The Coca Cola Company Supply Chain Essay
The Coca Cola Company Supply Chain
In the given report the major components of the supply chain management of The Coca-Cola Company has been discussed. It is stated that the company is the leading brand in the food and beverage industry and has been serving the society since March 1994. There are many changes took place in the supply chain process of the company. As the business of the company is totally depend upon the demand of the product in the market and to meet demand they must have an effective supply chain system. To have an effective supply chain system they have to look various value adding concepts and then make strategy to meet the increasing demand of the product in the market.
Since the company is doing good but still they have to keep an eye on the changing era of the market and choose their suppliers accordingly who can provide them with material on timely basis with specific quantity and quality on the given location. It is very important for the company to understand the procedure of the procurement to select a reliable supplier. They also need to identify the various risks included in the process of supply chain so that they can reduce them and enjoy more profitability. At the end, last but not least, they also have a duty towards the society and nature which they must take care and make strategies to avoid the wastage of water.
The Coca-Cola Company has been serving the society since March 27, 1994 and is one of the leading brands in soft-drink and beverage industry. The company is based in Atlanta, Georgia. It is invented by John Pemberton & was known as the patent medicine. But later in 20th century it is taken out by a businessman Asa Griggs Candler, whose marketing tactics made coke the leading brand in the food & beverage industry. It is now sold in more than 200 countries. The vision of the company is to be a highly efficient company where people can work effectively with a goal of profit maximization and can also serve the various communities of the society. The mission of the company is to create a value which makes the difference by refreshing the world and inspiring the happiness and optimism of the world. The company has produced many other products like coke-zero, diet-coke, Caffeine-free-coke, coke-vanilla, coke cherry, Fanta & Sprite
The Value Adding Concept
The value adding concept plays a very crucial role in the success of a business. It helps in increasing the value of the product & reducing the wastage in a company’s supply chain. The basic concept of this term is to how to make the supply chain that effective that it results in the profitability of the company. And one can make their supply chain process more valuable by maintaining strong relationships with suppliers or by using technology. Thus, by doing so, one can add the value to its supply chain process and transform it into value chain. A product or service can only be valued when it fulfils the need and expectation of the customers. So, to be a great value provider one needs to evaluate the needs and expectations of the customer and tailor its products according to their needs. In the case of Coca-Cola there are various value-adding factors which have an impact on the supply chain of the company. Those factors are: Customer need: The need of the customer is the first factor which has an impact on the supply chain process of a company. Sometimes company has to create the demand of the product and somebody there is already demand of the product in the market.
So, to compete in the market and to create a demand company made strategy to set up the vending machines for coke product after every 500 meters, it makes people develop the taste of the product, instead of going to some other product like Pepsi. So, these kinds of strategies helped the company to make the demand in the market which has a positive impact on the supply chain process of the company. Taste of the customer: Since coke has come out with different tastes like coke-vanilla, coke cherry, caffeine free coke, Fanta, sprite, which has a variety of taste. This provides the customer an opportunity to go for their product according to their taste and according to their needs.
As in a food & beverage industry things go with the forecast, by looking to the taste of the customer they manage their supply chain processes. Reliability: Reliability is one of the most important factors which have its impact on supply chain. In this, the contractor and supplier have to be reliable on each other. It works on the assumptions that the supplier has the enough raw materials to meet the requirements of the contractor on the required dates, and contractor has an effective work plan through which he can utilize the resources in an effective way without resulting in leaving the large quantities of the resources on the site.
Cost of the production: In the past two years the rise in the prices in food and beverage industry led to increase in the prices main ingredients in food and beverage industry. It has an impact on the strategic alliances, cost cutting prices, supply chain mergers etc. this resulted in that worker faces the continuous cost cutting and restructuring and sometimes companies turns to cheaper ingredients. But as, Coca-Cola is the world’s leading brand in the food & beverage industry they has to exert pressure in keeping the prices down by maintaining their brand image and the same taste for the customer. The goal of any company is to maximize the profits and reduce the wastage while fulfilling the needs of the customers. It is very important to reduce the wastage and have an effective supply chain system so that the product reaches to the customer timely and the company can enjoy more profits.
