Coca Cola Supply Chain Essay.
1. Executive Summary
This report comprises of findings, global strategies, strategic fit and recommendations with respect to The Coca Cola Company (TCCC) supply chain management of the beverage product Coke in North America. All findings are based on secondary research from relevant websites. All sources of information have been added into the References and Appendix for referral.
The report starts off briefly about TCCC’s global market position and summary of their suppliers and customer base. Following which, the flow of TCCC’s supply chain were described.
TCCC’s global strategies and efforts were identified in accordance to the company’s supply chain and the flow of information in the supply chain. The global strategies identified were namely: global diversity and sustainable communities. After which, TCCC’s global strategies are assessed against their supply chain to see if they are strategically fit.
Lastly, recommendations are provided in accordance to their supply chain and global strategy. The two recommended improvements to TCCC are being transparent with their information and share it across their supply chain and to improve their quality control checks.
By adopting these changes into their supply chain and global strategy, TCCC will be able to better align themselves with their business goals and experience a growth in their beverage sales.
2. Company Overview
2.1. Company Background
TCCC is currently the largest beverage company in the world. As a market leader in the beverage industry, they feature more than 3,500 different types of products which covers sparkling beverages, still beverages, juices, ready-to-drink coffee and waters. Some of the brands that TCCC offers includes Sprite, Fanta, Diet Coke, Honest Tea, Simple Orange and many more (Coca-Cola at a, n.d.). With their large and well developed supply chain and distribution channel, they are able to reach out globally to more than 200 countries in the world.
2.2. Company suppliers and customers
TCCC adopts a franchise model where they sell their beverage bases or syrups to more than 250 bottling companies worldwide. TCCC monitors all of their suppliers closely to ensure the quality of the products supplied. They ensure the suppliers meet the standards required by the law and follow their Supplier Guiding Principles and be environmentally sustainable.
The report would be focused on the soft drink Coke in North America’s market. Being the bestselling beverage for the company, Coke is sold in most of the countries in the world. The soft drink captures potential market of teenagers, athlete and working adults. The company is trying to target a bigger market regardless of age, ethnic groups, sexes and even lifestyle. To catch up with the increasing trend of having a healthy lifestyle, they have created drinks such as Diet Coke and Coke Zero. They strive to reduce cost, improve quality and provide service and support to tailor to customers’ needs.
3. The Flow of Supply Chain
The supply chain of a company shows all of the parties who are involved either directly or indirectly in the process of satisfying consumers’ request. The supply chain will also show the movement of product and the flow of funds and information. TCCC’s supply chain consist of six different stages. The six stages of the supply chain are supplier, Coca Cola Company, bottling companies, distribution centres, retailers and finally the consumers. (See Figure 1) TCCC aims to provide tailored services to customers all around the world with their constantly improving supply chain. Firstly, the suppliers will supply the raw materials to TCCC for production of concentrated beverage base in their plants.
The concentrated beverage base will then be franchised to the bottling companies. For the production of Coke, bottlers will have to combine the concentrated syrup with other materials in a certain fixed ratio. Next, they bottle the drink into respective containers. After the inspection, the bottled drink are packaged and delivered to distribution centres. The distribution centres will consolidate and deliver the products to the retailers who will then sell to consumers. 4. Global Supply Chain Strategies
TCCC aims to satisfy consumers’ needs and expectations through company’s improvement and implementation of global supply chain and strategies. With the 3
supply chain strategies, TCCC is committed to achieve global diversity and sustainability in communities. The sustainable communities refers to reducing environmental harm, nurture good work environment and increase economy in community.
TCCC believes that it is essential to get trustworthy suppliers to ensure best quality of concentrated syrup produced every time and having a good corporate citizenship will help in promoting future success of the business. The first step in achieving the best suited supply chain would be getting reliable and consistent supplier. TCCC strive to achieve supplier diversity by offering more opportunities for the minorities, women and even lesbian, gay, bisexual and transgender (LGBT) suppliers. Under the Supplier Diversity Mentoring Program, training and assessments are provided by TCCC to the supplier to better position and improve the growth of their operations.
TCCC also created the 2nd Tier Supplier Program to get Coca Cola’s main suppliers to work together with the women and minorities suppliers. This increases procurement opportunities and stretched our company’s network into more markets. TCCC came up with their own set regulations and policies which includes the Supplier Guiding Principles (SGPs), Human Rights Policy and Code of Business Conduct for Suppliers. The SGP conveys the expectations of the suppliers’ workplace policies and responsibility towards the environment. These policies, trainings and assessments are necessary for continuously updated to follow the company’s progress.
