As the world’s largest beverage company, Coca-Cola has 21 billion-dollar brands, with nearly 4,000 different beverages to choose from and a presence in every country on Earth, 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. In order to serve consumers with greater efficiency and reduced cost, 95 percent of the beverages are made in the country where they are sold. By keeping manufacturing and sourcing local, The Coca-Cola Company is able to minimize production time.
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Sustainability, technology and retailer relationships are also key areas of focus in the company’s supply chain.
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 CCE’s 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 CCE’s 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.
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.
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 are also insurance costs, floor space cost and consumption, opportunity costs, obsolescence and expiry costs…that 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 people’s 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.
The increased time and cost of international movement does not really affect Coca-Cola because they are using each region where they are selling the product for production. In many countries where Coca-Cola is located uses own water source and have their own factories to produce their drinks, they don’t even need to ship the products overseas.
The principle of strategic sourcing is to support the ultimate goal of achieving and sustaining a company’s competitive advantage. Any sourcing strategic initiative must be designed to support profit growth targets. Coca-Cola has successfully achieved the goal by keeping manufacturing and sourcing locally to minimize production and delivery time. Also, by manufacturing locally, Coco-cola can effectively customize and design their operations and products to account for cultural differences in different countries.
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