Coca Cola's Logistics And Supply Chain Management Essay.

Discuss about the Report for Logistics And Supply Chain Management for Coca Cola Group.

Coca Cola is the global leader in production of non alcoholic beverages or soft drinks. It is one of the most trusted and valued brand in the world. It sells more than 400 brands in more than 200 countries (coca-colacompany.com, 2016). So, we can say that it is one of the most recognized brands in the world. It started its journey in 1886 by Asa Griggs Candler in Atlanta and has covered more than a decade with both prosperity and challenges (coca-colacompany.com, 2016). Coca cola serves more than 1.8 billion customers daily globally. This has been possible for its strategic supply chain management system. Although the basic recipe of the soft drink has remained the same over the years, it is the different applications and implementations of the supply chain management system that brings success to the organization. The multi-pronged tactics have been circumspectly calculated to distribute fresh products, stocked shelves and meet customer’s need and demand, no matter if the trade is through at super market in USA or a small retailer in India ("Coke’s Muhtar Kent: ‘Innovation Starts and Ends With the Consumer’", 2016). The most common competitors of Coca Cola on a global scale are PepsiCo, Dr Pepper Snapple Inc., Monster Beverage Corp., and Suntory Beverage & Food Ltd.; The Coca Cola Company has strategically succeeded in holding the lead position in the industry. As the supply chain manger of The Coca Cola Company, I am developing the following report to analyse the effectiveness of the four key flows in the supply chain, the make process and the supply chain forecasting. Also, based on my analysis I would be recommending improvements in the supply chain management.

The supply chain system in soft drink industry is as same as other major industries: the manufactures, the distributors, the retailers and the end users or the customers. Though Coca Cola has more customized and complex supply chain management model that we are going to discuss in this report. Although The Coca Cola Company has vast brand and product diversity, so we are going to focus on particularly the brand of Coca Cola.

The Coca Cola is unique because it only produces the syrup concentrate and then it is distributed to diverse bottlers globally. It has only one bottling plant in North America which is known as Coca Cola Refreshments. But in most cases, the Coca Cola bottlers hold special territorial contacts with the organization receive the syrup concentrate from Coca Cola and produce the finished canned or bottled products. The final product is produced by concentrating the syrup concentrates with filtered water and other sweeteners. Then in the next process, the products are sold to distributors and merchandise which then goes to retailers or restaurants, or vending machines. The syrup concentrate is a syrup recipe of The Coca Cola which is kept trade secret and so there is a very little to no information about the actual ingredients or the costs that is required to produce the syrup concentration. The other ingredients that are used in manufacturing of Coca Cola soft drinks are Carbonated water, sucrose, high-fructose corn syrup, caffeine, phosphoric acid v. Caramel (E150d) and Natural flavours. Coca Cola has formed different strategic supply chain partnership with diverse suppliers who supply these ingredients to the organization. Coca Cola has been concentrating on independent bottlers who are responsible for majority of the sales of Coca Cola products that are sold globally. These bottlers receive the syrup concentration and are free to add more or less sugar according to the adoption of the local taste. Although these bottlers are on territorial contracts but they are free to distribution rights in their pre defined geographical location. Even if Coca Cola has set some predefined set of rules and regulations like operational processes, management of customer relationship and grievances management but they also experience freedom regarding developing other functional areas like  workforce management, distribution management, and improving credit lines. The bottling plants have their own supply chain management systems.

Product Flow

Currently, the total number of individual bottling production and distribution unit of globally are 742 and 650 respectively. The management is working to give more freedom to the individual producers and distributors. According to a recent report, the total cash that the management has like cash in hand is $7.31 billion. In 2015, the total revenue that was collected by Coca cola was $10.53 billion.

The information flow within the Coca Cola is effectively managed which consist of forecasting methods, capacity administration, supplier management and other inventory and sales management are well connected between the head office and the production plant. The Coca Cola uses software which is BASES which controls the whole ERP for the global operations. Quarries related to production, management and customer grievances are handled through this software. The software constitutes information regarding regional sales, per capita consumption development, customer feedback regarding new product launch, sales forecasting, supplier management data, and other related data which is required for organization’s operations. The production information comprises forecasting measures; the capacity management, multiple vendor management and other sales information which are equally distributed in the head office as well as in the production plant.

