Supply Chain Management In Coca-Cola: Planning And Control Issues

Discussion and Analysis

Discuss about the Supply Chain Management in Coca-Cola for Design to Grow.

For any company to be successful there needs to be consumer satisfaction in its products and services. One factor that assists in consumer satisfaction is supply chain organization. A customer will be contented if the goods reach them in the best possible state, usually the like the way they left the company. Therefore, it is essential that every company ensures efficiency in their supply chain to prevent mishandling of goods. If the enterprise decides to outsource the supply work, it has to ensure that they hire the best people to do so; else they might lose satisfied customers. It has to have a good plan on how the goods are to leave the production areas and reach the customers in the same or the best possible state. A company like Coca-Cola has to ensure that their drinks reach the market in a good state so that they can remain competitive against their rivals. The supply chain is also concerned with how raw materials get to the company at the lowest possible cost. For any company to maximize profits, it has to ensure that expenses are brought down as possible, especially transport costs of products to and from the company. Coca-Cola is one of the enterprises in the world that has a good supply chain. They have ensured that the chains are as short as possible to reduce the inefficiencies experienced in longer ones. This paper seeks to analyze the supply chain planning and control issues of Coca-Cola Company.

Coca-Cola is a multinational beverage corporation based in the United States. It specializes in producing, packaging, and marketing non-alcoholic beverages. Founded in 1886, the Coca-Cola company has grown to be among the largest companies globally in terms of revenue and market share (World of Coca-Cola, 2016). Part of their success comes from having an efficient supply system that has enabled them to reach customers from all over even the ones in remote areas. From the company, there are other intermediaries involved in ensuring that the beverages reach the final consumer regardless of where they are. In their supply chain, there are distributors or wholesalers, retailers, suppliers, manufacturers, the company itself, and the consumers. Undoubtedly, there is efficiency in the supply system as these products still reach the customers at competitive prices. Thus, even after all the intermediaries; the consumer can enjoy the beverages at a lower cost compared to other rivals.

In supply chain management, there are various factors which are crucial to ensure efficiency. According to Huang (2013), these factors are known as logistical drivers. They include facilities, inventory, and transportation. Additionally, there are cross-functional drivers which include information, sourcing, and pricing. Therefore, for the supply chain to be as effective as possible, the company involved has to put these six factors into consideration.

Facilities are crucial in the chain as they provide storage for the manufactured goods. Therefore, these physical locations are essential to the chain as they store products nearer to the market. The consumers can then have the goods in the market in a short time rather than have to wait for them to come from the factory. A company should select these facilities strategically to reduce the costs of transportation to the market. Coca-Cola has facilities all over the world in the form of a franchise (Huang, 2013, p. 21). The company just transports the secret formula to these locations located in different regions and they in turn complete production. Thus, the customers can access the products in a shorter time and a good state as they are produced in their vicinity. This method keeps the supply chain short and hence effective.

Another factor that is crucial in the supply chain is the inventory. The inventory includes all materials needed for the production and the final products. They include raw materials, equipment, labor, and the finished goods. Therefore, for the company to serve the demand, these factors have to be present (Huang, 2013, p. 21). With raw materials, equipment, and labor, the company can produce the goods needed by different consumers at a time. Hence, for the success of the supply chain, all these factors should be available.

Another factor that is crucial in the supply chain is transportation. For the supply chain to be successful, there has to be a means of moving the inventory from different points. Raw materials have to be moved from their place of origin to the factory. Additionally, the finished goods have to be transported from the factory to the market. Thus, transportation is a crucial factor that is needed in the chain. The company should select a means of transportation after considering several factors such as cost, speed, and quantity that can be transported at a time (Huang, 2013, p. 21). If the market is far away from the factory, the company can consider air or sea transport. Again, when deciding whether to use air or sea, the nature of goods should be considered. Bulky products are best transported via sea or railway if the areas are accessible to these means. Coca-Cola mainly transports their products through the air, although other means are applicable if the intended destination is not far away.

Information is another key factor in the supply chain that every company should strive to enhance. A good communication system between suppliers, the company, distributors, and retailers ensures that the products take minimal time to get to the market. Coca-Cola Company has invested in great communication systems which enable it to track the consumption behavior of their customers. Information assists planning in the chain and an excellent communication model can increase the profitability of a venture (Huang, 2013, p. 22). Therefore, the company can know the areas where consumption is high and decide to increase distribution centers or expand the current ones. In these distribution areas, the company can store the products ensuring that customers do not have to wait. Communication with the other members of the supply chain also informs them of areas that need more attention and those that are potentially profitable ones. The company keeps track of weather patterns so that their products are directed to the right markets at the right time (Boardroom Insiders, 2015). For instance, during the cold season, consumption may decrease, and it would be a waste to keep supplying these areas with the soft drinks. On the other hand, hot seasons call for an increase of supply to the regions experiencing such weather.

