Procurement and Supply Chain Management of Coca Cola Australia

Procurement and Supply Chain Management
NAME OF STUDENT:
NAME OF COLLEGE:
AUTHORS NOTE:
Running head: PROCUREMENT AND SUPPLY CHAIN

PROCUREMENT AND SUPPLY CHAIN
Executive Summary
Coca cola Australia is subsidiary company of Coca Cola beverages which is one of the
largest company in the world headquartered in Atlanta. Coca Cola Australia sources syrup
from Coca Cola Atlanta which is unique ingredient of their products and accordingly sources
various other ingredients such as juices and sweeteners from local Australian suppliers to suit
to local taste preferences of customers of Australia. The company has an effective supply
chain management system which helps in ensuring widespread popularity of products. Coca
Cola Australia also uses various IT tools in the form of Materials Resource Planning to
increase efficiency of their supply chain activities Moreover, there are various inventory
management challenges which are faced such as lack of visibility and difficulty in identifying
demand pattern. Coca Cola uses black book algorithm to avoid negative consequences of bull
whip effect and make their supply chain effective.
1

PROCUREMENT AND SUPPLY CHAIN
Contents
Executive Summary...................................................................................................................1
Analysis......................................................................................................................................3
Part A.....................................................................................................................................3
Part B......................................................................................................................................4
Part C......................................................................................................................................5
Part D.....................................................................................................................................6
Part E......................................................................................................................................7
Discussion of Coca Cola Australia’s procurement and supply chain analysis......................8
Improvement Programs..........................................................................................................8
Role of improvement programs in achieving mission, vision and strategic goals.................9
Conclusion..................................................................................................................................9
References................................................................................................................................10
2

PROCUREMENT AND SUPPLY CHAIN
Analysis
The mission of Coca cola Australia is to refresh world, inspire moments of optimism and
happiness and create values and make difference.
The vision of Coca Cola is to become a good workplace where employees are motivated to be
their best, offer wide range of quality products which fulfil needs and wants of customers,
nurture strong relationship with customers and suppliers and build mutual and enduring
values. Coca Cola also aspire to be responsible corporate citizen who could build uniqueness
by building and supporting sustainable community along with maximizing shareholder
returns by being largely efficacious, optimal and progressive company.
Strategic goals of Coca Cola are to strengthen category leadership position, improve
productivity and market execution and ensure effective alignment with their partners.
Part A
1. The key product categories which procurement department of Coca Cola Australia has to
manage are sparkling non-alcoholic product, still non-alcoholic and energy drinks.
2. Coca Cola Australia purchases syrups and concentrates from TCCC which holds patent
formula of company which is highly confidential.
3.According to Kraljic (1983) Supply market of Coca Cola Australia is diverse in nature and
has multiple suppliers based across Australia who supply ingredients according to local taste
preferences which are accordingly mixed with original patent syrup of Coca Cola.
4. The supplier selection at Coca Cola Australia is based on complying with values and
expectations by suppliers laid down in the Supplier Guiding Principles of Coca Cola.
Coca Cola Australia manages its suppliers with simple framework which is termed as Partner
for Growth which helps in segmenting their entire supply base and allows to invest time and
effort in an appropriate manner.
5. The key supply related challenges and opportunities for Coca Cola Australia in beverage
industry are:
3

PROCUREMENT AND SUPPLY CHAIN
 As stated by Sharma & Sisodia (2014) maintaining an effective relationship with
suppliers and partners by complying with mutually agreed standards.
 Increase in operating costs as a result of increase in fuel costs, freight and
transportation costs.
 Increasing use of advanced technology and information technology tools for
improving supply chain capabilities.
 Outsourcing vital supply chain processes to increase efficiency and reduce costs.
Part B
1. Coca Cola market their products to their customers by enduring wide category of
demographics. The company is well recognized for their wide range of commercials with
greater variety of various ethnicities being involved to associate with entire category of
population in every market. According to Ma Gloria (2017) Coca Cola’s products are spread
in various geographical locations which enables them to cater to needs of customers
belonging to various locations based on their preferences which helps in increasing their
market share. The key customers of Coca Cola Australia are youth population of the country
and also customers who fall in age group of 12-50 who seek refreshment and energy from
products of the company.
2. As opined by Patel (2017) the inventory management techniques which is being followed
in Coca Cola Australia is Economic Order Quantity model which builds ideal match amid
holding costs and ordering costs of customers. Coca Cola even uses FIFO (First In First Out)
system to ensure that their products remain fresh in nature and to deliver them in quickest
possible time to customers.
Coca cola Australia uses same inventory management techniques for all its product categories
and brands as it helps in avoiding confusion regarding management of stocks and inventory
and enables storage of information in single company database.
3. The inventory management challenges which are being observed in Coca Cola Australia
are:
Difficulty in identifying the demand patterns- According to Zhang, Gunasekaran & Yu
(2015) the change of demand regarding products of Coca Cola in market is considered as one
of the greatest challenge as incorrect estimation of demand can lead to instances of bull whip
4

