approximately 35 days in FY08 which
means it took Nestle and average of 35 days to convert its inventories into cash. Day Sales
Outstanding rose from 4.39 days in FY07 to 4.81 days in FY08. Since there isn't much variability
in the DSO, it can be concluded that the collection policy from the debtors hasn't changed much.
Consequently, the Operating cycle fell from 40.5 days in FY07 to 39.5 days. Inventories rose by
16% during the same period.

Moving further, we see that the Total Asset Turnover for Nestle rose from 1.78 in FY07 to 2.05
in FY08 indicating that the turnover grew at a faster rate of 21% whereas the asset base during
the same period grew by a lower 5%. Sales to Equity Ratio fell from 6.87 in FY07 to 6.65 in
FY08. Once again, all ratios for FY08 indicate negligible change in Nestle's performance on the
asset management front, which is more or less the same as FY07.

The debt to asset ratio stood at 0.74 and remained unchanged between FY07 and FY08. The debt
to equity ratio fell by 16% from 2.85 in FY07 to 2.39 in FY07 whereas, the long-term debt to
equity ratio fell from 1.4 to 1.36. This was due to the fact that both, long-term debt and equity
rose by 21.4% and 25%, respectively. Total equity gradually grew with all its components the
same as FY07 with the exception of accumulated profits, which rose. The Times Interest Earned
(TIE) ratio also faintly fell from 5.36 times to 5 times.

Market ratios indicate a 14% decline in Earnings Per share, which fell from Rs 39.81 per share in
FY07 to Rs 34.24 per share in FY08. Dividend per share also dipped by a 25 % falling from Rs
10 per share dividend in FY07 to Rs 7.5 per share dividend in FY08. Despite the descent in both,
EPS and DPS, the book value per share for Nestle Pakistan registered a 24.98% increase from its
value of Rs 90.67 at year-end FY07 to Rs 113.32 at the close of FY08. This rise can largely be
accounted for by a 5.27% increase in total assets without any change in the number of issued
ordinary shares.

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 PRICING – Diet Orange Juice
While price our new product we choose the cost plus pricing method. Full cost plus pricing seeks
to set a price that takes into account all relevant costs of production. There are some of the
advantages of cost plus pricing method.

The advantages of using cost plus pricing are:

Price increases can be justified when costs rise

Price stability may arise if competitors take the same approach (and if they have similar
costs)
Pricing decisions can be made at a relatively junior level in a business based on formulas

Fixed Cost and Variable Cost

First of all we will calculate the fix the cost and variable cost related to our product Diet Orange
Juice.

FIXED COST:
Factory production cost 12,000,000
Research & Development 800,000
Fixed selling cost 10,00,000
Fixed admin 12,00,000
Total fixed cost 15,000,000
Per unit fixed cost (15,000,000/25,00,000) 6
Variable Cost:
Per unit variable selling expenses(18,00,000/25,00,000) 0.72
Per unit variable adman expenses (19,50,000/25,00,000) 0.78
Per unit variable cost 1.5

Now after calculating the fixed and variable cost the second step is to calculate the ingredient
costs for 250ml. pack and for 450ml. separately.

Ingredient cost for 250ml.

INGREDIENT COST PER 250ml.

INGREDIENTS:
Carbonated water 1.50
Aspartame 1.25
Natural Flavors 0.35
Fresh oranges 2.40

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Phosphoric Acid 1.00
Citric Acid 1.25
Salt 0.20
Total ingredient cost per unit 8.25

Ingredient cost of 450ml.

INGREDIENT COST PER 450ml.

INGREDIENTS:
Carbonated water 2.90
Aspartame 2.25
Natural Flavors 0.65
Fresh oranges 5.10
Phosphoric Acid 1.75
Citric Acid 2.50
Salt 0.35
Total ingredient cost per unit 14.5

Now after calculating the ingredient cost for the 250ml. and 450ml. we will calculated there cost. The fix
cost will be remain same for both of the products. The ingredient cost will be different for 250ml and
450ml. The cost for each size is given below.

PRODUCT COST PER 250ml.

Cost:
Total ingredient cost per unit 8.25
Per unit fixed cost (15,000,000/25,00,000) 6
Per unit variable cost 1.5
Total cost 15.75
Profit Margin 3.00
Sale tax 1.25
Total selling price 20.00
PRODUCT COST PER 450ml.
Cost:
Total ingredient cost per unit 14.5
Per unit fixed cost (15,000,000/25,00,000) 6
Per unit variable cost 1.5
Total cost 22.00
Profit Margin 6.25
Sale tax 1.75
Total selling price 30.00

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Now we will analyze the break Even point for our sales.

Break-Even Analysis

The break-even point informs the business of the level of sales at which the business will realize
neither a profit nor a loss. It can be expressed in numbers or by the use of graphs. To arrive at the
break-even point using either method, we must have the projected and fixed manufacturing,
selling, and administrative expenses,

The study of these factors will inform us of the possibilities of lowering the break-even point and
increasing the gross profit margins. When attempting to determine the prospect of success for a
new operation, we analysis of the break-even point. Now even for diet orange.

Calculation of Break Even:

Break Even for 250ml.

The variable unit cost for making one unit of Diet orange juice of 250ml. is

Variable cost = 8.25+1.5=9.75

Price per unit=20.00

Fixed Cost =15,000,000

Break even for 250ml is

Break Even=sale/Price –Variable Cost

=15,000,000/20.00-9.75

Break Even=1,463,414 Units

Break Even for 450ml.

The variable unit cost for making one unit of Diet orange juice of 250ml. is

Variable cost =14.50

Price per unit=30.00

Expected unit to be sold=15,000,000

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Break even for 450ml is

Break Even=15,000,000/30.00-14.50

Break Even=9,67,742

After setting the price and analyzing the break even we are going to make the financial plane for our
product named Diet orange juice.

FINANCIAL PLANE

In this financial plane the sale figures are supposed data. But other figures are forecasted on the
basis of company balance sheets and other data.

Introduction to Financial Planning:

Financial planning is a continuous process of directing and allocating financial resources to

meet strategic goals and objectives.. The foundation for Budgeted Financial Statements is Detail
Budgets. Detail Budgets include sales forecasts, production forecasts, and other estimates in support of
the Financial Plan. Collectively, all of these budgets are referred to as the Master Budget.

We can also break financial planning down into planning for operations and planning for financing.
Operating people focus on sales and production while financial planners are interested in how to
finance the operations. Therefore, we can have an Operating Plan and a Financial Plan. However, to
keep things simple and to make sure we integrate the process fully, we will consider financial
planning as one single process that encompasses both operations and financing.

Strategic Planning:

Strategic planning is a formal process for establishing goals and objectives over the long run.
Strategic planning involves developing a mission statement that captures why the organization exists
and plans for how the organization will thrive in the future. Strategic objectives and corresponding

86
goals are developed based on a very thorough assessment of the organization and the external
environment. Finally, strategic plans are implemented by developing an Operating or Action Plan.
Within this Operating Plan, we will include a complete set of financial plans or budgets.

Financial Plans (Budgets) Operating Plan Strategic Plan

Sales Forecast:

In order to develop budgets, we will start with a forecast of what drives much of our financial activity;
namely sales. Therefore, the first forecast we will prepare is the Sales Forecast. In order to estimate
sales, we will look at past sales histories and various factors that influence sales. For example,
marketing research may reveal that future sales are expected to stabilize. Maybe we cannot meet
growing sales because of limited production capacities or maybe there will be a general economic
slow down resulting in falling sales. Therefore, we need to look at several factors in arriving at our
sales forecast.

After we have collected and analyzed all of the relevant information, we can estimate sales volumes
for the planning period. It is very important that we arrive at a good estimate since this estimate will be
used for several other estimates in our budgets. The Sales Forecast has to take into account what we
expect to sell at what sales price.

Product Volume Price per unit Total sales(in Rs.)

Diet orange juice 250ml. 15,00,000 20 30,000,000
Diet orange juice 450ml. 10,00,000 30 30,000,000

Detail Budget:
We also need to prepare several detail budgets for developing a Budgeted Income Statement. For
example, production must be planned for our estimated sales of 25,00,000 units.

Production Budget:
Sales 25,00,000
Add: Ending inventory 500,000
Less: Opening Inventory 0
Planned Production 30,00,000

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Once we have established our level of production. we can prepare a Materials Budget. The Materials
Budget attempts to forecast the level of purchases required, taking into account materials required for
production and inventory levels. We can summarize materials to be purchased as:

Materials Purchased = Materials Required + Ending Inventory - Beginning Inventory

MATERIALS BUDGET

250ml 450ml
Material required for sale forecast 12,375,000 14,500,000
Desired Ending Inventory 24,75,000 29,00,000
Materials Required for Production 14,850,000 17,400,000
Less Beginning Inventory 0 0
Total Materials Purchased 14,850,000 17,400,000

The second component of production is labor. We need to forecast our labor needs based on expected
production. The Labor Budget arrives at expected labor cost by applying an expected labor rate to
required labor hours.

LABOUR BUDGET:

Diet orange juice required .0015 hours to produce one unit.

25,00,000 units x .0020 = 3750 hours.
The expected hourly labor rate next year is Rs.110.

Estimated Production Hours 3750

Hourly Labor Rate x 110
Total Labor Costs 412,500

As production moves up or down, support services and other costs related to production will also
change. These overhead costs represent the third major costs of production. Each item that
comprises overhead may warrant independent analysis so that we can determine what drives the
specific cost.

OVERHEAD BUDGET:

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Indirect Labor Costs 150,000
Utilities 300,000
Depreciation 15,00,000
Maintenance 400,000
Insurance and Taxes 10,00,000
Total Overhead Costs Rs.33,50,000

Once production costs (direct materials, direct labor, and overhead) have been budgeted, we can work
these numbers into our beginning inventory levels for Direct Materials, Work In Progress, and
Finished Inventory. Beginning inventory levels are suppose amounts. We need to apply our costs
based on what we want ending inventory to be. The end-result is a Budget for Cost of Goods Sold,
which we will use for our Forecasted Income Statement.

COST OF GOODS SOLD BUDGET

Direct Material Work in Finished
process Inventory
Beginning Inventory 0 0 0
Purchases 32,250,000
Less Ending Inventory 53,75,000
Materials Required 26,875,000
Add: Direct Labor 412,500
Add: Overhead 33,50,000
Total Manufacturing Costs 34,350,000 34,350,000
Total Work In Progress 34,350,000
Less: Ending Inventory ( 22,20,000)
Cost of Goods Manufactured 32,130,000 32,130,000
Cost of Goods Available for Sale 32,130,000
Less: Ending Inventory (15,50,000)
Cost of Goods Sold Rs.30,580,000

We can now finish our estimate of expenses by looking at all remaining operating expenses. The
first major type of operating expense is marketing.

MARKETING BUDGET

Marketing Personnel 10,00,000

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Advertising & Promotion 15,00,000
Marketing Research 300,000
Total Marketing Expenses Rs.28,00,000

The final area of operating expenses is the administrative costs of running the overall business. These
types of expenses will be on estimates.
GENERAL & ADMINISTRATIVE EXPENSE BUDGET

Management Personnel 850,000

Accounting Personnel 700,000
Legal Personnel 200,000
Technology Personnel 600,000
Rent & Utilities 400,000
Supplies 100,000
Miscellaneous 300,000
Total G & A Expenses Rs.31,50,000

Budgeted Financial Statements

Based on the detail budgets we have prepared above we can finalize our budgets in the form of a
Budgeted Income Statement.

BUDGETED INCOME STATEMENT

Revenues 60,000,000
Less Cost of Goods Sold (30,580,000)
Gross Profit 29,420,000
Less Marketing (28,00,000)
Less G & A (31,50,000)
Less Depreciation (110,000)
Income Before Taxes 23,360,000
Taxes @ 35% (8,176,000)
Net Income Rs.15,184,000

Now that we have a Budgeted Income Statement, we can prepare a Budgeted Balance Sheet. But fist
we will calculate the working capital of that project which will lead us to calculate the total project
cost.

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The main link between the Income Statement and the Balance Sheet is Retained Earnings. Therefore,
preparation of the Budgeted Balance Sheet starts with an estimate of the ending balance for Retained
Earnings. In order to estimate ending Retained Earnings, we need to project future dividends based on
current dividend policies and what management expects to pay in the next planning period.

ESTIMATED RETAINED EARNINGS

Beginning Balance 3,405,824,000
Budgeted Net Income 15,184,000
Expected Dividend (3,17,673,671)
Ending Retained Earnings Rs.3,103,334,329

Next, we need to account for the acquisition of fixed assets.

CAPITAL EXPENDITURES BUDGET

Purchase New machinery 11,000,000
Total Capital Expenditures Rs.11,000,000

Based on the beginning balance in assets and the budget for capital assets in above table, we can
estimate an ending asset balance for the Budgeted Balance Sheet.

CHANGE IN FIXED ASSETS

Beginning Balance 9,464,373,000
New Acquisitions 11,000,000
Less Depreciation for the Year (110,000)
Ending Fixed Assets Rs. 94,475,263,000

We will assume that liabilities and interest expense will remain the same. However, after we have
determined our level of financing, we will need to revise these amounts. So for that purpose we will
first calculate the working capital.

Working Capital:

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Cash Rs.6,000,000 10% of Sales
Accounts Receivable 4,200,000 7% of Sales
Inventory 9125000 15.20% of Sales
Total current Asset 19,325,000
Accounts Payable 9,600,000 17% of Sales
Total Current Liabilities 9,600,000

Working capital = C.A - C.L=19,325,000 – 9,600,000 = 9,725,000

Project Cost
Particular Amount in Rs.
Cost of new Machinery 1,100,000
Research & Development Cost 800,000
Inventory Cost 26,875,000
Required Working Capital 9,725,000
Total Cost of Project 38,500,000

To finance the new product our Company is issuing new share. The current market price per
share is 1190. We will issue the share at current Market Price.

So finance that project we will issue shares at the price of Rs.1190 per share.

Calculation of no. of shares issued : total project cost/ Price per share= 38,500,000/1190=32353

so we will issue 32353 shares to finance our project

Budgeted Balance Sheet

EQUITY AND LIABILITIES Amount
Share Capital and Reserves (in Rs.)
Authorized capital 750,000,000
75,000,000 (2007: 75,000,000) ordinary shares of Rs. 10 each
Issued, subscribed and paid up capital(453,496,000+323530) 453,819,530
Share premium (249,527,000 + 38,176,470) 287,703,470
General reserve 280,000,000
Accumulated profit 3,103,334,329
4,124,857,329

Non-Current Liabilities

92
Long term finances 5,139,875,000
Deferred taxation 1,319,333,000
Retirement benefits 351,968,000
Liabilities against assets subject to finance lease 177,582,000
6,988,758,000
Current liabilities
Current portion of: 54,042,000
Liabilities against assets subject to finance lease
Short term borrowings – secured 300,000,000
Short term running finance under mark–up arrangements – secured 1,924,287,000
Customer security deposits – interest free 127,884,000
Trade and other payables 2,798,185,000
Interest and mark–up accrued 102,173,000
5,306,571,000

16,420,186,329

ASSETS Amount (In Rs.)

Tangible fixed assets
Property, plant and equipment 3,103,334,329
Capital work–in–progress 1,382,401,000

4,485,735,329

Intangible assets 49,744,000

Long term loans and advances 98,544,000
Long term security deposits 5,036,000
Investment 6,077,724,000

Current Assets

Stores and spares 804,647,000

Stock in trade 2,497,698,000
Trade debts 461,013,000
Current portion of long term loans and advances 26,615,000
Advances, deposits, prepayments and other receivables 1,488,103,000
Cash and bank balances 425,327,000
5,703,403,000

16,420,186,329

93
Submitted by:
Zille Huma
Sumera Kanwal
Rabia Manzoor
Qamar Abbas Shah
Zohaib Hassan

94
 Inventory Department
Ranks & Responsibilities:

Rabia Manzoor (Production Dep‟t. contactor)

Getting information from production department about desired raw material,

quantity, quality, pricing and time period within which to make inventory available
for production.