According to the factors discussed above the supply chain structure which we would suggest is that the company first should identify the need and taste of the customers which is to get refresh instantly with a tasty drink which they can prefer again and again according to their nutritional values. After identifying the needs they supposed to look for the reliable suppliers so that they can get timely delivery of the products on cheaper rates. As if the cost of production is high then there is no point of selling the product in the market.
Anyway, the customer will not going to purchase this kind of product on a higher rates. As we all know that transportation and logistics costs are the critical supply chain cost drivers, the company should use some economic packaging and transportation measures to reduce the cost of transportation and packing. Basically the company should use a push-supply chain strategy. Since they have developed the taste for the customer now only they need to make the forecast & supply the product in to the market. The only thing need to do is to control their transportation and logistics cost.
Procurement in supply chain Management
Procurement is said to be the purchase of goods and services. It is very important that the purchased goods and services are up to the mark and at the best possible economical price which meets the quality, quantity, time and location requirements of the customers. Many companies follow a certain process while selecting the supplier for the required products so that they can minimize the any kind of fraud and collusion and meet the requirement of the customer timely. It is considered to be a strategic advantage and taken as a value adding component to the whole process of the business. It has totally changed the world of older procurement processes. In the present era the procurement and sourcing functions are managed at both strategic and operational levels. These days’ managers are more interested in building supplier networks, reducing their costs etc.
These days all the paper work is managed on the ERP systems which intend to be much safer then paperwork. Basically a procurement process starts with the supplier selection and ends up with the placement of the order with the appropriate supplier. But there are other things also which we need to take into consideration, such as: We need to identify the opportunities: Opportunities are said to be the business requirement for a product or service like computer programmes, equipment, raw material, transportation carriers etc. Basically it means the need of material and resources needed to produce a product or service. We need to analyse the situation: It includes the purchase order and statement of work. On the basis of these things we can select our supplier. Say, if we need to supply an urgent order so, we will select such a supplier who can provide us the material within a short span of time, with specific quality and quantity requirements.
So, by taking these two factors in to consideration we can able to classify our suppliers. These are said to be the first two steps of the procurement process. Since we are aware of the situation and we also know that, what are the resources we need to produce the product, now we will evaluate the number of suppliers available in the market, and then on the basis of various supplier criteria we will select the best supplier and make a strategic sourcing plan. Evaluation of Supplier: Evaluation of a supplier begins with a list of potential suppliers present in the market and then an assessment is made on the basis of various factors such as: Availability of updated equipment and facilities and whether there is any scope of expansion in future or not On the basis of processes involved with supplier such as quality control, processing time, working conditions etc. Management Capabilities of the supplier that whether it is skilled, has a good and reliable team, has a long range strategic vision etc.
On the basis of available information systems, that whether the supplier is using up to date programmes and trainings. Since, we have assessed the suppliers, now we will evaluate them on the basis of Planning and control systems: Sophistication of planning and control systems has a crucial impact on the supply chain performance of the company. There are various factors which need to be considered such as the updated information system, planning material, capacity needs, key performance measures taken by supplier to provides the best quality, quantity and price on time and the simplicity to interact the customer with supplier’s planning and control systems. Environmental regulations compliance: This is to ensure that all the corrective measures are taken to prevent any hazard to the nature.
This includes the proper disposal of the waste, and taking corrective measure to reduce the pollution. SO, the ability to control all these measures is also be considered while selecting a supplier. Weighting point method: In this method a weightage is given to each supplier on the basis of different factors such as quality, delivery, price, service etc. They have given points out of hundred on the basis of their performance in the above given sectors and then a decision is made that with supplier the company should deal. Minimal typical evaluations: This is the easiest and quickest method to evaluate any supplier. Companies use this method in the times of emergency. In this kind of method the decision is made on the basis of best price offered, best quality offered, best service and the timely delivery of the product is offered. Since we have made an evaluation for the suppliers now we will create a strategic sourcing plan.
