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SUPPLY CHAIN MANAGEMENT (SCM) PRACTICES

AT
COCA- COLA

This report has been prepared by Mrinmoy Chatterjee (14032), Jaideep Singha Thakur (14023), Arunava banik (14014), Joy Dutta
Banik (14025) and Sofiar Rahaman (14046), students, PGDM, 2nd year, Calcutta Business School as part of the course of Supply
Chain Management and ERP. The opinions expressed or analyses shown in the same are as per best of knowledge and belief of the
authors. The authors would like to express their gratitude to the course instructors, Prof. Indranil Ghosh and Prof. Sanjib Biswas.

COCA- COLA FOUNDATION


Coca cola is one of the largest soft drink companies in the world with 1.8 billion Coca cola
products are sold every day according to Steve Buffington, vice president of supply chain
development and director of supply chain, bottling investment group for the Coca cola
Company. Making sure that every one of the thirsty clients gets the right product at the right
time and right price range is Coca colas supply chain priority.
Mr. Buffington a 34 year veteran with the coca cola company has been involved in a variety
of strategies for growth and operations excellence. He has led new development in the coca
cola supply chain around the globe from bottler consolidation in North America in the 1980s
to procurement and supply chain strategies in Argentina in the 90s. In the mid-2000s
Buffington took over management responsibility for the bottling Investment Group in Brazil,
Uruguay, India, Philippines and Singapore as coca cola focused on strengthening bottlers in
these key markets. Since 2009 Buffington has been responsible for development and
implementation of strategies to support and enhance the coca cola supply chain system.

CAPABILITY EXCELLENCE
One of the main goals of the supply chain arm of coca cola is to have every customer receive
tailored services from the system whether that customer is in New York City, Tokyo or a rural
area in an isolated part of the world.
We have 16 million retail outlets around the world that sell coca cola and we have common
practices, process and capabilities no matter where we operate in the world, Buffington
explains. We do direct store delivery to more than 10 million of those. We make sure we get
the product on the shelves in a consistent way from a quality and collaborative standpoint,
doing it very efficiently by leveraging our global best practices and building capabilities at
the local level.
Although coca cola is a global company its product never travel far to reach the final
consumer making it a local company in each market where it operates. Our business is a
local business, Buffington relates. We typically dont ship coca cola more than a few
hundred miles; its all about being responsive to the customers needs and the local tastes of
the consumers in every market.
This approach is what Buffington calls a customer-driven supply chain. Coca cola is the
same formula everywhere in the world, Buffington notes. The concentrate comes from a
few places around the world, so were pulling from the same global commodity pool, but we
still have to understand the individual customer requirements.
On the commercial side, coca cola works with its customers in what it calls brand, pack,
price, channel architectures, determining what packages to order, what packages to order,
what equipment to use and what service requirements will deliver the picture of success the
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client has in mind. How you serve a hypermarket such a Carrefour or Wal-Mart is quite
different to how you service a mom and pop in a rural area, Buffington says. Our supply
chain starts at the shelf, and with customer service design that is how were demand-driven.
The Logistics flow of the supply chain enables the company to tailor its services to its clients
needs. Its all in our demand and supply planning and in our sales operations planning,
Buffington explains. Planning supply is driven by forecasted customer demand input,
seasonality and also by promotions or changes in merchandising in the stores.
Coca-Colas diverse portfolio and package mix is geared to meet its diverse consumer and
customers preferences. Some customers are primarily take-home for future consumption and
some are very immediate consumption, on premise, Buffington says. Many customers offer
a large range of products, so you need packaging at different price points and multipacks; the
portfolio needs to be wide enough to serve all the beverage needs.