Qamar Abbas Shah (Supplier contactor)

Giving orders to the external suppliers for obtaining required material according to
the specifications regarding quantity, quality, price, commission, lead time,
logistics loading and unloading terms.

Zohaib Hassan (Finance Deptt. contactor)

Submitting the receipts and vouchers to the finance department, verifying the
transactions and getting cash from finance department in order to make payments
(through supplier contactor) to external suppliers and meeting other expenditures.

Sumaira Kanwal (Physical inspector)

Physically keeps the check and balance of incoming and outgoing stock along with
determining the quantity and quality obtained and performs overall inspection
responsibilities.

Zille Huma (Card Maintainer)

Manage inventory card system regarding incoming and outgoing of inventory and
providing information to production department of used and unused inventory.

95
 Strategic Objectives
From a financial perspective, inventory control is no small matter.Oftentimes,inventory
is the largest asset item on a manufacturer‟s or distributor‟s balance sheet. As a result,there is a
lot of emphasis on proper inventory management. The effectiveness of inventory control is
directly measurable by how successful a company is in providing high levels of customer
service, low inventory investment, maximum throughput and low costs. Certainly,an area where
management should apply a philosophy of aggressive improvements.

1. Obtain customer satisfaction and try to achieve six sigma.

2. Maintain adequate level of Inventory without excessive or over supply in order to reduce
investment in Inventory.

3. Get maximum efficiency.

4.Reduce cost by proper check and balance on Inventory.

5. Timely availability of materials.

6. Efficient Supplier network.

7.Provide storage facilities.

8.Physical inspection to keep records and ensure quality standards.

9.Using cost flow methods to evaluate Inventory.

10. EOQ.

11. Verifyng the transactions with finance department to provide true and fair view about
financial position of organization.

12. Try to cut down the normal losses of organizations by avoiding theft and other mal practices.

13. Responsible for all Department policies and procedures, and ultimate approval and financial
justification of site inventory write-offs. Enforces and is responsible for site policies and
procedures related to inventory control and compliance.

14. Leads the development and implementation of strategies, processes, tools, and system
requirements to improve the efficiency, quality, and effectiveness for Supply Chain and Site
Inventory Control Processes.
96
 15. Manage Inventory Control group, lead the development, implementation, continuous
improvement of inventory management and control, and reduce sources of known and unknown
loss.

Inventory Control Systems:

Continuous system (fixed-order-quantity)

Constant amount ordered when inventory declines to predetermined level

Periodic system (fixed-time-period)

Order placed for variable amount after fixed passage of time

Inventory Control Techniques:

1. Economic purchase order quantity (How much to order)
2. Reorder level (when to order)
3. Minimum inventory or safety stock.

Economic Purchase Order Quantities: In order to control inventory a decision model has been
developed to determine the optimum quantity of materials to be purchased on each purchase
order. The model determines the optimum working stock level to be maintained. Each time a
purchase order is placed, the company incurs certain costs.

EOQ=√2DS / H

=√2×2500000×87 /16

=5214 units

Annual Demand (D) =2500000

Ordering cost (S) =87

Carrying Cost (H) =16

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Cost of Ordering:
- Preparing purchase or production orders, receiving and preparing and processing related
documents.
- Incremental costs of purchasing or transportation for frequent orders (Purchase in small lots is
often costlier and transportation costs also increase)
- Out of pocket costs of postage, telephones, telegrams, cost of stationery, traveling etc.
- Extra costs of numerous small production runs, overtime, setups, training etc. In addition- fixed
costs in form of salaries, wages of employees connected with this work in purchasing, receiving,
inspection and Material handling Departments.

Costs of Carrying:

- Interest on Investment.
- Losses from absolescence and deterioration, spoilage.
- Storage-space costs, including Rent, Rates, Taxes, Electricity, etcs.
- Insurance, in addition- fixed costs in form of salaries, wages etc of employees connected with
this work in stores and Material handling Departments.

Reorder Level:

Lead time is the time interval between placing an order and receiving delivery. If the lead time
and the quantity of demand during lead time are known with certaininty the recorder point may
be determined.

ROP =d ×LT

ROP =25 ×7

ROP =175

Demand rate (d) =25

Lead Time (LT) =7

98
Minimum Inventory or Safety Stock:
In practice, we seldom come across such a situation and demand cannot be forecast
accurately. Actually the demand may fluctuate from period to period. If, therefore the usage per
week at anytime goes beyond fixed no.of units per week, the company will be out of stock for
sometime. Hence arise the need for providing for some safety stock, i.e. some minimum or
buffer as inventory as a cushion against such stock outs. The recorder point is inter-related with
the safety stocks because as the recorder point is moved upwards, the amount of the cushion is
increased. Thus the recorder point is the resultant of the demand during lead-time plus safety
stock. By increasing the safety allowance the recorder point is increased by the same amount. It
should be noted that the economic order quantity does not come into the picture and is
independent of safety stock analysis.

BIN Card holder (Zille Huma)

Supplier
Product contact
ion or
Contact
or

Finance
contact
or

Physical
BIN Card Inspect
Holder or

a)
99
Requirements for effective Inventory Management
Inventory are a vital part of business. Not only are they necessary for operations but they
also contribute towards customers satisfaction. To get a sense of significance of Inventories look
that very large firms have tremendous amounts of Inventories and it varies widely firm by firm.
One mostly used measure of managerial performance relates to the Return on Inventory
(ROI),which is the profit after tax divided by total assets.

Management has two basic functions concerning Inventory. One is to establish a system of
keeping track of items in Inventory and other is to make decisions about how much Inventory is
required and what is the most suitable time to place a reorder fior new Inventory in which
quantity of Inventory is of utmost importance. To be effective,mamagement must have the
following:

1.A system to keep track of Inventory on hand and on order.

2.A reliable forecast of demand that includes an indication of possible forecast error.

3.Knowledg of lead time and lead time variability.

4.Reasonable estimates of Inventory holding cost, Ordering cost and back order or shortage cost.

5.A classification system for Inventory items.

Inventory Functions

In order to understand the importance of Inventories, lets have glance on function of Inventories

1.To meet anticipated customer demand.

2.To smooth production requirement.

3.To decouple operations

4.To protect against stock out.

5.To take advantage of order cycle.

100
6.To hedge against price increase.

7.To permit operations.

Classification System

An important aspect of Inventory management is that the items holds in Inventory are not
of equal importance in the terms of dollar invested, profit potential, sale or usage volume or
stock out penalties. It would be unrealistic to devote equal attention to each of these items like
Oranges preserved in cold storage, carbonated material, diet material and other desired material.
Instead, a more reasonable approach is being used by NESTLE Diet Orange to allocate control
efforts according to the relative importance of the various items in Inventory.

Here, A-B-C approach classifies inventory items according to some measures of Importance
usually annual dollar value (i.e...dollar value per unit multiplied by annual usage rate),and then
allocates control efforts accordingly. Typically, three classes of items are used: A (very
important) ,B,( moderately important), and C (least important).However, some other categories
have been used beside these as mentioned above. With the three classes of items, A items
generally account for about 10 to 20 percent of the number of items in inventory but about 60 to
70 percent of the annual dollar value..At the other end of the scale, C items which are preserving
materials might account for about 50 to 60 percent of the number of the items but only about 10
to 15 percent of the dollar value of an inventory.

The annual dollar value of the items required in the production process of the NESTLE Diet
Orange has been calculated based on annual demand and unit cost. The annual dollar values were
then arrayed from highest to the lowest to simplify classification of items.

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Item Name Annual Demand × Unit cost =Annual dollar value Classification

Carbonated drink 100,000 1.50 150000 C

Aspartame 3900,000 1.25 4875000 A

Natural Flavours 1900,000 2.40 4560000 A

Fresh Oranges 100,000 1.0 100,000 C

. Phosphoric Acid 2500,000 1.25 3125000 B

Citric Acids 300,000 0.20 60000 C

Salt 250000 0.35 87500 C

Inventory Ratios
Liquidity of Inventory

The analysis of the liquidity of the inventories has been approached in a manner
similar to that taken to analyze the liquidity of account receivables. One
computation determines the number of days‟ sales in inventory at the end of the
accounting period, another computation determines the inventory turnover in times
per year, and third determines the inventory turnover in days.

Days Sales in Inventory

The number of days‟ sales in inventory ratio relates the amount of the ending
inventory to the average daily cost of goods sold. All of the inventory accounts
have been included in the computation. The computation gives an indication of the
length of time that it will take to use up inventory through sales.

Computation of the Days‟ sales in Inventory is as follows:

Days‟ sales in Inventory= Ending Inventory /Cost of Goods sold×365

=500000 /30580000 ×365

=60 days
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Inventory Turnover

Inventory turnover indicates the liquidity of the inventory. This computation is

similar to the account receivable turnover computation.

The inventory turnover is as follows:

Inventory Turnover=Cost of Goods Sold /Average inventory

=30580000 /500000

= 61.16 Times per year.

Average Inventory =Beginning Inventory +ending Inventory /2

= 0 +500000 /2

=500000 /2

=250000.

Inventory turnover in Days

Inventory turnover figure can be expressed in number of days instead of times per
year. This is comparable to the computation that expressed accounts receivable
turnover in days.

Computation of inventory turnover in days is as follows:

Inventory Turnover in Days= Average Inventory /Cost of Goods Sold ×365

=250000 /30580000 ×365

=3 Days

Operating cycle

The operation cycle represents the period of time elapsing between the acquisition
of goods and the final cash realization from sales and subsequent collections. An
approximation of the Operating cycle for NESTLE Diet Orange has been
determined from receivables liquidity figure and the inventory liquidity figure.

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Computation of the Operating cycle is as follows:

Operating Cycle =Account Receivable +Inventory Turnover

turnover in days in days

= 45 days +61.16 days

=106.16 days

Flow Chart For Purchasing Receiving,Recording,Paying For Inventory.

Purchase Account Account

Requisition Department Department
For Account
Number
Purchase
Vender
Department
Issue Purchase Order to Return Acknowledgement
Copy

Vender
Ship Material and Send invoice
Receive invoice for inspection
Receiving
Department Treasure
Bin Card
Issue Receiving Report For Payment

Purchase
Department

104
Inventory Control Counting System
NESTLE Diet Orange Accountants utilized Perpetual Inventory System (also name as
continual system ) keeps the tracks of removal from Inventory on a continuous basis, so the
system can provide information on the current level of Inventory for each ingredient required in
the production of Diet Orange like fresh Oranges ,Carbonating material, diet material and other
preserving requisites. When the amount on hand reaches a predetermined minimum level, a fixed
quantity Q is ordered. An obvious advantage of ths Inventory counting system is the control
provided by the continuous monitoring of Inventory withdrawals. Another advantage taken by
this system is that fixed order quantity, management can determine an optimal order
quantity.Accountans have maintained Inventory Accounts.

Production Process
As NESTLE Diet Orange is engaged in notorious juices and drinks process chooses for
the production of the Diet Orange as continuous process. Here; WIP Inventory is very high and
when liquid material is being entered in the process, it passes through the whole process without
process stopped. Product and process divergence is minimal in this production.Here at the plant
of NESTLE Diet orange containers capable of handling bulk of liquid material are utilized.
When the material is poured in the machines after setting the commands then stopping of the
system at any point of time can be distress. As soon as production of Diet Orange is completed it
passes under batch system as in the packing after it quality has been verified by Quality Control
Department.

Inventory Costing Method

Inventory is nonfinancial asset and usually shown in the BALANC Sheet of the NESTLE.As
items are sold from Inventory,their cost is removed from balance sheet and is transferred to the
cost of good sold,which is offset against the sales revenue in the income statement.NESTLE diet
orange accountants are using Last-In,First-Out Method,commonly known as LIFO,is among the
most widely used methods of determining cost of good sold and valuing Inventory.The most
recently purchased items are assumed to be sold first.

105
The journal entry made by the accountant in Inventory control Department is as shown below.
The inventory subsidiary ledger record after this entry has been posted.

Cost of Goods Sold…… 30580000

Inventory………….. 30580000

(To record the cost of 40 batches of NESTLOE Diet Orange, cost determined by LIFO flow
Assumption.)

Inventory Ledger Control

Material: Re-order Point:

Description: Re-order Quantity:

Max. Quantity:

Received Issued Balance

Req.No Q Amount Req.No. Q Amount Quantity U.C Amount

106
 QUALITY CONTROL DEPARTMENT

Quality control is also known as quality engineering and it includes the techniques
which are used to ensure that products and services are designed to meet the requirements of the
customers. Quality control is the basic aim of the company to attain the long term survival in the
market. There are various aspects of quality control like in raw material, in production process,
in post sales services etc. There are various techniques which are used to check the quality of the
service layout or the product like statistical control methods. In addition to the over all
performance of the business, quality control is the check to attain reliability, maintainability,
safety and customer‟s satisfaction

Our Strategic Objectives:

 Smooth execution with deployment of efficient management systems.

 A culture that sizzles, where sound planning, monitoring and quality control is ensured

by the quality control department.

 Maintaining a healthy relationship with the regulatory authorities for fulfilling social,

legal and community related responsibilities.

 Safe and environmentally sound operations.

 An independent quality control unit for ensuring unbiased, effective and transparent

quality control development works.

 The basic objectives of quality control are to maintain quality standards in order to ensure

customer satisfaction and to reduce the costs associated with the scrapping of defective
goods.
 Quality of conformance related to the extent to which the goods that are produced

conform to the condition.

 To monitor different dimensions of quality management and its strategies of

implementation.
 To find out the right organizational setup that would aid the implementation of quality

management policies.
 Serves as a basis for identifying metric to be measured in support of performance goals

107
 (Member and there designation)
CHIEF QUALITY CONTROL
QUALITY CONTROL MANAGERS
QUALITY CONTROL SUPERVISOR
QUALITY CONTROL INSPECTOR

Duties & Responsibilities of quality control Department

 CHIEF QUALITY CONTROL (Amir Saif Ullah)

Head of the department to make sure what overall production is going up to market.

 QUALITY CONTROL MANAGERS (Maryum Anwar)

To provide quality control and assurance functions that ensure products conform to
engineering specifications and meet customer quality requirements by performing the
following duties.

Duties and Responsibilities

Include the following. Other duties may be assigned. Maintains and reports product
conformance to specifications through inspection of raw material, work in process and
finished goods inventories.

Expected to effectively manage process improvements and change initiatives using Six
Sigma and Lean concepts as an enabler and establish operational metrics/key indicators
for process control, communication and on-going quality process improvements to
achieve Quality excellence
Reports and tracks any significant deviations from quality
standard

108
 Recommends corrective action as necessary to management to
insure compliance to Quality requirements and goals.
compliance to quality requirements and gathers feedback on
current level of customer quality perception.
Create and maintain a system for production to be responsible
for quality.
Establishes and presents regular training for inspection and
manufacturing employees on quality issues.

 QUALITY CONTROL SUPERVISOR (MEDIHA ZUBAIR)

 Plans, Job Descriptions, and manages the mechanical (length) inspections

first article and final acceptance) to ensure that the production of products
in the Machine Shop is consistent with established standards.
 Develops and analyzes statistical data and product specifications to
determine present standards and establish proposed quality and reliability
expectancy of finished product.
 Manages the development and implementation of inspection procedures.
Responsible for coordinating subordinate employee recruitment, selection,
training, performance assessment, work assignments, and disciplinary
actions.
 QUALITY CONTROL INSPECTOR (NAVEED MANZOOR)
Hands on testing of all products and environmental monitoring and regulating. Examines
machine-made product for defects: Selects sample , and visually examines product for
other defects. Records number of defectives and informs department supervisor when
percentage of defective units exceeds allowable limits, requiring inspection of entire unit
output.

