This document discusses proposed projects and new functions for Nespresso's supply chain management in response to changes in their value network. It analyzes how evolutions in suppliers, products, and customers could impact Nespresso's value equation parameters of customer centricity, assets, cash, and sustainability. Projects are proposed to address demand forecasting, inventory dimensions, digitalization, quality assessment, and training. New functions around after-sales logistics and quality control/management are also recommended to enhance Nespresso's competitive advantages as their business expands globally.

1. OMBA / Create sustainable value
Assignement #2: Go to field activity #1: COFFE CUP
NESPRESSO V2012(Younes CHITAOUI)
Michel Fender, Professor ABS, Dean of Faculty and Research ABS, Adjunct Professor
HEC Paris

2. NESPRESSO’s value equation : « actual » &
« futur »
C
C
C
Customer
centricity
ASSET
CASH
actual
C
C
C
Customer
centricity
ASSET
futur
SUSTAINABILIT
Y
Please; Explanation is below

3. Vision and mission of SC within COFFEE CUP
The key roles of SC are to maintain the actual value and address the forthcoming challenges :
• Monitoring the demand with the formalisation of the customers offers.
• Planning activities of the supply side ; production and procurment.
• Stock management.
• Guarantee; reliability of suppliers.
• Guarantee a constant high quality of the products and services .
• Reducing the delivery time
• Facilitate accessibility of the products to the consumers
• As the company goes global either for its procurment of supplies and for its sales
the listed activities become more complexes and the stakes even higher.
• Propose new services/idea to be included in R&D and Innovation stream addressing the
forthcoming challenges ;
• Reducing costs, increasing service levels and speeding up order fulfilment time whilst
maintaining the quality of products provided.

4. Impact on business value creation by Supply Chain
Management due to the evolution of the main
value network variable ; suppliers,
As the number and the location of suppliers grows notably from 12 to 50 and from one location in
Switzerland to more than four locations in two continents; the value equation will undergo a shift towards
strengthening sustainability (PLANET); since the foot print of the company will be huge. Also, The raise of
the number of carriers support this statement.
The number of suppliers obliges to adopt new way of stock managements like VMI which lead to invest in
ASSET equipped with breakthrough technologies. We can also assume that enhancing the number of
suppliers will raise the need to built more depots or warehouses so the parameter ASSET may also be
boosted.
Thus, the second parameter in value equation to be solicited is ASSET.
Digitalization will be a si ne qua non condition to succeed this size and complexity of suppliers.
Besides, the 30% in cross trade poses the constraint of securing quality standards. Only digitalization can
allow this remote, reel time quality assessment. This lead to more Digitalization implementation and more
investments in the digital. It might have an impact on the cost to source.

5. Impact on business value creation by Supply Chain
Management due to the evolution of the main
value network variable ; products,
As the number of products takeoff; NESPRESSO diversify its products profolio with a large brand of coffee,
machines and accessories: this tendency will have direct impact on Customer satisfaction as the main
parameter of the value equation that will assist this shift. Besides, the coming of new “ingredients” like
chocolate will diversify this offers, the downside is it’s a new raw materials that has its proper flux and
particularities (quality, disponibility,…).
On the other hand, as stated by the paradigm Trade-off, the bad news for this diversification is that the
company need to enhance its stock capacity; the cost of inventory will raise. Also, the need to build new
Depot or warehouse may be potential. Thus, the CASH and the Asset will be respectively the two other
parameters of the value equation that are implicated in this shift.
The company will have to deal with the high rate of obsolescence of the products. 1 to 2 years. That will add
much pressure on the cash.

6. Impact on business value creation by Supply Chain
Management due to the evolution of the main
value network variable ; cutomers,
The internet will ensure up to 55% of the distribution channels, normally the footprint of the company
will be enhanced. Hence the SUSTAINBILITY (PLANET), as main parameter of the value chain, will
support this shift.
We intend to reach customers all over the world, and the commitment of the company to deliver on
less than 48H will be a huge obstacle that need to be overcome. In order to deliver parcels anywhere
within 48hours lead time delivery, huge investment will have to be made ; new ASSETS have to be
located in strategic locations so that the promise of the delivery remain respected. There is a need to
scaled up Logistics in order to meet this need. Even if we are subcontracting logistics, at some level of
distance the cost to deliver will be substantial this also will lead to activate the COST as another value
parameter that is implicated during this process.
Digitalization raise again, as the main enabler for NESPRESSO expansion strategy.
In some very remote location the paradigm of the Fair value might not be fullfiled.

7. Proposed projects ; Demand Side.
Project 01 : “defining accountabilities related to demand forecasting”
its draw from the structural building block of the SC operating system (GOVERNANCE & KPIs)
Project 02 : “Designing the demand forecast process or demand plan”
its draw from the structural building block of the SC operating system (PRCESSESSES)
Project 03 : “The implementation of Digitalization and ERP to facilitate a reliable
collected demand’s DATA”.
its draw from the resource based building block (IT & DATA)
Project 04 : Providing formation and training sessions to people; professionals and
non professionnals of SCM.
its draw from the resource based building block (PEOPLE)

8. Proposed projects ; Supply Side.
Project 01 : Defining the phase in and the phase out in compliance with the strategy of enhancing number of
SKUs.
its draw from the structural building block of the SC operating system (PRCESSESSES)
Project 02 : The inventories dimensioning assessment in relation to the expansion plan.
its draw from the structural building block of the SC operating system (PRCESSESSES)
Project 03 : Digitalization of the transportation and delivering activities.
its draw from the resource based building block (IT & DATA)
Project 04 : Processing and digitalization of the coffee’s quality assessment .
its draw from the resource based building block (IT & DATA)
Project 05 : Assessment of the supplier’s VMI adoption.
its draw from the resource based building block (OPERATIONS)
Project 06 : Providing formation and training sessions to people; professionals and non professionnals of SCM.
its draw from the resource based building block (PEOPLE)

9. New functions
The after sales Market logistics may be considered as new functions to develops within the coffee cup
organization. Since the uniqueness of the combination capsules-machines had provide NESPRESSO with a
reliable competitive advantage. This advantage may be enhanced and sustained with logistics after sales
possibilities.
The quality control/ management is also a functions to reinforce ; at the central level by providing holistic and
detailed quality processes & standards and providing digital tools to assess in real time quality of raw
materials as finished products .
At the regional level the implementation of the quality process and the feeding of the digital tool will enables
the company the assess the qualities off all goods and provided new ways to overcome products qualities and
sourcing issues.

10. THANK YOU