MORE THAN SUPPLY CHAIN


Segmentation means dividing the broad market into a subset of consumer, business or
countries that have or perceived to have a common needs, interest and priorities and then
designing and implementing strategies to target them. Segmentation allows Coca Cola to
understand and meet the requirements in relation to their individual portfolios. This in turn
leads to fluent, efficient and agile supply chain. Depending on the consumer portfolio the
requirement of the consumer can be identified and sorted out. Broadly, in order to operate
with an efficient and effective supply chain management, supplier and consumer alliance
plays a significant role, such as,
1. Provide low cost and high quality
2. Maintains customer service level
3. Rectify the safety stock if problem occurs
4. To see the value in strategic
SCM PRACTICES OF COCA- COLA ENTERPRISE
Broadly, SCM practices carried out by Coca Cola can be explained under following areas.
Supplier relationship management: Coca Cola along with many other companies found
itself in fierce global competition. Coke found itself competing globally with other soft drink
manufacturers, most notably Pepsi Cola. Manufacturers investigated ways to provide low
cost and high quality products while maintaining high customer service levels. To accomplish
these goals, Coca Cola implemented just-in-time (JIT) and total quality management (TQM)
strategies to improve quality, manufacturing efficiency, and delivery times (Wisner, Leong,
& Tan, 2005, p. 11, para. 1). To minimize disruptions to manufacturing because of schedule
or production problems related to safety stock, organizations began to see the value in
strategic and cooperative supplier-buyer customer relations through the use of JIT and TQM.

Inventory management: Coca-Cola has expanded nationally and internationally, having


licenced bottlers and distributors throughout the globe. The company recognized that they
may control its inventory and related cost of the company products. The MRP1 and MRP 2
help Coca- Cola Company as a manufacturing unit to track inventory accurately.
Table 1: Financial Statement*
$US IN MILLIONS
Heads

Dec 31,2014

Dec 31,2013

Dec 31,2012

Dec 31,2011

Dec 31, 2010

Raw
1615
materials and
packaging
Finished
1134
goods
Others
351

1692

1773

1680

1425

1240

1171

1198

1029

345

320

214

196

inventories

3277

3264

3092

2650

3100

(*Source: Based on data from Coca-Cola Co. Annual Reports)

As reflected from the financial reports given above, it can be inferred that, inventory
management practices usually follow traditional system wherein it is seen that, the raw
material and packaging has gradually been increased during the year 2010 to 2014. Inventory
turn seems to be low. Usually it follows MTS strategy with more or less standardized
products. In recent time, Coca Cola has adopted new practices of supply chain management
to balance the gap between supply chain practices and actual demand. It has implemented an
integrated SAP enterprise resource planning (ERP) solution to solve the issues related to
Coca- Cola Enterprise (CCE). This program further allows CCE to shorten the cycle time in
this process and becomes more effective as well as productive with a goal to come up with
more visibility in its governance and management and thereby to improve decision making.
Competitor: Coca- Cola mainly faces competition from PepsiCo Company and Dr. Pepper
Snapple group.
Customers: Coca- cola enterprise track record data reveals not only historically sales data but
also point of sale data at retail locations. Coca- Cola encourages feedbacks from its customers
regarding product development, quality and performances of its products and services,
delivery etc. Eventually it has successfully created a loyal customer base despite stiff
competition and some set-backs received from the market of late. Usually it caters to the need
of all kind of customers belonging to different age group and income level, particularly
young generation.
In the process, the company began paring back the number of bottling operations, both owned
and independent. The 353 ownerships that existed at the time of CCRs formation have been
gradually reduced to 100 plants and 76 ownerships, Haddock told the San Francisco
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Roundtable of the Council of Supply Chain Management Professionals, at a recent meeting of


the group in the Bay Area. (There were more than 1,000 bottling plants in 1960, Haddock
noted. The formation of Coca-Cola Enterprises in 1982 marked the beginning of the
company's efforts to get that number down. Product development and commercial is the
supply chain management process that provides the structure for developing and bringing to
market product jointly with their customer.
Successful implementation of supply chain management is dependent on developing close
relationship with key customers and suppliers. At the last, globally supply chain forum
indicates the SCM requires integrated business enterprise.
Distribution style: It is basically an organization that buys large amount of product in one
single transaction. Here, the company provides goods to its customers (e.g. Clubs,
Restaurants, Hotels, Corporate hoses etc.) in credit basis, payment is made after a certain
period of time. Example- For future consumption, Coca- Cola consists of products, h ere; the
amount of stock is kept for the future consumption. Stocks are not getting exhausted within a
day, when required to add up, so as to avoid sufficient amount or non-availability of the
product. For immediate consumption, outlets in this organization require stocks on daily basis
which is not stored for future use, rather, it relies on maintaining sufficient amount of stock
for daily consumption especially for uses by restaurants, educational institutions etc.
Coca Cola follows mainly two types of selling mechanisms which are as follow.
I

II

Direct Selling
In the Direct Selling process they basically supply their products by using
transportation. In this type of selling company gain more profit.
Indirect Selling
Indirect selling In Indirect Selling they have their own sellers and agencies to
cover all area.