109
STRATEGIES TECHNIQUES FOR QUALITY CONTROL DEPATMENT
IN NESTLE

Quality control is defined as the operational techniques and activities that are used to
fulfill the requirements for the quality. It focuses on product defect detection through post-
production inspection. It is concerned with the adherence to standards and sorting rejects.
Quality is regarded as an „end-of-line‟ function where attention is given more to the end product
than the processes themselves. Variation is studied through a decision making process based on
acceptable or unacceptable standards. Quality control phase makes use of techniques (including
statistical) to achieve ,maintain and improve quality standards of products and services. In other
words, Quality control includes a system which accepts or rejects any activities which affects the
quality and prevents quality deficiency and imparts consistency in the quality of product or
service.

GOALS

We have to have a close eye watch on following grounds

1. over-production
2. motion (of operator or machine)
3. waiting (of operator or machine)
4. conveyance
5. processing itself
6. inventory (raw material)
7. correction (rework and scrap)

Besides TQM, other quality improvement strategies have come forth, including the
International Organization for Standardization ISO 9000, Zero Defects, Six Sigma, Bald
ridge, and Toyota Production System/Lean Production.

110
SIX SIGMA

Is a business management strategy originally developed by Motorola As of 2009, it enjoys

widespread application in many sectors of industry, although its application is not without
controversy.

Six Sigma seeks to improve the quality of process outputs by identifying and removing the
causes of defects (errors) and variability in manufacturing and business processes It uses a set of
quality management methods, including statistical methods, and creates a special infrastructure
of people within the organization who are experts in these methods. Each Six Sigma project
carried out within an organization follows a defined sequence of steps and has quantified targets.
These targets can be financial (cost reduction or profit increase) or whatever is critical to the
customer of that process (cycle time, safety, delivery, etc.).We r using this strategy in nestle
oranges juice.

2 Zero Defects:

Zero Defects was a quality control program originated by the Denver Division of the Martin
Marietta Corporation (now Lockheed Martin) on the Titan Missile program, which carried the
first astronauts into space in the late 1960s. It was then incorporated into the Orlando Division,
which built the mobile Pershing Missile System, deployed in Europe; the Sprint antiballistic
missile, never deployed; and a number of air to ground missiles for the Vietnam War.

1. Quality is conformance to requirements

2. Defect prevention is preferable to quality inspection and correction

3. Zero Defects is the quality standard

4. Quality is measured in monetary terms – the Price of Nonconformance (PONC)

111
ISO 9000

ISO 9000 is an international standard providing an assessment model for a Quality

Management System. Organisations can be registered as conforming to the standard
by undergoing regular assessments by accredited third party auditors.
Its aims are to assure consistency in the quality of products and services combined
with continual improvement in customer satisfaction and error rates. It also demands
conformance to the relevant regulatory requirements.
It is an excellent starting point for new or established organisations to develop or
improve their internal performance and efficiency as well as satisfying customer
requirements.

4 LEAN SYSTEM

Lean manufacturing or lean production, which is often known simply as "Lean", is a

production practice that considers the expenditure of resources for any goal other than the
creation of value for the end customer to be wasteful, and thus a target for elimination. Working
from the perspective of the customer who consumes a product or service, "value" is defined as
any action or process that a customer would be willing to pay for. Basically, lean is centered
around creating more value with less work.
5 Toyota Production System
(TPS) is an integrated socio-technical system, developed by Toyota that comprises its
management philosophy and practices. The TPS organizes manufacturing and logistics for the
automobile manufacturer, including interaction with suppliers and customers. The system is a
major precursor of the more generic "Lean manufacturing” Taiichi Ohno , Shigeo Shingo and
Eiji Toyoda developed the system between 1948 and 1975.
6 KAIZEN

112
The term kaizen (改善, Japanese for "improvement") is a Japanese word adopted into English
referring to a philosophy or practices focusing on continuous improvement in manufacturing
activities, business activities in general, and even life in general, depending on interpretation and
usage. When used in the business sense and applied to the workplace, kaizen typically refers to
activities that continually improve all functions of a business, from manufacturing to
management and from the CEO to the assembly line workers]By improving standardized
activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen was
first implemented in several Japanese businesses during the country's recovery after World War
II and has since spread to businesses throughout the world.

Quality Defined by Nestle

It is defined as,

"Quality should be defined as surpassing customer needs and expectations throughout the
life of the product."

Project Quality v Deliverable Quality

The situation above illustrates the difference between judging the deliverables and judging
the project. You need to decide how much focus you put on the quality of the project, and how
much on the quality of the deliverables.

The project quality refers to things like applying proper project management practices to
cost, time, resources, communication etc. It covers managing changes within the project.
The deliverable quality refers to the 'fit for purpose' aspect mentioned earlier. It covers
things like how well it meets the user's needs, and the total cost of ownership.

A quality project may deliver low quality deliverables and vice versa. It is more likely
however that a high quality project will deliver high quality deliverables. You can see that if we
were checking project quality we would look at completely different things than if we were
looking at the quality of the deliverables.

113
 Quality statement of nestle

“Can bear loss but not compromise on quality”

Quality policy of nestle

Quality is the foundation of our food, nutrition, health and wellness of company.
A hustle brand name on product is the promise to the customer that:
It is safe to consume.
It complies with all relevant laws and regulation.
Quality is to win customer trust and preference.
We are committed to offering product and services to all customers that meet their needs.
Quality is every body‟s commitment.
Our management takes the lead, sets the objectives and demonstrates its commitment
towards quality.
All nestle functions across our value chain are fully responsible to follow mandatory
norms.
Quality is striving for zero defects and no waste.
We focus on facts and results and we strive for zero defect and excellence in everything
we do.

Most appropriate way to check?

The quality checking should focus on compliance with the standard. This would indicate
a "Standard Audit" could be the best approach for nestle juice.

We have checked our product by making it to the level which can be certified with ISO
9001. We get our certification from ISO 9001.

ISO 9001

114
 Neslte diet orange juice is fulfilling the ISO 9001 quality standard. It is the standard
that provides a set of standardized requirements for a quality management system. We
have set our product according to the requirement of the standard.

Without satisfied customers, an organization is in peril! To keep customers satisfied,

the organization needs to meet their requirements. The ISO 9001standard provides a tried
and tested framework for taking a systematic approach to managing the organization's
processes so that they consistently turn out product that satisfies customers' expectations.

Working of ISO 9001 model

The requirements for a quality system have been standardized - but many
organizations like to think of themselves as unique. So how does ISO 9001allow for the
diversity of say, The answer is that ISO 9001 lays down what requirements our quality
system must meet, but does not dictate how they should be met in any particular
organization. This leaves great scope and flexibility for implementation in different
business sectors and business cultures, as well as in different national cultures.

Checking its work

The standard requires the organization itself to audit its ISO 9001 based quality system to
verify that it is managing its processes effectively - or, to put it another way, to check that
it is fully in control of its activities.
In addition, the organization may invite its clients to audit the quality system in order to
give them confidence that the organization is capable of delivering products or services
that will meet their requirements.

Quality Materials used?

The materials used to prompt for the reviewers to ensure there are no gaps. The "Quality
Materials" will usually be self evident. It may be useful to reduce things like standards to
checklists in order to make them more manageable. If the reviewers know the specifications for
xyz in standard abc, they only need to be reminded to check xyz. They don't need the full
standard as the primary piece of "Quality Material".

Continuous Improvement

The world is bigger than one project. We aregoing from a process of continuous
improvement In which we increasing the quality of our product step by step. This is what
continuous improvement is all about.

115
House of Quality

Six Sigma
It is a business management strategy originally developed by Motorola, USA in 1981. As
of 2009, it enjoys widespread application in many sectors of industry, although its application is
not without controversy.

Six Sigma seeks to improve the quality of process outputs by identifying and removing the
causes of defects (errors) and minimizing variability in manufacturing and business processes.

Six Sigma projects follow two project methodologies inspired by Deming's Plan-Do-Check-Act
Cycle. These methodologies, comprising five phases each, bear the acronyms DMAIC and
DMADV.

 DMAIC is used for projects aimed at improving an existing business process.

 DMADV is used for projects aimed at creating new product or process designs.

DMAIC

The DMAIC project methodology has five phases:

116
 Define the problem, the voice of the customer, and the project goals, specifically.
 Measure key aspects of the current process and collect relevant data.
 Analyze the data to investigate and verify cause-and-effect relationships. Determine what the
relationships are, and attempt to ensure that all factors have been considered. Seek out root
cause of the defect under investigation.
 Improve or optimize the current process based upon data analysis using techniques such
as design of experiments, poka yoke or mistake proofing, and standard work to create a new,
future state process. Set up pilot runs to establish process capability.
Control the future state process to ensure that any deviations from target are corrected before
they result in defects. Control systems are implemented such as statistical process control,
production boards, and visual workplaces and the process is continuously monitored.

DMADV

The DMADV project methodology, also known as DFSS ("Design For Six Sigma"),] features
five phases:

 Define design goals that are consistent with customer demands and the enterprise strategy.
 Measure and identify CTQs (characteristics that are Critical to Quality), product capabilities,
production process capability, and risks.
 Analyze to develop and design alternatives, create a high-level design and evaluate design
capability to select the best design.
 Design details, optimize the design, and plan for design verification. This phase may require
simulations.
 Verify the design, set up pilot runs, implement the production process and hand it over to the
process owner(s).
We have applied these techniques in our project to fallow a continuous improvement
programme.

Quality management tools and methods used in Six Sigma

Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many
established quality-management tools that are also used outside of Six Sigma. The following
table shows an overview of the main methods used.

117
  Quality Function Deployment(QFD)
 Process capability
 Pareto chart
 Pick chart
 Regression analysis
 Histograms
 Homoscedasticity
 Root cause analysis

Graph of the normal distribution, which underlies the statistical assumptions of the Six
Sigma model. The Greek letter σ (sigma marks the distance on the horizontal axis between
the mean, µ, and the curve's inflection point, in this case µ=2. The distance is equally distributed
horizontally to both sides of the mean µ as: [µ - σ/2, µ + σ/2]. The greater this distance, the
greater is the spread of values encountered. For the curve shown above, µ = 0 and σ = 2. The
upper and lower specification limits (USL, LSL) are at a distance of 6σ from the mean. Due to
the properties of the normal distribution, values lying that far away from the mean are extremely
unlikely. Even if the mean were to move right or left by 1.5σ at some point in the future (1.5
sigma shift), there is still a good safety cushion. This is why Six Sigma aims to have processes
where the mean is at least 6σ away from the nearest specification limit.

The term "six sigma process" comes from the notion that if one has six standard
deviations between the process mean and the nearest specification limit, as shown in the graph,
practically no items will fail to meet specifications. [This is based on the calculation method
employed in process capability studies.

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 Capability studies measure the number of standard deviations between the process mean
and the nearest specification limit in sigma units. As process standard deviation goes up, or the
mean of the process moves away from the center of the tolerance, fewer standard deviations will
fit between the mean and the nearest specification limit, decreasing the sigma number and
increasing the likelihood of items outside specification.

Sigma levels
The table [below gives long-term DPMO values corresponding to various short-term
sigma levels. Note that these figures assume that the process mean will shift by 1.5 sigma towards the
side with the critical specification limit. In other words, they assume that after the initial study
determining the short-term sigma level, the long-term will turn out to be 0.5 less than the short-term
Cpk value. So, for example, the DPMO figure given for 1 sigma assumes that the long-term process mean
will be 0.5 sigma beyond the specification limit (Cpk = –0.17), rather than 1 sigma within it, as it was in
the short-term study (Cpk = 0.33). Note that the defect percentages only indicate defects exceeding the
specification limit that the process mean is nearest to. Defects beyond the far specification limit are not
included in the percentages.

METHODS, TOOLS & TECHNIQUES

Methods, Tools & Techniques are vital to the success of any Six Sigma project whether
DFSS or DMAIC. Every stage of a Six Sigma project recipe requires a mix of these methods,
tools & techniques. Let us briefly review what do we mean by these keywords. Method is a way
of doing something in a systematic way. Here word "systematic" implies an orderly logical
sequence of steps or tasks. A tool provides a mechanical or mental advantage in accomplishing a
task. A technique is a specific approach to efficiently accomplish a task in a manner that may
not be immediately obvious.

SIPOC
SIPOC is a high-level picture of the process that depicts how the given process is
servicing the customer. It is an acronym for Suppliers-Inputs-Process-Outputs-Customers.

Operational Definition
Operational definition is the first step towards effective management. It helps us build a
clear understanding of a concept or a phenomenon so that it can be unambiguously measured.

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Benchmarking
Benchmarking is a standard by which something can be measured or judged. This term
was first used by surveyors. They set a benchmark by marking a point of known vertical
elevation. Therefore benchmark becomes a point of reference for a measurement. We benchmark
everyday. We compare our performance, lifestyle, or a game of golf with friends and peers.

Brainstorming
Brainstorming is a technique to systematically generate ideas usually to handle a
challenging situation, from a group of people by nurturing free-thinking. Some of the right
challenges to address using brainstorming are problem solving, new design or new product
development, and research & development.

Affinity Diagram
The process of affinity diagramming requires the team to categorize the ideas based on
their subject knowledge thereby making it easy to sift and prioritize ideas.
Fishbone Diagram
The fishbone diagram is a graphical method for finding the root causes of an effect. The
effect can be either a negative one, such as a process defect or an undue process variation; or a
positive one, such as a desired process outcome.
Pareto Chart
A Pareto Chart depicts the frequency with which certain events occur. It is a bar graph
where each frequency (or frequency range) is shown in a descending order of importance of data,
from left to right.This is based on the Pareto Principle, also called 80-20 rule or rule of vital few.
Risk Management
Risk has two key elements - a) an uncertainty and b) an impact in terms of potential loss
(if it happens). Risk management is a continuous process. Risk management process involves
several key steps.
Sampling
Sampling is a method to draw inference about one or more characteristics of a large
group of items by examining a smaller but representative selection of group items. Steps to
successful sampling are discussed, including topics like determining the sample size and
selecting the sampling technique.
Control charts

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 A control chart is a popular statistical tool for monitoring and improving quality.
Originated by Walter Shewhart in 1924 for the manufacturing environment, it was later extended
by W. Edward Deming to the quality improvement in all areas of an organization (a philosophy
known as Total Quality Management, or TQM).

The Purpose of Control Charts

The success of Shewhart's approach is based on the idea that no matter how well the
process is designed, there exists a certain amount of nature variability in output measurements.

When the variation in process quality is due to random causes alone, the process is said to
be in-control. If the process variation includes both random and special causes of variation, the
process is said to be out-of-control.

The control chart is supposed to detect the presence of special causes of variation.

In its basic form, the control chart is a plot of some function of process measurements
against time. The points that are plotted on the graph are compared to a pair of control limits. A
point that exceeds the control limits signals an alarm.

Assumptions Underlying Control Charts

The two important assumptions are:

1. The measurement-function (e.g. the mean), that is used to monitor the process parameter,
is distributed according to a normal distribution. In practice, if your data seem very far
from meeting this assumption, try to transform them.
2. Measurements are independent of each other.

During a stable stage of the process:

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 1. Determine the process parameter that you want to monitor (such as the process mean, or
spread).
2. Create the centerline of the plot, according to the target value of your monitored
parameter.
3. Group the process measurements into subgroups (samples) by time period. The points to
be plotted on the plot, are some function of the process measurements within each
subgroup, which estimate the target value.
For example, if you are monitoring your process mean, then the points on the plot should
be the sample-means, computed at regular intervals. Denote the point at time t as Xt

To give you a feel of this statistical terminology, The production manager wants to monitor the
mean weight of nestle orange juice produced on the line. The target value of the weight of a
single juice is 100 gm. It is also known that an estimate of the weight standard-deviation for a
single juice is 5 gm. Daily samples of 10 juices are taken, during a stable period of the process.
For each sample, the weights are recorded, and their mean/average is computed. The sample
means are estimates of the process mean.

