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CCHBC focuses on a Four A's credo in order to sustain its constant and growing demands in its markets: Availability, Affordability, Acceptability and Activation. Their operations strategy cleverly brings their processes together to form a supply chain that extends beyond the physical walls of the organisation and reach further involving suppliers and customers to help achieve their strategic goals.
CCHBC follows the proposed order of sustainable competitive advantages suggested by the Sand Cone Model. By focusing on achieving quality, dependability, flexibility and cost the company has been able to build up competitive advantages concerning all four elements.
The availability approach focuses on placing CCHBC's range of products within easy reach of their consumers the right package, in the right location, at the right time. To achieve this, they focus on developing strong relationships with their customers to ensure that the right products are in stock, highly visible and readily accessible wherever and whenever consumers may desire them.
Operations management is highly accountable for guaranteeing product availability by optimising production planning. CCHBC uses a SAP-based Advanced Planning Optimizer (APO) to coordinate operations within their whole network. This facilitates the alignment of supply chain and demand planning to achieve sales and operations planning efficiency. With operations fully coordinated, their intelligent production and better and faster supply chain offers a high degree of response, speed and agility.
The affordability approach focuses on offering affordable choices to customers through a vast variety of desirable, premium quality products, in appropriate packages for each market, for each occasion and at the right price. The aim is to reach as many consumers as possible while taking into account the differing levels of purchasing power in the countries in which they operate.
Both operations management and marketing have a significant impact on being able to provide affordability to CCHBC's customers. On the operations side, supply chain efforts which are centred on providing the necessary manufacturing flexibility to support the broadening of their product portfolio. Whilst providing variety is an important strategy for creating value to customers, CCHBC continuously introduces new products and packaging innovation which contribute to complex and costly production processes. The higher the complexity, the more difficult it is to achieve efficiency. CCHBC have realized this and according to their 2009 Annual Report they've streamlined their product portfolio, by reducing the range of product package combinations sold. They also started adopting the use of multilingual labels for a number of products in various territories.
The acceptability approach focuses on ensuring that CCHBC's products are acceptable to consumers across every market. Persistent control, effective customer service, outstanding efficiency and optimal route-to-market enables the company to supply an extensive and growing range of products that meet the highest quality standards in each country, increasing their acceptability to consumers.
Operations management is able to help achieve this by providing persistent quality control and efficient distribution channels. The company's route-to-market strategy is focused on adopting the most effective means to ensure the full availability of products in the marketplace and build lasting relationships with outlet owners. However, considering there are 1.4 million shops, restaurants, supermarkets, discount chains and other businesses that sell the company's beverages, building and managing these relationships is complicated and time-consuming.
On the other hand, marketing is responsible for understanding their consumer needs and accessing the most effective communication channels. This helps them to involve customers, retailers and suppliers in the processes of product development, modification and planning. It also allows the rapid development of new products or innovative packaging to be tested in-store prior to product launches, for example. Only by combining this with effective operations, CCHBC are able to reach out to customers and consumers in each of their markets and meet their demands.
The activation approach focuses on motivating consumers to choose their products by providing them with the right price for the right brand, in the right occasion. By improving their product availability and attractiveness at the point of purchase and by building brand strength in their local markets, CCHBC activates consumer demand. Marketing professionals work in close cooperation with their customers and invest in the placement of coolers and vending machines, the provision of signage and other point-of-sale materials, the implementation of local marketing and promotional initiatives, all in order to generate impulse sales.
Operations management practices don't impact directly CCHBC's ability to activate consumer demand. However, they have an indirect participation as are responsible for providing quality products at the correct price.
2 Capacity Management Approach
The success of an organisation is greatly determined by their ability to meet customer demand and to respond promptly and effectively to changes in this demand over time. Only an effective approach to capacity management will enable this to be achieved. According to Barnes (2008), the aim of capacity management is to match supply and demand. If capacity is insufficient the company risks having many dissatisfied customers and losing prospect sales as consumer demand can't be properly met. If capacity is excessive, costs will generally be higher than necessary as resources won't be fully utilised.
CCHBC's approach to capacity management is to match capacity to demand. This strategy relies heavily on being able to produce reliable future demand forecasts, which is notoriously proven to be a difficult task. Whilst this seems to be the most appropriate approach for this company, it still means the organisation is not able to meet sudden upturns in demand as capital investment decisions can typically involve a long lead time. Barnes (2008) points out that decisions involving adding capacity should be made within the necessary lead time as in some cases it can take years to devise the necessary structure and equipment.
