Supplier Selection Criteria and Issues at Coca-Cola
Discuss about the Coca-Cola Purchase Management.
Coca-Cola is a beverage company that trades in several brands of drinks around the world. In Australia, the firm sells a variety of beverages to its clients directly after manufacturing the drink in its several processing plants. Suppliers are responsible for supplying products to the plant where the actual production takes place. In the process of seeking raw materials from suppliers, the firm uses several criteria and guideline to arrive at the best placed supplier for its raw materials which range in commodities (Coca-Cola, 2017).
The firm exists to serve the broad consumer base in Australia by refreshing and benefiting its clients. Therefore, in arriving at the best taste of the commodity, it is necessary to create the a proper ground where the raw materials are sourced from the best and ethical suppliers who meet its guidelines. The suppliers act as business partners who deliver to the system materials such as drink ingredients, packaging materials, as well as goods and services aimed at aiding the manufacturing process. Hence, a responsible sourcing is essential at creating a good image and perception for the firm among its consumers.
The research majors on the supplier selection criteria and issues dealing with the goals ad needs of Coca-Cola. On the other hand, it looks into the information technology that the firm considers in its procurement operations thus providing real examples of cases where the firm benefits from the technology (Coca-Cola, 2017). The purchasing costs considerations of the enterprise are checked to ascertain whether they match with the required standards of practice. Summarily, the paper analyzes the purchase management issues in the business and compares them with the standards procedures of purchasing and supply management.
Supplier selection is a critical step towards attaining the best partners for supply business. Coca-Cola, as a manufacturing plant has several raw materials and packaging materials it needs in its production stages. In this case, the firm explores a wide variety of options among suppliers who produce goods at wholesale prices. The choice of wholesale prices is informed by the fact that the firm seeks to sell the products at the most competitive price possible while guaranteeing quality for the users (Coca-Cola, 2017). Therefore, the firm uses multiple options in selecting products for sale on its website.
The model created by Peter Kraljic assists in achieving several purchase options towards maximizing profits and reducing costs. The considerations in the diagram inform the Coca-Cola firm on the ways to explore in its supply chain while remaining profitable and meeting society’s needs. The four steps assist in classification of purchases according to urgency and numbers, market analysis of the available suppliers, strategic positioning of a firm towards supplies, and action planning to deliver the best supplies for production.
The Kraljic Portfolio Purchasing Model
The three considerations on whether to exploit, balance, or diversify supply sources depends on the strength of the market and the suppliers where a high demand for the beverages transfers into a high bargaining power by the firm to the suppliers.
The firm embraces supplier diversity in its business. Instead from selecting suppliers from one location, the firm believes in the fact that its suppliers should be spread across the region to represent the face of consumers it enjoys in the market. In selecting its suppliers, the firm considers different raw and packaging materials sourced at suppliers across the Australian region. Thus, the firm engages in several activities aimed at empowering communities across its offering with the skills and resources to produce the raw materials in a bid to capturing a large market share. In so doing, the firm embraces the spirit of diversity as a selection procedure and requirement in its supplier selection.
The firm stays clear in its guideline by ensuring that the materials come from destinations and people that practice ethical production. Suppliers are to conduct businesses in ethical manners which comply with the laws and regulations of an ethical firm. The suppliers have to read the firm’s guideline and communicate the values and expectations therein to the suppliers. For instance, the firm expects its suppliers not to supply materials containing conflict minerals coming from nations such as Congo where the suppliers have to certify their sources as described in the laws. After reviewing a source, the firm can then give an offer to individuals.
The firm in its supplier guiding principles stipulates the requirements expected on its suppliers. Coca-Cola Australia emphasizes on the importance of responsible workplace practices that have to be complied by the suppliers. The firm inspects and engages its suppliers in workplace inspection to ensure the firms offer the best working environment in the production process of commodities. The conditions must match those that reflect the commitment of the firm to respect of human rights and one that gives back to the society supporting its production ventures. The principles become part of all contractual agreements conducted between the firm and the suppliers that binds them to responsibilities in the communities. In ensuring the same, the firm uses third party organizations to inspect and ensure the internal environment of suppliers comply with the standards set by the firm.
Another strategy used by the firm is open selection where the company invites competitive suppliers to supply commodities for the business by offering products and services to the firm. In so doing, the firm allows competition where the highest bidder manages to increase their sales and subsequently the overall profits of the firm (Kumar Kar, Pani, 2014). The firm selects the suppliers from the international and domestic market where it promotes people with disability by considering them in their supply ventures.
Multiple selections is also implored by the firm where one commodity can be supplied by different individuals in meeting the demands in the market. the firm does so to have a steady supply of commodities and in catering for the needs of its diverse population. Embracing a wide supplier selection assists the firm to reach to the several large and small-scale business thus promoting them while growing its influence among the consumers. For instance, the company sources packaging materials from women-owned companies, people with disability, and youths in the society. Therefore, it places the supply category to several individuals as long as they meet the ethical provisions and requirements given by the firm.
The use of ICT in procurement is essential to the success of companies in different locations. For companies to remain profitable and meet the demands of the market there is a need to utilize the opportunities of technology to explore the market demands (Memon, Lee, & Mari, 2015). Selecting purchase sources from the internet offers a firm a wide opportunity to spread its risks and obtain the best company with a good reputation and review from the consumers. The procurement professionals possess necessary skills essential to balancing costs, fulfilling social concerns, managing supplies and using technology in gaining a competitive advantage.
