Question:
Discuss about the Transport and Distribution Management of Coca-Cola.
Coca-Cola Company is one of the greatest known global beverage manufacturing companies with operation in over two hundred countries across the world. The company through its manufacturing plants produces over four hundred daily shipments and it is responsible for over 1000 points of deliveries, the creation of 4,000 finished products as well as over 5,000 thousand packaging materials and ingredients. The company operates in various countries with operations that require heavy logistical operations leading the company to seek a suitable way of delivery without incurring unnecessary extra costs (Coca-Cola, n.d.).
Up to until, 2009, Coca-Cola had no a specific standardized transportation management system. This presented a major challenge to its logistical operations and further affected their vision 2020 on business strategy goals. The challenges further arose from company’s inability to determine a suitable supply and chain management partner who would manage the company’s logistics activities to the expected level. The company needed to understand the logistics costs involving an external operator, in their bid to increase their level of inventory and continuous increase in the sales every year; according to their business objectives.
Coca-Cola, therefore, started their projects and in the year 2009, they brought on board Future Logistics Optimization; Oracle’s supply management partner to support full implementation by early 2010 (Flo Group, n.d.). Through their association, Flo managed to develop a lasting fully integrated operations system. The system included the use of electronic data in reporting activities and freight payments. This was made successful by 2011, and to date, the company manages inbounds and the outbound through the online system. The company standardized its operations and in the year 2012, they selected Oracle Transportation Management which is responsible for managing all the inbound supplies between the plants and their networks.
The extent of the Coca-Cola operations across the globe means that the company has a diversified system of trading terms. The company operates within a wide range of countries under separate management. Sometimes the regional manufacturing plants are responsible for the management of all the logistical procedures and policies depending on the country of operation. Being a global company, Coca-Cola has to cope with extreme variation in international laws and the trading policies that are used in the countries of operations.
Therefore, on the factor of Incoterms considerations, Coca-Cola has applied different strategies depending on the country of operation and also depending on the choice of the supply partners or carriers. For instance, the division of the Coca-Cola Company depending on the region, such as the Coca-Cola HBC for Europe and Coca-Cola Sabco for Africa means that the distribution needs of the company sometimes are solved within the market sphere of the specific countries. The selection of the Incoterms addresses the business terms of the company towards its buyers and suppliers (Coetzee, 2010).
Coca-Cola Company practices a variety of Incoterms, but the commonly practiced in the line of their transportation activities include Delivery Duty Paid (ADP), which involves the company paying all the charges involved in delivering the goods to the buyer (distributors). Secondly, the company uses EXW-Ex Works. In this case, after the production process, the registered distributors take the full responsibility of the product from the company. Then lastly, the company also applies the Carriage Paid To (APT), whereby the company pays for the freight charges and all the carriage charges to the point of destination. From this point, the distributors and suppliers take charge of the products. There is, however, other Incoterms that a company might put to use including the Carriage & Insurance Paid To (CIP).
The CIP would be reasonable Incoterm for Coca-Cola since most of the company’s transportation activities are addressed within the firm (Genesis Capital Management Group, n.d.). However, the incorporations of these Incoterms may pose a challenge for the company given the complexity and diversity of the company’s operations. It is quite difficult for the company to unify all of its trading policies across the world. While some rules remain universal, issues related to Incoterms could be adjusted to suit the needs of the company depending on the prevailing trade terms and policies. Therefore, flexibility is fundamental.
The carrier selection criteria of the Coca-Cola Company consider a number of factors. There are a number of several factors to consider when selecting a carrier for your logistics solutions. These include the environmental soundness. The selected carrier should be environmentally sound in regard to issues such as carbon emissions and other environmental agendas. Associating with a company with a poor reputation in environmental pollution may lead to the poor brand image. Secondly, efficiency and reliability are paramount. The selected carrier should be an efficient operator in the delivery and the time management to avoid delays and other unnecessary losses. The last but not least factor is the cost efficiency. The carrier selected should be economically affordable, and generally with reasonable freight charges.
Coca-Cola Company with diversified operations across the world has most of its carrier services addressed regionally. Furthermore, the company has significant developed an integrated internal carrier system with their own trucks and containers for the supply and distribution of their products to their warehouses and pick up points. Secondly, their carrier system deals with the transportation of the ingredients and the packaging materials (Coca-Cola, n.d.). However, these are just some of the internal mechanisms. The company has other carrier needs across the globe.
