Coca Cola Supply Chain Management And Sustainability Practices

Question: Discuss the Supply Chain Management And Sustainability Practices Of The Coca-Cola Company Enterprise In Australia. Answer: Introduction It may be the most recognizable brand on the planet. It has been said that theres nothing as global as Coca-Cola. Its a $67bn dollar empire with a presence in over 200 countries worldwide, found in even the most remote corners of the globe. It owns or licenses more than 500 distinct non-alcoholic beverage brands to satisfy taste buds around the world. These brands include sparking beverages as well as a wide range of still beverages such as water, juices, ready-to-drink teas and coffees, and energy drinks. The Coca-Cola Company was founded in 1886 by Dr. John S. Pemberton, a chemist, in Atlanta. A Coca-Cola production facility was set up in Sydney in 1937, amid start-up challenges like product unfamiliarity, small capital city markets and geographical separation. However, by 1939, plants were operating in several parts of Australia. The Coca-Cola United States South Pacific headquarters is located in Brisbane. Today, Coca-Cola in Australia and its bottling partner, Coca-Cola Amatil offer well over 200 products including soft drinks, waters, teas and energy drinks. Coca-Colas leading brands include Coca-Cola, Coke Zero, Sprite, Powerade, Pump, among others. Coca-Cola Company carries out production, distribution and marketing of non-alcoholic beverages and concentrate. On August 24, 2016, the share price of the Coca-Cola Company s recorded at $43.92 under the New York Stock Exchange. (The Coca-Cola Company). Coca-Colas Supply Chain Management Practices. The Coco-Cola Company needed a modern supply chain for a classic beverage. The supply chain needed be reliable and consistent. There was a need for a consistent process to also assist with procurement of supplies as well as to better integrate manufacture, bottling and retailing. (Mentzer, et al., 2001) The company obtained a viable solution to these challenges via a deployment of Sales and Purchases (SAP) Enterprise Resource Planning (ERP). Coca-Cola Company Enterprise (CCE) is one of the worlds largest producers and distributers of the companys brands, sometimes through its subsidiary companies, in Australia. The following are the SCM Practices employed by CCE in packaging and retailing of Coca-Cola products: Alignment of supply chain system with overall company strategy. For instance, CCEs primary goal is to improve inventory turns. The raw material (concentrate, refined sugar, water, carbon dioxide) usually take one production session to consume. This ensures smooth flow of purchases from suppliers and products to retailers. The success of CCEs supply chain is largely owed to Coca-Cola Companys strategy and business plan. Importance of Supplier Relationship management. CCE establishes and maintains good relationship with it suppliers that transcends business relations. Rather than viewing suppliers as a source of raw materials the relationship is that of an associate in the process sustaining production and supply of a strong brand in the world market. This means not telling the supplier what to do, how to do it and when to do it; but ratherfocusing on a relationship that creates the following: An ambient rostrum for problem resolution. Mutual-benefit CI initiatives. Favorable performance standards that are compatible with both sides of the divides interests. Collaborative work ethics. Focus on Total Cost of Ownership This CCE supply chain strategy does away with highest-bidder-wins and instead considers all costs, direct and indirect costs of raw material procurement and end-product retailing are factored in the terms of trade. In economist-speak, this supply chain strategy is aimed at internalizing all externalities (an externality is a cost that one party pays due to the benefit of another party). For instance, TCO looks at actual price of raw materials, training and maintenance costs, transportation and warehousing of both supplies and products, and cost of quality and warranty. Inventory Minimization The Coca-Cola Company Enterprise looks to have as much stock or inventory as possible just enough to keep production and distribution running while still providing wiggle room (The Coca-Cola Company). In the supply chain, there is more to look at than just cost of material and transportation. There is also insurance costs, floor space cost and consumption, opportunity costs, obsolescence and expiry coststhat must too be considered. The key to this, CCE argues, is emphasis on better planning, full-capacity operation and forecasting of marketing conditions. For instance, during the summer season or the festive season, there has always been an upward trend in peoples consumption of beverages. To counter the highly likely upsurge in demand, supply, production