How does the saying go again? Oh yes—the customer is always right. Sometimes this means going above and beyond to discover what it is the customer really wants. One company that insists on going that extra mile for its customers is Nestlé—who did not just snap its metaphorical fingers and remove all artificial flavors from its candy on a whim. In fact, well before it made its announcement in February, Nestlé had been monitoring consumer trends and preferences to create new products and ultimately answer this unmet need in the marketplace.
Findings from the Nielsen 2014 Global Health and Wellness Survey showed that more than 60 percent of Americans prefer products without artificial colors or flavors. To reaffirm these findings, Nestlé conducted its own research that confirmed this data, concluding that consumers in the U.S. tend to prefer candy brands that are free of artificial flavors and colors.
While Nestlé has been featured as one of the World’s Most Admired Food Companies by Fortune magazine for 17 consecutive years, its success has not been easy to achieve nor to maintain. Running 447 factories, operating in 194 countries, and working with 165,000 direct suppliers and 680,000 individual farmers can create quite the challenge.
Customer happiness comes down to this question: How can global companies like Nestlé make a smooth transition to an effective supplier program with the outcome equaling a happy consumer?
Hindsight shows us that pleasing customers is much easier said than done. In 2009, for example, Necco Wafers attempted to make the bold move to natural ingredients. This move was met with utter outrage from its devoted customers. Sales fell 35 percent, and less than two years after the au naturale movement, Necco was forced to return to its old artificial ways.
Nestlé on the other hand, has managed to adapt to this new trend while still maintaining quality and taste at the same affordable price.
How have they made this possible? Necco showed us that a drastic change in formula is not an easy transition as it affects several different areas of the organization. But Nestle seems to have the right recipe.
Nestlé’s enthusiasm for pleasing customers and attention to supply chain development has landed the company on Gartner’s Supply Chain Top 25 list for over a decade. So how can companies follow suite?
The challenge begins internally. Product management and regulatory affairs folks are tasked with updating packaging and labeling accordingly to comply with evolving regulations (this may require declaration of ingredients, nutritional facts and allergen risks). In order to support this process, the marketing team must create packaging needs to meet brand guidelines while also highlighting the change in ingredients to increase awareness.
Next, the operations team must define and document the new standard operating procedures for production processes, sanitation requirements, and hazard analysis to ensure safety, quality, and consistency in the finished products.
The purchasing and product management teams come together to configure demand forecasts for the suppliers as well as update contract pricing in an enterprise resource planning, or ERP, system to ensure the “Perfect Order.” Essentially, they are in charge of the product, making sure it has the right quantity, price, and time. The purchasing team is dually responsible for handling new suppliers, vendors, and information on the company, including products sourced, lead times, and country of origin. And finally, the quality team needs to agree on details such as product specifications, documentation, and certificates, testing requirements and the supplier’s quality processes. More recently, companies are looking for ways to connect to tier two and three suppliers, and even their supplier’s suppliers. But this has been made easier with new cloud technologies that enable greater transparency across the entire value chain, allowing for faster issue resolution to reduce costs and inefficiency within the partner network.