CCHBC consider that production planning based on long term forecasting is no longer necessary. Instead, they have opted to operate a continuous planning process. Krajeski et al (2010) agree, as they affirm that forecast accuracy declines as the forecast horizon lengths. However, Barnes (2008) disagrees asserting that forecasting future demand is important both in long term and short term scenarios. He defends that long term forecasts are needed when planning investment in new facilities and equipment and short term forecasts are important to manage effectively existing capacity.
At CCHBC, a dedicated forecast manager is responsible for using historical sales information and consumer data to produce a weekly demand plan. Whilst this approach is based on the use of scientific methods and data mining tools, accuracy is still an issue. Unfortunately, independent of the number of forecasting methods used by an organisation, none of them are particularly accurate in predicting demand. Barnes (2008) affirms that nonetheless any forecast is almost certainly better than none as it forces managers to think about the future and consider how they can best respond to changes in demand.
Assuming a quantitative method based on time series analysis is used, CCHBC are using the past to predict the future, which might not always be the case. A casual analysis should also be utilised in order to help them identify relationships between demand and relevant happenings, such as exceptional weather, advertising campaigns and major sports/music events.
Although not clear in the case study, it's very likely that they also use qualitative methods such as market surveys and scenario planning to assist them in forecasting demand. These methods are based on estimates and judgements made by either customers or managers but again cannot guarantee accurate forecasts.
Their continuous planning process is also heavily dependent on achieving a consensus plan amongst all relevant senior managers. This approach can be considered valuable as it is designed to satisfy the targets and limits of all involved. However, it relies heavily on effective communication and outstanding teamwork of all members which is something far from easy to achieve. Unless relationships are very tight and teamwork is exceptional members could tend to focus more on their individual targets rather than the team's goal.
Most challenges faced by CCHBC as a result of their capacity management approach are eased by fostering good relations and partnering with customers, suppliers, retailers and other members of the supply chain. The organisation has an extended and complex supply network which makes it more difficult to manage, however it's not an impossible task. Dedicated teams and the Group's Chief Procurement Officer manage relationships with suppliers both and Country and Group level.
A firms' capacity management approach should be constantly revised as capacity planning decisions have implications for all members and processes in the supply chain as well as various departments within the organisation. Therefore, the whole chain should be designed for effectiveness. Agile supply chains are more capable to meet unpredictable demand surges as they are action-oriented, competitive and driven to perform.
3 Supply Management Approach
The nature of CCHBC's supply chain is both global and local. Suppliers are sourced from a variety of locations throughout the world to make a product demanded by consumers also located globally. CCHBC has a global sourcing network with facilities in a number of countries. All activities are integrated and coordinated across the whole organisation and they've worked on building transparent and valuable relationships to deliver the best in terms of quality, cost, service and innovation.
These fair and mutually beneficial relationships are the key to the success of this supply networks. This increased dependence makes these strategic suppliers ever more important and supplier development is a necessity. Partnerships with the suppliers are established and CCHBC actively contributes with them to jointly improve processes, reduce costs and deliver innovation and efficiencies. By being directly involved, CCHBC is able to help by improving the suppliers' operational performance and developing their capability to improve. This way, CCHBC is able to demonstrate commitment both to processes and to suppliers. In return, this interaction helps to build trust, communication and commitment and has a priceless effect on the overall buyer-supplier relationship.
Establishing and maintaining these relationships is a complicated process that needs to be thought through and managed over time. Effectively managed supply chain relationships foster cooperation and trust, increasing supply chain coordination. In contrast, poorly managed relationships lead to each party being opportunistic, resulting in a loss of total supply chain profits. In the view of this, CCHBC has multi functional teams working with suppliers both at country and Group level to ensure quality and optimise efficiency. The organisation also employs a Group Chief Procurement Officer which has ultimate accountability for supplier relationship management.
Constant evaluation of supplier performance and regular inspection also help to insure that process and quality standards are aligned. CCHBC also works closely with The Coca Cola Company to approve all suppliers of key ingredients and primary packaging. This approval practice is carried out jointly by both companies and includes verifying processes, quality and capacity of potential suppliers.
Furthermore, suppliers are audited independently every two years to verify the compliance with strict business standards set out by CCHBC on business ethics, human rights, labour practices and environmental management. These standards are part of suppliers' contracts with CCHBC and must be rigorously followed.