The Coca Cola has also an effective reverse logistics or return management in its integrated logistics. Missing the reverse flow management is like omitting and important aspect of the supply chain system. The Coca Cola reverse management system manages the source of return and the cause of the return.

Figure: The Supply Chan Management System of the Coca Cola Company

Source: Formulated by the author.

The Production Planning Process:

The basic product of Coca Cola is a concentrated drink and sugar based liquid which are mixed to produce the syrup concentration which is then distributed in bottling plants globally for producing the Coca Cola soft drink. The Coca Cola Company transports the syrup concentration to the individual plants that then produce the drink according to local tastes with mixing refined water. The water is purified through a number of filtration processes to make certain the purity of the water that is used to produce the drink. To make the drink fizzy, Carbon dioxide is stored in plants and then piped in the production process by carbonator and cooler. To maintain the quality standards and safety at workplace, Coca Cola Specifies the measure that should be adopted in these bottling plants. Also, The Coca Cola Company has taken one step further regarding quality control by  regular samples are collected from the plants to culture in laboratories to ensure the plants are following the quality standards set by Coca Cola. The plants are provided with the most modern technology existing and also promotes to use the most modern computer technology and statistical process control methods (Rushton, et al. 2014). The packaging process is united by rapid filling methods. The bottling plants have automated production line, where Coca cola bottles and cans are filled automatically with precise amount of the beverage. While the bottles and cans progress the length of production line, they are seamed with ring pull for cans and crowns for bottles and fabricate the finished product. For plastic bottles, they are first bought as test-tube size and are ballooned into bottle shape. The process is completed by scrutinizing the bottles and cans for any leakage or damage. Every can and bottle is coded with an individual code so that it can be tracked. It also includes a date code guarantees which ensures the freshness of the drink. The end product is that we see in the vending machines or in retail shops. Due to its ever growing demand, the management of The Coca Cola Company has adopted the continuous flow production. It is process where the production process is constantly repetitive and indistinguishable stuff goes all the way through the identical series of operations. To ensure a 24 hour production, the bottling plants uses a computer controlled automatic systems. To ensure quality production methods, the quality control employees observe the product and collect test samples. To ensure zero errors, the quality control employees collect statistically selected samples towards the end of the production line. By conducting chemical tests and analysis, they make certain the quality of the product and ensure they meet the standards set by The Coca Cola. It is also their duty to check the packaging. After the production and quality control process, the bottles and cans are ready for distribution. For distribution, the management uses an automatic machine which is known as the case former, which generates the casing so that the cans and bottles are protected when they are arranged on pallets. Then they are distributed to various locations on big distribution trucks. According to my recommendation, the process can be improved if the organization implements a centralized distribution planning process. This can reduce cost and bring effectiveness in the system. For instance, this type of centralized distribution system is used in Walmart.

Cash Flow

In Coca Cola the Material Requirement Planning or MRP is utilized to create, manage, execute, preserve and constantly develop the soft drink quality and safety management system also keeping harmony with the needs of the organization that constitutes the products and packaging materials supplied to the Coca-Cola system. There is a designated person to monitor the performance of the system who is responsible for the performance of the system with responsibility to report to the higher authority.

