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Coca-Cola's Supply Chain Strategy
and Design
Coca Cola's Supply Chain Strategy and Design
Introduction
Coca-Cola is a well-known and popular brand across the world. The company was founded in 1886 when Dr. John Pemberton served the world's first Coca- Cola at Jacobs' Pharmacy in Atlanta, Georgia. Since then, Coca-Cola has grown into a full-service beverage corporation, owning licenses for over 400 non-alcoholic drink brands.
Vision and Scope
Coca-Cola's vision is to create the brands and drink selections that people like, to revitalize them, and to perform in a way that contributes to a more sustainable organization and a better common vision that improves people's lives, society, and the environment.
The Coca-Cola Company produces, distributes, and sells soft drink beverages. The company owns licenses for 400 brands, which include diet and light beverages, waters, juice and juice drinks, teas, coffees, sports and energy drinks, and many more.
Scale and Operations
Coca-Cola operates in over 200 countries and owns stakes in a number of bottling and canning enterprises. The company's operations are structured into six geographical regions: Africa, Asia Pacific, Europe, Latin America, North America, and Eurasia.
Coca-Cola Canada is a significant part of the company's operations, having been introduced to Canadians 100 years ago. Coca-Cola Canada has grown from horse and cart delivery to having the largest fleet of trucks and vehicles in the country, employing around 5,500 Canadians throughout all 10 provinces.
PESTLE Analysis
A PESTLE analysis examines the external factors affecting Coca-Cola's business strategies:
Political
Coca-Cola's operations are subject to government rules and regulations, which can vary across countries.
The company faced trade restrictions in Burma and is unable to operate in Cuba and North Korea due to political situations. Tariffs on raw materials like steel and aluminum have led to increased costs for the company.
Economic
Coca-Cola is the dominant player in the carbonated beverage industry, with a 50% market share. The company supports the new trade deal between the United States, Mexico, and Canada to promote free and fair trading. Consumers' preferences have shifted towards low-calorie beverages, leading to an 8% growth in the retail value of Diet Coke and Zero Sugar products.
Social
Coca-Cola uses social promotions to engage with customers, such as encouraging them to share personalized bottles with friends and family.
Technological
Coca-Cola is innovating its product portfolio, including the launch of the first ready-to-drink frozen beverage in Japan. The company offers a freestyle dispenser that allows customers to customize their beverages.
Legal
The Canadian beverage market has seen significant changes, such as the adoption of the Canada-United States Free Trade Agreement and the transition to Polyethylene Terephthalate (PET) bottles and tin cans. Coca-Cola has faced legal issues in the past, including concerns about the caffeine content in its drinks and allegations of employee mistreatment.
Environmental
Coca-Cola has been criticized for its high water usage and has faced environmental concerns related to packaging, water consumption, and air pollution. The company has adopted water-smart agricultural techniques and set goals to increase water efficiency and move towards a waste-free future.
Porter's Five Forces Analysis
An analysis of Coca-Cola's industry using Porter's Five Forces model:
healthier options like sports drinks, energy drinks, tea, coffee, and fruit juices
Research and Development
Coca-Cola's research and development activities focus on: - New product development - Quality improvement of existing products - Manufacturing process modernization - Adoption of technological advancements The company's R&D strategy is centered on providing value to its customers and has been adapted to give more flexibility to its local business units.
Structure and Decision-Making
Coca-Cola has a strong presence in the North American market and has restructured its operations in the region to focus on three business units: sparkling beverages, still beverages, and developing brands.
The company's decision-making is governed by a Board of Directors appointed by the shareholders, who are responsible for appointing and overseeing the top management team.
Production and Supply Chain
Coca-Cola's core operations include the production of syrups and concentrates, which are then sold to its approved bottling and canning plants. These bottlers have individual contracts, known as bottler's agreements, that allow them to produce, package, and sell Coca-Cola's beverages in specific regions.
Coca-Cola invests in various operations to improve manufacturing, distribution, and marketing to ensure smooth operations throughout its supply chain.
Coca-Cola's Business Model
Bottling and Production
Majority of Coca-Cola products are manufactured and marketed by bottling companies that are not completely controlled by Coca-Cola. Coca-Cola bottles and sells a limited number of Coca-Cola products through corporate-controlled and centralized bottling facilities, accounting for 8% of the company's global output in 2003. Coca-Cola obtains the appropriate production and distribution of its products through bottler's agreements, which enable the firm to retain control and influence over bottling companies.
Human Resources
Coca-Cola adopts an approach of rewarding and recognizing employees to provide a complete, comprehensive suite of compensation, incentives, and training and development initiatives. Coca-Cola actively hires, creates a diversified staff, and builds a culture that encourages training, progression, and creating value. Coca-Cola supports the diversity of all of its workers.
Marketing and Branding
Coca-Cola's marketing goals are to increase production, raise the global share of non-alcoholic ready-to-drink product sales, increase long-term cash flow, and enhance profitability. Coca-Cola's major approach to achieve these goals is an investment program in high-margin drinks combined with marketing initiatives such as advertising, point-of-sale merchandising, and promote sales. Coca-Cola launched a plan in 2001 to reposition itself as 'the world's premier branding and marketing organization.' Coca-Cola's strategy is based upon four core concepts: rejuvenation, refreshment, health and nutrition, and replenishment to meet the demands of consumers. Coca-Cola is moving its advertising and marketing emphasis from regional and global initiatives to community scale, particularly retail chain incentives.
Risk Profile
There are seven risk components for Coca-Cola, but the text does not provide any details about these risk components.