The Coca-Cola Company has about 300 bottling partners around the world and together they make up the Coca-Cola System. It is the most extensive beverage distribution system in the world. The system is defined by its ability to create value for customers and consumers, which makes it unique among businesses. The sustainable growth of the whole system depends on the collaboration, support and shared values and goals of The Coca-Cola Company and its bottling partners. The Coca-Cola Company's relationship with their bottlers is crucial to their success, which allows them to conduct business on a worldwide scale while still maintaining a local approach.
4 Management Information Systems
It is widely known that good-decision making abilities and problem-solving skills enable organisations to reach its objectives and goals. Management information systems (MIS) can help an organisation to achieve these goals by providing an insight into the day-to-day operations of the company so that they can control, organise and plan more effectively and efficiently.
According to Oz (2004), the output of a management information system is information that sub-serves managerial functions. A variety of reports in the form of charts, graphs, tables, summaries, etc, can be produced, all aimed at supporting management decisions. Different reports are used in different contexts but all with the same objective, which is to provide an insight to the company's regular operations.
As the availability approach focuses on placing CCHBC's range of products within easy reach of their consumers in the right package, in the right location, at the right time, they need to ensure that consumers will be able to easily find their products. This means ensuring that products are in stock, high visible and readily accessible to consumers.
To guarantee availability of its products, CCHBC could use scheduled reports, produced periodically to monitor and control manufacturing output. The SCM manager could use a daily summary report to ensure he is meeting production targets. By ensuring his production capacity target is met he is effectively contributing to making the company's products available as set out in their business strategy.
Demand reports can be produced to fulfil requirements for specific information upon request. If CCHBC identifies that their products are not sufficiently available, they might consider building a new plant to increase capacity. To confirm the viability of a significant decision like this, they can use a demand report that will help them understand the effect of the amount of plant investment the will be necessary to provide the extra capacity for producing the additional products.
CCHBC could also use exception reports, which would be automatically produced when an unusual situation arises or when a problem requires management action. They would be generated when there is a production problem, for example. This would then enable the relevant manager to make a quickly, timely and informed decision in order to keep the production line fully functioning.
All of these reports enable the relevant managers to make the best decisions and solve problems according fully supporting the organisations' strategic planning and corporate policies. Production scheduling, inventory control, manufacturing resource planning and quality control are all activities that could potentially be optimised with the use of these various reports.
In fact, CCHBC realises the importance of business reports and according to their 2009 Annual report, they've been successfully rolling out SAP information systems which are expected to improve the efficiency of their entire business, by increasing the speed and accuracy of production, warehousing and sales functions, while increasing customer service levels.
Competitive advantage can be achieved by the effective utilisation of the management information system and its' reports as managers are supported whilst they work to achieve corporate goals. With an effective management information system in place, CCHBC can monitor the achievement of the "availability" credo identify problem areas and opportunities for improvement. By aligning company goals with customers' desires and needs, they can provide the right product, in the right location and at the right time.
5 Data Mining and Search Tools Analysis
"Coca Cola's acceptability factor demands, among other things, "effective customer service". Using specific examples, explain how data mining and related search tools can enable Coca Cola to analyse performance here."
The past century has seen an information explosion which has created new opportunities and problems in every field. The gathering of corporate data has grown exponentially in consequence of increasingly automated operations. Many businesses and organisations collect data in an attempt to improve the efficiency in their underlying operations. Once collected this represents a wealth of information that can be used to improved decision-making in every area of the business. But due to the voluminous amount of data, the challenge is understanding anything about what is happening rather than every possible thing. Fortunately we have enough computing power available to help us with this complex task.
Data mining is a collection of tools and techniques. It is the exploration and analysis of larger quantities of data in order to discover meaningful patterns and rules. It is one of several practices required to support a customer-oriented orgnisation. According to Berry & Linoff (2004), data mining implies that business actions should be based on learning that informed decisions are better than uniformed decisions and that measuring results in beneficial to the business.
Data mining is utilised because it can improve customer service, better target marketing campaigns, identify high-risk clients, and improve production processes. It is mainly used to help a company save money. Data mining can be successfully employed at the very beginning of a product lifecycle to lower costs during research and development. It can also be profitably employed to save money in manufacturing. Data mining also helps marketing professionals improve their understanding of customer behavior. According to Berry & Linoff (2004) data mining plays an important part both in advertising and direct marketing to identify the right audience, choose the best communication channels and pick the most appropriate messages.
