IT Integration Issue Slows Nestle Production
An IT integration issue is leading to some supply constraints for Nestle’s Health Science business.
The issue, which occurred during the consolidation of U.S. packaging sites, stemmed from being simply overwhelmed by the large number of systems and SKUs requiring integration, according to Nestlé SA CEO Mark Schneider, not because it was overly complex.
The issue has resulted in short-term supply constraints that are expected to extend into early 2024 and reduced Q3 organic growth by around 700 basis points for Nestlé Health Science, the consumer goods company reported. The fourth-quarter impact on the fourth is expected to be lower, and Schneider said they are close to a resolution and resuming the required output.
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“We've done lots of IT integrations, and we've done that as part of our past acquisition activities,” he noted in an earnings call. “And so this should have been done right. And so clearly, we are fully on top of it.”
Not all categories were impacted by the issue. While vitamins, minerals and supplements recorded sales decreases, the company’s active and medical nutrition brands were not affected. Pure encapsulations and medical nutrition categories also recorded growth.
“It's not so much that we're scrambling to find the solution. I think we're close to the required output already,” shared Schneider. “But when you are missing production from several weeks, then clearly, your supply chain from that time, given that demand has come on quite strong again, is empty. And so you need to refill.”
Nestle Health Science, which includes such brands as Boost, Nature’s Bounty, and Carnation Breakfast Essentials in its portfolio, just welcomed its own CEO, Anna Mohl. She will take the helm Jan. 1.
