Coca cola is a multinational company with operations spanning almost all the regions of the world. The company offers convenient foods, beverages and snacks in more than 200 countries with more than 400 brands. Despite the elaborate global operations, the company doesn't produce the final drinks by itself. Instead, Coca Cola produces only the syrup and concentrates that are used to make the beverages. Franchisees receive the concentrates and syrup and use them to make the final products. The parent company holds interest in most of the franchisees and distributors scattered around the world. Given the secret nature of its manufacturing processes, production costs cannot be ascertained with accuracy. The exact ingredients used in the manufacturing are not known but it is believed that it is made up of high fructose corn syrup, aspartame, sucrose and citrus concentrates (Coca Cola, 2012; Blanchard, 2010).
Coca cola has a geographical and functional organizational structure comprising of Eurasia and Africa, Europe, Latin America, North America and the Pacific. Each continental division is headed by a vice president. The continental operations are further subdivided into regional divisions headed by regional heads. These are further subdivided into even smaller regions allowing the company to have a local orientation despite it being a global company. On the functional categories, the company has a human resource division, a bottling and supply chain division, business and technology, administration and public affairs and other departments dedicated to the USA refreshments market only (Coca Cola Enterprises, 2012).
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Coca Cola's success largely emanates from its superior distribution structure. It has the ability to offer its products anywhere in the world at the same high quality. Throughout its value chain, the company has build linkages with other auxiliary industries such as transport and distribution, packaging and production of raw materials (Coca Cola Enterprises, 2012).
Coca Cola's supply chain is founded on the principle of creating value for the customer and supporting its distributors and retailers. It conducts training to its retailers at no cost or at subsidized rates. It also empowers communities by providing them with the means to reach the customer: for instance it offers kiosks and pushcarts to local retailers to enable them deliver the company's product to the customer. Besides, regular sales support is offered to retailers by helping them arrange the merchandise in a manner that attracts customers. The company employs merchandisers who regularly report stock outs and customer feedback to the bottling firms (Coca Cola Enterprises, 2012; Jenkings, et al., 2010; Simchi-Levi, et al., 2007).
Small businesses are crucial to the firms continued value delivery. It recognizes that developing shared value at all levels of its value chain is key to sustained positive performance. The following are coca cola's points of focus;
Building local retailer's capacity
To retain its competitive edge, the firm must maintain strong relationships with local retailers to accelerate growth and improve efficiency as well as creating differentiation (Simchi-Levi, et al., 2007).
Understanding source of impact
The company recognizes that it operates within communicates and seeks to empower them through training and support in their service to their customers. The company's growth model leverages on shared prosperity as opposed to one track volume based growth.
Just In Time operations
Manufacturing the company's products involves collaborations with various suppliers and distributors. The bottlers and canners handle vast materials quantities each day and dispatch the packaged products in time for the market. the ideal solution for the company is to ensure that the materials arrive just in time for transformation into finished goods. The finished products are also delivered just in time to their selling destinations to meet demand. Modern canning plants have a "hole in the wall" building design where finished products are transferred to the canners for subsequent packaging and transmission to distribution agencies (Coca Cola Enterprises, 2012).
The distributors are in a position to know the demand prevalent in their areas and therefore deliver their products in time for customer consumption. The retail chains are supported by the parent company through provision of cooling fridge that keep the product at the right temperature. The customers are therefore able to access the packaged products with minimal waiting times. This just in time arrangement has been the basis for the firm's competitive edge against its rivals in the market.
Always on Time
Marked to Standard
Design of the supply chain system
The nature of soft drinks industry requires players to move large quantities of their products to realize profits. Margins are small and the layout costs are very high. Therefore, sustained profitability can only be realized if the players move large quantities of their products to breakeven and thereafter build profits. Demand fluctuates sharply and therefore requires the firm to be very responsive to the developments in the market lest it suffers from either overstocking or under stocking. Competition is stiff both from direct competitors of the brand such as Pepsi to close substitutes of the main products. To weather continued headwinds, firms rely on elaborate supply chains supported by intensive sales and marketing effort to move large volumes of sales.
It is in this light that coca cola needed to design a superior supply chain to support its marketing and distribution effort. The challenge that faced the company was to create a modern and consistent supply chain spanning the globe that would not compromise on the quality and specification of the company's brand. The firm also needed a consistent process that would assist in the acquisitions since some markets would only be accessed through carefully planned acquisitions of the local players. Finally, the company needed to integrate its manufacturing and retail operations to be responsive to shifts in market sentiments. Only through the observance of these three provisions would the company weather the threats of competition and develop a reliable customer base.
The company leveraged on technology to speed up its supply chain processes. It deployed SAP ERP system to run its operations. SAP offers an integrated platform for managing all the aspects of the company. The system produces real time reports on the various performance measures. This speeds up decision making and response time in operations. SAP replaced the company's legacy system ad crated a cohesive view of the streamlined processes and metrics. Coca Cola also outsourced its noncore operations to CSC to cut costs and to better manage its core operations.