In any organizational supply chain, forecasting is crucial because it establishes the organizational operational performances. In the strategic business development plans and projects the function if the economic analyst becomes very crucial (Ballou, 2007). An effective forecasting offers a projection of the future demand and change in the customer preferences. It helps in planning strategic business plans to face challenges and changes in the business environment. A successful forecast plan ensures that there is a little gap between the forecast and the actual scenario (Van Weele, 2009). For multinational organizations like Coca Cola a long term forecast will be more suitable to strategically plan and sustain in the market. This will help the organization in new expansions and planning for long term financial conditions. Long term forecasting also fabricates the planning of human resource demand supply (Hieber, 2002). A long term forecast generally lengths 3-10 years in period. Whereas the management can adopt short term forecasting for reduction of cost of raw materials, planning and implementing sales target, promotional campaigns and short term financial conditions. A forecasting technique is often not accurate but both qualitative as well as quantitative forecasts can be enhanced by gathering participation with the trade partners (Christopher, 2016). The qualitative methods comprise of assumptions and intuitions but quantitative forecasting method is more scientific with use of mathematical and statistical tools. There are mainly qualitative methods, they are: Jury of Executive Opinion, Delphi Method, Customer Survey and Sales Force Composite (Tayur, et al. 2012). Whereas, there are four types of qualitative forecasting methods, they are: Trend variation, cyclical variation, Seasonal variations and Random Variations. As the business environment and the customer demand is shifting and where the situation is uncertain, analysts should rely on qualitative methods. They should forecast the future by analysing the past trends and patterns. To a degree, non-linear models are efficient to capture the degree of discontinuities however forecasting does not generally effort to deal with this issue (Hugos, 2011). Although according to scholars, there is a modest relation among the average forecast accuracy and inventory performance. The processes create related total costs but the less accurate process gives superior customer service. To meet the customer demand and cope with the shifting taste, the Coca Cola Company should introduce the Consumer survey method to trap the change in the customer demand and analyse the possible factors so that they can effectively face the changing challenges. An effective demand forecast ensures efficient planning and implementation of the resources for business sustainability (Ross, 2013). It is an essential part of demand management as it endows with an approximate demand and foundation for planning and taking effective business decisions. A difference in supply and demand would end in unnecessary inventory and also hamper the brand image. So, a successful analysis should implement both qualitative as well as quantitative analysis to fabricate forecast for planning process. Collaborative planning, forecasting, and replacement is a method in which organizational departments work mutually to build up equally satisfying strategy and take accountability on behalf of their activities (Wisner, et al. 2014). 

Conclusion:

The above study was conducted to study the effectiveness of the four key flows in the supply chain, the make process and the supply chain forecasting of Coca Cola Company. Also, based on my analysis I have recommended development in the supply chain management. The report is an analysis from the point of view of a supply chain manager. This study has discussed the key flow in supply chain in context to product, financial, information and return flow of Coca Cola Company. Also, in the nest part the production process of the Coca Cola drink is critically discussed and according to analysis I have recommended how the process can be improved. Lastly, we have discussed about the significance of the supply chain forecasting in context to the selected organization. In the report we have discussed the importance of forecasting in business decision. The accomplishment of the forecasting purpose is extremely dependent relative on the point of organization support (Blanchard, 2010). In the contemporary business most of the multinational organizations understand the importance of forecast.

Reference:

Ballou, R. H. (2007). Business logistics/supply chain management: planning, organizing, and controlling the supply chain. Pearson Education India.

Blanchard, D. (2010). Supply chain management best practices. John Wiley & Sons.

Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

coca-colacompany.com, B. (2016). Sustainability - The Coca-Cola Company. The Coca-Cola Company. Retrieved 4 November 2016, from https://www.coca-colacompany.com/topics/sustainability

coca-colacompany.com, C. (2016). History and Heritage - The Coca-Cola Company. The Coca-Cola Company. Retrieved 4 November 2016, from https://www.coca-colacompany.com/topics/heritage

Coke’s Muhtar Kent: ‘Innovation Starts and Ends With the Consumer’. (2016). The Coca-Cola Company. Retrieved 4 November 2016, from https://www.coca-colacompany.com/stories/coke-s-muhtar-kent-innovation-starts-and-ends-with-the-consumer

Hieber, R. (2002). Supply chain management: a collaborative performance measurement approach (Vol. 12). vdf Hochschulverlag AG.

Hugos, M. H. (2011). Essentials of supply chain management (Vol. 62). John Wiley & Sons.

Ross, D. F. (2013). Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Springer Science & Business Media.

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Tayur, S., Ganeshan, R., & Magazine, M. (Eds.). (2012). Quantitative models for supply chain management (Vol. 17). Springer Science & Business Media.

Van Weele, A. J. (2009). Purchasing and supply chain management: Analysis, strategy, planning and practice. Cengage Learning EMEA.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: a balanced approach. Cengage Learning.