A strategic sourcing plan requires the procurement to analyse and manage the change in such a way that benefits of the procurement strategy can be seen. The whole plan must be created in such a way so that all the benefits defined in the strategy can be delivered on time and all the changes must take place according to the realistic time plan. Sometimes the implementation of the plan is very time consuming and has a high failure rate. So, to minimize the risk, the whole strategy must be well planned, and well communicated, all the areas which impact the business plan must be taken extreme care. While the strategy getting implemented all the results and key milestones must be measured to ensure the success. Risks involved in the supply chain management of Coca-Cola Company The four types of the risks in the supply chain management of the Coca-Cola Company are: 1. Political risk: Since Coca-Cola is the leading brand in the food and beverage industry and has an influence in all the countries but still there is some political risk to the company, like any shifts in the legislation or any actions and sanctions of governments can make an impact on the supply chain process of the company.
2. Operational Risk: Coca-Cola has big operations and has the latest technology but nothing is perfect in this world and a machinery can breakdown at any time, since the company has taken various preventive measures but still there are some risks related to the failure or breakdown of the machinery or change in the technology with the pace time can affect the supply chain process of the company. 3. Demand Risk: Risk of demand is uncertain and very high, It is totally depends upon the likeliness of the customer. If the customer likes the product, then demand is very high, if customer start disliking the product then the demand gets low and company has to bear the losses.
So, this is the biggest risk then others because the main function of the company is to maintain the number customers and keep increasing them. So they have to increase the pace of demand to enjoy the more profits. 4. Economical risk: Last but not least, economical risk is also a very important risk which needs to be considered. Any kind of economic shifts, labour costs, exchange rates, recession or change in custom policies can also affect the supply chain process of the company. To overcome from these risks the company should take proper measures and a general risk managing strategy is given below.
As we all know that a political risk cannot be managed, but it can be reduced by making good relations with the political party of a country and showing them the benefit of your plan. Operational risks can be avoided by continuous maintenance of the machinery and upgrading the technology with regular interval of times. Well, demand risk is the only factor with uncertainty; it can be reduced by getting the regular feedback from customers regarding the product by conducting various surveys and campaigns. The other way of reducing it, by doing regular Research and development with new products in other segments like drinks with new flavours, making ice creams with existing flavours etc. The economic risk can be managed by various activities like hedging etc.
Green Issues of Coca-Cola
Green issues play a very important role in the expansion of the Coca-Cola Company. The have published a Water Steward Replenish Report which states that water is an significant part of the world, as two-third of the population lives in the water. As the price of the water is rising and it is also an important component of the supply chain of Coca-Cola Company. The four best practices they are considering to manage the water risks such as: 1. Start at Home: To conserve the water Jeff Seabright, Vice president, water and human resources suggested faucet aerators to make an awareness to conserve the water. 2. Understand the risk: it is a huge risk for a company like Coca-Cola, Even sometimes they have also faced water supply issues. In context to reduce the risk they have donated their water risk geospatial information to the world Resource Institute’s aqueduct database which enabled many companies governments and investors to create a water risk map with high detail and resolution.
3. Develop and evolve a strategy plan: The Coca-Cola Company has included the water into its SWOT analysis and made a serious discussion on points like what if their competitor invested in clean tech water technology? What if the supply of water cuts down? Now these types of questions are included and have given a serious discussion which also affects the society and nature. 4. Involve various types of contacts as partners: The company has involved various green teams to keep a check on the conservation of water and to save money
Recommendations and Conclusion
In order to conclude I would like to say that Supply chain management is a significant part of the operations of any company. With appropriate use of the supply chain strategies a company can select a good and reliable supplier and manage the risks related to the supply chain of the company. With this, the company also should take care of the environmental issues. At the end I would like to recommend The Coca-Cola Company that to compete in the market they should keep a regular check on their supply chain process and keep improving it with the changing era. To capture an competitive advantage they must keep on innovating new products and try their hands in other sectors of food and beverage market.
The value chain: Adding value to the supply. (n.d.).
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