Coca Cola - The Evolution of Supply Chain Management
Manufacturers of goods and services often struggle with finding the right mix of identifying their particular product or service with the right customer base along with the appropriate price and quantity to satisfy demand. Supply chain management provides valuable insight and assistance by providing organization’s information identifying core competencies and competitive advantages. When used to develop a strategic plan supply chain management can identify areas of improvement resulting in improved processes and increased profitability through cost reductions and improved customer responsiveness.
Coca Cola began as a small organization with a limited supply chain in a small local market. However, as Coca Cola grew and expanded, its supply chain grew with it. This paper discusses Coca Cola’s supply chain changes throughout its life cycle from traditional mass merchandising, inventory management and cost containment, supplier and customer alliances, relationship formation, and the future capabilities of its supply chain.
Supply Chain Definition
Supply chain management encompasses the preemptive managing of the progression of goods, services, data, and money between the raw materials stage to the end user, the customer (Trent, 2004, p. 55, para. 5). Successful organizations resorted to thinking outside the box by looking at the entire business strategic picture. Realizing that decisions made by one party in the supply chain directly affected others in the supply chain, organizations began developing strategies to best use the resources at hand. As a result, supply chain management seeks solutions or methods benefiting the entire supply chain. As Trent (2004) comments “Supply chain management involves proactively managing the two-way movement and coordination (that is, the flows) of goods, services, information, and funds from raw material through end user” (p. 54, para. 3).
Traditional Mass Merchandising
Organizations like Coca Cola started out as local or regional manufacturers that eventually employed large scale manufacturing techniques. However, these traditional mass manufacturing techniques prevented quick product design, research and development. During this timeframe, Coca Cola focused on producing Coke by keeping equipment operating and maintaining a steady stream of supplies that resulted in excess work-in-process inventory (Wisner, Leong, & Tan, 2005, p. 10, para. 4). In this scenario, because information, design, production, and distribution are conducted in house, outside collaboration is not a viable option..
Inventory Management and Cost Containment
As Coca Cola expanded nationally and internationally by adding licensed bottlers and distributors, the company recognized the need to control inventory and its related cost to the company. The advent of material requirements planning (MRP) systems and manufacturing resource planning (MRPII) systems along with improved computer capabilities provided organizations like Coca Cola the ability to track inventory accurately. As a result, reduction of inventories such as new and used bottles, sugar, syrup, and other ingredients occurs along with improvements in communication indicating when further acquisitions are necessary. While not implemented, Coca Cola realizes the importance of radio frequency identification as a benefit for the future.
Supplier and Customer Alliances
Coca Cola along with many other companies found itself in fierce global competition. Coke found itself competing globally with other soft drink manufacturers, most notably Pepsi Cola. Manufacturers investigated ways to provide low cost and high quality products while maintaining high customer service levels. To accomplish these goals, Coca Cola implemented “just-in-time (JIT) and total quality management (TQM) strategies to improve quality, manufacturing efficiency, and delivery times” (Wisner, Leong, & Tan, 2005, p. 11, para. 1). To minimize disruptions to manufacturing because of schedule or production problems related to safety stock, organizations began to see the value in strategic and cooperative supplier-buyer customer relations through the use of JIT and TQM.
Developing strategic cooperative supplier-buyer customer relationships allows organizations such as Coca Cola to select suppliers that provide the highest quality service. Coca Cola identifies those suppliers and gives the majority of its business to those that assist in generating additional sales through improved delivery, quality, and product design as well as provide cost savings, improvements in processes, materials, and components used in the manufacturing of their products.
Organizations, facing increased competition and uncertain economic conditions, use business process reengineering (BPR) that is a business process designed to reduce waste and increase performance. To accomplish this, organizations focus on cost reductions and emphasis placed on organizational core competencies leading to long-term competitive advantage. For example, Coca Cola has installed SAP software to assist improving processes, execution, and store deliveries.