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The industry we have chosen is beverage industry. There has been change in the dynamics of business environment that characterized by economic uncertainty and volatility in beverage industry, which made companies to rethink their current business strategies in an effort to become increasingly adaptable and flexible.
The supply chain of the beverage industry is normative, in that sense that the supply chain wants to establish a general understanding of the underlying principles. Understanding the supply chain is a prerequisite to managing it. The tasks are threefold:
1) To develop a framework for analysis
2) To recognize the systematic nature of the supply chain, and
3) To identify the processes those are involved.
Because supply chains become global in geographic scope, it is necessary to recognize the implications of an environment with another set of influences, stemming from both factors relating to individual host countries and the phenomenon of the global corporation.
COMPONENTS OF SUPPLY CHAIN:
The main components involved in the supply chain are shown in the above diagram. Different components are described as follows.
SUPPLY CHAIN STRATEGY:
A supply chain strategy determines the nature of procurement of raw materials, transportation of materials to and from the company, manufacture of the product or operation to provide the service, and distribution of the product to the customer, along with any follow up service and a specification of whether these processes will be performed in house or outsourced. Given the firms are rarely completely vertically integrated, it is important to recognize that the supply chain strategy defines not only what processes within the firm should do well but also what the role played by each supply chain entity is.
Logistics and facility costs incurred within a supply chain change as the number of facilities, their locations, and their capacity allocation is changed. Beverage Companies must consider inventory, transportation and facility costs when designing their supply chain networks.
Inventory and facility costs increase as the number of facilities in a supply chain increase. Transportation cost decreases as the number of facilities is increased. If the number of facilities increases to a point where inbound economics of scale are lost, then transportation cost increases.
The supply chain network design is also influenced by the transformation occurring at each facility. When there is a significant reduction in a material weight or volume, as a result of processing, it may be better to locate facilities closer to the supply source rather than the customer. Total logistics costs are a sum of the inventory, transportation and facility cost. The facilities in a supply chain network should at least equal the number that minimizes total logistics cost. A firm may increase the number of facilities beyond this point to improve their response time to its customer. This decision is justified if the revenue increases from improved response outweighs the increased cost from additional facilities.
Procurement is a process in which the supplier sends product in response to customer orders. Managers must decide on the structure of procurement of direct as well as indirect materials and strategic as well as general materials. In each case, it is important to identify the critical mechanism for increasing supply chain profits. For example, a firm should set up procurement for direct materials to ensure good coordination between the supplier and buyer. In contrast, the procurement of products should be structured to ensure that transaction costs are low.
Information is a key supply chain driver because it serves as the glue that allows the outer supply chain drivers to work together with the goal of creating an integrated, coordinated supply chain. Information is crucial to supply chain performance because it provides the foundation on which supply chain processes execute transactions and managers make decisions. Without information, a firm cannot know what customers want, how much inventory is in stock and when more products should be produced or shipped. In short, without information one can only make decisions blindly. Therefore information makes the supply chain visible to a manager. With this visibility a firm can make decisions to improve the supply chain performance.
SUPPLY CHAIN PLANNING:
The goal of supply chain planning is to maximize the supply chain surplus that can be generated over the planning horizon given the constraints established during the strategic phase. Companies start their planning phase with a forecast for the coming year of demand in different markets. Planning includes making decisions regarding which markets will be supplied from which locations, the subcontracting of manufacturing, the inventory policies to be followed and the timing and size of marketing and price promotions. In this planning, companies must include uncertainty in demand, exchange rates, and competition over this time horizon in their decisions. Given a short time frame and better forecasts than the design phase, companies in the planning phase try to incorporate any flexible built in to the supply chain in the design phase and exploit it to optimize performance. As a result of the planning phase companies define a set of operating policies that govern short term operations.
The consistency and support between the above components and other functional strategies is very important.
DIFFERENT FIRMS INVOLVED IN SUPPLY CHAIN:
Through the application of the Supply Chain Management, the beverage companies are trying to radically reduce costs and inventory cost. Supply Chain management facilitates the development of integrated relationships, real time information transfers and moving towards a 'push rather than pull' distribution system. The focus is on increasing the flexibility amongst upstream suppliers, in response to the strategic power of the dominant supermarket chains, through the closer integration of external enterprise relations. Inter enterprise integration, represented by supply chain management, is strongly related with, and dependent upon, the effective implementation of intra enterprise integration.
The supply chain involves a variety of stages. They include:
*Components/Raw material suppliers.
Each stage in a supply chain is connected through a flow of products, information, and funds. These flows often occur in both direction and may be managed by one of the stages or an intermediary. The appropriate design of a supply chain depends on both the customer's needs and the roles played by the stages involved.
