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Nestle Canada, Inc.

Nestle Canada Delivers the Products You Know and Love

Kevin Doyle, Senior Editor

Nestle Canada VP Mike Owens explains the logistics of moving goods across Canada in an efficient manner
Nestle Canada Delivers the Products You Know and Love

Nestlé Canada’s products have enhanced your morning coffee (Coffee-mate), satisfied your mid-afternoon craving (KitKat) and provided a quick, healthy dinner (Lean Cuisine) when you’re on the go.

How does the company’s array of more than 50 immediately recognizable brands make it to market, readily available whenever you desire or need them? Mike Owens, Nestlé Canada’s Vice President of Physical Logistics, has the answers. Nothing Nestlé related moves across Canada’s vast expanse without Owens’ knowledge.

“I oversee the physical flow of products from the factories to the various distribution centres and from there to our Customers. If we sell it, I’ve moved it, stored it or picked it,” says Owens. The lion’s share of business is delivered to our customers’ warehouses. Only our ice cream business is serviced by a standalone, direct store delivery model.”

Nestlé Canada, Inc. is part of the vast Nestlé SA empire based in Switzerland that has been in operation for 134 years, maintains 456 factories world-wide and is the world’s largest food company. Nestlé Canada is one of the country’s leading food and beverage company, generating approximately +$2.0 billion annual gross revenue. Nestlé’s company-wide revenue for FY2008 was 109 billion Swiss francs – approximately $123 billion Canadian.

Nestlé Canada’s 500,000sf distribution centre in Brampton, ON is in the midst of the country’s most densely-populated region. Top clients such as Canada’s top four food retailers Loblaw’s, Sobey’s, Metro and Wal-Mart account for more than 40 per cent of the country’s grocery market.

“We leverage the scale of the business to maximize the cost structure. We have 33 million people living within the world’s second largest land mass. Fifty per cent of the population is in Ontario and the geographic density is near Toronto,” Owens explains. Nestlé Canada employs approximately 4,000, 55 within Physical Logistics and another 150-200 in Supply Chain.

The SAP Factor

Nestlé is the world’s largest customer of software developed by German giant SAP, having turned to SAP in 2001 after a series of acquisitions left Nestlé with a hodge-podge of non-compatible systems across companies.

“With acquisitions come legacy systems,” Owens explains. “So, someone sitting in Switzerland couldn’t tell how many KitKats were sold globally for any time period. The multiple systems made it virtually impossible to capture this level of detail.”

Owens recalls moderate resistance when Nestlé launched SAP globally but says it was the proper solution to a massive problem.

“There were some who felt we were trying to fit a round peg into a square hole but the intent was to bring transparency and best practices to the entire organization from an end to end perspective. In Logistics it’s all about rigor and compliance and SAP delivers on these,” Owens points out.

“I love SAP. Now I can go to any country in the world, log onto any screen and do my job the same as I would here. The technology also promotes the sharing of ideas back and forth. Because of SAP, we were able to fully integrate recent acquisitions like Gerber and Novartis inside of six months,” he adds.

SAP also provides real-time product tracking and problem-solving.

“We track everything by batch code. If we  get a customer complaint call at 7 p.m. on a Friday, we can have a report from SAP within two hours of every location in Canada that received the product and the contact information and batch right down to the case. It’s all about the rigor,” Owens stresses.

Operations

Nestlé in Canada maintains nine factories – three for global partner Nestlé Waters, two for Purina and the remainder s for specific product groups such as chocolate and ice cream. The Brampton distribution centre has two temperature zones – one specifically for chocolate confectionaries, the second ambient. Meanwhile, ice cream specific distribution centres have voice-activated picking systems – essential since the deep cold environment for storage of ice cream impairs the effectiveness of hand-held scanners.

Nestlé Canada has utilized inter-modal transport strategies for a number of years. “Nestlé  Business Services will tender our freight. We use common carriers and will enter into an agreement and stick with it for two years. We negotiate hard and ensure the carriers understand the specific business needs. After the negotiations are done we’ll work with them in a very collaborative way,” Owens notes.

The company relies on the Canadian Pacific  railway for cross-country hauling. “We load product onto their containers and they pull them to  their yard and  then distribute them to the appropriate warehouse in Western Canada. Rail freight has helped us reduce our carbon footprint by 50 per cent,” Owens says.

In a 2010 collaborative effort known as “Project Candy,” Nestlé Canada and CP Rail worked closely to re-calibrate delivery schedules that had fallen out of sync, leading to poor on-time delivery and rising costs. For example, specialty cars needed to ship products such as ice cream at minus-28° weren’t always available.

“We worked to arrive at a system where we would deliver products only on those days when their containers were going to be in the (rail) yard. Our on time deliveries went from somewhere around 77 per cent to 95 per cent and better,” says Owens.

Nestlé Canada is a vigilant steward of environmental best practices. Most impressively, the company and all of its third-party partners have achieved 100 per cent waste diversion. “Nestlé and its partners are sending nothing to landfill in Canada. A lot of waste is being used to generate power in our communities,” Owens says.

Additionally, the company replaced the lighting in the 10-year-old distribution centre with high efficiency lighting that reduced the power draw for lighting by 49 per cent and shrank the facility’s overall power consumption by 25 per cent.

“Ultimately, these initiatives are all self-funding. The long-term payback makes them a very justifiable opportunity,” Owens points out.

People

The company’s succession plan involves filling senior staff vacancies by promoting from within. Opportunities for front-line employees within the distribution centre and factories are attractive.

“You can definitely make a career here. We’re a cash-rich company and the environment is never boring,” Owens says.

Nestlé also has in place an “Ex-Pat Program” that moves senior personnel to a location in another country for a period of three to five years to fill needs and share best practices. The current Canadian CEO was the Head of Sales at Nestlé Waters USA prior to his appointment to Canada.

Nestlé hosts an extensive company intranet and promotes the internal sharing of information. “It’s a matter of being able to pick up the phone and having a discussion with someone in Australia or Russia, for example, to share ideas,” Owens says.

Down The Road

Owens has spent more than 30 years of his career consolidating operations and shutting down regional distribution centres. However, his sense is that Canada’s sheer enormity coupled with rising fuel prices may force Nestlé -Canada to re-think its centralized distribution model.

“This goes against the grain but the massive distance and the low (population) density is a big, big challenge,” he says. “There’s going to be a tipping point where it makes sense to split our inventory and have a distribution centre in Western Canada.”

With Western Canada’s far-flung population of 10 million people spread through four provinces, arriving at a cost-effective model is the trick. 

“Most of our customers do not pick full trailer loads. We have a quarter-trailer minimum, so we’ll consolidate in a way that makes sense. Any time you’re not at full capacity on a trailer, that’s a loss,” Owens says. “Calgary has 25 per cent of the new warehouse starts in Canada, so that’s a good indication that we have to think forward about this.”

Owens, 55, expects “no empty miles” to become an industry mandate and that “dead-heading” – the practice of returning home with an empty trailer – will become a thing of the past by the time he retires.

Just so long as the KitKats arrive on schedule.

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