Digital Transformation in International Purchasing.edited
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Digital Transformation in International Purchasing: A Case Study of Nestlé
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Introduction
Nestlé, a world-famous multinational corporation, is a leader in innovation and strategic adaptability in the ever-changing world of worldwide business. With a wide range of products in the food and drink sector, Nestlé has been adapting to the modern digital landscape by improving
its supply chain management and purchasing procedures (Nestle.com, 2022). Digital technology has become increasingly important in international purchasing. Using digital technologies is crucial for staying competitive in this era of instantaneous information and networked markets. The fascinating case study of Nestlé's entry into the digital domain reflects larger business trends
(Nestle.com 2022). In light of Nestlé's digital transformation, this report's principal objective is to assess the company's purchasing and supply strategy. Multinational corporations can optimize their processes for sustainable commercial value and competitive advantage by reviewing integration systems, offering advice, and addressing the issues faced in adopting and integrating digital technology.
Purchasing and Supply Strategies at Nestlé
Nestlé, a prominent food and beverage sector player, proactively implements procurement and supply strategies that align with its primary objective of generating value (Verbeke, Hutzschenreuter, and Pyasi, 2021). The company's dedication to being current, adaptable, and achieving exceptional performance reflects its long-term plan, which emphasizes consistent success, as seen in Figure 1. Nestlé's strategy for digital transformation is integrated into its overall value creation model, emphasizing the importance of ongoing innovation, efficiency in operations, and rigorous resource allocation for achieving growth (Cambaza, 2022).
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Figure 1. Overview of organic growth of the company in 2021
As per Porter's Value Chain model, Nestlé's digital initiatives play a crucial role in both the primary and support operations. Nestlé's emphasis on digital technologies enhances inbound logistics by improving supply chain visibility, optimizing inventory management, and fostering efficient supplier relationships. In addition, digital tools enhance operations, marketing, and sales, which results in a favorable impact on outbound logistics. Nestlé intends to improve its revenue share by utilizing e-commerce platforms and online sales channels using Porter's cost leadership and differentiation generic strategy (TAHRI and KOURAICHE, 2020). Nestlé's focus on achieving growth through ongoing innovation aligns with the principles of the Resource-
Based View (RBV) paradigm (MUIRU and MUIRU, 2023). The company utilizes digital
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technologies to optimize current operations and stimulate product creation and consumer involvement innovation. Nestlé has identified digital transformation as a strategic goal to achieve
concrete commercial results. This aligns with RBV's focus on utilizing internal resources and competencies to maintain a competitive edge over time.
In addition, Nestlé might utilize the Theory of Constraints (TOC) to enhance operational efficiency using digital transformation (Ma, Shi, and Kang, 2023). Nestlé optimizes its resources for optimal throughput by using data-driven insights to identify and address inefficiencies in the supply chain in alignment with TOC principles. The company's dedication to augmenting capacity and reducing expenses aligns with TOC's focus on surmounting limitations to optimize total system efficacy (Ma, Shi, and Kang, 2023). Nestlé's digital transformation is supported by the Value Disciplines concept developed by Michael Treacy and Fred Wiersema (Evans, 2020). Nestlé emphasizes digitization to enhance operational efficiency based on the Operational Excellence discipline, which prioritizes process optimization and cost leadership. Nestlé's dedication to ongoing innovation aligns with the product management discipline, allowing the company to stay ahead of market developments and consumer preferences (Evans, 2020).
Within the framework of Porter's Five Forces model, Nestlé's utilization of digital technology acts as a deterrent for prospective rivals attempting to enter the market. The company's streamlined supply chain, facilitated by digitalization, strengthens its ability to negotiate with suppliers and purchasers. Furthermore, implementing digital transformation significantly distinguishes Nestlé from its competitors, decreasing the risk of alternative products and alleviating competitive competition (Shehata and Montash, 2020). Nestlé aims to raise its online sales from 13% to 25% by 2025, which aligns with Michael Porter's e-commerce adoption model
(TAHRI and KOURAICHE, 2020). The company's augmented expenditure on digital marketing
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and focus on establishing significant connections with consumers demonstrate the strategic congruence with Porter's model, highlighting the significance of information technology in attaining a competitive edge in the digital age.