The various stages in a supply chain can be best referenced from the flow diagram below:
In the initial stages, raw materials are procured through various suppliers and transported to the manufacturing unit. At the upstream part of the supply chain, the partnership with the suppliers of agricultural raw materials is essential to maintain high environmental standards and to encourage dissemination of best environment practice. Many companies work in partnership with farmers and growers, offering appropriate technical advice, training and contributing to relevant research projects to improve the quality, efficiency and productivity of agricultural production. After the procurement they are blended with several products viz. water thereby leading to the desired product. The container for the product is manufactured at a location different from that of the product. Both the product and the container are then put through processing and filling to be enabled to be put through product testing and release. Lastly the final output is obtained which is then sent to warehousing for distribution and merchandising through different modes of transport. After all the necessary transactions are finalized, the product is available for sale in the market.
The risks that unexpected events pose to this supply chain
Raw material cost get changed
Quality of the product
Products get spolited eg: cheese , milk etc
Customer preferences may get changed it should be checked.
Treat of new enterents
Procurement from suppliers may get tough task
Use of technology is very imp in supply chain
Demand variability may be perceived as a source of disturbance and discontinuity in manufacturing. Various demand-forecasting models corroborate the fact that demand variability is an important factor in managing the sc. The jit/mass customization approach has renewed focus on demand variability and its impact on the design of the manufacturing process. Demand variability arises in two forms. It may be caused by the existence of a broad product mix, which may also vary over time. Automobiles manufacturers typically provide a wide variety of options (color, seating arrangement, top, doors, different window design etc.) thus, practically ensuring that they never produce two cars in a row that are exactly alike. They must learn to cope with demand variability in the form of volume variability. Suppliers to retail sales channel often experience considerable variability in sales on a seasonable basis as their customers make holiday, beginning-of-school and other seasonal purchases. Volume variability may be experienced by a manufacturer of a single product line, or may compound the already complex management problem of broad product mix. Thus breadth of product line and variation in demand volume are both sources of demand variability with which SC must cope source of demand variability with which sc must cope.
Supply variability has also been widely recognized as source of disturbance for a manufacturing operation .Models to set safety stock levels and recorder points all recognize uncertain delivery lead times and variable incoming material quality as factors scrap and rework factors are accounted for in setting yield factors in materials requirements planning systems. Minimizing supply variability is recognized as a basic tenet of the JIT system
As with demand variability there are different dimensions of supply variability,First the number of different parts to be procured is certainly a source of complexity similar to that introduced by the number of different products along of different suppliers located at different locations as well
Timely delivery of parts and quality of parts contribute to supply variability. Despite improved relationships with supplies, uncertainly as to delivery and quality may be an issue to be resolved
RAW MATERIAL COST GET CHANGED
This is one of the risks for supply chain when inflation occurs cost of the raw materials gets increased. Even demand for the raw materials gets increased so that production get decreased due to within the investment no of units got decreased in with the amount of investment. Due to that price will increase eventually per unit. Coca cola raw materials are caffeine, carbonate water, sugar, bottles,
QUALITY OF THE PRODUCT
Quality of product will effect supply chain in a way that ingredients used in the coca cola if at all caffeine used in coca cola is in larger amount, users will switch to the non caffeine products in beverages like fruit juices and energy drinks. In the manufacturing process certain security steps is to be taken to control the quality. Beverages like coca cola will expire within 3 months of the manufacturing that will effect the supply chain if at all lot of inventory is in the market. Dealer will not order for the next load. From the past five years there are many issues on the ingredients which the coca cola is using.
Now a day's market depends on customer preferences which are going to lead the market. Based on the customer manufacturer will manufactures the product demand of the product depends on customer preferences. Customer will switches to another product based on the preferences, so that demand will decrease that will again risk for the supply chain, customer preference is based on taste color and trust.
TREAT OF NEW ENTERENTS
As a beverage industry it is easy to enter the market but difficult to capture the market. As a new entries customer will definitely taste the newly enter product. Coca cola will face the newly entry product but it effects to supply chain process as the inventory increased in the market so that dealer will not order for new stock. As a beverages coca cola faces local makers of fruit juices and badam milk and energy drinks.
PROCUREMENT FROM SUPPLIERS MAY GET TOUGH TASK
The process of obtaining goods and services from preparation and processing of a requisition through to receipt and approval of the invoice for payment. it may get tough task from the supplier because of the following reasons 1) standards determination 2) specification development 3) supplier research and selection 4) value analysis 5) price negotiation 6) supply contract admiration 7) inventory control 8) disposals 9) financing
USE OF TECHNOLOGY
Use of technology is very important in supply chain to increase the sales of the product and to decrease the inventory. With today's emphasize on cutting costs and streaming expenses, many companies are looking to improve their bottom line with more effective supply chains. Supply chain includes a company's entire manufacturing and distribution process. They involve every step of the production from planning to manufacturing and distribution process. They involve every step of the production from planning to manufacturing to handling defective goods. The overall goal of these chains is to keep all of the components (i.e .vendors, ware house , etc.) connected
The operation of transportation determines the efficiency of moving products. The progress in techniques and management principles improves the moving load, delivery speed, service quality, operation costs, the usage of facilities and energy saving. Transportation takes a crucial part in the manipulation of logistic. Reviewing the current condition, a strong system needs a clear frame of logistics and a proper transport implements and techniques to link the producing procedures. The objective of the paper is to define the role of transportation in logistics for the reference of further improvement. The research was undertaken to assist logistics managers, researchers and transportation planners to define and comprehend the basic views of logistics and its various applications and the relationships between logistics and transportation.
