CENTRAL UNIVERSITY COLLEGE

QUESTION: Identify the supply chain of a company. Investigate why or analyze reasons for which they are practicing that supply chain concept.

COURSE: SUPPLY CHAIN MANAGEMENT

LECTURERS NAME: Mr. Gunadiish Gilbert Nyavie

DATE FOR SUBMISSION: Thursday April 16, 2015

PRUDENCE GROUP MEMBERS DETAILS

NAMES INDEX NUMBERS email PHONE NO SIGN

1. ANDREW SAPATHY MGT/12/01/0439 andrewsapathy@yahoo.com 02404420852. EBENEZER DICKSON MGT/12/01/0999 lilglen10@gmail.com 02633238033. ABIGAIL DAVID-ADJAH MGT/12/01/1562 loveulotsaby@yahoo.com 0267774652

INTRODUCTION

According to the Council of Supply Chain Management Professionals (CSCMP),

supply chain management encompasses the planning and management of all

activities involved in sourcing, procurement, conversion, and logistics

management. It also includes coordination and collaboration with channel

partners, which may be suppliers, intermediaries, third-party service providers, or

customers. Supply chain management integrates supply and demand

management within and across companies. More recently, the loosely coupled,

self-organizing network of businesses that cooperate to provide product and

service offerings has been called the Extended Enterprise.

Supply chain management managing complex and dynamic supply and demand

networks. ( Wieland/Wallenburg, 2011)

The company we chose to investigate is the Coca Cola Company.

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.

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 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.

An amazing 1.8 billion servings of Coca-Cola products are sold around the world

everyday according to Steve Buffington, vice president of supply chain

development and director of supply chain, Bottling Investments Group for The

Coca-Cola Company. Making sure that every one of the thirsty clients gets the

right product, at the right time and in the right price range is Coca-Cola’s supply

chain priority.

THE SUPPLY CHAIN OF COCA-COLA COMPANY

Although Coca-Cola is a global company, its products never travel far to reach the

final consumer, making it a local company in each market where it operates. They

typically don’t ship Coca-Cola more than a few hundred miles; it’s all about being

responsible to the customer’s needs and the local tastes of the consumers in

every market.

COCA-COLA SUPPLY CHAIN PROCESS

Information flow (orders, schedules, forecasts, etc.)

Material flow (supplies, production, deliveries, etc.)

Suppliers Manufacturers Assemblers Retailers Customers

Materials Parts Manufacture

Product Assembly

Sales Use of Consumption

But to make it easier, the supply chain for the Coca-Cola Company is;

Supplier Manufacturer Distributor Retailer Shopper

When the Coca-Cola Company is supplied the raw materials supposed to be used

to produce the soft drinks, they process the raw materials to produce a finished

product which is a bottle of Coca-Cola. Then, after the manufacturers have

finished with the processing, they move on to package the product in order to

differentiate it from other soft drinks and to also ease the process involved in the

transportation of the products to Distributors who in turn break the bulk products

into bits and sell them to Retailers or wholesalers who would sell it to the

consumers or shoppers.

RAW MATERIALS

Water is a main ingredient in all Coca Cola products. Carbonated water consists of

94% of a soft drink. Water is a limited resource in many parts of the world and

Coca Cola recognizes water availability, quality and the sustainability of the

natural resource for both their operations and also the communities where they

operate as one of the key challenges facing their business. (Oliver, Thomas 1986)

In addition to water, the second main ingredient is sugar, which makes up 7-12%

of a soft drink. The principal raw materials used are nutritive and non-nutritive

sweeteners. In the US, the principal nutritive sweetener is high fructose corn

syrup (“HFCS”), a form of sugar, which is available from numerous domestic

sources. The principal nutritive sweetener used outside the US is sucrose another

form of sugar, which is also available from numerous domestic sources. In the US,

they purchase HFCS to meet their bottler’s requirements with the assistance of

Coca-Cola Bottlers’ Sales & Services Company LLC (“CCBSS”). CCBSS is a limited

liability company that is owned by authorized Coca Cola bottlers doing business in

the US. CCBSS also provides procurement services to Coca Cola Company for the

purchase of various goods and services in the US, including HFCS.

The principal non-nutritive sweeteners are aspartame, acesulfame potassium,

saccharin, cyclamate and sucralose. Generally, these raw materials are readily

available from numerous sources. However, Coca Cola Company purchases

aspartame an important non-nutritive sweetener that is used alone or in

combination with other important non-nutritive sweeteners such as saccharin or

acesulfame potassium in their low calorie sparkling beverage products, primarily

from The NutraSweet Company and Ajinomoto Co., Inc., which they consider to

be their primary source for the supply of the product. They currently purchase

acesulfame potassium from Nutrinova Nutrition Specialties & Food Ingredients

GmbH, which they consider to be their primary source for the supply of this

product, and from two additional suppliers.

Coca Cola Company sells a number of products sweetened with sucralose, a non-

nutritive sweetener. They work closely with Tate & Lyle, their sucralose supplier,

to maintain continuity of supply. Although Tate & Lyle is their single source for

sucralose, they do not anticipate difficulties in obtaining their requirements for

sucralose.