and distribution needs to operate at higher capacity than normal. This means faster or larger-quantity supply of raw materials and Coca-Cola products. Further, the longer machine uptime means tighter maintenance schedules that might possibly require machinery replacements. Driving regional expansion with Information Technology Coca-Cola Enterprises recently launched a new supply chain management solution in Australia. The system, referred to as Project Genesys was intended to computerize a majority of CCEs supply chain processes and thus required new skill sets to ensure faster speed of deployment. To ensure the intended realization of full benefits, CCE outsourced a long-time partner in CSC to drive this Sales and Purchases (SAP) enabled strategy that involved technology solution delivery, user training and process oversight. The fact that CSC had long been an associate of CCE in implementing nearly similar strategies, it followed that CSC was well aware of CCEs processes, policies and business plan. This ensured a shorter acquaintance and learning curve and faster, smoother take-off of this technology-centered supply chain management and expansion plan. Bridging the Supply-Demand Gap The Genesys Program effectively replaced some legacy time-inefficient schemes like order-to-cash, requisition-to-payment and record-to-report. This new automation program did a lot to help CCE reduce the cycle time in logistics, and hence improved efficiency of the overall production process. CCE is a shelf-replenished company, a supply chain company, a sales and customer service company. There is need, therefore, for full, seamless integration of supply of raw materials and manufacture/production and all the way to the replenishment of stock in the retail outlets, says Esat Sezer, senior vice president for the Coca-Cola Company Enterprise. The production process is essentially an equation, and the role of supply chain management is to balance the two sides; manufacturing, which fuels supply, and inventory in the retail outlets, which sustains demand for Coca-Cola products. An efficient supply chain management, by bridging the supply-demand gap, ensures that raw materials for production are always available as and when required. Further, it ensures that inventory in retail outlets is always replenished. There is, however, general lack of autonomy between the manufacturing and bottling plants, whereby bottling companies in Australia and the retailers are expected to stick to some code of conduct, particularly in product mixing, bottling and retailing, established by the Coca-Cola Company board of governors. Further, a reliable supply chain management ensures that the operations and products of the Coca-Cola Company are maintained at length without interruption or weakening. To explore this, it is necessary to investigate and analyse the companys strategies of ensuring sustainability. Coca-Colas Sustainability Management Practices. The Coca-Cola Company being a superb, iconic brand in Australia and worldwide means the companys operations should be maintained without weakening or interruption. Business sustainability centers on the following: Operating within legal, ethical and mandatory mutuality limits. Appreciation and upholding of the interconnection and interdependence among economy, the environment and society. This means making corporate social responsibility and accountability a part of the overall business plan. Equitable distribution of resources and opportunities. (Sustainable Measures, 2010) A sustainable business, by definition, produces products that are lasting and of long-term utility and their use and/or disposal is environmentally benign and harmless to future generations; replaces national and international products with local and regional products; assumes accountability for its effects of production on the natural world; utilizes quotidian sources of capital and production inputs to develop and grow; carries out production in a worthy, distinguished and essentially substantial and satisfactory; and makes customers out of consumers through education (Hawken, 1993, p. 144). Coca-Cola Enterprises manufacture, sell and distribute some of the best-known non-alcoholic brands in Australia and the world by extension. It is part of the companys business plan to conduct its operations in an accountable and sustainable manner. The company has promised in its sustainability vision to deliver for today, growing a low-carbon, zero-waste business, and inspire and lead change for a more sustainable tomorrow. Carbon Reduction CCE is committed to reducing carbon at every link of the production and supply chain. This carbon reduction targets all the companys products and in all packaging formats and across the whole entire value chain. The company reduces environmental and social impact at every stepof the value chain by use of