Swiss food giant Nestle has just rolled out its biggest and most modern distribution centre (DC) in the Philippines. The 40,233-sq. metre Nestle North Distribution Center is also its most distinctive with a unique H design to provide for easy access.

"The site is good, it is next to a highway. We have more than 100 trucks coming in and going out daily. There are doors on four sides of the building. It is designed not so much for storage but more for flow," said Robert M. Vallender, Head of Supply Chain Operations, Nestle Philippines. Of the four loading and unloading areas, one is for inbound and the second for outbound containers, while two are for local delivery  - one for small trucks for mini-marts and mom and pop shops and the second for big trucks for the major stores.

Mr Vallender had the concept in mind when he saw the layout of the land in Bulacan, which once housed a textile plant. With the help of a structural engineer, he translated the concept into reality. "We take the land and design to the land," said Mr Vallender, who in the past helped developed a D shaped DC in Malaysia and an underground DC in the Middle East.

Built and equipped by Philippines' Supima Holdings and leased to Nestle for 10 years with options, the DC also has a very high roof of 15 metres with a 9 degrees pitch. Located in a typhoon prone area, this ensures that water does not collect on the roof even during a heavy downpour. The floor of the DC is also raised by 1.3 metres to prevent any possibility of flooding.

As for safety, "the building is as secure as it can be," he noted. Firewalls are erected to minimise the damage from fire, and seismic racks installed on a 228 mm thick super flat floor laid out in the traditional way, even though the area does not fall within the seismic belt.

The same care was given in the choice of a rack supplier. "In racking, it is extremely competitive. There are those in the market who would like to commoditize it. I don't think it is right. We chose someone established. It is a big investment, you want to make it work," said Mr Vallender.

"With the need to bring the facility up to speed within a tight time frame, it became even more important to have a supplier who could deliver and install it safely and efficiently on time and within specification."

Schaefer secured the contract, its largest seismic installation in the Philippines after having completed the installation at Nestle South Distribution Center in Laguna. As the two are separate projects, Mr Vallender said Schaefer still had go through the due process of bidding for it.

The US$2.8 million contract for 47,152 pallets locations was completed in 3½ months, one week ahead of delivery date, even though the schedule was thrown out of kilter by two super typhoons, the Milenyo (also known as Xangsane) and Reming (Durian), which hit the Philippines in late September and early December 2006 respectively. As completion of the building was delayed, Schaefer made up for loss time by mobilising extra men for the installation.

"The Project Management team operated round the clock. We had 100 installers during the day, 50 at night for 3½ months. In the last two weeks, an additional 50 installers were employed," said Mr. Rizalino A. Angeles, Sales Manager of SSI Schaefer Systems Philippines, Inc.

Like the building, the racking system has an H layout. The two vertical H strokes are equipped with Drive-In Seismic Racks extending 11-metre high to provide 39,872 pallet locations for the storage of bulk, homogenous products. In the centre are Selective Seismic Racks of 9.5 metres height with 7,280 pallet locations for case picking.

Operational in March 2007, it is the last piece in Nestle's revamp of its distribution network in the Philippines, which began in 2005 when Mr Vallender came on board. As part of the market business strategy for 2005-2015, he revitalised a plan first proposed in 1998, to cut back on the number of DCs in the Philippines to lower costs and improve efficiency.

Instead of the 33 smaller warehouses, Nestle now has three large DCs for the entire Philippines. Two are in the main island Luzon where some two-thirds of the population of over 85 million reside and the third is in the extreme south in Mindanao, with logistics and order management directed from the head office in Manila. With the consolidation, inventory levels have been reduced.

The Nestle North DC now supplies part of Manila and north Luzon with some 500 skus of Nestle products including coffee, milk, infant nutrition, beverage, breakfast cereals and confectionery under well established brands such as Nescafe, Bear Brand, Cerelac, Milo and Nido, produced both locally and in the region.

Incoming goods are scanned before being put away in locations assigned by the SAP warehouse management system. The DC holds stocks for 2½ weeks.

Orders are picked, packed and sent out within 24 hours, though this will be gradually reduced when the DC is operated on three shifts instead of two. Some 75% of the orders involve case picking, and 25% pallets.

Nestle maintains overall management of the warehouse but the day-to-day operation is subcontracted. It is a system that has worked well for Nestle. In a recent stock take, it recorded an inventory accuracy of 100%.

For more information, please contact:

Schaefer Systems International Pte Ltd

Ann Ng

Tel:    +65/6863 0168

eMail: ann.ng@ssi-schaefer.sg

This new Nestle North DC, which is currently 65% utilised, is well able to accommodate Nestle's expanding presence in the Philippines.