With regard to juice and juice-drink products, citrus fruit, particularly orange juice

concentrate, is their principal raw material. The citrus industry is subject to the

variability of weather conditions. In particular freezing weather or hurricanes in

central Florida may result in shortages and higher prices for orange juice

concentrate throughout the industry. Due to their ability to also source orange

juice concentrate from the Southern Hemisphere (particularly from Brazil); they

normally have an adequate supply of orange juice concentrate which meets their

Company’s standards.

Their Company-owned or consolidated bottling and canning operations and their

finished products business also purchase various other raw materials including,

but not limited to, PET resin, preforms and bottles; glass and aluminum bottles;

aluminum and steel cans; plastic closures; aseptic fiber packaging; labels; cartons;

cases; post-mix packaging; and carbon dioxide. They generally purchase theses

raw materials from multiple suppliers and historically have not experienced

material shortages.

THE MANUFACTURING PROCESS

Most of their soft drinks are made at local bottling and canning companies. Brand

name franchise companies grant licenses to bottlers to mix the soft drinks in strict

accordance to their secret formulas and their required manufacturing procedures.

(Mitchell, Alan J; 1990)

Clarifying the Water

The quality of water is crucial to the success of the soft drink. Impurities, such as

suspended particles, organic matter, and bacteria, may degrade taste and color.

They are generally removed through the traditional process of a series of

coagulation, filtration and chlorination. Coagulation involves mixing a gelatinous

precipitate, or floc (ferric sulphate or aluminum sulphate), into the water. The floc

absorbs suspended particles, making them larger and more easily trapped by

filters. During the clarification process, alkalinity must be adjusted with an

addition of lime to reach the desired pH level.

Filtering, sterilizing, and dechlorinating the water

The clarified water is poured through a sand filter to remove fine particles of floc.

The water passes through a layer of sand and courser beds of gravel to capture

the particles.

Sterilization is necessary to destroy bacteria and organic compounds that might

spoil the water’s taste or color. The water is pumped into a storage tank and is

dosed with a small amount of free chlorine. The chlorinated water remains in the

storage tank for about two hours until the reaction is complete.

Next, an activated carbon filter dechlorinates the water and removes residual

organic matter, much like the sand filter. A vacuum pump de-aerates the water

before it passes into a dosing station.

Mixing the ingredients

The dissolved sugar and flavor concentrates are pumped into the dosing station in

a predetermined sequence according to their compatibility. The ingredients are

conveyed into batch tanks where they are carefully mixed; too much agitation can

cause unwanted aeration. The syrup may be sterilized while in the tanks, using

ultraviolet radiation or flash pasteurization, which involves quickly heating and

cooling the mixture. Fruit based syrups generally must be pasteurized.

The water and syrup are carefully combined by sophisticated machines, called

proportioners, which regulate the flow rates and ratios of the liquids. The vessels

are pressurized with carbon dioxide to prevent aeration of the mixture.

Carbonating the beverage

Carbonation is generally added to the finished product, though it may be mixed

into the water at an earlier stage. The temperature of the liquid must be carefully

controlled since carbon dioxide solubility increases as the liquid temperature

decreases. Many carbonators are required with their own cooling systems. The

amount of carbon dioxide pressure used depends on the type of soft drink. For

instance, fruit drinks require far less carbonation than mixer drinks, such as

tonics, which are meant to be diluted with other liquids. The beverage is slightly

over-pressured with carbon dioxide to facilitate the movement into storage tanks

and ultimately to the filler machine.

Filling and packaging

The finished product is transferred into bottles or cans at extremely high flow

rates. The containers are immediately sealed with pressure-resistant closures,

either tinplate or steel crowns with corrugated edges, twist off, or pull tabs.

Because soft drinks are generally cooled during the manufacturing process, they

must be brought to room temperature before labeling to prevent condensation

from ruining the labels. This is usually achieved by spraying the containers with

warm water and drying them. Labels are then affixed to bottles to provide

information about the brand, ingredients, shelf life, and safe use of the product.

Most labels are made of paper though some are made of a plastic film. Cans are

generally pre-printed with product information before the filling stage.

Finally, containers are packed into cartons or trays which are then shipped in

larger pallets or crates to distributors.

PRODUCT ASSEMBLY

The actual Coca-Cola owned factories do not make the actual soft drink. They

make the concentrate which is then used to make the soft drink. The concentrate

is then shipped to what they would refer to as a bottler who would use the

concentrate to make the actual soda. There are very few concentrate

manufacturing plants globally and the whole of Africa shares two, one in

Swaziland and the other in Egypt. Concentrate manufacturing is very delicate,

and it takes small variances in environment, personnel, process to ruin the quality

of a process as per statistical process control. There are two types of concentrate

used; Powder concentrate and liquid concentrate.

The manner in which they run such a process is simple. Automation. Almost all

processes are automated to save a few manual processes and those processes fall

under extreme scrutiny to maximize production while reducing overheads.