Purchasing department uses the diverse information on the Internet to aid in their procurement ventures. For example, the firm uses the online availability of information on Google sites and other wholesale companies providing wholesale supplies gives an upper-hand to the production department. After gaining the information, the procurement departments can contact the suppliers and examine their supply standards thus coming up with the right people to supply its needs (Chai, Liu, & Ngai, 2013). The evolving nature of technology allows for the use of informatics in assisting in securing suppliers in the market.
The use of digital tools in procurement increases the pace of procurement leading o a high rate of success. Coca-Cola has an information technology enabled inventory system in both its stores and the third party supplier portfolio (Coca-Cola, 2017). In the internal stores, the firm links its inventory with the supplier where a significant drop in the products is met by a timely replenishment of products in the market. In this respect, products do not run out of stock as the suppliers remain in access to the store inventory that is shared between them. The minimum order quantity is displayed in the inventory where a red line is marked every time products go below the demand of the firm (Balm, van Amstel, Habers, Aditjandra & Zunder, 2016). In this case, the supplier responds effectively with supplies that meet the demands.
Good Corporate Citizenship
On the other hand, the firm has a connection with its third party suppliers where a connection exists that allows the supplier to list the total number of orders present on sale. A decrease in products due to customer purchase results in a subsequent indication of the number of products remaining (Camarero Izquierdo, Garrido Samaniego & San José Cabezudo, 2015). For instance, a drop in the packaging materials can be easily noted and replenished within time. In this case, the use of ICT is present in the purchase arrangements done by the firm. The small product suppliers do not matter a lot in the equation as there are several suppliers of the kind of the product whose numbers are maintained on the websites which can be viewed by the management.
The use of ICT for purchases is recommended in the current business as more suppliers get to register themselves on the websites. Linking supply chain and inventory information with the supplier is an essential tool towards growing influence and maintenance of a steady supply of products. On the other hand, maintaining such a communication assists in fostering timely delivery of products where Coca-Cola can track the product whereabouts in the case of goods on shipping to their different stores (Rodríguez-Escobar, & González-Benito, 2015). Thus, the firm can advertise products, especially in the brand new category without doubt as the commodities shall arrive on time.
Cost analysis refers to the breakdown and examination of constituent costs in a production process. The investment analysis deals with the identification of the total cost of purchasing from a supplier where it examines the costs in storing products compared to that of not having the items on sale from the manufacturer. The costs in procuring do not stop at procuring but rather stretch to aspects such as costs of storing items, delivery costs, and handling charges incurred in the process of procurement (Zhang, Van Donk, & van der Vaart, 2016). In case firm orders excess goods, the costs incurred for storage, handling, and delivery rise beyond the expected numbers thereby leading to a crisis.
Total cost of ownership is important to the firm as it reduces the overall costs. Thus, acquiring items from suppliers who meet the required standards reduces costs in production and legal challenges. At Coca-Cola, an effective cost analysis is done by the procurement team where the product orders are done in agreement with the forces of supply and demand (Coca-Cola, 2017). The purchasing goals of the organization aimed at providing wholesome product availability according to the demand situation in the market. In this case, it does not need to fill its stores with products that fail to perform in the industry. The firm through the information technology utilizes the technology enabled inventory system which allows for information sharing between the firm and the suppliers (Cheng, Farooq & Johansen, 2014). The raw products are procured according to their demands in the market. In such a scenario the firm maintains a low cost when purchasing and producing final beverages that do not overstay in the stores thus creating space for other commodities.
ICT for Purchasing Operations
On the other hand, the firm weighs the costs of lacking products in its store which remain high due to the increased flow of customers during the summer seasons. The cost of storing a lot of products in the warehouse surpassing the demand ratio becomes expensive and unmanageable to the procurement team. Such an action limits the acquisition of other products that might be on demand thus leading to losing customers (Monczka, Handfield, Giunipero & Patterson, 2015). The cost of losing customers cannot be compared to that of having limited products and thus calls for a full utilization of the available space for commodities.
In response to the same, the firm ensures a steady supply of commodities to remain all time high as long as they match the demands of the market. Lack of products for the firm spells a crisis as such a move leads to lack of trust and reliability for the high market of consumers (Heizer & Barry, 2013). Therefore, it is recommendable for the firm to exercise the use of increased technology in linking with the leading suppliers more so, those dealing with parent production to get the lowest price yet a competitive quality on offer (Miles, 2015). The use of technology enhances transparency as the purchasing individuals get to know the performance standards and the destination of goods. Besides, it needs to explore more on other suppliers with established reputation to increase delivery standards, and limit complaints especially from a product coming from the third party sellers trading directly.
Coca-Cola appears to be a firm that follows all the purchase and supply criteria essential for profitability. The firm uses multi-criteria in the selection of its suppliers by focusing on providers with the lowest price, diversity considerations, and ethical sourcing that meet competitive quality in their offering. The information satisfies the adherence by a large margin thus demonstrating success for the organization. Besides, the firm is up to date in the use of technology in purchase activities as evident in its selection criteria as well as the inventory management leading to proper and timely replenishment. The firm conducts purchasing cost analysis that assists in avoiding losses occurring from high costs of storage, handling, and product delivery. Therefore, it is evident that the firm conforms to the required standards in supply chain management as well as its procurement ventures which promote a steady supply of commodities. Coca-Cola is a certified company in the line of purchase management leading to a steady business venture.
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