Challenges in Adopting and Integrating Digital Technologies
Nestlé's supply chain management and purchasing (PSM) has transformed by adopting and integrating digital technology. This has improved efficiency and the ability to make strategic decisions (Choi, 2019). Nevertheless, this development process is not devoid of difficulties, and a thorough examination uncovers significant obstacles that must be overcome to achieve successful integration. The culture of work at Nestlé is crucial in influencing how open people are to digital transformation projects in PSM. According to Ollivier de Leth and Ros-Tonen (2022), Nestlé's organizational culture consists of commonly held values, beliefs, and assumptions that impact the behaviors and attitudes of individuals, as seen in Figure 2. The adoption of digital technology can be hindered by reluctance to change and a limited comprehension of its advantages, as demonstrated by Nestlé's staff. Implementing training and education initiatives, similar to Nestlé's dedication to prioritizing digital transformation, is crucial. This aligns with Cook's (2021) argument that firms must actively control and create their
cultures through intentional interventions.
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Figure 2. The company’s portfolio management activities are on track.
The absence of consistency in data and procedures poses a significant obstacle for Nestlé in achieving standardization, which hampers the smooth integration of digital technology into PSM.
Nestlé faces challenges due to the lack of interoperability between various systems and processes, which hinders their ability to support over 1 million transactions daily across numerous applications worldwide and locally. This can result in inefficiencies and errors, highlighting the importance of adopting standardized procedures (Agarwal et al., 2022). This supports the assertions by Gal and Rubinfeld (2019), who emphasize the significance of standardization in improving interoperability and decreasing complexity. Nestlé's contributions to the standardization of data and procedures are crucial for assuring compatibility, enhancing efficiency, and minimizing errors in PSM.
Data accuracy and reliability are crucial for digital technologies' success in PSM, making data quality a fundamental problem for Nestlé. Nestlé acknowledges that inadequate data quality might result in erroneous judgments and impaired performance. Özkan, Azizi, and Haass (2021)
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argue that effective data quality management methods, such as Nestlé's dedication to data infrastructure and quality management, are crucial for ensuring the precision and dependability of data. Implementing strong data quality management systems is essential for assuring the effectiveness of digital technology in Nestlé's PSM.
The incorporation and utilization of digital technology in Nestlé's PSM is made more intricate by
the presence of security concerns. Cybersecurity threats introduce potential dangers, such as unauthorized access to sensitive information and vulnerabilities in security systems, highlighting the need for proactive actions to protect business data. Nestlé's emphasis on cybersecurity as a strategic priority in their digital transformation resonates with Ibrahim et al.'s (2020) views about
the crucial role of security in adopting information technologies. Nestlé's actions to develop thorough cybersecurity safeguards are essential for maintaining the safety and security of data in PSM.
The acquisition and assimilation of technological advances in Nestlé's PSM may encounter obstacles because of the potential lack of readily accessible skills inside the business. Nestlé recognizes that lacking expertise and information might impede adoption, so they support their online sales goals. According to Maroufkhani et al. (2020), skills and competencies play a vital role in determining the effectiveness of information technology adoption. Collaborative interventions, such as Nestlé's emphasis on partnering with outside parties, can address skills gaps and provide organizations with the necessary expertise and knowledge to effectively adopt and integrate digital technologies in PSM.
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Integration Systems Shaping Digital Transformation
The digitalization of buying and supply management (PSM) activities at Nestlé is closely linked to integrating systems that involve several components, such as data infrastructure and legal frameworks. Comprehending the impact of these integrated systems is crucial in developing a sustainable purchasing strategy that aligns with Nestlé's dedication to innovation, effectiveness, and enduring prosperity.