SALES

They are a global business that operates on a local scale, in every community

where they do business. They are able to create global reach with local focus

because of the strength of the Coca-Cola system, which comprises of their

company and their more than 250 bottling partners worldwide.

The Coca-Cola system is not a single entity from a legal or managerial perspective,

and the Company does not own or control all of their bottling partners.

While many view their company as simply “Coca-Cola”, their system operates

through multiple local channels. Their company manufactures and sells

concentrates, beverage bases and syrups to bottling operations, owns the brands

and is responsible for consumer brand marketing initiatives. Their bottling

partners manufacture, package, merchandise and distribute the final branded

beverages to their customers and vending partners, who then sell their products

to consumers.

All bottling partners work closely with customers – grocery stores, restaurants,

street vendors, convenience stores, movie theaters and amusement parks, among

many others – to execute localized strategies developed in partnership with their

company. Customers then sell their products to consumers at a rate of more than

1.9 billion servings a day.

DISTRIBUTION

The first thing to realize is that Coca-Cola is a sort of franchised operation. The

people in Atlanta take care of the brand and overall marketing, product

development, but then each country has its own bottler, or more likely bottlers.

Although Coca Cola may have an interest in some of these bottling operations

they are generally separate legal entities. Many in their current firm are totally

dependent on Coca Cola as they do not bottle anything else. However, this is not

always the case. In Ghana, for example, Accra Brewery Limited (ABL), a subsidiary

of SABMiller, is the sole bottler of Coca-Cola in the country, and also bottle beer.

Within each country, the same pattern of devolution is seen when it comes to

distribution. In Africa, we have seen two sorts of distribution models.

There is the much trumpeted Manual Distribution Centre (MDC) model which

operates within densely populated areas e.g. Around large towns and cities. The

MDCs are independent businesses with links to their local bottler who may

provide technical support (e.g. sales training and general support) and credit to

the MDCs. The owners of the MDCs generally own the bottles and crates they use.

They advertise a ‘liquid only’ wholesale price. MDCs can be solely dedicated to

the sale of Coca-Cola but some are wholesalers of other products as well (e.g.

bottled beer). MDCs are often run from shipping containers painted red. They

receive a delivery of Coca-Cola once a week or thereabout. Typically a Coca-Cola

lorry leaving the bottler will visit one MDC which will take the entire load.

Distribution from the MDCs is mostly ‘manual’ with crates being loaded on to

handcarts, bicycles etc.

The relationship between the MDCs and the bottler is similar to that between the

bottlers and Coca-Cola Atlanta – although the MDCs are legally independent

businesses, many depend on the local Coca-Cola bottler for their business to

succeed.

REASONS COCA-COLA IS PRACTICING THIS SUPPLY CHAIN

The Coca-Cola Company is a universally recognized beverage manufacturing

company. It is a global company, but they don’t have to go through a lot of

processes to get their products to certain parts of the world. That is because they

have manufacturing companies present in almost all the countries they distribute

Coca-Cola.

The Coca-Cola Company tries as much as possible to reduce the expense incurred

while trying to get the product to the final consumers. Their primary aim is to

satisfy thirsty customers, and to have their product available at the right place at

the right time and in the right price range.

If Coca-Cola Company had a longer or more complicated chain, it would incur

more expenses which would lead to an increase in the price of each bottle of

Coca-Cola.

If Coca-Cola Company don’t give its products to distributors, it would be harder

for consumers to access it. So they need to give the distributors who would in

turn sell to retailers who are closer to the final consumers.

There are too many people that consume Coca-Cola, and if the supply chain was

just from the manufacturers to the consumers, it would be very difficult for them

to meet the needs of all their customers around the world.

CONCLUSION

Coca-Cola Company has adopted a very useful supply chain, which has enabled

them gain a lot of customers, and has subsequently given them competitive

advantage over their competitors.

While some companies sell directly to their consumers while eliminating their

middlemen, they don’t get to maintain a very large customer base because they

are in charge of every logistics process.

Coca-Cola is one of the biggest and most patronized beverage companies. Their

bottling partners are in charge of the sales to grocery stores, restaurants, street

vendors, convenience stores, movie theaters and amusement parks who in turn

sell to the consumers. This helps Coca Cola Company assess as many consumers

as possible. And that is the main reason they are recognized in every country.

REFERENCES

Andreas Wieland and Carl Marcus Wallenburg (2011): Supply-chain-

management in sturmischen Zeiten (in German). Berlin: ISBN 978-3-7983-

2304-9

Council of Supply Chain Management Professionals

Mitchell, Alan J. (1990), 1st edition: Formulation and Production of

carbonated Soft Drinks. AVI

Oliver, Thomas (1986): The Real Coke. Random House.

BIBLIOGRAPHY

Jacoby, David (2009). Guide to Supply Chain Management: How Getting it

Right boosts corporate performance. The Economist Books (1st edition)

Bloomberg Press

Lummus R.R, Krumwiede D.K and Vokurka R.J. (2001) The relationship of

logistics to Supply Chain Management: developing a common industry

definition. Industrial management and Data systems, Vol. 101. NO. 8, 426-

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