Supply Chain of Kit Kat in India

MGN 562 – Managing Operations

Group Work

The Supply Chain of KitKat in India

Submitted by

Khin Myo Kyu (1706140002)

Phyu Phyu Win (1706140003)

Thu Thu San (1701260004)

Pwint Zar Thin Khine (1702070013)

Aye Mar Kyi (1706230002)

The History of KitKat

Our group has selected to present the supply chain process of KitKat chocolate in India. KitKat is the bestselling chocolate of UK. In 1935, KitKat was created in England with the name, “Rowntree’s Chocolate Crisp”. In 1937, the name was changed to “KitKat Chocolate Crisp” as the original name was difficult to remember. Because of the milk shortage in World War II, the packaging was temporarily changed to the blue color. A few years later in 1988, KitKat was bought by Nestle, Swiss Company. Internationally KitKat manufactures in Canada, Germany, India, Malaysia, China, Japan, Australia, South Africa and US. KitKat is available in more than 100 countries all over the world.

As KitKat is owned by Nestle, it has the common mission and vision with the Nestle mentioned below.

Nestle Mission

Good food, good life – is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories

Nestle Vision

Nestle is the largest food company in the world. But more important to them is to be the world’s leading food company.

The supply chain of Kit Kat in India

In 1961, KitKat manufacturing operations set up in India. There are altogether 7 Nestle factories in India; 3 in north and 4 in south. Here is the comprehensive supply chain process of KitKat in India. There are 5 main ingredients needed to produce chocolate which are milk, sugar, wheat flour and coca. Sugar, milk and wheat flour are locally produced in India but, palm oil and coca come from Indonesia. According to the findings in 2012, Indonesia is the second top coca beans producers in the world. KitKat works together with Non-Government Organizations (NGOs) to maintain the quality of the raw materials. NGO partners conduct supplier audit and farm assessments to ensure the procurement of top ingredients.

After the raw materials production, suppliers buy and collect them and send to the factory to make chocolate. The chocolate and waffle are produced separately in the factory and then combine and put them into the proper packaging. Later, KitKat chocolates are sent to the Nestle warehouse. Nestle manages the warehouse with Radio Frequency Technology. Chocolates need to be kept under the special temperature 70°F (ideally between 65 and 68°F), and at a humidity of less than 55%, the emulsion of cocoa solids and cocoa butter will stay stable for months.

In Nestle India, most of the transportation and logistics is outsourced to third parties. Nestle links with carrying and forward agents to distribute KitKat chocolates in and outside of India. These agents link with distributors, then wholesalers and retailers to reach to the consumers. Sometimes, distributors link with retailers to sell KitKat to end users. Moreover, Nestle India also realizes the importance of e-retailing and continues to successfully engage with the leading e-retailers.

Risk analysis of the supply chain

Child labor is an issue on Nestle especially at the cocoa farms. Children younger than 15 continue to work at the farms even though Nestle stop using child labor in their supply chain process. According to the findings from researchers, Nestle do not have sufficient effort to educate farmers about the code of conduct. Farmers, themselves, are not interested to join the awareness and training sessions. Moreover, there is no proper age verification system for workers to stop child labor.

Another problem faced is during packaging. Because the biscuit is actually a wafer, it can break easily and consumers end up getting a broken piece of KitKat chocolate most of the times. It is not a good image of KitKat. Therefore, warehouse and logistics process need to be careful not to break the KitKat.