However, to be effective data mining must occur within a context that allows a organisation to change its behaviour as a result of what it learns. When data mining is correctly utilised within the organization the whole company will be able to benefit from an increased understanding of its customers and market, a better-focused marketing strategy and a more efficient use of resources. This enables them to analyse that they are effective meeting customers' needs and demands and providing effective customer service.
According to Oz (2004) the main objectives of data mining are: sequence or path analysis, classification, clustering and forecasting.
By utilising data mining techniques, CCHBC can classify the vast information held in their large data warehouse adn
Berry & Linoff (2004) affirm that the promise of data mining is to return the focus of business to serving customers and to providing efficient business processes. This is very important in today's world, where we've learned that targeted marketing will lead to more satisfied and more profitable customers.
CCHBC's strategic supply chain management and operations approach is a success story. The company has been able to identify the real problems in production and their causes, which has enabled it to correctly address them. They've also had targets for improvement and accomplishment, which has helped the throughout the way.
CCHBC works hard to adapt their business to the changing needs of their customers. Recently they've initiated a number of customer-specific programmes. This aims to facilitate a cross-functional approach to planning for the purpose of better aligning the organisation with the way their customers do business. The goal of this approach is to create value for their customers.
CCHBC is a solid and very well managed company and its approach to establishing long-lasting relationships with customers, suppliers and retailers is a key aspect to success in today's challenging and aggressive business environment.
All of these practices are important building blocks of CCHBC's operations strategy. These are the forces that help shape them into a customer-driven and customer-focused organisation. Their operations function provides the basis of competitive advantage and set standards for the entire industry.
Appendix 1 - Teamwork Commentary
Groups were divided in class on Saturday 30 October. Our group was composed of the following members: Wasim Farook, Srini Krish, Candi Noldin, Maka Quparadze and Madhav Sharma.
A few days after the initial division, our group met for the first time. It was a very successful meeting and stage 1 of Tuckman's model for effective team working was achieved. In this forming stage there was little progress in terms of tasks but we managed to agree on how the project would be handled, as well as informally discuss a timetable and agree on next steps. We also decided it was unnecessary to nominate a team leader. The atmosphere was informal, comfortable and relaxed.
At the next meeting, we entered the storming stage. Even though there was still no progress in the assignment itself, we took the time to familiarize ourselves with the project and fully set out and understand each other's expectations. Communication and interaction were natural and easy as we already knew each other well and belonged to the same social group in class. All members had very high standards so it was easier to agree on what would be an acceptable presentation and how much work we'd be willing to dedicate to the project.
Discussions were successful and the team thoroughly talked about how to proceed with the project. However, due to diverse opinions, team members spent a lot of time explaining and defending their point of view and working out their differences. Overall it was a bit chaotic as all members wanted to talk, but a lot was achieved.
The third meeting was our most successful as we could clearly see that the whole team was engaged and fully aligned in terms of process and goals. Team members helped each other understand the important ideas. This could be classified as the third stage of Tuckman's model, the norming phase. There was no conflict and relationships were very cooperative. We were able to concentrate and significant progress was made. During discussion team members offered each other a chance to talk. Active listening was also very much practiced used during all discussions. Decisions were made fairly, after everyone had spoken.
We soon crossed into stage four - performing. When we reached this point we all had realised each other's strengths and weaknesses, and established what we were best at. We were open and trusting and a good presentation was produced as no one was afraid to offer ideas and suggestions.
Generally we did manage to easily overcome our problems and produced the required presentation. A few situations can support that we indeed worked effectively as a team, however many critical points were also ignored and in consequence working together was much more difficult than it could have been.
The team had unified commitment. Even though we didn't agree on everything, it was clear that all individuals were directing their efforts towards the goal initially established. There was also a very collaborative climate. The climate was of complete trust produced by honest, open, consistent and respectful behaviour.
All members realized from the start that to successfully work as a team, the benefits of collaboration far outweighed individual success. Therefore, team members were capable of reviewing other's work and providing constructive feedback which helped to improve the project.
From the beginning we did indentify a clear goal, which was to produce a great presentation. I believe we failed in not considering that working effectively as a team should also have been objective. Our structure was exclusively results-driven and no proper thought was put into the process itself.
We also concluded that the team should have had principled leadership. No team leader was specifically assigned and leadership of the group shifted from time to time At least two members clearly would have liked to be the dominant figures as they were constantly seeking to gain and retain power in the group.
The team work was completed on time and the presentation was successful and as planned. We were effective in the outcome which was to get the work done and deliver a presentation. However, we weren't as effective in working as a team.