Manufacturing: Salient features of the manufacturing processes being practiced by Coca


Cola are:
1. Coca-Cola is the worlds leading bottling and canning companies manufactured by
franchisees. Franchisees business is strictly controlled by the Coca-Cola Company.
Manufacture of soft drink is a competitive business of Coca-Cola. Coca-Cola helps in
meeting the highest quality standards for its product using cost effective production
techniques.
Example Small changes in the shape of could save a canning factory millions of
dollars in production costs.

Fig 1. Manufacturing process*


(* Adapted from process layout information of Hccpl, Patliputra, Unit no. 7)

Manufacturing of COCA-COLA involves the following steps:


1. Firstly the water is taken from the river and then it passes through water treatment
plant, then passing through the sand filter and activated carbon filter there, to cleanse
the pure water.
2. The concentrate received from another bottling plant from the syrup room, which is
situated at pune, is blended with the sugar syrup.
3. Once the water and final syrup ready, then this two will be mixed together and send to
the carbonator section, where Carbon Dioxide is added to the mixture to form the
final product.
4. After the final product is ready, bottles and cans are transported to machines which
pack them in cartons.
5. This packed are delivered by trucks to delivery to the customer and to be enjoyed by
consumers.
WAY AHEAD
As a major segment of consumer are student/teenagers. Sponsoring them for their educational
assistance like scholarship and prizes would sure increase the brand image. This has been
observed that majority of the retailers are happy with delivery at the right time, credit facility
and commission provided by the company.
The company should undertake social responsibility campaigns like AIDS awareness,
population control etc and activities like construction of hospital, roads. As a result, reduction
of inventories such as new and used bottles, sugar, syrup, and other ingredients occurs along
with improvements in communication indicating when further acquisitions are necessary.
Coca-Cola identifies those suppliers and gives the majority of its business to those that assist
in generating additional sales through improved delivery, quality, and product design as well
as provide cost savings, improvements in processes, materials, and components used in the
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manufacturing of their products. In Coca-Cola business process reengineering (BPR) is


practiced wherein basic objective is to reduce waste and increase performance. To
accomplish this, focus is given on cost reductions and emphasis placed on organizational
core competencies leading to long-term competitive advantage meeting strategic, tactical as
well as operational goals.
When the issue of resource allocation comes into action, Coca-Cola entrusts the authority to
the managers to use the resources. The resources can be capital, labour, machinery and any
other related.
Competitive advantage involves communicating a greater perceived value to a target market
than its competitors can provide. They can be archived through many avenues including
offering a better-quality product or service, lowering prices and increasing marketing efforts.
Sustainable competitive advantage refers to maintaining a favourable position over the long
term, which can help boost a companys image in the marketplace, its valuation and its
future earning potential advantage.
CONCLUSION
It is true to any extent that, the consumer is in a state of confusion than comfort. Due to the
mind Strategies used by all brands, consumer choice have increased numerously. Still
consumer is the king holds its highest value. Although there is a neck to neck competition
with Coca- Cola, Pepsi had emerged as the strongest brand.
The factors influencing while decision making in consuming soft, drinks in Belgium are the
taste of the product, brand name and advertisements, celebrities that influence the consumer
attitude to a large extent. There is greater market potential for 7up soft drink business in
Belgium city due to the presence of a larger population of college students in the city. At
present Pepsi brands especially lemon flavour 7up soft drinks have a greater market share in
Belgium city when compared to the Coca-Cola lemon flavour brands of sprite soft drink
among the international brands.
At last the Coca- cola Enterprise takes regular feedback from its employees to know the
customer taste, preferences, and relevant data. The company its self-maintain a good ERP
system, to maintain their daily transaction. Product development and commercial is the
supply chain management process that provides the structure for developing and bringing to
market product jointly with their customer.

REFERENCES
1. Supply Chain Management: Text and Cases, Janat Shah, Pearson Education India,
2009 2.
2. Supply Chain Strategies Customer driven and customer focused, Tony Hines,
Butterworth Heinemann, 2008.
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