Data Infrastructure
Nestlé's extensive operations, which involve over 1 million transactions daily on a global and local level, require a strong data infrastructure to initiate transformation in PSM successfully. Data infrastructure refers to the framework, software, and advanced systems that facilitate data storage, manipulation, and examination. As per Laudon and Laudon's Information Systems model, Nestlé's implementation of sophisticated data infrastructure is crucial for guaranteeing the
presence and ease of access to precise information across the supply chain (Xu et al. 2021). This infrastructure allows for immediate access to information, empowering Nestlé to make well-
informed decisions immediately. Nestlé's investment in data infrastructure is consistent with the principles of the Resource-Based View (RBV) paradigm. The organization utilizes data as a strategic asset to acquire valuable information, streamline operations, and promote creativity (Cambaza, 2022). Effective data infrastructure administration facilitates the development of a durable competitive edge, underscoring the significance of internal capabilities and resources in the Resource-Based View (Muazu and Abdulmalik, 2021).
Regulatory Frameworks
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Nestlé's implementation of digital transformation in its PSM (Product Safety and Quality Management) adheres to a set of norms and standards across various regions. Adherence to these
regulations is essential to guarantee ethical and lawful company actions. Regulations concerning data privacy, such as the General Data Protection Regulation (GDPR) and food safety standards, influence Nestlé's digital endeavors (Cambaza 2022). Aligning digital processes with legal standards preserves Nestlé's brand and guarantees ethical conduct in its worldwide operations. The Institutional Theory sheds light on Nestlé's strategy for adhering to regulations (Wesley, Dau, and Moore, 2019). Nestlé, as a corporate entity, is subject to the impact of institutional pressures, which encompass normative and coercive influences. Complying with regulatory frameworks is a legal obligation and a way to uphold credibility and get social approval. Nestlé's adherence to various regulatory frameworks displays its dedication to harmonizing its digital evolution with institutional requirements.
Implications of Sustainable Purchasing Strategy
Nestlé's strong and reliable data infrastructure forms the foundation for an enduring purchasing strategy guided by data. This advanced solution enables Nestlé to make well-informed decisions by utilizing real-time data across its supply chain. Nestlé employs data analytics to enhance inventory management by accurately predicting demand and minimizing surplus stock (Wesley, Dau, and Moore, 2019). This not only improves operational efficiency but also conforms to the principles of Sustainable Logistics Management. Nestlé's purchasing strategy includes accurate inventory control to minimize waste and contribute to environmental sustainability.
Furthermore, Nestlé's sourcing decisions are also influenced by a data-driven strategy. The organization can uncover environmentally responsible sourcing possibilities using real-time insights (Xu et al., 2021). As an illustration, Nestlé can evaluate the carbon emissions caused by
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its suppliers and selectively opt for those who employ environmentally sustainable methods (Despoudi, 2020). Nestlé's incorporation of environmental factors into sourcing decisions illustrates their dedication to establishing a sustainable supply chain, aligning closely with sustainability frameworks prioritizing environmental and social aspects. Nestlé's ecological purchasing strategy is closely connected to its aggressive stance on regulatory compliance (Choi,
2019). Compliance with different regulations, such as data privacy and food safety requirements,
is not just a legal requirement but also a crucial strategic necessity. Nestlé guarantees the secure management of consumer data following the General Data Protection Regulation (GDPR) regulation, thereby reducing the likelihood of data breaches (Choi, 2019). This dedication perfectly corresponds to the Triple Bottom Line philosophy, which emphasizes the interdependence of factors about the economy, society, and the environment.
Moreover, adherence to regulations is essential for establishing and keeping consumer confidence. Nestlé ensures the protection of its brand name by maintaining rigorous confidentiality of data and food safety requirements. Consequently, this adds to the long-term viability by promoting customer allegiance. Nestlé's adoption of the Triple Bottom Line theory highlights its understanding that adhering to regulations is not just a legal requirement but a crucial aspect that impacts its economic sustainability, social accountability, and environmental conservation (Konadu, Ahinful, and Owusu-Agyei 2021). Nestlé's dedication to digital innovation catalyzes its sustainable purchasing strategy. The company's strategic objective of enhancing online sales demonstrates its adherence to the dynamic capability theory, which underscores the importance of adaptation and innovation in addressing market dynamics and customer needs (Maroufkhani et al., 2020). Nestlé's capacity to promptly adapt to shifting circumstances establishes it as a leader in implementing sustainable practices in the industry.