NEW TECHNOLOGIES USED IN SCM OF COCA COLA
New technologies used in supply chain management of coca cola are ERP. ERP is the short form for enterprise resource planning. The aim of ERP is to integrate the functions of the different business units and departments such as finance, operations, accounting and human resources. This integration is necessary to organize and coordinate information that may be scattered in different department and making them available in an organized format to the different decision center where they may be needed. Through this integrative approach, the different functional units of the business are able to share a common database, exchange information, and have consistent view of the their operations. This consistent view is also presented to the customer thus improving the quality of customer service. With the integration of the information system, the different functional departments work together to achieve common organizational goals and objectives. Without such integration, common customer services such as order processing would be difficult to track and inconsistent information may be relayed by the different departments
Coca-cola implemented an ERP solution from SAP. They were looking for away to increase and quicken their return on investment by reducing the cost of hardware upgrades and maintenance.
Quicker and better ROI.
Low total cost of ownership
Easy server-based computing printing
Access to multi-media content
We considered the product in cool beverages as Cheers tagline "Makes you fresh" which we are going to launch in the market. For which we are considering Supply Chain Management, Order Processing, Inventory Management, Warehousing, Transportation, Material Handling and Storage, Logistical Packaging and Information System to make our product Cheers competitive product in the market.
SUPPLY CHAIN NETWORK FOR CHEERS:
"A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves."- from Chopra and Meindl in their book Supply Chain Management: Strategy, Planning, and Operations.
Before considering the supply chain for Cheers product we tried to make decisions on five important areas:
Production can make the company more responsive, delivery of the product would be shorter. And thus if the efficiency is desirable then the company can build the factories with the very little excess capacity.
Inventory acts a major role to make the company more responsive because stocking the product at many locations can make the product available to the customer immediately.
We are using Location approach to make our company more responsive where our company opens up at many locations which make us physically close to the customers. Like for example Dell serves the large geographical markets from few central locations and it performs the wide range of activities.
Transportation also acts the major role in our company because responsiveness can be achieved by transportation mode which is flexible and fast.
Information can be used to check whether other four supply chain drivers are performing well or not. It can be used to collect the data about what is the customer demand? , feedback about the product and by collecting the feedback from the customers we can change the defects in our product.
SUPPLY CHAIN OF OUR PRODUCT CHEERS:
The above supply chain is a supply chain used for manufacturing the finished product and delivering the product to the customers.
This is which we are going to implement for the product cheers.
By using this PILOT Study we can analyze the customers view on our product by knowing the customer desire on our product we can do small modifications on our product.
Advertising acts the major role which can be used to introduce the product into the market and which will also make the product get recognized by the customers. It is nothing but best communication process between the product and the customers.
Pilot study is one type of advertising which can be used by the company.
In our distribution channel the numbers of middle men involved to make the product reach the customer or consumer from the company are:
This supply chain can be used to make our product reach the customer or consumer from supplier, these middle men can used to improve the profit and also reduce the price of cool drink because cost of the product get reduced by decreasing the number of middle men in the distribution channel. This is distribution channel is very important for our product cheers because it acts the major role to reach our product to customers or consumers. We are also trying to outsource our product to make easy availability of our product to customer or consumer which will also increase our efficiency. We are also using PUSH STRATGY to make our product efficient for this reason distribution network acts major role.
Our company management also following TQM (Total Quality Management) Method to maintain the quality of our product at each level.
Logistics is nothing but the activities that occurs within the boundary of a single organization where as supply chain is that which refers to the network of the companies that works together and which coordinate their actions which deliver a product to the market.
Order Processing is one of the core business processes which are done to look after whether the work has been done properly and systematically without any problems occur when the product is prepared or manufactured. Order processing main goal is to concentrate on the external customers, directly add value in a noticeable way, it is also used to check that there is no problem being faced by company or machines which are working for preparing the orders for the consumers.
Our companies produce cool drink with the name of the product as cheers. This product demand grows at the time of summer and in winter its demand is less when compared with summer. We main goal is that the availability of our product should be easier to the customer or consumer, efficient. So order processing plays a vital role in the operation.