The company had for a long time struggled with a harmonized logistics systems. And for this reason, they brought on board Oracle Transportation Management. Oracle is a reputable supply management software provider handling transport issues for globally renowned brands including Heineken. They formulated a fully integrated system that addressed all the supply chain management and logistics through an automated system. Through this system, Coca-Cola can easily manage all the inbound and outbound transportations through online mechanisms. The system is also used to store all the carrier records. This system is used by the company in association with their Carrier partners such as ITECO Corporation.
The relationship between the Company and the Carriers should always be smooth. This is in relation to business terms. The good relationship involves a variety of factors, which are affected by the freight charges, the contractual terms and the technological factor among other factors. The good relationship between the company and the carriers should be enhanced by the positive relationships in terms of honoring the contractual terms and fulfillment of the agreements without the breaching. It is fundamental for such relationships to remain as professional as possible and only within the stipulated contract terms. Every party has to honor their part; the carrier to deliver the supplies safely and in time and the company honoring their payments on time. This enhances trust and continued business relationships.
The Coca-Cola Company maintains a very professional carrier relationships and it has set a number of regulations and policies to manage all of its supplier conducts. With the company having a substantial externally outsourced carrier system, they put very strong measures to ensure that they meet all the criteria from the technological point of view, their freight charges, their freight capacity as well as their efficiency and reliability of their operations.
The significance of contract negotiations is important in the carrier relationship management. It sets the tone for the subsequent business operations. Therefore, the terms of the contract should include further extra charges and some of the cost-saving mechanisms that can be used for both the company and the carrier. There should be transparency including the availability of freight data, and continuous contact in all aspects that affect the business association between the company and the carriers. This relationship can be enhanced sometimes by use of the external outsourced broker, who acts as a link and manages all the carrier relationship management on behalf of the company and the carrier.
Conclusion
The Incoterms have diverse characteristics and they vary according to the business needs of the people involved. They can also be complicated depending on the mode of the operations a company employs. This is evident in relation to Coca-Cola’s global operations. The company had not, until 2009, developed an extensive and a harmonized transportation system. The other important point to note is that the Incoterms are mostly used in the global logistics and freight management. They are the regulating policies that guide the traders on the best available logistics charges to adopt and consider in the transportation and delivery of goods.
While the Coca-Cola Company uses a variety of Incoterms depending on the prevailing business situations; their complete incorporation of the terms is faced with a lot of challenges that have been addressed through the diversity of the company’s operations. The professional carrier relationship is attributed to effective Human Resource management (Hussain & Ahmad 2012). The human resources department is responsible for the strategic alignment of a company (Shen et al. 2009). Turner, Huemann & Keegan (2010), outlined that through the human resource, there is coordination of operations and this has been Coca-Cola’s strongest point.
References
Coca-Cola. (n.d.). Our Company. Available at https://www.coca-colacompany.com/our-company
Coca-Cola. (n.d.). Purchasing Terms and Conditions for All Suppliers. Coca-Cola Bottling Co. United and Affiliates. Available at https://cocacolaunited.com/wp-content/uploads/2015/03/Terms.pdf
Coetzee, J. (2010). INCOTERMS as a form of standardization in international sales law: an analysis of the interplay between mercantile custom and substantive sales law with specific reference to the passing of risk. Dissertation presented for the degree of Doctor of Law at the University of Stellenbosch.
Flo Group. (n.d.). Coca-Cola Case Study. Future Logistics Optimization. Available at https://www.flo-group.com/casestudies/coca-cola-transport-management/
Genesis Capital Management Group. (n.d.). Genesis Incoterms Definitions & ICUMSA (International Commission for Uniform Methods of Sugar Analysis). Available at https://www.genesisny.net/Commodity/Sugar/SugarINCO.html
Hussain, M., & Ahmad, M. (2012). Mostly Discussed Research areas in Human Resource Management (HRM) – A Literature Review. International Journal of Economics and Management Sciences, 10-17.
Shen, J., Chanda, A., D’Netto, B., & Monga, M. (2009). Managing diversity through human resource management: an international perspective and conceptual framework. The International Journal of Human Resource Management.
Turner, R., Huemann, M., & Keegan. (2010). .A Human resource management in the project-oriented organization: Employee well-being and ethical treatment. International Journal of Project Management.
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