4.2. Bottling Companies
Being the largest beverage company, TCCC partners with more than 250 bottling companies all around the world. These bottling companies are responsible for bottling, packaging, merchandising and marketing Coca-Cola beverage products. Some of the authorised bottlers are Coca-Cola Hellenic in Eastern Europe and Coca-Cola Enterprises (CCE) in Western Europe. Most of the bottling companies are independent from TCCC.
Coca-Cola Refreshment (CCR) is a subsidiary of TCCC after TCC decided to acquire it from CCE on October 2010. They focuses mainly on the Northern America market. Other than the concentrated syrup from TCCC, CCR requires other raw materials such as aluminum can sheet from Novelis Inc., PET bottles, high fructose corn syrup and carbonate. CCR is part of the Coca-Cola Bottlers’ Sales & Services Company LLC (CCBSS). CCBSS is a limited liability company and is owned by Coca-Cola bottlers in America (Seasonality.n.d.). CCBSS helps in facilitating and procuring strategies and systems to the bottling companies in America. In order to achieve efficient purchasing, CCBSS consolidates the purchases of raw materials for all bottling companies in America.
The bottlers made an effort to be environmentally sustainable through recycling, reusing and usage of lighter weight package. To encourage recycling, recycle bins are placed everywhere in public. The use of lighter packaging helps in reducing the carbon footprint as well as reducing the amount of material used (See Figure 4). They also use recyclable PET bottles that are made partially from plants (Our progress, n.d.). 4
4.3. Distribution Centres
TCCC have many distribution centres and warehouses around the world. All distribution centres and warehouses are controlled by TCCC. To better enhance their global commitment, TCCC initiated the 5by20 program. TCCC hope that through this program, over five million business women all over the world would benefit from it. Under the 5by20 program, the women entrepreneurs would receive training, financial resource and mentors from TCCC. In America, the 5by20 program is currently under incubation in Haiti and Mexico. These micro-distribution centres will be in-charge of delivering Coca-Cola beverages to local retailers, helping TCCC to gain easy access to more hard-to-reach communities and markets (See Figure 2). TCCC tried to make the delivery process more effective through the transformation of the delivery truck.
The packaged Coke in the warehouse are now delivered to the retailers using the Order Fulfilment System (OFS) trucks instead of the traditional sideloading delivery trucks. These OFS trucks allows CCR to load and deliver products in America more conveniently through palletized orders. The palletized order allows driver to unload just one cart filled with different products ordered by the customer. This will reduce the delivery time and increase the amount of orders delivered. Not only so, the trucks are more fuel efficient as compared to traditional delivery trucks, incurring a lower transportation costs.
The distribution centres in America delivers the beverages to retailers in different area through the Interstate Highway System route. The Interstate Highway system interlinks provides business routes for companies to enter the central business district in each city, making it more convenient for the delivery trucks to deliver the products around America. The vehicle routing software is also implemented to make the delivery process more efficient. The transportation planners will be able to use this software to design which route to take to reduce the time taken and distance travelled to deliver the product to the retailers.
Retailers who purchases the Coca-Cola soft drink includes restaurants, small businesses and international retailers. Retailers are platforms for consumers to purchase Coca-Cola beverages. They are important in the supply chain as they have direct contact with the consumers.
TCCC provides customer training and development when necessary, especially to those smaller businesses. TCCC hopes that through the programs, it will help the retailers be more efficient and profitable in their business. To further help the retailers to be economically sustainable, a global initiative AIM-PROGRESS is implemented. This initiative offers joint trainings either physically or virtually globally covering responsible sourcing.
TCCC also have their own vending machines. The vending machines are designed to increase interaction between the company and the consumers. TCCC are also known for using their unique vending machines to spread happiness or spread awareness. Some of the vending machines includes getting people to mimic the dance moves in South Korea and Hug Me vending machine in Singapore (See Figure 3). These interactions encourages healthy living into people.
The consumer is the most important source of revenue for the company in the supply chain. TCCC hopes to capture as many people in the market as possible regardless of age or lifestyle. Coke is a more popular choice of drinks among the teenagers and middle class consumers. With the increasing number of teenager and middle class consumers globally, this is particularly favourable to the company. TCCC offers a diversity of beverages to cater to different lifestyles. To target the health conscious customer group and address the obesity issue, Coca-Cola Zero, Coca-Cola Diet and beverages with low or no calorie are available in the market. The company would also get people to exercise through efforts such as the interactive vending machine as mentioned in 4.4.