1. The monitored parameter is the process mean.

2. The center line in this case will be equal to 100 gm (the target).
3. The points on the plot will be the sample means (where each sample consists of 10
measurements).
4. The control limits are given by 100 ± 3 · 5 / root(10)

Quality Function Deployment, QFD

QFD is used to translate customer requirements to engineering specifications. It is a link

between customers - design engineers - competitors - manufacturing. It provides an insight into
the whole design and manufacturing operation from concept to manufacture and it can
dramatically improve the efficiency as production problems are resolved early in the design
phase. It is very powerful as it incorporates the voice of the customer in the designs - hence it is
likely that the final product will be better designed to satisfy the customer's needs. Moreover, it
provides an insight into the whole design and manufacturing operation (from concept to
manufacture) and it can dramatically improve the efficiency as production problems are resolved
early in the design phase.QFD is applied in the early stages of the design phase so that the
customer wants are incorporated into the final product. Furthermore it can be used as a planning
tool as it identifies the most important areas in which the effort should focus in relation to our
technical capabilities.

Whatever you do, do it with all your might. Work at it, early and late, in season and out
of season, not leaving a stone unturned, and never deferring for a single hour that which can be
done just as well as now."

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.

The use of QFD by Quality department

It includes;

1. Product Planning (House of Quality):

translate customer requirement into product technical requirements to meet them.

2. Product Design:
translate technical requirements to key part characteristics or systems

3. Process Planning:
identify key process operations necessary to achieve key part characteristics.

4. Production Planning (Process Control):

establish process control plans, maintenance plans, training plans to control operations.

Quality Planning of Nestle

Planning quality improvement, implementing the plan, analyzing the results and re-
planning is a continuous cycle (Plan-Do-Check-Act ). Inter-related improvement plans are
deployed at all levels of the organization (corporate, department, process, individual). Following
are the steps for quality planning: · Quality policy is formulated. Quality policy is adopted by the
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management explicitly, stating its commitment and intentions with respect to quality. · Quality
plans are established annually based on the past or expected in the future is collected. · Based on
this feedback, quality objectives involving every function are set. · Quality objectives are set in
regard to procedures, training, quality preventive maintenance, development of new products,
etc. Total Quality Management (TQM) is an integrated system of principles, methods, and best
practices that provide a framework for organizations to strive for excellence in everything they
do. No two organizations have the same TQM implementation. There is no recipe for
organization success; however, there are a number of great TQM models that organizations can
use. These include the Deming Application Prize, the Malcolm Baldrige Criteria for Performance
Excellence, the European Foundation for Quality Management, and the ISO quality management
standards. Any organization that wants to improve its performance would be well served by
selecting one of these models and conducting a self-assessment.

The simplest model of TQM is shown in this diagram.

The model begins with understanding customer needs.
NESTLE have processes that continuously collect,
analyze, and act on customer information. Activities are
often extended to understanding competitor's customers.
Developing an intimate understanding of customer needs
allows NESTLE to predict future customer behavior.

NESTLE integrate customer knowledge with other information and use the planning
process throughout the organization to manage day to day activities and achieve future
goals. Plans are reviewed at periodic intervals and adjusted as necessary. The planning
process is the glue that holds together all TQM activity.
NESTLE understand that customers will only be satisfied if they consistently receive
products and services that meet their needs, are delivered when expected, and are priced
for value. NESTLE use the techniques of process management to develop cost-controlled
processes that are stable and capable of meeting customer expectations.
NESTLE also understand that exceptional performance today may be unacceptable
performance in the future so they use the concepts of process improvement to achieve
both breakthrough gains and incremental continuous improvement. Process improvement
is even applied to the TQM system itself!

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 The final element of the TQM model is total participation. NESTLE understand that all
work is performed through people. This begins with leadership. In TQM organizations,
top management takes personal responsibility for implementing, nurturing, and refining
all TQM activities. They make sure people are properly trained, capable, and actively
participate in achieving organizational success. Management and employees work
together to create an empowered environment where people are valued.

Types of errors:

Control limits on a control chart are commonly drawn at 3s from the center line because 3-sigma
limits are a good balance point between two types of errors:

Type I or alpha errors occur when a point falls outside the control limits even though no
special cause is operating. The result is a witch-hunt for special causes and adjustment of
things here and there. The tampering usually distorts a stable process as well as wasting
time and energy.
Type II or beta errors occur when you miss a special cause because the chart isn't
sensitive enough to detect it. In this case, you will go along unaware that the problem
exists and thus unable to root it out.

All process control is vulnerable to these two types of errors. The reason that 3-sigma control
limits balance the risk of error is that, for normally distributed data, data points will fall inside 3-
sigma limits 99.7% of the time when a process is in control. This makes the witch hunts
infrequent but still makes it likely that unusual causes of variation will be detected.

Guidelines

At Nestle we try to take the mentality and customs of individual countries into account, but there
are some general guidelines that we apply everywhere. Those include:

A positive attitude toward work

A pragmatic, realistic approach to doing business
An open-minded approach to the world
A minimal number of systems and written guidelines
A personal style of management
An atmosphere of mutual trust
An avoidance of showing off, windy rhetoric and hypocritical remarks
An emphasis on practical experience and on the setting of good examples.

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The nestle policy on the Environment

This commitment is put into practice by considering local legal requirements as a

minimum standard. If these do not exist, our internal rules, adjusted to local conditions, apply.
Research and Development and new investments include an evaluation to ensure
environmentally appropriate products, packaging and processes. Management and personnel
within NESTLE worldwide are encouraged to help resolve environmental problems within their
own sphere of influence.

In order to achieve this, the NESTLE , while maintaining its commitment to supply the
consumer with products and services of high quality and safety, will continue to apply a series of
general principles. Within the Group, relevant decisions take protection of the environment into
.

Packaging

Manufacturing comprises all unit operations necessary to transform perishable raw materials
into finished products, with the aim to make them safe and convenient for the consumers. The
manufacturing activities of the NESTLE

Respect natural resources by efficient use of raw materials and energy

minimize waste generation and emissions
Ensure environmentally safe disposal of all waste which cannot be recycled.

Regular assessments of processing practices are carried out. These assessments include:

Evaluation of individual plant performance with regard to operations which have an

impact on the environment
definition of targets for improvement
review of plant compliance with local government regulations, company environmental
standards, as well as results achieved in comparison with targets for improvement

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 GANNT CHART

Tasks performed by Quality control Duration Start Finish

department in days
Team was created 1 30OCT 30OCT
Ranking of members 1 1stNOV 1stNOV
Tasks are defined 1 2ndNOV 2ndNOV
Receiving of information from design department 1 15NOV 15NOV
Establishment of criteria regarding quality of design 1 16NOV 16NOV
Analysis of criteria/parameters are determined 1 16NOV 16NOV
SWOT analysis of quality of diet orange 1 17NOV 17NOV
Check features of design 1 17NOV 17NOV
Criteria is analyzed 1 18NOV 18NOV
Actual product features are determined 1 18NOV 18NOV
Quality definition 1 19NOV 19NOV
Identifying dimensions of quality design 1 19NOV 19NOV
Continuous quality improvement adopted 1 19NOV 19NOV
House of quality applied 6 19DEC 24DEC
Approval from quality assurance departments received 1 24DEC 25DEC
Quality policy adopted 1 25DEC 25DEC
Quality management tolls are adopted 1 25DEC 25DEC
Quality function deployment realized 2 25DEC 26DEC
Cost estimation with relevance to quality 2 27DEC 28DEC
Elimination of errors 1 28DEC 28DEC
Quality agreement made by quality control 1 29DEC 29DEC
Design quality was approved 1 30DEC 30DEC
Features relevance quality standards 1 30DEC 30DEC
Report sent to Executives & project director 1 30DED 30DED
Report to CEO & President for approval 1 30DEC 30DEC
st st
Approval from CEO & Executives 1 JAN 1 JAN 2010
2010

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 Quality Assurance
Quality assurance is the process of verifying or determining whether products or services
meet or exceed customer expectations. Quality assurance is a process-driven approach with
specific steps to help define and attain goals. This process considers design, development,
production, and service.

The terms “quality assurance” and “quality control” are often used interchangeably to refer to ways
of ensuring the quality of a service or product. The terms, however, have different meanings.

Assurance: The act of giving confidence, the state of

being certain or the act of making certain.

Quality assurance: The planned and systematic activities implemented in a quality system so that quali
a product or service will be fulfilled.

Control: An evaluation to indicate needed corrective responses; the act of guiding a

process in which variability is attributable to a constant system of chance causes.
Quality control: The observation techniques and activities used to fulfill requirements for
quality.

Quality Assurance Mission

“To provide synergetic, quality driven solutions that continuously

improve our client‟s ability to succeed.”

Quality Assurance Vision

“Quality Assurance is dedicated to support its clients around the world
to reach a sustainable corporate environment that succeeds through a
continuous commitment towards quality excellence, social responsibility
and customer satisfaction.”

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Objectives:

 To maintain an effective Quality Assurance System complying with International

Standard ISO9001 (Quality Systems).

 To achieve and maintain a level of quality which enhances the Company's reputation with
customers.
 To ensure compliance with relevant statutory and safety requirements.

Quality Assurance Policies & Procedures

A quality assurance program is a system of policies and procedures designed to continually

improve specific business processes. While most popular in manufacturing settings, quality
assurance efforts can be utilized to improve the efficiency and quality of any workflow--
secretarial, production-oriented, or managerial.

1. Failure testing:
What is failure testing; why is it important?
Failure testing is an important part of the manufacturing process, no matter what you are
manufacturing. Failure testing is a way to ensure that you are producing a product and service
that will not fail under different circumstances and situations of stress, weather, temperature, and
so on and so forth. Continual failure testing, even after a product is developed, will help you
ensure that your manufacturing processes are as optimal as possible and that you are continually
improving your products and your services.

When a product or a part or a component fails, then you can examine those failures immediately
so that you can correct the problem. When you perform failure testing on a component that has
failed, or just to test for potential failure, then you need to correlate your observations of a
number of different aspects of the component: the appearance of the component or product, its
composition, and its strength. Also keep in mind the design of the product, the operating
conditions, the service environment, and the manufacturing history.

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Failure testing procedures contain many of the same components and practices as failure
analysis. Failure analysis occurs after the fact, but failure testing strives to occur before the fact
so that failure can hopefully be avoided by continually testing products and components so that
they can be improved before they fail. It would be beneficial to you and your customers if you
engage in failure testing on a regular basis, so that you can prevent any future problems.

2. Statistical Process Control (SPC):

Statistical process control, also referred to as SPC, involves using statistical techniques to
measure and analyze the variation in processes. Statistical process control is mostly used in the
manufacturing process to monitor the product quality and to maintain processes to fixed targets.
Most manufacturing plants use statistical process control to improve the quality of their
processes. However, statistical process control is rarely used on its own, most of the time you
will find that manufacturing plants use statistical process control in addition to other techniques,
such as process improvement plans, variation reduction, and sampling plans.

Statistical process control is going to be used by most manufacturing plants as a way to monitor
the consistency of the processes that they use to manufacture a product as designed. The main
goal of statistical process control is to get and keep processes under control, regardless of how
good or bad the design is of the product being manufactured. All that statistical process control is
supposed to do is make sure that the product is being manufactured as intended, by following the
design that it is assigned. Statistical process control cannot improve a poorly designed product's
reliability, all it can do is maintain the consistency of how the product is made, which is only as
good as its designed reliability.

One of the most common tools used for statistical process control is the control chart. The
control chart is a graphical representation of the descriptive statistics for certain quantitative
measurements of the manufacturing process for a product. How the control chart works is that
the statistics are displayed in the control chart in comparison to the "in control" sampling
distributions. This comparison is designed to detect any unusual variations in your
manufacturing process. If these unusual variations arte detected it can indicate that there is a
problem with your process, by knowing what the possible problem is you can take the steps
required to correct the problem so that your manufacturing process runs as designed.

The one thing that you need to know about control charts is that several different descriptive
statistics can be used in control charts, and several different types of control charts can be used to
test for a variety of causes. Control charts can also be used with product measurements to
analyze process capability and to make improvements to your processes.

Here is a look at the benefits that using statistical process control can provide for your
manufacturing plant.

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 Will provide you with feedback on whether or not you are keeping processes in control. It
can also provide you with surveillance of the processes, which allows you to see if they
are in control or not.
Will signal you ahead of time if there is a problem with one of the processes, which will
give you plenty of time to fix the problem before it gets out of hand
Detects assignable causes of variation Also detects normal causes of variation.
Accomplishes process characterization
Once it has been in play for a period of time it will gradually reduce the need for
inspections because it will show you ahead of time what is going on so that you can stop
it.
Can also monitor your process quality, which will alert you to the fact of any
improvements that need to be made in your process
Provides you with the mechanism that you will need to make process changes and to
track the effects of those changes
Once the process is considered stable, meaning you have eliminated all of the assignable
causes of variation for the process, it will provide you with the process capability analysis
with comparison to the product tolerance

In Nestle Diet Orange Juice Project SPC is used in coordination with Six Sigma programs
to track the level of defects produced by a specific process. The reported number of defects
serves as a measure of the performance of quality assurance policies, and the ultimate goal
is to consistently reduce defects to minimum levels.

The basic purpose of implementing SPC in Nestle Diet Orange Juice Project is to ensure the
reliability of the process under use and to reduce the inspections cost‟s beard on removing
the defects. Because after the defect is found in the product/process, the company will suffer
double loss. Firstly because of the cost‟ suffered on removing the fault in process/product
and secondly the defected product‟s also raise the per unit cost of the defect free units
manufactured.

3. Total Quality Management

Nestle and other companies use total quality management (TQM) to manage quality through
various processes. TQM provides companies with the ability to improve their effectiveness,
competitiveness, efficiency, and flexibility in order to suit the needs of their consumers. The
acronym TQM is broken down as follows:

T - Total = Quality that involves everyone at the company and all the different activities
that are involved.
Q - Quality = Meeting the customer and company expectations.
M - Management = Quality must be measured in order to be effective.

The process of TQM involves various responsibilities like; meeting customer satisfaction and
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customer requirements, reducing production time, demand-flow manufacturing, implementing
improvement teams, reducing costs of services and cost of products, and improving training.

The TQM process involves ten steps to success:

1. Pursue New Strategic Thinking
2. Know your Customers
3. Set True Customer Requirements
4. Concentrate on Prevention, Not Correction
5. Reduce Chronic Waste
6. Pursue a Continuous Improvement Strategy
7. Use Structured Methodology for Process Improvement
8. Reduce Variation
9. Use a Balanced Approach
10. Apply to All Functions

In order to follow the TQM process, it must be managed and constantly improved. A team needs
to sit down together and write out the goals. These may include: defining the process, measuring
and reviewing performance, analyzing problems and shortcomings, and clear communication
between all parties.

Without clear and effective communication from the team, TQM will not be successful. This is
not just a change you can implement on paper, it requires action from employees. Everyone at
the company must understand their role in TQM and look for ways to make the entire process
run smoothly.

The driving factor behind TQM is to become profitable by lowering costs due to efficiencies
achieved, higher customer retention, greater attraction to new customers, and potential to charge
higher prices. Keeping your company in a competitive position is also a key factor to successful
TQM. In the analysis of your company you should set apart key questions such as:

Why is my company unique?

How is my company different from others?
Why would potential customers choose my company over competitors?

Keeping competitive is a unique advantage to your company especially if your competitors have
not yet adopted TQM.

Ways to implement TQM

There are essentially eight elements to Total quality management and each element needs to be
done correctly in order for TQM to work the way it was meant to. The implementation of TQM
is a long term process.
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For TQM to work properly all key elements need to be implemented properly and adhered to.
Managers and all employees need to embrace all of the elements and follow what the elements
say. Outside consultants are best hired to help train all employees including managers on the
correct ways to implement TQM. Embracing all key elements for TQM is the most important
way for TQM implementation. If one of these key elements does not work properly then you can
not properly implement TQM.