Three important dimensions of Order Processing are:
â€¢ Logical Control
â€¢ Information Processing
â€¢ Organizational Setting
Order Processing is a set of decision functions to keep the co-ordination between the demand and production. At operational level planning decisions mainly related to making order agreements like accepting orders from customers, promising delivery time. These logical decisions mainly depend on production possibilities.
It is related to processing on information like customer orders contain information about the demand specified by the customers and these specifications are translated to production orders and other agreements. The ordering process not only concerns the processing of order information through the company but also includes the matching of information with respect to customer demand and the state of production system.
It is related to discuss about the co-ordination and influence of the de-coupling of the departments have on the ordering process. The co-operation, the relationships and degree of interdependence among the actors participating in the ordering process, as well as the clarity in tasks and responsibilities seem to be of significant importance when a company formalizes the ordering process.
Inventory spread in the supply chain which includes everything from the raw materials to the work in progress and to the finished goods which is held by the manufacturers, distributors and retailers in supply chain.
We want our company to be very efficient rather than very responsive so that there will be no fluctuation in the demand of the customers and easy availability of the product to the customer on time.
There are 3 basic decisions for creating and holding the inventory:
â€¢ Cycle Inventory.
â€¢ Safety Inventory.
â€¢ Seasonal Inventory.
It is important thing which is needed by the company or factory because it stores the goods which are in surplus.
The beverages the cold storage and normal warehouse is very important to store the product and the demand for it is more in summer time but in winter comparatively less so it maintain inventory to store the products.
We need warehouse in two different ways like one is for storing raw materials by which we will manufacture them as finished goods and to store this finished goods.
Transportation referred to movement of everything from the raw materials to the finished goods between different facilities in supply chain. There are six types of transportation:
â€¢ Air transport
â€¢ Electronic Transport.
The trade-off between responsiveness and efficiency are manifested in choice of transport modes. Our company use road transport as a transportation mode which is not very responsive but very efficient and convenient. This transportation mode not more costly like Air transport but at the same time is not very cost efficient like Ships and Railways. This transportation mode is very easier and more available.
MATERIAL HANDLING AND STORAGE SYSTEM:
Material handling is very important for beverages because after the production the product should be stored safely and securely so that the product does not get destroyed and it will remain safe. The management should take care about the finished good until it entered into the process of distribution channel and it reached to the customer. It completes the first phase of the product. Transportation facility should be flexible.
Our company has its own storage inventory to store the finished product and the raw material safely and securely without getting damage to them.
Logistical packaging means packaging the product and transferring the product to the outlets which is nothing but packaging the product properly and transporting the product to the outlets and to the places where the product get sold. The packaging should contain different assortments according to the customer availability and the product usage.
The packing should be attractive, convenient, shape of the product, wrapping and size etc. Our product packing mainly depends on requirements of the customers with their convince like family package and individual availability and even it should be convenient to the distributors also. The packing of the product manly depends on size of the bottle and shape of the bottle.
Information system is based upon which to make decision regarding other four drivers in the supply chain. Information system is a connection between all the operations and activities in the supply chain.
Information system is the system where the information is transferred from the consumer to the company and from the employee to the head of the company to know that the company is running in a systematic manner and to know what the consumer wants out of the company and to see that what new thing or changes is needed in the company to go further and increase the company production and increase the growth of the company.
Our company uses the information which is obtained from the customer and promotes the product.
Consistency and support between various components of the supply chain are very important. The information flow between different firms involved in the supply chain gives a strong foundation for the effective supply chain.
After research on supply chain of coca cola some of the risks I noticed in supply chain process that are demand variability, supply variability, raw material cost get changed, quality of the product, products get spoiled, Customer preferences may get changed it should be checked, treat of new entrants, procurement from suppliers may get tough task and Use of technology is very imp in supply chain due to this demand and supply got decreased so that it will effect to supply chain process in order to overcome this some precautions as to be taken to overcome the supply chain risk and to follow new technology that will help u in the supply chain that will increase the sales of product coca cola follow new ERP system for the supply chain. The aim of ERP is to integrate the functions of the different business units and departments such as finance, operations, accounting and human resources.
We launched a product in cold beverages as "CHERRS" for which we used a supply chain and distribution channel to make our product competitive in the market. We used PUSH Strategy for this product which is nothing but more efficient than more responsive. We mainly concentrated on the major five areas Production, Inventory, Location, Transportation and Information.
We also used PILOT Study to get feedback from the customers and to analyze the product condition in the market. For this product we used good road transportation mode to make our product easily available to the customers. We used attractive packing to attract customers. We made our product available in different assortments. We used different advertizing techniques to make our product get recognized by the customers or consumers.
Finally all these functions are made to get more number of customers and especially to get loyal customers and to get succeed in the competitive market.