Scarcity and Bad Quality of Water
Coca-Cola faces challenges related to the scarcity and poor quality of water, which is a critical ingredient in their beverages. This issue is particularly prevalent in certain regions where water resources are limited or contaminated.
Non-Alcoholic Beverage Industry Changes
The non-alcoholic beverage industry, in which Coca-Cola operates, is undergoing significant changes. These changes may impact the company's operations and strategies.
Higher Competition
Coca-Cola faces increased competition in the non-alcoholic beverage market, both from traditional competitors and new entrants. This
Real-Time Visibility
Coca-Cola utilizes real-time visibility solutions, such as GPS-equipped recording devices in its trucks, to provide accurate data and improve communication with its key partners, including shipping agencies. This technology enhances the company's operational visibility.
Route Optimization Technology
Coca-Cola has developed a route optimization model that links all outlets to trips and allocates them to available drivers and trucks. This optimization allows the company to reduce total costs while fulfilling all necessary requirements.
Direct to Store Delivery (DSD)
Coca-Cola's Direct to Store Delivery (DSD) model enables the company and its partners to distribute products directly to retail outlets from their manufacturing plants, bypassing a distributor. This approach ensures the availability and proper presentation of Coca-Cola products, ultimately driving sales.
Warehouse Automation
Coca-Cola operates Automated Storage and Retrieval Systems (ASRS) in its business units, which can contain and circulate over 30,000 pallets in their warehouses. This automation helps the company manage and track the inventory process until delivery, addressing the shortcomings of traditional warehousing management.
Supplier Relationships
Coca-Cola places a strong emphasis on developing and maintaining relationships with its diverse suppliers. The company incorporates its customers in its strategic procurement process, which helps create better communities and provides a long-term competitive edge.
Ingredient and Packaging Providers
Coca-Cola's direct suppliers include ingredient and packaging providers, who play a vital role in the company's value chain and have a direct influence on its sustainability performance and commitments.
Indirect Suppliers
Coca-Cola's indirect suppliers include those who provide equipment, IT, fleet and logistics, utilities, and other services that support the company's operations.
Group Critical Suppliers
Coca-Cola identifies group critical suppliers, which are those that spend highly on critical components, such as sweeteners, juices, resin, and cans, or those that support the company's business strategies.
Country Strategic Suppliers
Coca-Cola also works with country strategic suppliers, who operate on a local or regional scale to support the company's operations.
Tactical Suppliers
Coca-Cola has a limited number of tactical suppliers, who provide specific and specialized services or products.
Coca-Cola's Corporate Social Responsibility
Coca-Cola has undertaken various initiatives to address environmental concerns, such as waste reduction, water replenishment, and carbon footprint reduction. The company is also working to make its packaging more recyclable and reduce material usage.
Public Awareness
Coca-Cola collaborates with organizations like the World Wildlife Fund (WWF) to raise public awareness and support conservation efforts, such as protecting the habitat of polar bears.
Distribution
Coca-Cola's extensive manufacturing and distribution network, which dates back to 1899, allows the company to establish a global reach with a local emphasis. The company works closely with its bottling partners, suppliers, and various retail outlets to distribute its products efficiently.
Points of Sale for Coca-Cola Goods
Distributors/Wholesalers
Coca-Cola goods can be sold through distributors and wholesalers.
Retail/Convenience Stores/Supermarkets
Coca-Cola goods can be sold through retail stores, convenience stores, and supermarkets.
drinks daily are more likely to gain weight and develop diabetes. Diet sodas are the most apparent alternative, yet they also have no nutritional benefit.
Increased Competition from PepsiCo
Coca-Cola and PepsiCo have competed for a 'throat share' of the global beverage industry for more than a decade.
Beverage Manufacturing, Sales, and Distribution in a
Changing Climate
The basic component in Coca-Cola beverage products is water. As a result, the effects of climate change on water supply are a major commercial risk for the corporation internationally. Changes in rainfall volume and probability, rising temperatures, shifts in snow, ice, and melting glaciers, rising dry spells, and prolonged dry periods can have an impact on fresh water availability in the future, whereas climate changes can harm the infrastructure system of water and pollute water resources. In some locations, climate change is expected to increase demand for agriculture and drinkable water that can result in increased competitiveness and water shortages, particularly in parts of the world where water is already scarce. Coca-Cola's beverage production is subject to agricultural output fluctuations since agriculture is particularly sensitive to climatic factors. Changes in all the climate factors will have an impact on crop quality, availability, and price. Supply chain is sensitive to transit interruptions or delays since it is dependent on reliable transportation and logistics infrastructure that might be more problematic in a changing environment. Consumer preferences and sales are also majorly affected by weather.
Focus on Water Stewardship
Coca-Cola has pledged to become 'water neutral' in all of its worldwide operations by 2020. The goal is to return a water quantity comparable to what people consume in drinks and manufacturing to societies and the environment. Water is a fundamental element to the firm's activities and is related to changing climate and emissions. Coca-Cola has implemented a worldwide and comprehensive Water Stewardship Strategy. This approach establishes worldwide goals in three aspects:
Increase Water Efficiency
Coca-Cola has adopted an organizational water sources protection guideline to support sustainable water resource management. This guideline mandates all Coca-Cola production units to complete the following by 2012:
- Build a team for water resource management - Plan and execute a Source Water Protection Plan (SWPP) - Maintain the SWPP regularly at least every 5 years
Increase the Volume of Recycled Water and Percentage of
Fresh Water Delivered Back to the Ecosystem
Coca-Cola has implemented measures to increase the volume of recycled water and the percentage of fresh water delivered back to the ecosystem.