4. ISO 9001:

ISO 9000 is a family of standards for quality management systems. ISO 9000 is
maintained by ISO, the International Organization for Standardization and is administered by
accreditation and certification bodies. Some of the requirements in ISO 9001 (which is one of the
standards in the ISO 9000 family) include:-

A set of procedures that cover all key processes in the business;

Monitoring processes to ensure they are effective
Keeping adequate records
Checking output for defects, with appropriate and corrective action where necessary;
Regularly reviewing individual processes and the quality system itself for effectiveness;
and
Facilitating continual improvement

5. Kaizan:
If we define kaizen literally, it means simply "improvement", or more literally: "good
change".

Kaizen 5S Concept:

The define kaizen cycle has five standard phases. It starts with standardizing an
operation, and then measures that operation to find the cycle time and how much inventory is in
process. These measurements are compared to the requirements. Then, innovations that will meet
the requirements and raise productivity are offered. These new operations are standardized as
before. Then the cycle repeats.

Standardize
Measure
Gauge
Innovate
Control.
Repeat

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Kaizen 5 Elements:

Teamwork
Personal Discipline
Increased Morale
Quality Circles
Suggested Improvements

6. The PCDA Model

The PCDA Model is a tool that can assist your efforts to create effective quality assurance
policies, and will help you to adapt and refine your policies over time. According to
WiseGeek.com, PCDA stands for "Plan, Do, Check, Act." Begin with careful planning
efforts to ensure that all quality assurance policies are in line with company initiatives and
quality standards. Put your plan into action after gaining the support of all levels of
management in your company. Audit your efforts and record all relevant performance data,
and then act upon your findings to adapt and refine your policies and procedures.

Considerations

Remember that line-management buy-in is vital to the success of any quality assurance
initiative. Make sure that your managers are fully aware of your new policies and procedures,
and that they have access to the information and tools necessary to fulfill their
responsibilities. Before implementing your quality assurance program, ensure that the
technical infrastructure is versatile enough to handle the program. Perform internal audits
frequently.

Resources

Several tools can assist you in developing a world-class quality assurance program. TQM
and SPC software can help you to store and utilize data related to process improvements, and
can help with the calculation of complex models. Consultants specializing in quality
assurance implementation can jump-start your efforts and leave you with a manageable
quality program. Trade journals and professional associations related to quality assurance
and control are also great places to obtain valuable information and resources. (See
Resources for the

Quality Planning:

Planning quality improvement, implementing the plan,

analyzing the results and re-planning is a continuous cycle (Plan-Do-Check-Act ). Inter-related
improvement plans are deployed at
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all levels of the organization ( corporate, department, process,
individual ). Following are the steps for quality planing :

Quality policy is formulated.

Quality policy is adopted by the management
explicitly, stating its commitment and intentions with respect to quality.
Quality plans are established annually based on
quality policy.
The feedback on quality problems encountered in
the past or expected in the future is collected.
Based on this feedback, quality objectives
involving every function are set.
Quality objectives are set in regard to procedures, training, quality costs, documents,
tools and gauges, preventive maintenance, development of new products, etc.
Quality plans are monitored quarterly by the
quality council, reporting directly to the chief executive.

Quality chains and Teamwork

Each stage of the production process is seen as being a link

in the chain right down to the relationship between one worker in the process and another. This
will foster teamwork. It is the teamwork from which the business will receive quicker and better
solutions to problems. Teams also provide more permanent improvements in processes and
operations. In teams, people feel more comfortable bringing up problems that may occur, and
can get help from other workers to find a solution and put into place. There are mainly three
types of teams that TQM organizations adopt :

 Quality Improvement Teams or Excellence Teams (QITS)

These are temporary teams with the purpose of dealing with specific problems that often re-
occur. These teams are set up for period of three to twelve months.

 Problem Solving Teams (PSTs) –

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These are temporary teams to solve certain problems and also to identify and overcome causes of
problems. They generally last from one week to three months.

 Natural Work Teams (NWTs) –

These teams consist of small groups of skilled workers who share tasks and responsibilities.
These teams use concepts such as employee involvement teams, self-managing
teams and quality circles. These teams generally work for one to two hours a week.

Quality Control
Quality control is defined as the operational techniques and activities that are used to
fulfill the requirements for the quality. It focuses on product defect detection through post-
production inspection. It is concerned with the adherence to standards and sorting rejects.
Quality is regarded as an „end-of-line‟ function where attention is given more to the end product
than the processes themselves. Variation is studied through a decision making process based on
acceptable or unacceptable standards. Quality control phase makes use of techniques ( including
statistical ) to achieve, maintain and improve quality standards of products and services. In other
words, Quality control includes a system which accepts or rejects any activities which affects the
quality and prevents quality deficiency and imparts consistency in the quality of product or
service.

Quality Assurance Unit

Quality assurance is a wide-ranging concept covering all
matters that individually or collectively influence the quality of a
product. It is the totality of the arrangements made with the object of ensuring that
pharmaceutical products are of the quality required for their intended use.

A quality assurance unit assures the management that all the

activities are being performed as designed in the organization and the products are of quality
required for their intended use. QA unit at pharmaceutical product manufacturing establishment
has following principal duties :

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 To establish control procedures and revise them
when necessary.
To prepare specifications for raw material,
packaging materials and finished products.
To devise system for identification, segregation
of test samples to avoid mix-up and cross contamination.
To prepare SOPs for each test or analysis.
To evaluate adequacy of manufacturing conditions
by monitoring environment and validation of equipments.
To reject or release raw materials and intermediate products on the basis of results of
examination, test or analysis.
To reject or release containers, closures, other packaging materials and labeling materials
on the basis of results of examination, test or analysis.
To reject or release each lot of finished
product.
To evaluate storage conditions of raw materials,
intermediates and finished products.
To carry out stability studies on finished
products.
To establish date of expiry of potency under
specified storage conditions.

7. Six Sigma
Six Sigma is a business management strategy originally developed by Motorola. As of 2009, it
enjoys widespread application in many sectors of industry, although its application is not without
controversy.

Six Sigma seeks to improve the quality of process outputs by identifying and removing the
causes of defects (errors) and variability in manufacturing and business processes It uses a set of
quality management methods, including statistical methods, and creates a special infrastructure
of people within the organization ("Black Belts","Green Belts", etc.) who are experts in these
methods.Each Six Sigma project carried out within an organization follows a defined sequence
of steps and has quantified financial targets (cost reduction or profit increase).
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Methods
According to "Naveen Chinnamane" a Green Belt Certified "Six Sigma projects follow two
project methodologies inspired by Deming's PDCA CYCLE. These methodologies, comprising
five phases each, bear the acronyms DMAIC and DMADV.

DMAIC is used for projects aimed at improving an existing business process.

DMADV is used for projects aimed at creating new product or process designs.

DMAIC
The DMAIC project methodology has five phases:

Define high-level project goals and the current process.

Measure key aspects of the current process and collect relevant data.
Analyze the data to verify cause-and-effect relationships. Determine what the
relationships are, and attempt to ensure that all factors have been considered.
Improve or optimize the process based upon data analysis using techniques like Design of
Experiments.
Control to ensure that any deviations from target are corrected before they result in
defects. Set up pilot runs to establish process capability, move on to production, set up
control mechanisms and continuously monitor the process.

RDMAIC
The RDMAIC project methodology has six phases:

Recognize what is most important for your organization, and identify the key initiatives
that will have the most impact to your organization.

DMADV
The DMADV project methodology, also known as DFSS("Design For Six Sigma"),features five phases:

Define design goals that are consistent with customer demands and the enterprise strategy.
Measure and identify CTQs (characteristics that are Critical To Quality), product capabilities,
production process capability, and risks.
Analyze to develop and design alternatives, create a high-level design and evaluate design
capability to select the best design.
Design details, optimize the design, and plan for design verification. This phase may require
simulations.
Verify the design, set up pilot runs, implement the production process and hand it over to the
process owners.
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Implementation roles
One key innovation of Six Sigma involves the "professionalizing" of quality management
functions. Prior to Six Sigma, quality management in practice was largely relegated to the
production floor and to statisticians in a separate quality department. Six Sigma borrows martial
arts ranking terminology to define a hierarchy (and career path) that cuts across all business
functions.

Six Sigma identifies several key roles for its successful implementation.

Executive Leadership includes the CEO and other members of top management. They are
responsible for setting up a vision for Six Sigma implementation. They also empower the
other role holders with the freedom and resources to explore new ideas for breakthrough
improvements.
Champions take responsibility for Six Sigma implementation across the organization in
an integrated manner. The Executive Leadership draws them from upper management.
Champions also act as mentors to Black Belts.
Master Black Belts, identified by champions, act as in-house coaches on Six Sigma. They
devote 100% of their time to Six Sigma. They assist champions and guide Black Belts
and Green Belts. Apart from statistical tasks, they spend their time on ensuring consistent
application of Six Sigma across various functions and departments.
Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific
projects. They devote 100% of their time to Six Sigma. They primarily focus on Six
Sigma project execution, whereas Champions and Master Black Belts focus on
identifying projects/functions for Six Sigma.
Green Belts, the employees who take up Six Sigma implementation along with their other
job responsibilities, operate under the guidance of Black Belts.
Yellow Belts, trained in the basic application of Six Sigma management tools, work with
the Black Belt throughout the project stages and are often the closest to the work.

Origin and meaning of the term "six sigma process"

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Graph of the normal distribution, which underlies the statistical assumptions of the Six
Sigma model. The Greek letter σ (sigma) marks the distance on the horizontal axis
between the mean, µ, and the curve's inflection point. The greater this distance, the
greater is the spread of values encountered. For the curve shown above, µ = 0 and σ = 1.
The upper and lower specification limits (USL, LSL) are at a distance of 6σ from the
mean. Due to the properties of the normal distribution, values lying that far away from
the mean are extremely unlikely. Even if the mean were to move right or left by 1.5σ at
some point in the future (1.5 sigma shift), there is still a good safety cushion. This is why
Six Sigma aims to have processes where the mean is at least 6σ away from the nearest
specification limit.

The term "six sigma process" comes from the notion that if one has six standard
deviations between the process mean and the nearest specification limit, as shown in the
graph, practically no items will fail to meet specifications. This is based on the
calculation method employed in process capability studies.

Role of the 1.5 sigma shift

Experience has shown that in the long term, processes usually do not perform as
well as they do in the short. As a result, the number of sigmas that will fit between the
process mean and the nearest specification limit may well drop over time, compared to an
initial short-term study. To account for this real-life increase in process variation over
time, an empirically-based 1.5 sigma shift is introduced into the calculation. According to
this idea, a process that fits six sigma between the process mean and the nearest
specification limit in a short-term study will in the long term only fit 4.5 sigma – either
because the process mean will move over time, or because the long-term standard
deviation of the process will be greater than that observed in the short term, or both.

Hence the widely accepted definition of a six sigma process as one that produces 3.4
defective parts per million opportunities (DPMO). This is based on the fact that a process
that is normally distributed will have 3.4 parts per million beyond a point that is 4.5
standard deviations above or below the mean (one-sided capability study). So the 3.4
DPMO of a "Six Sigma" process in fact corresponds to 4.5 sigma, namely 6 sigma minus
the 1.5 sigma shift introduced to account for long-term variation. This is designed to
prevent underestimation of the defect levels likely to be encountered in real-life
operation.

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Sigma levels
The table below gives long-term DPMO values corresponding to various short-term sigma
levels.Note that these figures assume that the process mean will shift by 1.5 sigma towards the
side with the critical specification limit . In other words, they assume that after the initial study
determining the short-term sigma level, the long-term Cpk value will turn out to be 0.5 less than
the short-term Cpk value. So, for example, the DPMO figure given for 1 sigma assumes that the
long-term process mean will be 0.5 sigma beyond the specification limit (Cpk = –0.17), rather
than 1 sigma within it, as it was in the short-term study (Cpk = 0.33). Note that the defect
percentages only indicate defects exceeding the specification limit that the process mean is
nearest to. Defects beyond the far specification limit are not included in the percentages.

Sigma Percent Percentage Short- Long-

DPMO
level defective yield term Cpk term Cpk

1 691,462 69% 31% 0.33 –0.17

2 308,538 31% 69% 0.67 0.17

3 66,807 6.7% 93.3% 1.00 0.5

4 6,210 0.62% 99.38% 1.33 0.83

5 233 0.023% 99.977% 1.67 1.17

6 3.4 0.00034% 99.99966% 2.00 1.5

7 0.019 0.0000019% 99.9999981% 2.33 1.83

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Software used for Six Sigma
Noted quality expert Joseph M. Juran has described Six Sigma as "a basic version of quality
improvement", stating that "[t]here is nothing new there. It includes what we used to call
facilitators. They've adopted more flamboyant terms, like belts with different colors. I think that
concept has merit to set apart, to create specialists who can be very helpful. Again, that's not a
new idea. The American Society for Quality long ago established certificates, such as for
reliability engineers."

Role of consultants

The use of "Black Belts" as itinerant change agents has (controversially) fostered a cottage
industry of training and certification. Critics argue there is overselling of Six Sigma by too great
a number of consulting firms, many of which claim expertise in Six Sigma when they only have
a rudimentary understanding of the tools and techniques involved.

Some commentators view the expansion of the various "Belts" to include "Green Belts," "Master
Black Belts" and "Gold Belts" as a parallel to the various "belt factories" that exist in martial
arts.

Potential negative effects

A Fortune article stated that "of 58 large companies that have announced Six Sigma programs,
91 percent have trailed the S&P 500 since". The statement is attributed to "an analysis by
Charles Holland of consulting firm Qualpro (which espouses a competing quality-improvement
process)." The gist of the article is that Six Sigma is effective at what it is intended to do, but that
it is "narrowly designed to fix an existing process" and does not help in "coming up with new
products or disruptive technologies." Many of these claims have been argued as being in error or
ill-informed.

A Business Week article says that James McNerney's introduction of Six Sigma at 3M may have
had the effect of stifling creativity. It cites two Wharton School professors who say that Six
Sigma leads to incremental innovation at the expense of blue-sky work. This phenomenon is
further explored in the book, Going Lean, which provides data to show that Ford's "6 Sigma"
program did little to change its fortunes.

Based on arbitrary standards

While 3.4 defects per million opportunities might work well for certain products/processes, it
might not operate optimally or cost-effectively for others. A pacemaker process might need
higher standards, for example, whereas a direct mail advertising campaign might need lower
ones. The basis and justification for choosing 6 (as opposed to 5 or 7, for example) as the number
of standard deviations is not clearly explained. In addition, the Six Sigma model assumes that the

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process data always conform to the normal distribution. The calculation of defect rates for
situations where the normal distribution model does not apply is not properly addressed in the
current Six Sigma literature.

Criticism of the 1.5 sigma shift

The statistician Donald J. Wheeler has dismissed the 1.5 sigma shift as "goofy" because of its
arbitrary nature. Its universal applicability is seen as doubtful.

The 1.5 sigma shift has also become contentious because it results in stated "sigma levels" that
reflect short-term rather than long-term performance: a process that has long-term defect levels
corresponding to 4.5 sigma performance is, by Six Sigma convention, described as a "6 sigma
process." The accepted Six Sigma scoring system thus cannot be equated to actual normal
distribution probabilities for the stated number of standard deviations, and this has been a key
bone of contention about how Six Sigma measures are defined. The fact that it is rarely
explained that a "6 sigma" process will have long-term defect rates corresponding to 4.5 sigma
performance rather than actual 6 sigma performance has led several commentators to express the
opinion that Six Sigma is a confidence trick.

Training for quality assurance

Quality Assurance or QA is a systematic method used to ensure that products and or services
meet or exceeds customers' requirements. The process is planned out and systematic in nature.
Quality assurance cannot absolutely guarantee the production of quality products, but it helps to
make this ideal more likely. There are two key principles when dealing with quality assurance:
"fit for purpose" and "right first time".

Fit for purpose indicates that the product or service should be suitable for its intended purposes.
It is wasteful to produce products that do not fit the needs of your customers. Remember, quality
is dictated by your clients or customers, not by society in general. Even "low-end" items can be
quality items if they fit the need of a specific user.
The Right first time principle is just as it sounds. Quality assurance helps in eliminating
duplication of work and mistakes. It would include regulation of the quality for raw materials,
products and components, assemblies, services related to your production, management
practices, and the production and inspection processes.

