Coca Cola

Coca-Cola, Fulfilling Customer’s Request

Coca-Cola is the world's largest beverage company, with an operation reach covering over 200 countries and six operating regions including Eurasia &Africa, Europe, Latin America, North America, Pacific and bottling investments (Who We Are). Coca-Cola prides itself as a global company that operates on a local scale. Through partnerships with local bottlers, distribution carriers, and merchants, Coca-Cola is able to effectively monitor the pulse of local market conditions that strongly effect the overall service level offered in those markets. Coca-Cola is one of the world's most respected companies and a brand with substantial global appeal and recognition. Coca-Cola's distribution centers, as noted above, allow them to quickly respond to regional variations and adjust for specific demand and supply pressures. (The Coca-Cola System).

Coca-Cola should continue to attempt to improve their service levels and ability to recognize as well as respond to smaller markets. In an effort to be able to offer personalized service to address local tastes, culture, and priorities, Coca-Cola in 2007 began collectively working with their largest bottling partners in order to determine whether the collection and internal exchange of economic, social, and environmental data. While this is a potential avenue to creating specific regional preferences and better serve customers in that area, the cooperation and exchange of such information may have not only political ramifications, but also legal constraints. Additionally, the level of corporate willingness by bottlers to allow Coca-Cola the ability to secure their private information might not be an easy road given the relationship between Coca-Cola and their bottlers especially in light of Coca-Cola's strategic decision to incorporate its own wholly-owned bottler so as to largely limit leverage potential by bottlers (The Coca-Cola System).

Financial Measures of Performance and Supply Chain Management Techniques

Coca-Cola's ROE is 26.33% as also illustrated in the below chart (see fig. 1). “Return on Equity refers to the net income returned to shareholders as a percentage of shareholder's equity” (Return on equity). The number allows shareholders to consider how much profit Coca-Cola is creating with each dollar that shareholder's invest in the company. PepsiCo offers a ROE of 27.66% and 27.55% for Dr Pepper Snapple Group (PepsiCo Return on Equity; Dr Pepper Snapple Group Return on Equity). Overall, for the competitive set, it appears that each company is operating at that market's expected ROE. One is lead to believe that Coca-Cola's supply chain is, at least, working at a level comparable to its major competitors.

(Fig. 1) Graph Depicting Cola-Cola's Five Year Return on Equity.

Source: "Coca-Cola Return on Equity."

ROA

Coca-Cola's ROA for the 12 month period ending March 31, 2013 is reported as 10.6% and recent quarterly trend numbers are provided in the chart below (see fig. 2). Compared to competitors, Coca-Cola is performing fairly on this financial measure as shown in the lower chart shown below (see fig. 3). “Return on Assets is a consideration giving insight as to how profitable a company is in relation to its total assets” (Coca-Cola Company). Looking at an ROA allows shareholders to consider what kind of efficiency a company's management is utilizing its assets in order to create additional earnings for shareholders (Return on Assets). Planning processes appear to actually be consistent compared to Snapple and Pepsi processes. Coca-Cola appears to be only slightly better utilizing its assets in production processes compared to those two competitors.

(Fig. 2) Trend Depiction of Coca-Cola Company ROA Over The Ten Past Quarters.

Source: "Coca-Cola Company."

(Fig. 3) ROA Comparison of Coca-Cola and its Competitors.

Source: "Coca-Cola Company."

Little’s Law

With regard to Little's Law, Coca-Cola holds cycle time and waiting information guarded so as to not allow competitors strategic information as to production capabilities or signal scheduling decisions. However, given Coca-Cola's international breadth, total annual revenues and market maturity, one would expect such information to be similar to Snapple and Pepsi. The "big three" soft-drink manufacturers appear to be on even footing given the ratios considered.