The implementation of the above features led to quicker response time through the use of automation and outsourcing. The measures also led to the firm bringing newly acquired operations online more quickly. Most importantly, supply and demand processes were managed from the same system through the SAP Genesis module leading to ease in operations and decision making. Today, the company's supply chain is one of the most efficient systems in the world.
Integration of functional areas
As mentioned, the company runs on SAP ERP software. The system allows the company to run on a single platform shortening cycle times and brining more visibility to businesses to improve their decision-making functions. Through SAP Genesis, the order-to-cash, requisition-to-payment and record-to-report are all integrated into a single platform and database allowing a seamless connection of the firms operations.
To survive in competitor markets, firms must measure the most critical processes and improvements over time. *** cites that performance measurement is the foundation for continuous improvement initiatives. the company has a number of measures centered around its key success indicators as follows;
The company relies on technology to improve internal efficiency, mitigate legal issues and leverage on its existing knowledge base. The firm features its performance on this from by its investment in technology and the returns gotten from such investments. Some of the highly successful technology initiatives include the interactive vending machines, integrated internal operations and 120- drink jet foundation.
Coca Cola measures its manufacturing ability through elaborate quality controls and ensuring a low production cost design tailored to produce a customized product.
The basis for leadership in the beverage markets calls for low production costs that are passed on to consumers by way of lower product prices. The company benchmarks its production costs against the competition and passes on the low cost benefit to consumers in order to move large sales volumes.
Coca Cola measures the time it takes for its products to move from raw material to the consumer. Competition in this industry requires fast movement of products from raw materials to finished products. All this time, the costs are kept low in order to appeal to the mass market. The firm measures its ability to serve the market by the time it takes to move these products from the raw material stage to the finished product stage in readiness for uptake by the consumers.
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Customer service strategy
The firm has an elaborate customer service strategy centered on the demands of the customer. The company relies on the strength of its brand to stimulate demand. Through elaborate advertising strategy that relies on the power of famous personalities and festive seasons, the company is able to reach customers in most regions of the world. Coca cola's customer service strategy has always been centered on customer convenience. In the tropics, the firm supplies refrigeration facilities to retail outlets to make their products able to satisfy the local customers need of cold drinks. In towns and cities, the company avails vending machines to ease the process of obtaining their product. It is also packed ready for take away by customers on the go. As mentioned, customer convenience informs all the major decisions that the company takes. Even the support offered to local retailers in form of training and supply of kiosks is done with customer convenience in mind. To best reach its customers, the company has classified markets based on geography. This enables it to offer its products as per the demands of the consumers in the specific geographical territory.
Transport and warehousing
Coca cola has varied transport and warehousing arrangements across it operating zones. In most cases, the company supplies its products to the market in two main ways: direct and indirect route. The direct route entails movement from the plant through to the warehouse and then directly to the market based on forecast demand. The indirect route entails use of a distributor from the warehouse to the market. To manage its channels, the company has two main arrangements: franchise owned bottlers and company owned ones. Company owned bottlers in various markets sell the products themselves while franchise owned bottlers handle the distribution by themselves on behalf of the company.
The company manages its distribution strategy using SAP system that is able t initiate a transaction from requisition to report. It partners with distribution partners to deliver supplies to most of its markets. The parent company has an elaborate arrangement with the partners to deliver supplies as and when they are needed while enforcing the highest quality standards.
Given the complicated nature of its operations, the company must maintain close working relations with distribution partners from across the world. It partially owns most of the company's networks of distribution and therefore has a strategy of keeping most of the things under its control and to match the uniform quality standards across all of its operations.
Organizational relationships with supply chain partners
The company has close working relationships with all its supply chain partners and suppliers. Partnerships are worked based on long term orientation and value enhancement to the consumer. The firm has close relationships with suppliers scattered all across the world as well as bottlers, distributors and retailers. Their relationship is based on long term sustained value delivery and service to the customer as opposed to moving volumes of output to the final consumer.
Most importantly, the company's strategic supply chain partners sustain the basic technological difference that sets it apart from its competitors. The partners uphold the same quality specifications, their regard for the customer and product differentiation. In pursuit of harmonious working relationships with its partners, the company has a department dedicated to business integration. The division is responsible for ensuring smooth working relationships between the various stakeholders in the entire supply chain (Drucker, 1998; Hines, 2004; Jacoby, 2009).
Coca Cola operates in the highly competitive beverage markets where sustained profitability is built on customer loyalty and ability to move huge product volumes. Being a global company, it must customize its offering to the local level in all the markets that it operates while maintain the original quality specifications of the product. The company relies on cutting edge technology coupled with superior supply chain to deliver beverages to the markets just as they are demanded. It relies on partnerships built around enhancement and delivery of value to the customer. It maintains a decentralized organizational structure that supports local operations but at the same time observing the operational and quality specifications dictated by the parent company. To safeguard its main competitive strength, coca cola keeps the formulas for its beverages secret and supplies the concentrates to its franchised entities across the world. To better manage its operations, the company runs on an integrated SAP platform that facilitates integration of all supply chain processes. Streamlined processes coupled with a powerful marketing effort make the company one of the most recognizable commercial brands globally.