Quality assurance provides confidence in your product for customers, which in turn provides
more success for you as a business. So the training of personnel in this area is extremely crucial
to a business' success. There are a variety of methods available for providing this kind of
training. Below are just a few methods that may help your business.

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Method #1: In-house training. our company can provide an expert for each of the various areas
needing quality assurance. That expert can then provide training on the job or in classroom
settings to each employee. This can be done as part of the induction process or as an on-going
basis throughout individuals careers. In-house training allows our company to have an expert on
hand whenever necessary.

Method #2: Outsource. There are many firms and individuals out there that make their living on
training other businesses on how to succeed in quality assurance. When outsourcing you have a
few options as well. You can send individuals to their place of business one on one, or in large
groups. Or you can them come to your place of business and do the same. Depending on the
company or individual you select will determine which options are available. If you want to have
your training managed in a particular way you will need to do some research as to which firms
provide that particular type of service. Costs for outsourcing can become expensive depending
upon the extensiveness you utilize them.

Method #3: Computer based training. There are several software companies that have written
programs to help individuals and or groups complete quality assurance certifications. These
programs can be purchased and housed within the walls of your own company. This would allow
you some flexibility to when and how many employees you can train simultaneously. This
method does allow you a little more quantitative data about how each individual does or thinks
about safety. Software programs can collect data and provide instantaneous feedback about the
strengths and weaknesses in your processes. These programs are also available over the internet
now. Your company can purchase the rights to use these courses. This allows for employees to
complete their training from home on their own time and in their own comforts. This can benefit
the employee providing an environment of less stress and comfort. It can also be detrimental if
there is no accountability to whether or not the training has been completed. Most programs will
provide you with various reporting data to help you make sure that everyone receives the training
and the successfulness of the program.

Training for quality assurance

Training for quality assurance can be a very difficult thing to do or to conduct if you are not sure
that types of quality issues are most important to your manufacturing operation. As with many of
the steps in the manufacturing and production process, without quality control you cannot hope
to be able to consistently produce a product that your consumers will be happy with and, more
importantly, willing to buy. There are many considerations to make when training for quality
assurance; just a few things to keep in mind are listed below.

Knowledge of the process (not necessarily just their step in the process)
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Quality control employees tend to be able to be most productive when they have a good
understanding of the importance of every step in the manufacturing process rather than just the
specific step that they may have stewardship over ensuring the quality for. Having a knowledge
of that which is happening both before and after the step in question can help in determining how
to best address production and efficiency issues.

Ability to think independently and recognize quality errors in their many forms

There are times when quality errors are not black and white. In fact it is often times the
deciphering of the gray areas of quality control that separate the great quality assurance teams
from the mediocre ones. Ability to think outside of the box is often a necessity not only in order
to identify quality issues but also to be helpful in suggestion possible solutions.

People skills if assuring quality of human performance

Quality assurance responsibilities can be much more difficult when it is the quality of human
performance that is being evaluated rather than the quality of a product. It is only natural that a
human be made responsible in at least some degree for an error that is found in a product. Tact,
respect, effectiveness and sensitivity are just a few characteristics that a good quality assurance
employee will be trained on. Training for these traits can be a challenge and some will definitely
show more progress than others.

Hiring out your training or making your own training interesting and exciting

Training for quality assurance positions should really involve a certain level of excitement and
enthusiasm. Those who are working in quality assurance cannot afford to be able to become
complacent about the job that they are doing. It is for this reason that many employers find that it
is worth their while to hire outside sources with experience in training quality control personnel.
Training for quality assurance can be complicated and unless the proper experience can be found
in-house, it is not a bad idea to look to others for help.

Tips for total quality control

There is a quality control technique that is referred to as total quality control that those
training for quality assurance would do well to train up on. In this technique all areas of quality
control are deconstructed and looked at to see if what the customer really wants is truly being
provided. There will be times in the course of evaluating the quality of a product that the
statistical and mathematical control techniques may be positive, yet sales are still decreasing.
Quality control is not only a department, it is a mindset. Quality control entails everything from
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 the attitude that the managers have with their employees and the resulting moral of the team to
the feedback that can be obtained by the customer to strive to better fill their needs. Of course
there are other principles involved in the several other quality control techniques, so review of
these strategies and familiarity with the different options that can be used to improve the quality
of a product should always be recommended.

Lean enterprise training

Purpose

Quality Assurance (QA) provides timely, independent and objective reviews of projects,
their progress and their difficulties including but not limited to an assessment of the quality of
deliverables. This document is intended to serve as a model for Nestle Quality issues, facilitating
a consistent approach across Nestle Diet Orange Juice Project. The goal is to establish common
expectations among inter stakeholders, QA vendors, the Department of supply chain and
production, about the role of QA of the project under consideration.

This Responsibilities and Obligations for Quality Assurance document is the work product of the
Quality Assurance Department Summit convened on January 06, 2010 in UOS. It is intended to
reflect the consensus view of representatives of the QA vendor community, the public sector i-e
community and the management.

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Statutory Authority

The powers and duties of the QAD, including the authority to develop statewide technical
policies, standards and procedures , functions lies with QAD.

Scope

These guidelines apply to all executive and department‟s, as provided by law, that operate,
manage, or use QA techniques or methods to support critical state business functions.
Policy

Quality Assurance (QA), when required on any new projects within Nestle Portfolio-based
Management, will be procured and conducted in a manner consistent with the following
principles:

1. Purpose - QA serves the wider public interest of assuring quality in Nestle projects. To that
end, QA provides a common source of reliable information to those charged with the
oversight of projects. For those projects requiring external quality assurance, agencies and
QA contractors agree to adopt the principles of Responsibilities and Obligations for Quality
Assurance document and its related policies.

2. Relationships - QA professionals provide ongoing advice, counsel and recommendations to

the project team, steering committee and/or executive sponsor while refraining from the
performance of implementation activities or advocacy on behalf of projects to external
stakeholders. The first loyalty of a QA professional is to the business purpose being
addressed through the Nestle project – not individual stakeholders, preferred solutions,
methodologies or other interests.

3. Documentation - QA Plans are required for all projects requiring QA. The QA plan should
address all factors related to the successful completion of the project and its integration with
the horizontal infrastructure. Prior to an engagement, and as part of the QA plan, the roles
and responsibilities of QA providers are to be clearly defined and mutually agreed upon by
the Executives, the provider and approval authorities as appropriate. Specifically, the plan
will address reporting relationships and governance, including but not limited to issue
escalation and resolution.

4. Deliverables - Formal QA reporting is established in the QA plan. It is done at appropriate

intervals and/or around major milestones , and addresses whether deliverables are acceptable,
whether sufficient progress is being made to meet upcoming milestones; whether milestones
are met on schedule; and, once met, the level of agency preparedness for subsequent phases.

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5. Distribution - The content of formal QA reports is consistent and provided in a timely
manner to all key decision makers as defined under Nestle Management, including, but not
limited to the Nestle executive sponsor; project steering committees; and project teams; the
executive and oversight staff of NQAD; and NQMS. The QAD and Nestle executives
provide status reports (and copies of formal QA reports as appropriate) to the Legislative
fiscal committees at appropriate intervals or as required by statute.

6. Expertise - Procurements for QA services will require contractors to demonstrate their

qualifications to perform quality assurance, including but not limited to professional
credentials, previous recent experience with similarly scoped projects, and access to the
necessary staff and resources.

7. Compensation - Compensation for QA consultants shall be structured to ensure objectivity

by making it independent of project duration. Compensation should be funded by the project
but paid as a separate and discrete element. If during the course of a project, the project plan
is modified the QA plan and QA compensation agreement must also be reviewed and
modified as appropriate. Early project completion, project scope reduction or cancellation
based on sound QA advice and reporting should not create a disincentive against the
objectivity of the QA consultant.

8. Conflict Avoidance – Nestle Executives will ensure that procurement documents and
contracts address conflicts of interest pursuant to, such that firms do not provide QA on
projects on which they are concurrently engaged in the development process. Consulting
services provided prior to the funding of a project (including but not limited to feasibility
studies, needs assessment and project planning) are not considered QA. However, vendors
must declare all prior involvement in the pre-funding stages of a project, in responding to
procurements for QA services for the funded project. The selection of such a company as the
apparently successful vendor is contingent on a review by the agency head and contractual
provisions to address potential conflict of interest.

9. Expectations - QA professionals, in consultation with the sponsoring agency, adopt a

disciplined methodology in the project plan for monitoring project that is consistent with the
Responsibilities and Obligations for Quality Assurance. QA plans establish standard
benchmarks against which project progress can be measured and set forth the functionality
requirements for each phase of a project and include the following criteria – benefits, costs,
risks, and organizational readiness to proceed with the next phase.

Maintenance
Technological advances and changes in the business requirements of Nestle will
necessitate periodic revisions to policies, standards, and guidelines. The Department of MIS
(Management Information System) or the Department of Information System is responsible for
routine maintenance of these to keep them current. Major policy changes will require the
approval of the Project Coordinator.

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Marketing Department

149
Company Profile
Nestle Pakistan Limited. The Group's principal activities are to manufacture process and sell food
products and ancillary equipment. The food products include diary, confectionery and culinary products,
coffee and beverage and drinking water. The major brands include MILKPAK UHT, NESTLE
EVERYDAY, LACTOGEN and NESCAFE. It operates in Sheikhupura, Kabariwala, Islamabad and
Karachi.

Mission & Vision

The vision and mission is to be the leading provider of dining tables to the public in the EU
within the next ten years at a profit

OBJECTIVES

Marketing Manager

The main objective of marketing department is to create the demand for the products of the
company through promotional mix.
To create the values for the customer in order to build the good will of the organization
Increase product awareness among the target audience by 30 percent in one year.
Inform target audience about features and benefits of our product and its competitive advantage,
leading to a 10 percent increase in sales in one year.
Decrease or remove potential customers' resistance to buying our product, leading to a 20 percent
increase in sales that are closed in six months or less.
To supervise the Public Relation
Advertising Manager

To make suitable advertising for the products of the company

To retain the customers, persue and inform the customers about the products of the company
To encourage the creativity
To get advantage over the competitors in price, quality, and efficient time delivery using
advantageous distribution channels

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 Define the positioning of the product or service to create a distinct marketing focus.
Promotion Manager

Sale promotion objectives vary widely. Dealers may use consumer promotions to urge short term
customer buying or to enchase long-term customer relationships. Objectives for trade promotions include
getting retailers to carry new times and more inventory. Buy ahead or advertise the company‟s products
and give them more shelf space. For the sale force, objectives include getting more sale force support for
current or new products or getting salespeople to ding up new accounts

Public Relation Manager

Public relations objective is to obtaining favorable publicity, building a good corporate image, and
handling or heading off unfavorable rumors, stories, and events.

Hierarchy of Department

Marketing
Department

Marketing
Manager

Advertising Public Relation Promotion

Manager Manger Manager

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PRODUCT

Nestle is now giving a new touch in the market providing DIET ORANGE JUICE for the betterment of
the society and young old health conscious people.

Purpose

The purpose of launching the Diet Orange Juice is to give a new taste to the people who are health

conscious and surfing form diabetics. We want to provide the fresh orange juice in diet flavor to the

people so that they become so energetic and healthy.

Features

Following are the features that are most beneficial for the people. The features are as follow;

 Diet flavor is good for health

 Provide calcium
 Provide vitamins
Benefits

Following are the certain benefits which we offer to our customer to give them value. Following are the

some benefits.

 Give 4 lids and get one free juice bottle

 Purchase one juice bottle and get one nestles milk pack sachet free.

 If you purchase a small crate of juice then you will able to participate in lucky draw and you win

following prizes.

 You win a NOKIA 6300 .

 You win DVD system

 You win Cash Prize

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PROMOTIONAL ACTIVITIES

To promote our product in the market we use different type of resources to enter the product into the

blood of the customer. Following are the resources;

 Cable TV

 Billboards

 Newspaper

 Radio

 Banners

PLACE

We place our product in the Local market at different places. We supply our product not only

the big stores but also supply it to the bakeries, departmental stores and School Canteens as well the

university canteen.

The places which we choose are as follows;

 Q-Mart

 Sheehan Shopping Mall

 Shangrilla bakers

 Taj Mahal Sweets

 Gull Sweets

 Canteen of University

Strengths:

Our biggest str engt hs ar e u ndoubt edly the facts that:

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Sug ar free\Low calorie co ntent :

We ar e of f er ing su gar fr ee dr ink in a mar ket wher e upcoming gener ation is

paying mor e att ention t owar ds its hea lt h and fit ness.

No Direct S ubst it ut io n in acco rdance w it h o ur quality:

We a ls o enjoy no dir ect subst itut es b ecaus e the fact t hat t her e ar e pr es ent ly n o
ot her compa ny wh ich pr oduces the su gar fr ee, car bonat ed fruit dr ink.

Good for diabet ic pat ients;

As ther e is no su gar in this pr oduct compar atively s o it is t he b est alt er nat e

soft dr ink f or diab et ic patients.

Ot her Strengt hs:

o High- qualit y f ood of f er ings t hat exceed comp et it or s‟ off er ings in color ,
fla vor and qua lit y.
o High cust omer loyalt y.
o Excellent staff who ar e highly tr ained and ver y cust omer att ent ive.

WEAKNESSES:

Our biggest wea kness is t he fact t hat:

New product

As our DIET ORANGE ju ice is a new p r oduct a nd in t he intr oduct or y pr ocess, it

wou ld ob vious ly take time t o r each matur it y and b ecome a pur ely establis hed pr odu ct.

Stro ng Hold o f ot her C arbo nat ed Drinks

T he diet dr inks mar ket is lar gely occupied b y t he diet car bona t ed gia nts like
diet C oke and diet P eps i. D esp it e t he ex ist ence of an opp or tu nit y t o intr odu ce a new
fr uit f lavor ed diet dr ink, t he new pr odu ct will ha ve t o face t ou gh comp et it ion in t h e
b eginning.

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Ot her Weaknesses:

o T he str uggle t o cont inua lly susta in the cutt ing edge.

OPPORTUNITIES:

Pos itive pos it io n

Since our compa ny Nes t lé is alr ea dy establis hed s o we ar e hop ing t hat our
new pr odu ct DIET ORANGE juice will s oon occup y a pos it ive p os it ion in the mar ket.

Trend tow ards healt h

As the p eop le now b ecome mor e health conscious a nd the awar eness t owar ds
hea lt h incr eas es day b y day, s o this will incr eas e our sales in futur e.

Ot her Opport unit ies:

o I ncr easing sa les opp or tunit ies du e t o sugar fr ee dr ink.

THREATS:

New pro duct intro ductio n

We f ear t hat thou gh a str ong compa ny Nestlé stands b ehind t his new pr oduct, st il l
it will face a tou gh comp et it ion fr om its comp etit or s.

Po lit ical inst ability

T he p olit ica l instab ilit y is a big t hr eat f or us as the attent ion of t he tar get mar ket
gets diver t ed fr om t he f ood stuf f to p olit ica l cr is is on ha nd.

Eco no mic regressio n

Due t o cur r ent economic r egr ess ion, t he exp ect ed pr ofit of our new pr odu ct might
not b e achieved du e t o low pur chas ing p ower of p eop le a nd cur r ent over a ll low pr of it
envir onment

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Ot her T hreats :

o Comp et it ion fr om pr es ent companies in t his industr y t hat r esp ond t o Nestlé‟s
sup er ior off er ings.
o A s lu mp in t he economy a nd a b oom in t he inflat ion, in our cou ntr y, wil l
r edu ce cust omer 's disp osab le income sp ent on eat ing.

Conclusion of Marketing Environment

With the help of an intensive study of the entire market in its whole perspective it has come to know that

the overall environment is not much in favor of new Product. Because of semi-democratic ruling and the

presence of well established competitors holding major part of the market it seems very difficult for a new

firm to make its place in the market and position its product easily. And Eco political conditions are also

are not in favor right now, it is hoped will be in better in near future.