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Nestlé utilizes digital technologies to monitor and adapt to changing sustainability trends effectively. To address the increasing need for ethically sourced products, Nestlé can employ blockchain technology to track the source of raw materials, guaranteeing transparency in the supply chain (Maroufkhani et al. 2020). This invention aligns with the concept of Dynamic Capabilities, as Nestlé utilizes its technology expertise to fulfill evolving customer demands and positively contribute towards minimizing environmental impact. Nestlé actively cultivates a sustainable purchasing strategy that matches current market demands and promotes long-term company sustainability by embracing digital innovation.
Personal Reflection on the Learning Process
Engaging in overseeing personal learning within the framework of the coursework has been both illuminating and revolutionary. An essential component of effective personal learning management is acknowledging the necessity of ongoing self-assessment and reflection (Elliot, 2022). At first, I defined explicit learning goals, pinpointing the specific sections in the syllabus that needed thorough investigation. By adopting this introspective method, I could assess my current knowledge, skills, and areas that need improvement. The recognition that individual learning is a repetitive procedure characterized by ongoing self-examination became evident as the courses progressed.
The integration and application of theoretical information were crucial in controlling personal learning. Theoretical principles offered a structured foundation for comprehending the intricacies
of international procurement in the digital era. For example, I utilized theories such as Porter's Value Chain, Resource-Based View, and Institutional Theory to examine the operational strategies of multinational corporations (Beamish and Chakravarty, 2021). Incorporating theory
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into my analytical framework enhanced my comprehension of the subject matter, allowing me to critically assess and derive significant insights from the selected international firm, Nestlé.
The concept of adaptability played a significant role throughout the learning process. In the digital age, it is crucial to have the capacity to adjust to changing technologies, industrial trends, and theoretical frameworks due to their dynamic nature. As I explored the difficulties organizations such as Nestlé encountered in embracing and incorporating digital technology, I recognized the significance of maintaining flexibility in adapting to the swiftly evolving environment of global procurement. The capacity to adapt was relevant for comprehending the subject matter and essential for improving my research questions and procedures to match changing trends. The research process itself emerged as a fundamental aspect of overseeing personal learning. To thoroughly examine Nestlé's procurement and supply strategy, planning, gathering data, and synthesizing information was necessary. The amalgamation of material from many sources, encompassing scholarly articles and corporate reports, enhanced my research acumen (Hannila, 2023). Acquiring the skill to assess the trustworthiness and pertinence of sources has enhanced my ability to make informed judgments in my academic pursuits. This study experience went beyond the theoretical domain, cultivating a practical comprehension of how firms manage the intricacies of digital transformation in the global marketplace.
Interacting and working together with my peers had a substantial impact on my educational progress. Participating in dialogues, exchanging ideas, and receiving valuable critiques enhanced
my viewpoint and questioned my preconceptions. The multitude of perspectives within the academic community expanded my comprehension of the intricate and varied aspects of international procurement (Coiro, 2021). Collaborative learning catalyzed the improvement of my arguments, deepened my thinking, and prompted me to consider alternate ideas. Integrating a
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personal perspective on managing individual knowledge in the coursework proved beneficial in developing metacognitive skills. Engaging in self-reflection over my learning process enabled me to discern my areas of proficiency and areas that need additional growth. This experience compelled me to see the importance of self-directed learning, emphasizing that individuals are responsible for their educational progress beyond traditional classroom settings.
Conclusion
Overall, Nestlé's experience navigating the ever-changing world of global commerce, characterized by its strategic flexibility and ability to innovate, provides a fascinating example for analysis in the era of digital technology. A study of Nestlé's purchasing and supply strategies,
the difficulties in integrating digital systems, and the importance of integration systems has revealed the intricacies and potential benefits of striving for long-term company value and competitive edge. Nestlé's dedication to using digital technology for environmental and social concerns, in line with current market expectations, is shown by the impact on sustainable purchasing strategy. The personal learning process, characterized by ongoing self-evaluation, integration of theory, flexibility, and collaborative participation, has played a crucial role in successfully navigating the complexities of this program. As Nestlé progresses in the digital domain, the insights from this analysis enhance our comprehension of how multinational corporations can adeptly navigate the digital transformation landscape to achieve enduring success and resilience.
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