sustainable ingredients in production, how the product packaging is made, how the drinks are bottled, the mode of transport, how the drinks are chilled (i.e. in the company-issue refrigerators), and the way they are disposed of after use by consumers. On-going carbon reduction activities have been rolled out right across the value chain (ingredients, packaging, manufacturing, distribution, refrigeration, and recycling) since 2011, and focuses on robust measurement, operational excellence and perpetual advancements. For instance, chilling of beverages has a significant carbon impact due to the refrigerants. The company managed as at 2015 to reduce this by an average of 35%. The company also targets to source nearly 40% of its manufacturing energy from low-carbon or sustainable (green) energy sources. Collaboration with suppliers has been of importance of achievement of carbon footprint. The company challenges its suppliers and distributors as well as retailers to cap their carbon footprints and work in collaboration to develop carbon reduction plans for joint sustainability. Zero waste The Coca-Cola Enterprise seeks to be an industry leader in sustainability by constantly raising the bar on beverage packaging. The commitment is to perpetually set and revise standards for sustainable packaging, achieve zero waste in operations and recycle more packaging than is used (The Coca-Cola Company). The company uses renewable and reusable materials (high-strength plastic and glass) that is fully recyclable. The intention is to eliminate packaging disposal and attendant impacts on the natural world. There is already a 25% reduction in packaging material used across all packaging formats and, the ultimate goal is closing the loop through full recycling of every single bottle. CCE initiatives as well as national packaging collection schemes target to recollect, reprocess and reuse more material than the amount of packaging in use. Using brands in the market, the company also influences consumer behavior through education and incentives to recycle and reuse more frequently or proper waste disposal that dies not harm the environment (Hawken, 1993). Water Conservation Practices The CCE aims to minimize environmental impact throughout the value chain through collaboration by setting standards for water efficiency and establishing water-sustainable operations. Water is not only the worlds most precious resource, its also Coca-Cola Companys main ingredient in its products as well as necessary for cooling, washing and rinsing processes in the manufacturing plants. The CCE employs a sustainability blueprint that centers on efficient water use, and recycling and replenishing natural water sources. According to a Key Production Indicator Report published in 2015, production has increased by about 12% in the last five years, while water usage has fallen by 6%. It was reported in 2014 that the water: product ratio stood at 1.42:1, and the company seeks to attain the 1:1 ratio mark by 2020. To achieve this, the company focuses on industry leadership in water efficiency, and that to be achieved through significant reduction in overall water use. The company also recycles and returns almost 90% of waste water from manufacturing processes to nature, and seeks to improve that. To attain sustainable water resource in nature, the company understands it need not have any negative impacts on local communities or the ecosystem. This has been and is still being achieved through targets to replenish water in the beverages in areas of water stress by championing and investing in community-based water programmes. Product Portfolio The company has achieved and stuck to its goal of providing a variety of quality, refreshing beverages. Further, nutritional and ingredient information is provided so consumers can make informed beverage selection and know what they are getting into. Amid concerns with the role of sugar, the company ensures all its beverages have a place in a balanced diet. Low and zero-calorie drinks currently account for a third of product offerings, with Coke Zero, Tonic Water, Fanta Orange Zero and Diet Coke leading the pack. Every sugar and sweetener that the company uses is regularly and scientifically tested and is regarded as safe by the Food and Safety Authority (The Coca-Cola Company). The company, through its products aims to encourage active, healthy living by making sports and fitness activities accessible, demonstrating and encouraging the benefits of healthy living and promoting healthy lifestyles. An example of how the company achieves this is the Mission Olympics, a secondary-school sports platform sponsored and overseen by the Coca-Cola Enterprise. Another is the visibility of the Coca-Cola Company in the Olympic Games. An association of Coca-Cola with sports does well to encourage fitness among our customers (The Coca-Cola