Recommended Marketing Mix

Product

Product name: “DIET ORANGE JUICE”

The product is named based on its quality level and on the company‟s strategy and its vision to provide

high quality products to its valued customers not only to increase its market share but also to provide

fresh and delicious “Diet Orange Juice” to its customers that will give them strength and protection

against the adverse effects of diseases and ultimately increase their life.

Product Positioning

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Our product is new in market regarding taste and keeping this in mind we have conducted a survey of

people belonging to different age groups and social classes. In that particular survey they were questioned

about different aspects of the product which has helped us to determine the product sizes, packing, colors

and other such attributes that customers like the most and that our competitors are not offering at present.

Positioning Statement

Our Positioning Statement for this new product will be

“Badal Do Zamaana Diet Orange Rozaana”

Competitor‟s Strategy:

The size of the product is of much importance in the success of the product. As for as size of the

product is concerned, our competitors are offering their products in following size

Coca Cola

250ml

500ml

1.5ltr

Pepsi

500gm

250gm

1.5ltr

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They have no specific sizes, but they provide customers products in sizes which they demand and their

products are also not in proper packing.

The Company‟s Strategy

On the basis of product sizes offered by our competitors and on the basis of information obtained

from survey we have decided to introduce our product in the market in the following sizes.

------------300ml

------------500ml

Colors:

As for as the colors are concerned most of the people have showed their interest in bright colors

without naming a particular color, but majority of people have agreed on the following colors to be the

part of labeling the product.

---------------Light Blue

---------------Orange

---------------yellow

---------------Green

Packing:

According to the information gathered through survey the people have stressed that the product should

be offered in a packing that facilitate customers to keep other house hold things and could be used for

multipurpose.

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 By keeping this in mind we have designed the packing of the product that serves that purpose of the

customers. We have offered the product of 300ml in traditional thick bottle packing that is most often

used by our competitors.

The packing of 300 ml product size is as follows.

PRICE

We offer our product into only two size that is 300ml and 400ml, and it is for/Rs.20 and Rs.30
respectively.

Price Strategy

Every marketing activity--------including pricing ----should be directed towards a goal. Thus

one should decide on its pricing objectives before determining the price itself.

 Pricing Objectives:

There are mainly three types of pricing objectives.

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 Profit Oriented

o To achieve a target return

o To maximize profit

Sales Oriented

o To increase sales volume

o To maintain or increase market share

Status -Oriented

o To stabilize prices

o To meet competition

As our product is infancy and have no position in the market we have decided to enter in the market by

focusing on Sales Oriented objectives and determine our strategy accordingly

Our Price Strategy:

Cost Approximation

The total per unit cost that will occur on the production of the product is estimated as follows.

Cost of Orange Rs.2

Electricity Rs.2

Factory over head Rs.6

Miscellaneous Rs.5

Total cost approx. [Rs.15]

As our product is new and our objective is not to maximize our profit but to capture the market because

nestle is already getting profit form other products in product line. We will introduce our product at a

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discounted price initially. In accordance to our strategy we have decided to offer the product to customers

at a discounted price of Rs.18 for the very first month of its issue. After one month we raise its price to

Rs.20. This price is very much compatible and the offer is substantial enough to attract a large percentage

of market in a very quick time.

As for as the retailers are concerned, they are offered a margin of Rs.1 at present. We have decided to

give them a maximum margin of Rs.2. That will helps us in promoting our product broadly and with

convenience also.

Placement

As for as the placement of the product is concerned we have decided to place the product in all the major

as well as minor markets of Khushab and Sargodha. We have decided to acquire the services of the

largest and the most organized distributors of Khushab and Sargodha in the beginning. The Abbasi

Distributors have a great name in the market and they are also well established and have their access in

both cities. We have decided to place our products with their services in Khushab and Sargodha by giving

them some share in the profit as per agreement.

Promotion (Media strategy)

Effective promotion plays a key role in the way for the product‟s success. There are many different ways

through we can promote our product. Actually Orange is such fruit that is almost equally consumed by

different age group people. Keeping this in mind we have planned a very wide promotion strategy that

covers almost every part of the society. We have also paid serious attention to the span of intensive

promotion in the initial stages. We have supported our promotional strategy with the use of media,

printing sources and also with the help of some schemes such as lucky draws. Our promotion strategy in

detail is as follows.

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Promotion through Media

Television channel

As a wide range of our market watches TV daily, we have decided to promote our product to that part

of our target market through TV. Since our target market includes people belonging to all age of

health conscious as well as social groups so we have decided to promote our product through

intensive TV marketing. In this connection we have made arrangements to play the ads of our product

during, Dramas, Cartoons, Morning Transmission and in other such occasions and in such program

that convey our message to maximum people belonging to our target market. We have decided to play

our ads between 5 to 10 times daily for the very first month consecutively.

NEWS Papers and Magazines

NEWS papers and Magazines are also very important sources of reaching to our customers who do

not watch TV. There are many NEWS papers and Magazines in the market which cover the whole of

Khushab and Sargodha comprehensively. We have chosen the following NEWS papers and Magazines to

promote our product.

NEWS PAPERS

JANG

KHBRAIN

THE NEWS

EXPRESS

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MAGAZINES

AKHBAR-E-JAHAN

FAMILY

We have decided to print our ads on the front pages of all these sources in the very first weak.

Promotion through Pamphlets

In order to make our promotion more intensive and also to cover and convey our message to maximum of

our market we have decided to promote our product through pamphlets. We have decided to print above

5000 pamphlets that are not only attractive in their design but also rich in information. These pamphlets

will be distributed in the public places such as Cafeteria, Parks, and Markets and also by dropping the

pamphlets door to door.

Promotion through Banners and Sign Boards

Another very important and wide ranged strategy is to promote our product through Banners and Sign

Boards. It has been said that,

“Picture speaks a thousand words”

Keeping this in mind we have decided to construct and prepare highly attractive as well as innovative

Banners and Sign Boards that will be installed on all the Main Spots, Public Places, Main Roads, Railway

Stations and on all the sky scrappers of the cities.

Promotion through Cable Operators

Cable is the most popular and fast growing entertainment source and is getting popularity by leaps and

bounds. We have decided to promote our product by playing continuous ads of our product on the cable

during a program as well as by continuously scrolling a bar through out the month.
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Promotion through Schemes

We have decided to promote our product also by introducing some consumer as well as retailer oriented

schemes. The schemes that we have decided to offer are as

Lucky draws

Extra Product With in the Same Price

Offering gifts of Home Appliances on the collection of four lids

Market Survey

In order to learn that weather people would like to buy or use our diet orange we conducted a

survey, first of all we have designed a survey form, that how can we fulfill the requirements of

the people. For this purpose we have surveyed different areas of Khushab and Sargodha.

1. Do you use Orange Juice in Diet flavor before?

Yes No

2. Which brand do you use? _________________

3. What do you consider before buying a product?

1. Price 2. Labeling 3.Packing 4.Brand name

What should be the color of packing?

Blue Orange Green Yellow

5. Would you appreciate this new step in market by Nestle if it introduces a better Diet Orange Juice

at a lower price?

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 Yes No

Elements in Marketing Strategy

Strategic Marketing Marketing Defined Marketing

Objectives Objectives Plan Responsibilities

Marketing
Research
Product Development
Marketing
Program Distribution Channels

Promotional Mix

Pricing Policy

Allocation of
resources
Marketing
controls Implementation
of program
Market
feedback

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 GANNT CHART

Tasks performed by Marketing Duration Start Finish

Department in days
Team was created 1 30OCT 30OCT

Ranking of members 1 1stNOV 1stNOV

Tasks are defined 1 2ndNOV 2ndNOV

Feasibility Analysis is done for Diet Orange 3 17NOV 19NOV

Market Plan is developed 5 19NOV 23NOV

SWOT analysis of quality of diet orange 1 24DEC 24DEC

Actual product features are determined 1 24DEC 24DEC

Marketing Mix are defined for Product 7 24DEC 30DEC

Report sent to Executives & project director 1 30DED 30DED

Report to CEO & President for approval 1 30DEC 30DEC

Approval from CEO & Executives 1st JAN 1st JAN 2010
2010

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 The Feasibility Plan

Executive summary

Nestle Pakistan Limited. The Group's principal activities are to manufacture process and sell food
products and ancillary equipment. The food products include diary, confectionery and culinary products,
coffee and beverage and drinking water. The major brands include MILKPAK UHT, NESTLE
EVERYDAY, LACTOGEN and NESCAFE. It operates in Sheikhupura, Kabariwala, Islamabad and
Karachi.

As Nestle is strong in food and brewages so we are introducing a new product in brewages named as”Diet
Orange Juice” which is for health conscious of any age. For this we have developed this Feasibility plan.

In the beginning we introduced the Nestle and its products, and after it we explain the product and
describe the purpose and the unique features of the product/service (consider cost, design, quality,
capabilities. We also explain new product/services could be developed to meet the continuously changing
market needs in this industry or others.

About Market we describe the current size of the industry for the product and growth potential of the
industry. Industry trend that will affect the product is also explained. Our target market, target customers
and Product mix are briefly explained in second part.

Price strategies and define in third part and our cost associations are also clearly mentioned there.
Management of the organization and financial plan and exist strategy is at the end of this report.

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The Nestle “History”

The company dates to 1867, when two separate Swiss enterprises were founded that would later form the
core of Nestlé. In August of that year, Charles A. and George Page, brothers from Lee County, IL in the
United States, established the Anglo-Swiss Condensed Milk Company in Cham. In September, in Vevey,
Henri Nestlé developed a milk-based baby food and soon began marketing it. In the succeeding decades
both enterprises aggressively expanded their businesses throughout Europe and the United States. (Henri
Nestlé retired in 1875, but the company, under new ownership, retained his name as Farine Lactée Henri
Nestlé.) In 1877 Anglo-Swiss added milk-based baby foods to its products, and in the following year the
Nestlé company added condensed milk, so that the firms became direct and fierce rivals

Nestle Pakistan Limited. The Group's principal activities are to manufacture process and sell food
products and ancillary equipment. The food products include diary, confectionery and culinary products,
coffee and beverage and drinking water. The major brands include MILKPAK UHT, NESTLE
EVERYDAY, LACTOGEN and NESCAFE. It operates in Sheikhupura, Kabariwala, Islamabad and
Karachi

Product/Service Description

The Product and Services section is a detailed description of the products and/or services you will be
selling. You should not assume that the reader is familiar with your product/service, so be sure to explain
and describe it carefully.

What exactly is our product or service? What isn't it? Carefully describe.

Our product is Diet Orange Juice which is especially for the health conscious people; it is free of sugar
and no injurious effects for the diabetics‟ patients and for those who take care of their weight. The person
who willing to enjoy brewages and can‟t due to health reason, Diet orange now provide him good flavor
and complete brewages taste.

What is the unique selling proposition (USP) of our product/service? What are its features and
benefits? Do we have any proprietary rights to the product/service (for example, technology,
patents, copyrights, etc.)?

Our unique selling proposition is Orange flavor with Diet, which any other company in market hasn‟t at
that time. We have got patents for this product.

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Why is our product/service superior to the competition, and how is it different?

Our new product is superior to the competitor, because none of our competitor is producing diet
brewages in orange flavor but in black. Pepsi is producing Diet Pepsi and 7up diet etc.

Industry and Marketplace Analysis

The Industry and Marketplace Analysis section dispassionately describes and outlines the industry and the
marketplace in which you will compete. When finished with this section, you and your readers should
understand the dynamics, problems, and opportunities driving your industry and marketplace.

What is the industry that addresses this market?

ORCAN PVT LTD is the industry which deals this market.

What is the market we intend to serve? How large is it? What is its growth potential?

The markets we intend to sever are the health conscious people both in young and old age. It will
employ all the market and growth potential is long run, there may little discrepancies arises in short run

What motivates customer purchase decisions?

Sugar free brewages, orange flavor, and our perfect market campaign for the promotion of the product
will influence the customer to purchase the product in reasonable price.

Who are the major players/competitors in the market?

Coca cola, Pepsi are our major competitors. There are some local as well like Amrat Cola will not
influence us.

Marketing Strategy

The Marketing Strategy section of your plan will make or break the prospects for your venture. In the
Marketing Strategy section, show how you are going to fit into your marketplace. What are unmet needs
in the marketplace and how are you going to fill them? How will you differentiate your product or service

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from your competitors? What unique features, benefits, or capabilities will you bring to the marketplace?
Who are your customers?

Who are our target customers? What problems are we solving for them? What are their profiles?
What motivates their buying decisions?
Our target customers are the health conscious and diabetics effected persons. The problem we are going
to solve for them is that they may able to use brewage like Diet orange because it is free of sugar and
haven‟t harmful effect for them. They might be young or old age customers. Our unique feature of
orange flavor in diet, and company name because of quality food will motivate the customers to buy.

What are the strengths of our product/service? Weaknesses? Who are our competitors? How will
we differentiate our product or service?

We have strength on our competitors because of diet orange flavor, they haven‟t product as like ours.

The weakness we find is that the price as compare to the diet cola and 7up is comparatively high which
will change the buyer decision in short run but in long run we have advantage. There another weakness
that we are not making 1.5 Liter and 2.15 as our competitors are doing. It will influence because in
Pakistan there is joint family system and large gathering between guests, the need of jumbo pack.

We differentiate our product with respect of design, color, labeling and size product.

How will our product be priced? What is our cost and profit margin per unit sold? What are
anticipated annual sales (units sold times price per unit)?

As our product is new and our objective is not to maximize our profit but to capture the market because
nestle is already getting profit form other products in product line. We will introduce our product at a
discounted price initially. In accordance to our strategy we have decided to offer the product to customers
at a discounted price of Rs.18 for the very first month of its issue. After one month we raise its price to
Rs.20. This price is very much compatible and the offer is substantial enough to attract a large percentage
of market in a very quick time.

As for as the retailers are concerned, they are offered a margin of Rs.1 at present. We have decided to
give them a maximum margin of Rs.2. That will helps us in promoting our product broadly and with
convenience also.

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Cost associated as

Cost of Orange Rs.8.25

Factory over head Rs.6

Variable Rs.1.5

Total cost approx. [Rs.15.75]

Distribution & Sales Strategy

How will you reach your customers? How will you close the sale with your customers?

Remember, "Nothing happens until the sale is made" – and the cash is received.

What distribution channels will we use (e.g., direct sales, internet, wholesalers, etc.)?

We will use direct marketing channel for the distribution.

How will we communicate with our customers (e.g., advertising, promotions, etc.)?

We will communicate with our customers through rational advertising using fear, emotional, plain and
less than perfect appeal to convene the customer. Media use for the product advertising is print media
and broad casting media as well.

How will our product or service be sold? Who will do the selling (our own sales people,
manufacturing representatives, etc.)?

Our product will sell through whole sellers and retailers

Operations Plan

The Operations section outlines how you will run your business and deliver value to your

Customers. Operations is defined as the processes used to deliver your products and services to the
marketplace and can include manufacturing, transportation, logistics, travel, printing, consulting, after-
sales service, and so on. In all likelihood, about 80% of your expenses will be for operations, 80% of your

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employees will be working in operations, and 80% of your time will be spent worrying about operating
problems and opportunities.

Which operations are critical to the success of our business? Which are secondary?

Development Plan

The Development section is a road map of how you are going to get from where you are now to where
you want to be in the future. These steps can be as routine as securing retail space, or as critical as
applying for and getting a patent on key technology.

What must be done before we can introduce our product or service to the marketplace? What are
the risks?
Market analysis.,consumer interest for the product and competitors product analysis is necessary.strong
positioning of competitors product is one of the major risk.

How long will it take to bring our product or service to market? What is our timeline

It is estimated to be “more likely “to bring our product in the market.

What are the one-time start-up and development costs of our business (equipment, deposits,
fixtures, furniture …)?

Bill boards cost; sign board cost, spender cost, ex_spender cost, tit cost.

Financial Plan

Your Financial Plan should be frosting on a cake. You have outlined a great business concept,
demonstrated a real need in the marketplace, shown how you will execute your ideas, and now will show
how much money everyone is going to make.