4.6. Flow of Information
The sharing of essential information is important across the supply chain. TCCC came up with the Coca-Cola Retailing Research Councils in order to communicate more efficiently and effectively throughout the supply chain. The Coca-Cola Retailing Research Councils would conduct market research on a periodical basis with regards to the possible factors which may affect the beverage industry. When there is a change, the supply chain will be notified through a collaborative website. TCCC also uses the SAP application in order to improve the flow of information in their existing supply chain. The implementation of SAP in North America has helped in monitoring and maintaining consistency. Information is shared across the supply chain and thus every segment is notified on what is going on.
5. Strategic Fit
Strategic fit is the key to having supply chain profitability and consistency. In order to achieve strategic fit, all parties in the supply chain need to work towards the same goal. They also need to make sure that the goal is relevant to customers’ requests. For TCCC, their strategies fit their supply chain. The nature of the beverage industry is that the profit margin is low, the product life cycle is short, intense competition and high demand fluctuation. This means that TCCC needs to have a very efficient, responsive and well developed supply chain in order to fulfil customers’ requests. TCCC’s supply chain is able to maintain the speed of product flow through their extensive and distributive network. The company have many distribution centres and over 2.4 million delivery points all over the world to help them in the distribution of Coke.
Also, TCCC uses the just-in-time and the total quality management strategies in support with the rest of the supply chain. The collaboration in using these strategies helped in minimising the disruptions that may be caused by problems such as the safety stock. It also reduce delivery time and produce better quality products. TCCC’s strategies are in line with their principles. It is a challenge for TCCC to standardise the packaging and production across all the bottling companies across the world. However, the implementation of strict rules and frequent assessment by TCCC enables the consistent packaging requirements and the quality of Coke. In line with their focus to attain customer diversity, TCCC tries to lower the cost through their 6 supply chain. As mentioned in 4.3, transportation cost is reduced by planning the delivery route wisely and using fuel saving trucks to deliver the products to retailers.
6.1. Information Sharing
TCCC could improve the transparency of different levels of their supply chain. The transparency of the supply chain has been getting more important as internet becomes more accessible. Consumers wants to know more about the process and ingredients of the products as they are worried for the safety and quality of the product. They are also more concerned on what impact does the manufacturing of the product do to the environment.
With the increase in scrutiny by the social media, being transparent with the company’s supply chain will help in getting trust from consumers, especially those who focuses on the sustainability and corporate social responsibility. By trying to be more transparent, it encourages the company to be on a constant lookout for any potential or existing risks or problems and solve them before getting media attention. TCCC could also make use of the transparency to minimise any information gaps.
6.2. Improvement in Quality Control
TCCC have stringent control on suppliers to ensure that the ingredients received are of good quality and consistent. However, it is not just the suppliers that constitute to the overall quality of the beverage drinks produced. The choice of ingredients made by the company also influences the quality.
In America, the sweetener, aspartame, is used as an artificial sweetener in Diet Coke. The aspartame gives Diet Coke a taste that is similar to sugar. TCCC uses aspartame as a sweetener in many of their diet beverages. However, the aspartame have negative effects on human if drunk. According to the Medical Daily, aspartame contains high dosage of toxic which could cause neurological problems and depression. Reports also proved that aspartame will result in greater weight gain as compared to consuming sugar (See Figure 5). The negative effects caused by aspartame affects the quality of the beverages and tarnish TCCC’s reputation. The usage of aspartame results in contradiction with one of their strategy which is to promote healthy lifestyle.
Although aspartame is currently one of the most common artificial sweetener found in many food and beverage product, TCCC could source for another alternative that does not have any negative effect and meet their healthy lifestyle strategy. If used effectively, it could be one of the company’s competitive advantage against other competitors. The drop in sales due to use of aspartame can also be picked backed up.
In conclusion, TCCC has a well-developed supply chain and an extensive distribution network through their corporate social responsibility efforts. Although the supply chain and strategies are quite developed, there are still rooms for improvement. If TCCC constantly improve themselves and keep up to the rising trends, the company will be able to grow and advance further.
5by20 markets. (n.d.). The Coca Cola Company. Retrieved November 29, 2014, from http://www.coca-colacompany.com/5by20-map/#TCCC
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