Another factor that is crucial in the supply chain is sourcing. The company involves other parties to assist in the distribution of the product to the final consumer. These parties include wholesalers, retailers, and logistic companies among others (Huang, 2013, p. 22). For large enterprises such as Coca-Cola, these parties are essential in availing the goods to the final consumer. The company relies on Coca-Cola Enterprises (CCE) in the distribution of the beverages after production (CokeCCE, 2016). One of the primary reasons for the success in their supply management is the presence of resources to improve their efficiency. CCE makes sure that they have the latest technology to assist in the chain. For instance, it opened an automatic storage and retrieval system in one of their distribution in the Netherlands. The facility, located in Dongen, now has a system that can automatically move cans and pallets of bottles. This assists in easy retrieval and hence faster transportation to the intended market (Boardroom Insiders, 2015). Additionally, the company is usually in the forefront to test and acquire new technology that can assist them in increasing efficiency. Technology is a major factor influencing the success of businesses in the current business environment. For instance, new ways of transport lower expenses incurred in availing the goods in the market. The company that is determined to acquire the best technology will have greater efficiency in their operations (University of San Francisco, 2016).

After many years of producing and marketing their products, the company has achieved large economies of scale which enable them to sell to wholesalers at very low prices. Therefore, they can produce at significantly lower cost than their other rivals in the industry (Buzacott, 2014, p. 204). Subsequently, these distributors and wholesalers can sell to retailers at slightly higher prices and still earn a considerable profit. The retailers can then avail the products to the final consumers at a fair price. It is important to note that a good supply chain could positively influence the performance of any company. For instance, if the wholesalers hike the prices of goods with the aim of making more profit, the retailers will be forced to sell them at a higher price to the final consumers. These may lower the demand for such products thus hurting the company’s performance. Hence, the company has to use a very efficient supply chain that will contribute to their success.

A supply chain also requires employees who are motivated to push the company forward. Through incentives, the company has ensured that employees are motivated to be efficient in their assigned areas. The company has the required resources to hire the best people to assist in the supply chain management. The franchise also employs competent individuals with proven track records. For instance, Ronald James Lewis, the supply chain chief in CCE has a vast experience in the sector through both internal and external exposure (Boardroom Insiders, 2015). A good relationship between all stakeholders is crucial as they hold a large stake in the success of the venture (Liu, 2012, p. 122). Suppliers have to deliver raw materials on time, and at a reasonable price to enable the production of high quality and affordable soft drinks. Therefore, for the success of any supply chain, there has to be a good relationship between all parties involved.

To improve their efficiency in supply all over the globe, Coca-Cola has also incorporated a franchising model in its operations. Through this model, the company only produces the primary raw materials to be used in the manufacture of the soft drinks. These basic raw materials, which include syrups and beverage bases, are then sold to the different bottling partners spread all over the world (Srivastava & Verma, 2012, p. 316). Thus, these partners can produce the final products in the areas where the consumers are located. Coca-Cola Company has eased the operations in the supply chain as they do not incur costs once they provide the syrup to the franchises.  This method makes it easier to manage the supply chain from the company to the final consumer. In other enterprises, the final product comes from the company, and it has the role to ensure it reaches the intended consumers. Through this franchising method, the company has eliminated the bulkiness of transactions in the chain of supply. Each franchise has exclusive rights to handle a region thus the chain of supply is shorter and well-organized. Short chains are easier to manage, and the products can reach the retailers promptly (Manufacturing global, 2016). This model saves on transport costs which would be incurred if the final products were to come from the parent company. The company has managed to establish its presence throughout the globe throughout his method. The parent company just supervises the production process in this franchise also operating under their name (Liebowitz, 2016, p. 32). These primary raw materials consume far lesser space and costs and increase the efficiency of the chain. The franchise then complete the production process by adding other required ingredients, such as carbonate, sweeteners, and water. Then, they bottle the drinks and distribute them to wholesalers who later sell to retailers. The franchising method also enables market segmentation in different regions of the world. Hence, they can meet the needs of different consumers all over the globe. Other than Coca-Cola Enterprises, the company also owns shares in a large franchise such as Coca-Cola Amatil, Coca-Cola Hellenic Bottling Company, and Coca-Cola FEMSA.