Summarize estimates made in previous sections: $

A. Annual unit sales:

B. Price per unit:

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C. Variable cost per unit (production and sales):

D. Fixed costs (admin, production, and sales):

E. One-time start-up costs (eqpmt, mktg, legal, etc.):

F. Working capital rqd (receivables , inventory, etc.):

Calculate estimated annual gross revenues and income:

G. Estimated annual revenues (A*B):

H. Estimated annual variable costs (A*C):

I. Estimated annual contribution margin (G-H-D):

Calculate break-even figures:

J. Contribution margin per unit (B-C):

K. Annual break-even quantity (D/J):

L. Ratio of break-even to expected quantities (K/A):

Estimate the money you will initially need to start your business:
M. Total up-front funds required (E+F):

N. Additional units to cover up-front funds (M/J):

O. Break-even quantity with up-front funds (K+N):

Calculate financial performance figures:

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P. Payback period for startup funds (M/I):

Q. Annual return on start-up investment (I/M):

R. Variable cost to price ratio (C/B):

S. Contribution margin ratio (I/G):

Do these numbers look attractive enough to proceed? How can they be improved?

How much cash will we need to start our business? Where will we get it (personal savings,
friends & family loan, venture capital, an angel…)?

Provide 3-year profit & loss projections of sales, expenses, and operating profit. Please describe
your assumptions in arriving at these numbers.

Year 1 Year 2 Year 3

Sales
Expenses
Operating Profit

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 SUPPLY CHAIN DEPARTMENT

Introduction
"iA supply chain refers to the network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers.

Supply chain management lies between fully vertical integrated firms where the entire flow of
material is owned by a single firm in which each channel member operates independently. The key for
effective management lies in the coordination between the various key players within the chain".

The Procurement The Operating

or supply system System The Distribution System

Finished Goods
Raw Material Movement/
Storage Manufacturing Storage
Movement/ Movement/ Movement/ Transport
Transport Transport Transport
STORAGE PLANT 1 WAREHOUSE A

STORAGE PLANT 2 WAREHOUSE B

STORAGE PLANT 3 WAREHOUSE C

MARKETS

Fig. 1– Supply Chain

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SUPPLY CHAIN VISION

Our ambition is to achieve high level of customer satisfaction through low

cost, highly efficient operations driven by value creation and continuous
improvement

OBJECTIVES
To optimize and consolidate low-cost but efficient resources and processes
To develop and manage simplified & effective supply network to achieve a
high level of service
Create a continuous improvement culture driven by performance measures
and rewards

SUPPLY CHAIN DEPARTMENTAL HIERARCHY

Customer Services &

Logistics
Manager

Purchase Manager Warehouse Manager Distribution Manager

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Posts & Responsibilities
Customer Services & Logistics Manager – Assigned to Mr. Usman-Ul-Haq who is
responsible for handling processes involved in a supply chain, liaising with a variety of parties
including suppliers of raw materials, manufacturers, retailers and consumers, implementing health &
safety procedures, managing staff training issues, setting objectives, motivating team members.

Purchase Manager – Assigned to Mr. Hassan Javed who is responsible for purchasing of
raw material, formulating procurement strategy to reduce material cost, developing & maintaining a
close relationship with suppliers, exploring new suppliers/vendors to cope with customer requirements,
working closely with internal departments to ensure the necessary materials are ready for production on
a timely basis, monitoring supplier's performance in terms of price, quality and delivery.

Warehouse Manager – Assigned to Mr. Mohsin Aziz for overseeing the efficient
receipt, storage and dispatch of goods, ensuring productivity targets are met and maintaining
computerized administration, automated storage & retrieval systems.

Distribution Manager – Assigned to Mr. Ajmal Khan who is responsible for handling
delivery of goods, decisions involving transportation, stock control, warehousing and ensuring
structures to monitor the flow of goods.

Key critical supply Chain processes:

a. Customer service management
b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

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a) Customer service management process
Customer Relationship Management concerns the relationship between the organization and its
customers. Customer service is the source of customer information. It also provides the customer
with real-time information on scheduling and product availability through interfaces with the
company's production and distribution operations. Successful organizations use the following
steps to build customer relationships:

 determine mutually satisfying goals for organization and customers

 establish and maintain customer rapport
 produce positive feelings in the organization and the customers

b) Procurement process
Strategic plans are drawn up with suppliers to support the manufacturing flow management
process and the development of new products. In firms where operations extend globally,
sourcing should be managed on a global basis. The desired outcome is a win-win relationship
where both parties benefit, and a reduction in time required for the design cycle and product
development. Also, the purchasing function develops rapid communication systems, such as
electronic data interchange (EDI) and Internet linkage to convey possible requirements more
rapidly. Activities related to obtaining products and materials from outside suppliers involve
resource planning, supply sourcing, negotiation, order placement, inbound transportation,
storage, handling and quality assurance, many of which include the responsibility to coordinate
with suppliers on matters of scheduling, supply continuity, hedging, and research into new
sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order
to reduce time to market. As product life cycles shorten, the appropriate products must be
developed and successfully launched with ever shorter time-schedules to remain competitive.
According to Lambert and Cooper (2000), managers of the product development and
commercialization process must:

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 1. coordinate with customer relationship management to identify customer-articulated needs;
2. select materials and suppliers in conjunction with procurement, and
3. Develop production technology in manufacturing flow to manufacture and integrate into the best
supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on
past forecasts. Manufacturing processes must be flexible to respond to market changes and must
accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in
minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times,
meaning improved responsiveness and efficiency in meeting customer demand. Activities related
to planning, scheduling and supporting manufacturing operations, such as work-in-process
storage, handling, transportation, and time phasing of components, inventory at manufacturing
sites and maximum flexibility in the coordination of geographic and final assemblies
postponement of physical distribution operations.

e) Physical distribution
This concerns movement of a finished product/service to customers. In physical distribution, the
customer is the final destination of a marketing channel, and the availability of the
product/service is a vital part of each channel participant's marketing effort. It is also through the
physical distribution process that the time and space of customer service become an integral part
of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers,
wholesalers, retailers).

f) Outsourcing/partnerships
This is not just outsourcing the procurement of materials and components, but also outsourcing
of services that traditionally have been provided in-house. The logic of this trend is that the
company will increasingly focus on those activities in the value chain where it has a distinctive
advantage, and outsource everything else. This movement has been particularly evident
in logistics where the provision of transport, warehousing and inventory control is increasingly
subcontracted to specialists or logistics partners. Also, managing and controlling this network of
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partners and suppliers requires a blend of both central and local involvement. Hence, strategic
decisions need to be taken centrally, with the monitoring and control of supplier performance
and day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement
Experts found a strong relationship from the largest arcs of supplier and customer integration to
market share and profitability. Taking advantage of supplier capabilities and emphasizing a long-
term supply chain perspective in customer relationships can both be correlated with firm
performance. As logistics competency becomes a more critical factor in creating and maintaining
competitive advantage, logistics measurement becomes increasingly important because the
difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance measurement
realized improvements in overall productivity. According to experts, internal measures are
generally collected and analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer perception measures and "best practice"
benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking.

Components of Supply Chain Management are: -

1. Standardization

2. Postponement

3. Customization

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Decisions on Three Levels
Supply chain management decisions are often said to belong to one of three levels; the strategic,
the tactical, or the operational level. Since there is no well defined and unified use of these
terms, this Section describes the how they are used in this thesis. Figure-2 shows the three levels
of decisions as a pyramid shaped hierarchy. The decisions on a higher level in the pyramid will
set the conditions under which lower level decisions are made.

Fig-2: Hierarchy of Supply Chain Decisions

Strategic: At this level, company management will be looking to high level strategic
decisions concerning the whole organization, such as the size and location of
manufacturing sites, partnerships with suppliers, products to be manufactured and sales
markets.

Tactical: Tactical decisions focus on adopting measures that will produce cost
benefits such as using industry best practices, developing a purchasing strategy with

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 favored suppliers, working with logistics companies to develop cost effect transportation
and developing warehouse strategies to reduce the cost of storing inventory.

Operational: Decisions at this level are made each day in businesses that affect how
the products move along the supply chain. Operational decisions involve making
schedule changes to production, purchasing agreements with suppliers, taking orders
from customers and moving products in the warehouse.

Supply chain management flows:

The product flow
The information flow
The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as any
customer returns or service needs. The information flow involves transmitting orders and
updating the status of delivery. The financial flow consists of credit terms, payment schedules, and
consignment and title ownership arrangements.

Types of Inventories
There are three types of inventories kept by Nestle Diet-Orange juice factory:

Raw Materials:
Raw material inventory Nestle Diet-Orange juice consists of oranges which are kept in big
cartons. Inventories of raw materials can't be maintained in bulk quantity and for a longer period
of time. The factory can store the milk up to 560000 liters.

Work-In-Process:
WIP inventories are not too huge. Whatever they put into production they stop production after
its completion. The unpacked goods inventory can be kept as the WIP inventory which is stored
in big boxes. Then through an automatic plant fresh juice is packed.

Finish Goods Inventory:

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Inventories of packaging material are included in WIP inventory. The packaging material is
purchased from an external supplier "Packages Private Limited Pakistan”. Nestle Diet Orange
maintains huge amounts of Finish Goods inventories. There is huge warehouse in the factory in
which finish goods are stored.

Materials Management:

There is separate department in the factory which is responsible for purchasing the raw material
& manages its supply. There is centralized system of materials management. The whole
operations of which are overlooked by the operations managers. There is also a stores officer
which also looks after the materials management.

Supplier Relations:
There type of the supplier relation competitive orientation is cooperative orientation. Nestle Diet-
Orange have very friendly relationships with suppliers of Oranges on one hand & suppliers of
packing on the other hand.

Relation with Oranges' Suppliers:

Nestle Diet-Orange has very co-operative relations with its oranges suppliers. They provide
facilities as well as consultancy for improving the quality of the oranges to them.

Packing Material Suppliers:

The packing material is supplied to Nestle Diet-Orange by the packages (PVT) Ltd. They
cooperate a lot with the firm for maintaining the quality of the final product.

Supply Chain Strategies

The supply chain develops its strategies to support the competitive priorities of a firm's
products. As the product's competitive priorities are freshness, cost effective price, consistent
quality, and delivery speed. So the strategy of supply chain, that will be used, is a combination of
"Efficient Supply Chains" and "Responsive Supply Chains" strategies. The firm will uses
"Efficient Supply Chains" to manufacture its product "DIET ORANGE – FLAVOUR &
CARBONATED DRINK" so that it can utilize a capital-intensive manufacturing process, and

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then it will use a "Responsive Supply Chain" for the packaging and delivery processes to be
responsive to retailers.
Efficient Supply Chains work best when:
Demand is highly predictable
Focus of supply chain is on the efficient flow of materials and keeping inventories to a
minimum
Infrequent new introductions
Low Contributions margins
Focus on efficiency
Responsive Supply Chains works best when:
Demand is Unpredictable
Focus on competitive priorities like variety, fast delivery times
Frequent new introductions
High Contribution margins

Lean supply chain

 Forming a value stream from suppliers to final customers to eliminate
all kinds of buffering cost in the system and to ensure a level schedule
in production in order to maintain the competitive advantage through
economic of scale in a stable and predictable marketplace.
Cost leadership needs lean supply chain
 Long-term and rigid relationship with suppliers
 Standard products to customers
 Low cost distribution

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Characteristics of leanness
Distinguished Lean supply
attributes
Typical products Commodities
Marketplace demand Predictable
Product variety Low
Product life cycle Long
Customer drivers Cost
Profit margin Low
Dominant cost Physical costs
Stockout penalties Long-term Contractual
Purchasing policy Buy materials
Information enrichment High desirable
Forecasting mechanism Algorithmic

Source: Mason-Jones et al. (2000)

Corporate Strategy

Supply Chain Strategy

Efficiency Responsiveness

Facilities Inventory Transportation Information Market

Segmentation

Fig-3 – Supply chain Strategy

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Inventory Control Systems:
For controlling inventory Nestle Diet-Orange use Continuous Review.

Continuous Review:
NDO (Nestle Diet-Orange) have a computerized system. It involves the amount of stock in the
warehouse as well as the amount drawn from the store room. The store officer not only maintains
records but also makes visits at the warehouses to see the actual situation of materials. The
officer can review the inventory at any time. Operations manager and auditing people also check
the inventory & its records so that the risks of loss may be minimized.

Distribution:
Placement of Finish Goods Inventory
There are two alternate decisions regarding the stock of inventory of finish goods:

1. Forward Placement

2. Backward Placement

Forward Placement:

In forward placement finish goods are stored closer to customer. NDO use forward
placement as they use to keep the stock of finish goods in their distribution centers. From
distribution centers the goods are further sent to retailers.

Backward Placement:

In backward placement finish goods are stored at the manufacturing plant where they
keep goods stocked. So in this way they use backward placement also. So for inventory
placement NDO uses a mix of forward & backward placement in order to provide goods to the
market on time.

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Distribution Strategy of Nestle-Diet Orange Ltd:
Nestle has its own distribution networks equipped with all transportation facilities. They
transport their products at distribution centers located in different cities of Pakistan. They have
their own vans with sales people who sell and transport goods to the retailers. NDO follows
following distribution strategy:

Selective Distribution strategy:

Nestle adopts "selective strategy" in which firm distribute its product (Diet-Orange Juice) on few
selective retail outlets.

Selection of Transportation Mode:

For transportation of goods to the distribution centers NDO has its own vans and other vehicles.
For further distribution to retailers, the distributor of each area uses its own vehicles. This mode
is efficient in terms of cost and fast delivery.

Supply Chain Management Technology

If a company expects to achieve benefits from their supply chain management process, they will
require some level of investment in technology. NDO has used Enterprise Resource Planning
(ERP) suites, such as SAP and Oracle.

NDO has taken advantage of Web-based software and Internet communications. Instant
communication between vendors and customers allows for timely updates of information, which
is the key in management of the supply chain.

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 GANNT CHART

Tasks performed by Supply Chain Duration Start Finish

Department in days
Team was created 1 30OCT 30OCT
Ranking of members 1 1stNOV 1stNOV
Tasks are defined 1 3rdNOV 4thNOV
Receiving of information from inventory department 1 15NOV 17NOV
Establishment of criteria regarding selection of supplier 1 18NOV 19NOV
Analysis of criteria/parameters are determined 1 22NOV 23NOV
Check features of purchase suppliers 1 2ndDEC 3rdDEC
Criteria is analyzed 1 5th DEC 6th DEC
Information regarding WIP is maintained 1 8th DEC 9th DEC
Analyze Supplier Certification criteria 1 10th DEC 11th DEC
Identifying dimensions of Finish goods Inventory 1 12DEC 13DEC
Finish goods arrived at Warehouse 1 15DEC 16DEC
Mode of Transportation Defined 1 18DEC 19DEC
Strategies regarding distribution defined 2 20DEC 21DEC
Mode of transportation selected 2 22DEC 23DEC
Supply chain technology selected 1 24DEC 25DEC
Finish goods transported to customers 1 26DEC 30DEC

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 QUESTIONNAIRE

Nestlé wishes to introduce a new product called ‘DIET ORANGE’ to

provide further value to its customers and for the purpose of this
introduction, we wish to take your opinion that whether this new
product idea will satisfy your demand or not, by using a Questionnaire
survey which is as follows;

1. Do you want to buy a diet drink which is of fruit flavor?

(a)YES

(b)NO

………………………………………………………

2. Do you generally buy drinks of nestle?

(a)YES

(b)NO

………………………………………………..

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3. Have you ever thought of another different diet drink than
Diet coke or diet Pepsi?

(a)YES

(b)NO

………………………………………………….

4. Would the carbonated content feature in our new diet drink

Attract you?

(a)YES

(b)NO

…………………………………………………..

5. Do you believe in using natural drinks like fruit flavor

Drinks?

(a)YES

(b)NO

…………………………………………………….

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6. Are you in the habit of using sugar less drinks?

(a)YES

(b)NO

……………………………………………………..

191