Coca-Cola's Supply Chain Overview

A presentation by Mark Lynch, Director, Supply Chain Capability, for Coca-Cola allows us an in-depth view of Coca-Cola's supply chain strategy and value proposition. As a note for the following slides, DOIP refers to Coca-Cola's Demand, Operations & Inventory Planning. The below slides include information not only to describe stages of the Coca-Cola supply chain overall, but also a look at small-scale planning and constant review/coordination protocols that serve to tailor quantity and service particulars on a monthly basis (see fig. 4,5,6,7).

(Fig. 4) Coca-Cola's Demand, Operations & Inventory Planning.

Source:"Demand Operations Inventory Planning."

(Fig. 5) Flow Analysis of Coca-Cola's DOIP Alignment and Goals

Source:"Demand Operations Inventory Planning."

(Fig. 6) Flow Analysis of Coca-Cola's Supplier to Customer Supply Chain

Source:"Demand Operations Inventory Planning."

(Fig. 7) Example Horizon Planning Map for Coca-Cola

Source:"Demand Operations Inventory Planning."

Achieving Strategic Fit

In considering strategic fit, one asks whether an organization is effectively managing its resources and capabilities to best match with opportunities available in the market environment. Given the above financial ratios, and more importantly, their relative evenness compared to Coca-Cola's largest competitors, it appears that Coca-Cola has been able to achieve strategic fit. Coca-Cola's biggest competitors are PepsiCo and Dr Pepper Snapple Group. This immediately appropriate competitive set is considered given their similar international distribution scope, varied product offering, and company size.

Coca-Cola focuses largely on providing a wide variety of branded beverages including popular fares like Dasani, Minute Maid, Powerade, Sprite, and Nestea, among many others (Product Descriptions). While Coca-Cola also has licensing agreements for other brand names, they do not have as great of breadth in order consumer staples, unlike PepsiCo. PepsiCo's brands span food and drink, including Frito-Lay, Tropicana, Quaker, and Gatorade (Brands). However, even with the increased portfolio, Coca-Cola's chief rival, PepsiCo, still posts similar returns.

Forecasting Solutions and Innovation in Inventory

At its infancy, Coca-Cola produced a single brand which made forecasting relatively easy for the soft drink giant. Inventory was determined off of sales and distribution was little more than "drivers load[ing] their trucks with product and dropp[ing] whatever was needed at the businesses on their route." Now, however, demand forecasting has exponentially increased in its complexity. One bottler in Charlotte, N.C. "distributes 13,000 SKUs to 200,000 customers throughout 11 Southeastern states, delivering more than 125 million cases of product per year." Reacting to the promotional advertisements and discounts of customers has become a daunting task and requires a highly integrated supply chain that enables the bottlers to stay a step ahead of the large demand swings that customer promotions produce. In 2002, Coke began using a system called "a collaborative demand planning and forecasting system from Manugistics, Rockville, Md." This system allows field managers "to have real-time, dynamic input into the forecasting process" and centralized management giving "the company...visibility throughout all its facilities." It starts with customers submitting their forecast as early as 17 weeks out based on planned promotions. This allows the distributors to begin planning on a longer term. The four week point is when forecasts are sent from the distributors to sales managers aligned with distribution centers allowing them to make changes. It allows all players to "see their forecast accuracy" and "provide local intelligence to the system" to provide changes up to three days from delivery. This increased demand visibility coupled with centralized control has improved forecasts to over 90 percent accuracy and allowed the Charlotte bottler to avoid spending over $50m on new warehouses while actually cutting over twelve of their 73 existing facilities saving the company millions in inventory (Murphy, 2002).

Flourishing in the technological realm is one of Coca-Cola's biggest strengths. It "has been quick to embrace new mediums" and apply these mediums to the promotion of their new products (The Coca Cola). Along with being one of the leaders in innovative advertising, Coke continues to upgrade the presentation of its beverages in stores with equipment like the Freestyle, "the fountain business model of the future," and the Interactive Vendor which "incorporates sight, sound, and motion video to take the vending experience from transaction to true brand interaction" (Innovation Brochure). These innovative concepts coupled with staying on the cutting edge in technology combine to allow

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