As seen, the company has its presence all over the world due to their method of distribution. The franchising method enables them to serve consumers globally without having to incur heavy costs in the supply chain. They keep the formula of the base secret to avoid duplication thus enhancing control of the market. The Coca-Cola Export Corporation (TCCEC) is the corporation with exclusive rights to distribute the concentrate to all other affiliates companies in the world (The Coca-Cola Company, 2016). Although most of these franchise are independent, Coca-Cola gives the directions on bottling and branding of the final product. Hence, the soft drinks in different regions will be similar, yet their finishing is done in different companies. Through this, the company has managed to gain dominance in the industry in many parts of the world (Butler and Tischler, 2016, p. 59). Recently, the company opened up another bottling company in Mozambique, Africa. The new plant, the largest in the region, will widen their African market considerably (Mano, 2016).

Coca-Cola enterprise (CCE), the main franchise operating in Western Europe produces and sells Coca-Cola products in the region. It mainly sources raw materials locally hence the supply chain is short and fast (Boardroom Insiders, 2015). The company receives the major raw material from Coca-Cola Company and then adds sweeteners and other ingredients to produce the finished product (Computer Sciences Corporation, 2016). The final drink is obtained through mixing the secret Coca-Cola syrup and other additives (Nestle, 2015, p. 13). One main benefit is that they mainly serve the local population, and hence supply expenses are minimized. In 48 hours, the company can ensure that the drinks are on shelves of supermarkets and other areas of demand.

Due to the long period of operation, Coca-Cola has been able to develop and strengthen the supply chain globally. Using the same route over an extended period creates a repetitive task which is easy to follow. On the other hand, companies supplying goods for the first time may have several challenges in their way before finally discovering an efficient chain. Rather than the company basing all the production in the headquarter factory, it has ensured that smaller companies are serving different regions (Gong, 2013, p. 47). The primary goal of associating with these other companies is to break down the complex supply chains that would be involved in serving consumers all over the world. The company has strived to keep its supply chains short to increase efficiency in the system which is vital to their success. The customer has to receive the beverages in good quality and without delays. Long supply chains only increase the time taken to reach the final consumer and increase the final cost. For example, if there are many intermediaries, in this case, the soft drinks would be expensive, and their rivals would take advantage of the situation to gain price leadership.

Coca-Cola also makes strategic investments that improve the delivery of their products to the market. In the past, the company has been involved in mergers, acquisitions, and purchase of shares. For instance, the company bought shares in Coca-Cola Bottlers Philippines Inc. in 2012 to bring their ownership at 51% (NoticiasFinancieras, 2012). One of the major factors that Coca-Cola Company considered is the large market for their products in the Philippines. Through this, the company will have greater access to the Philippines market. Additionally, it acquired a large franchise in Northern America to assist in their expansion in the region (Taylor, 2013).

Coca-Cola Company has succeeded in having an efficient supply chain, and this has been one factor that has contributed to their success. Their model of distribution reduces the complexity and bulkiness in the supply chain saving time and money in the process. Their chains are short and fast hence the customer can receive the beverages at an affordable price and in the reasonable time. One recommendation would be that they should invest in areas where their presence is not yet strongly felt. For instance, Africa has a large potential to drive the profits of the company even higher. In the remote areas, the company can partner with the government to develop transport facilities to enable movement of their goods more efficiently. Therefore, the company should be involved in development projects aimed at establishing their dominance even in remote areas. The company should seek to tap these potential markets early before their rivals establish their presence in them.

Conclusion

In conclusion, it is crucial for a company to have an efficient supply system that makes certain goods or services provided by the company reach the consumer in the best state. In the case of outsourcing the supply, they should look for the best companies available by considering their equipment, personnel, and performance in earlier contracts. Other factors that are essential in the chain include inventory, sourcing, information, transportation, and physical facilities. Consumer satisfaction should be the major aim of a company that plans to keep making profits in the long run. Coca-Cola has ensured that their products reach the consumers fast and at an affordable price. Through their franchising strategy, they have managed to establish their presence globally. The approach also assists in reducing the cost of transport of the products from the head company. Instead, they manufacture the syrup and sell it to their partners who then finish the production and bottle according to the set guidelines. The company can hence avail soft drinks to the customers with minimal costs increasing their profit margin. Their vast resources enable them to acquire the latest technology which in turn increases their efficiency. It also maintains a good relationship with other stakeholders which is critical in the production process. Additionally, there is good communication in internally and externally which assists them to make informed decisions.

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