Process and Operations / Processor of the Year

Nestle USA: Manufacturing That Sustains

For 2009 Food Processing processor of the year, Nestle USA, it's all about creating long-term value for the bigger picture and serving customer and consumer needs.

By Bob Sperber, Plant Operations Editor

Managing the thousands of moving parts that comprise Nestle USA manufacturing operations is "a bit like [maintaining] a Boeing 747," Allan McIntosh says. He notes the aircraft's half-century of service despite being designed to last 20 years. "While all of the components may have been modified on today's 747, it's still fundamentally the same aircraft," he says.

There's something to be said for the analogy in light of the decades of upgrades that keep old plants running like new. But there's more to it than knowing when to add a new combination-weighing carousel to a 30-year-old Lean Cuisine tray-packing line at Nestle Prepared Foods' Solon, Ohio, plant; it's about priorities at the plant, division and corporate levels.

McIntosh, senior vice president of technical and manufacturing for Nestle USA and other North American operations, must manage every plant using the same set of priorities and management directives as his counterparts across the global Nestle SA organization. This means that Nestle USA, our 2009 Processor of the Year, must operate under the corporate mandate to support "nutrition, health and wellness." And it must do so in a "shared values" approach that encompasses the "convergence of competitiveness and sustainability," as Jose Lopez, executive vice president for operations and global business excellence, puts it.

While living up to those long-term values isn't rocket science, it can be as daunting and critical to the public good as any challenge Boeing faces.

No matter what vision the company holds dear, Nestle USA is still subject to the forces of the larger business environment. At present, the industry is just getting over years of consolidation that left fewer but larger plants. McIntosh thinks this era of restructuring has run its course and is giving way to a "really exciting" period that will let Nestle refocus on "growth and investment and on the development of appropriate technologies."

This leaves him optimistic to capitalize on "even more potential now to develop our manufacturing operations and deliver improvements in performance than we've delivered over the last 10 or 15 years," he says. "There much more potential to do so in a way that supports Nestle's retrenched focus on lean and effective manufacturing operations."

Broad view of sustainability

Nestle's view of sustainability can be illustrated by a pyramid with the corporate vision up top and environmental and workplace issues just below it, which in turn rest upon a foundation of compliance to standards and practices, whether quality, regulatory or other.

The most commonly understood definition of sustainability deals with the environmental issues in the operational middle. On that front, Nestle's focus includes various internal improvements as befit a global organization, such as reducing energy and water consumption while increasing overall efficiency and savings.

"Basically, we've halved our greenhouse gases per ton in the last decade, and we've made similar reductions in water consumption per ton, and enormous reductions in packaging overall as a company," McIntosh says.

Each division and plant has its own projects on these fronts. For example, the Solon Prepared Foods facility planned and executed a project in two years to replace 80 percent of its natural gas supply with landfill gas.

But sustainability goes beyond being eco-friendly, at least for Nestle. The company's values extend to economic sustainability across the supply chain. Eschewing short-term deals in purchasing and partnering, McIntosh says it's counterproductive to squeeze suppliers' profits bone-dry. "Simply having a mission to create value for shareholders of the company isn't enough to ensure the long-term survival of the company," McIntosh says. "You have to create shared value for all of the stakeholders that are associated with the company along the supply chain from the farm to the customer and the consumer."

While he sees manufacturing as a support function to larger management goals, he notes the considerable cross-functional teamwork needed to formulate, manufacture and package a new product. Nestle conducts basic food science research at the global, corporate level while applying what it knows at product-specific research centers to develop and manufacture products that meet -- or create -- consumer needs.

There was as much marketing, R&D and packaging input as came from manufacturing in the process that created and justified the new Anderson, Ind., dairy beverage plant (see sidebar). A similar, cross-functional approach created Slow Churned Light Ice Cream in the Dreyer's business unit in 2004. The company pioneered low-temperature extrusion to eliminate the formation of ice crystals and deliver a product with a full-fat experience.

Manufacturing focus

McIntosh oversees 33 production facilities, including all 26 of Nestle USA's. As is common with many Nestle executives, he has moved around within the company, working in eight different locations on five continents during his 27 years with the company.

Nestle favors manufacturing its products in its own plants over contracting-out production because it can better control all aspects of value creation, from marketing and supply chain factors down to technology and plant-floor processes. "That doesn't mean that we will not co-manufacture where there are advantages to doing so, such as speed to market or access to technology," McIntosh says, "but we invariably find that we are much more cost-effective in-house than out-of-house."

Nestle USA manufacturing has rededicated itself to compliance with the deluge of standards and regulations. Nestle USA has been active in certifying to standards such as ISO 14001 (environmental management), OHSAS 18001 (occupational health and safety) and ISO 22000 (food safety management systems). All plants will be certified by 2011, which represents a significant undertaking because these efforts will have been initiated and completed in roughly three and a half years.

Complying is resource-intensive, so Nestle set out to consolidate its way of managing its standards and all management practices. A new program called Nestle Continuous Excellence (NCE) is being implemented across all plants. It's a management system that consolidates the principles of Lean Manufacturing, Total Productive Management, Six Sigma, 5S and other methods familiar to followers of the Toyota Production System and other quality and productivity disciplines.

NCE is intended to eliminate confusion while helping manage improvements. Now, quality and productivity are linked under the same program as rooting-out waste in all its forms. McIntosh says it's paying off in relation to prior efforts with early reports of "far more success in engaging employees -- all employees, including management -- in driving improvements in our manufacturing operations."

Under the unified system, corporate vision and mission statements cascade down to business units, plants and work groups or cells defining their own goals. This alignment is critical, McIntosh says, "because people can only make decisions and deliver on objectives if they understand the context in which they are working."

Such efforts are paying off with "significant improvements in all areas -- safety, consumer complaints, consistency of products, performance of production lines or the overall operation of the supply chain."

The umbrella initiative in turn feeds another key focus for Nestle USA manufacturing: sustaining a competitive advantage. Beyond any single new technology, product or metric, keeping that advantage is rooted in the ability to "deliver what your customers and consumers want; and to be able to do it in a way that is consistent and which brings to them a sense of quality they do not get from the competitor," McIntosh says.

Now that the era of restructuring appears to be ending, Nestle USA is ready for another growth phase. A prime example is this year's opening of the beverage division plant in Anderson, Ind. -- the largest single capital investment in the history of Nestle SA.

All of the prospects and the end of worldwide recession have McIntosh excited. With its new vision and strategy for operational excellence, McIntosh sees the company at the beginning of a new journey. "The early signs are so strong in terms of potential that I really believe we're going to make a significant difference to the capability of this company in the next decade."