Company, 2015). In the workplace, diversity is ensured by attracting, developing and retaining a talented, self-driven and talented workforce. The workplace safety is also maintained by attaining and maintaining world-class health and safety standards. Access to health and well-being services and facilities is also ensured as a fundamental privilege. In all, the supply chain management practices marry well with the sustainability management practices of the organization. For instance the company vision coined in 2009 as a platform for its Vision 2020. The mission statement reads: To refresh a world in mind, body and spirit. To inspire moments of optimism through our brands and actions. To create value and make a difference everywhere we engage The supply chain management, as well as its sustainability practices for the Coca-Cola Company Enterprise discussed in preceding chapters have undertones of market leadership through superb standards in every step of the value chain. The commitments of utmost sustainability to achieve zero carbon footprints, zero packaging material waste and optimal water efficiency are in tandem with the supply chain management practices that seek to establish a closed-loop packaging materials flow. Figure 1: Closed-loop flow of packaging material Further, the company recycles waste water and feeds it back to the natural habitat. This initiative of supply chain management also enhances sustainability through replenishing water resource. This, too, is a form of closed-loop supply chain that also serves as a sustainability practice. Figure 2: The closed-loop flow of water Conclusion This aspect of sustainability emphasized by the companys supply chain management has led me to perceive the imminent intermarriage of sorts between sustainability practices and supply chain management practices, the main drive of them being a need to minimize wastage especially in water and packaging material as well as reduction (and, by 2020, elimination) of carbon footprint in manufacture, distribution and retailing of Coca-Cola products. This intermarriage is, however, without its shortfalls. For instance, CCE relies on a mutual agreement between itself and its business partners to effect the goal of minimization of carbon footprint. This requires bringing all players suppliers, raw material producers, manufacturers, bottling plants, distributors and retailers on board. It can be an uphill task to convince a raw material producer or supplier or product distributor to use some methods or materials and not others. Further, the reliance on these players to measure and monitor their carbon footprint is hardly reliable because, business ethics aside, what would stop them from cooking up figures in their KPI reports to seem interested in a common sustainability goal? There is, however, a way around this. Recommendations The CCE could consider buying these raw material processing plants, suppliers, beverage bottlers and product distributors so that they can have complete control over the entire value chain, from obtaining raw materials from the natural world to serving customers with their 500+ brands not just in Australia but worldwide. This would make regulation easier as sustainability practices wouldnt be a factor of mutual agreement but rather a key part of the overall business plan. Also, the company needs to examine the effects of diet products on their standard product sales. Owing to increased customer health and better-lifestyle awareness, there has been a general preference in diet coke, for instance over standard coke. O counter this, the amount of sugars and sweeteners in regular soft drinks needs to be reduced as well. The success of diet soda has caused an unintended consequence of drop in demand and sale of standard products (Euromonitor, 2013). References Euromonitor. (2013). Coca-Cola Company, The Soft Drinks (World). Hawken, P. (1993). The Ecology of Commerce. New York: Harper Business. p. 114 History of Coca-Cola. August 23, 2016. Coca-Cola: Australia. https://www.coca-cola.co.au/about-us/history-of-coca-cola-1886-1892.html Hnatko, C., Sidhu, R. Li, Z. (2014) The Coca-Cola Company: Case Synopsis. p. 2-10 MintGlobal. Coca-Cola Company. 23 August 2016. https://mintglobal-bvdinfo-com.proxy.lib.sfu.ca/version- Mentzer, J. T.; et al. (2001) Defining Supply Chain Management. Journal of Business Logistics. 22(2): 1-25 Nemetz, P. N. (2003). Basic Concepts of Sustainable Development for Business Students. pp. 1-4. Journal of International Business Education. Our Company Mission, Vision Values. August, 23, 2016. Coca-Cola Journey: Global. https://www.coca-colacompany.com/our-company/mission-vision-values The Coca-Cola Company. Annual Report: 2015. 2016 World Demographics Profile, 2014. World Demographics Profile 2014. N.p.,n.d. Web. 23 August, 2016. https://www.indexmundi.com/world/demographics_profile.html