Nestlé and XPO Logistics are building a 638,000-square-foot distribution center in Leicestershire, U.K., scheduled for completion in 2020 as a testbed for logistics automation and AI. Concurrently, Nestlé migrated its SAP ERP to the SAP Private Cloud in 2022 and is embedding SAP’s AI-powered assistant into core systems—targeting full deployment by 2025. The upgrade aims to enhance procurement, real-time supply-demand matching, and order fulfillment. Supply constraints linked to IT hiccups in highly automated U.S. packaging systems caused a 3.2% decline in real internal growth at Nestlé Health Science in H2 2023 and a 1.6-percentage-point drop in operating profit margin. SAP will end mainstream support for its ECC system in 2027.
Nestlé and XPO Logistics will build a 638,000-square-foot distribution center in Leicestershire, U.K., which will serve as a "testbed environment" for new technologies for the logistics space, press release.
Warehouse of the Future
This “warehouse of the future” will be completed in 2020 and will use automation and artificial intelligence (AI) to streamline operations and improve the efficiency of Nestlé’s supply chain.
For Nestlé, automating its supply chain and streamlining logistics through XPO could be the competitive edge it needs to outpace other food companies in a very tight food market. The chocolate company already has a majority stake in organic and natural food, as well as a plan to move all its products to environmentally-friendly packaging by 2025, to keep up with current consumer tastes.
SAP ERP Modernization
Nestlé migrated its entire SAP ERP from its data centers to the SAP Private Cloud in 2022, the spokesperson said. The installation, which will take two more years to complete, will embed SAP’s AI-powered assistant into Nestlé’s core business systems, release.
The company expects the added intelligence to improve procurement, supply chain management and order fulfillment efficiency.
“With the upgrade, we gain more flexibility, capabilities and insights that will help us roll out new products globally faster to meet the needs of our customers and consumers,” Chris Wright, CIO and head of Nestlé IT, said in the release.
With the deployment of a more AI-focused ERP system, Nestlé expects more advanced order fulfillment that matches supply and demand in real time for in-store and online retailers. Other upgrade advantages include consistency across reporting and planning processes, along with automated and standardized procurement procedures, release. The food and beverage maker is currently upgrading from SAP S/4HANA Finance, the legacy Enterprise Central Component ERP system on SAP HANA, an SAP spokesperson said in an email. SAP introduced ECC in 2004 and the finance component on the in-memory database management system in 2014. SAP plans to end mainstream support for ECC in 2027.
Supply Chain Performance Impact
Real internal growth at Nestlé Health Science fell by 3.2% in the second half of 2023 because of the supply shortfalls, François-Xavier Roger, CFO and EVP, said on the company’s earnings call. The unit’s underlying trading operating profit margin fell by 1.6 percentage points.
The supply issues trace back to IT hiccups in the implementation of what Roger described as “highly automated systems” at its U.S. packaging sites. IT hiccups at packaging sites created a supply chain backup in the food and beverage giant’s vitamin, mineral and supplement unit.
Source: Supply Chain Dive
Compiled from international media by the SCI.AI editorial team.