PROCUREMENT AND SUPPLY CHAIN
effect. The demand of product in market is influenced by various factors which can create
inventory management challenges for Coca Cola
Part C
1. The instance of bull-whip effect was regarding Coca Cola’s Minute Maid and Simply
Orange Brand in Australia which occurred due to wrong demand forecasting and resulted in
stock outs and changes in buying patterns of customers. As opined by Lee, Padmanabhan &
Whang (2009) Coca Cola Australia utilizes system which is termed as Black Book which
uses algorithm to ensure that bull-whip effect does not take pace in SBU region and ensures
that Coca Cola receives appropriate data which is required to make effective supply chain
decisions.
2. The Key Information Technology tools which are used across Coca Cola’s key supply
chain business processes are:
Enterprise Resource Management- As stated by Singh & Gupta (2014) Coca Cola Australia
makes use of proprietary software known as BASES and some modules of SAP to deal with
their business operations. This particular software administers their functionality of overall
ERP such as Information of geographical sales per capita consumption pattern, response
regarding new product introduction, sales forecasting, seasonal variations, customer
relationship management data, fleet management data etc. Various types of query
management and customer complaints are also administered using this particular software.
Above mentioned IT tools have impacted supply chain capabilities of Coca Cola in following
ways:
Increases competitiveness - As opined by Singh & Garg (2015) Coca cola Australia is able to
increase their competitive power and service quality by enabling their customers and clients
to access services offered from anywhere and at any point of time. These IT tools also help in
tracking customer preferences and demands for products.
Smooth Supply chain operations- As opined by Mamillo (2014) Coca cola Australia has been
able to achieve smooth supply chain operations as introduction of IT Tools have helped them
in avoiding problems in supply chain related to workload, long lead time, responsiveness and
consistency in quality and efficiency.
3. The collaborative practices which are being used in supply chain of Coca Cola are:
5

PROCUREMENT AND SUPPLY CHAIN
Vendor Management Inventory- As stated by Li & Wu (2017) main idea behind Vendor
Management Inventory of Coca Cola from supplier side is that their upstream partners takes
over all replenishment decision of downstream partner. As demand pattern is controlled by
upstream partner, safety stock at both parties can be reduced and accordingly service level
can be increased which not only helps in decreasing inventory spaces and costs but also helps
in increasing customer satisfaction and in avoiding problems related to bullwhip effect. The
challenge with this practice is that it requires 100% involvement of all stakeholders which is
difficult to obtain at times.
Collaborative Planning, Forecasting and Replenishment- As stated by Bag (2014) main idea
behind Collaborative Planning, Forecasting and Replenishment from customer side is that
this collaborative practice helps in removing uncertainties related to supply and demand by
improving communication between various layers. One important characteristic of this
practise is that it helps in improving accuracy of forecast related to demand, order and sales
of Coca Cola by allowing accessibility of customers and suppliers in forecast process. Further
during case of any discrepancy, suppliers can get involved and accordingly can decide
replenishment quantity to rectify identified problem. The challenge with this practice is that it
requires trading partners to create relationships with customers which are based on trusts.
Part D
1. The supply chain map of Coca Cola Australia is as follows:
6

PROCUREMENT AND SUPPLY CHAIN
Fig: Map of Supply Chain of Coca Cola
Source- coca cola company.com (2019)
2. Coca Cola Australia relies greatly on breakdown of processes within their supply chain
integration. Their supply chain management focuses on analysing every process within
structure to reduce company costs and to serve their customers in more effective manner. The
main focus of Coca Cola remains in efficiency of their processes associated with supply chain
as it leads to increased opportunities. As opined by Lambert & Cooper (2000) Coca Cola
makes use of available data to keep their supply chain partners informed always which helps
in decreasing lead times. As stated by Lee (2004) Coca Cola has KPI’s in place to measure
efficacy of their supply chain like computing lead times and time utilised to serve. Coca Cola
even emphasizes on measuring holding costs and movement of data in black book system and
logical networks in supply chain are administered by the company and therefore Coca Cola’s
level of strategy-key processes objectives alignment is effective in nature based on
components of Triple-A Supply chain.
Part E
The key procurement and supply chain sustainability practices which is followed in Coca
Cola Australia are:
Engagement in collaborative strategic sourcing- As opined by Dubey (2014) collaborative
strategic sourcing initiative of Coca Cola helps in producing better results for the company as
this approach not only helps in ensuring availability of supplies but also helps in lowering
total costs, streamlining processes and increasing responsiveness to changing needs of their
customers.
Establishing supply chain council- Coca Cola has also established a governing supply chain
council to provide direction to the company and this helps in aligning their supply chain
strategy with their overall strategy.
Adopting green initiatives and corporate social responsibility initiatives- As stated Pagell &
Wu (2009) Coca Cola has also increased its effort towards adopting green initiatives to
reduce carbon footprint and have also increased their efforts towards corporate social
responsibility to help in development of community and society in which they do business.
7

PROCUREMENT AND SUPPLY CHAIN
Discussion of Coca Cola Australia’s procurement and supply
chain analysis
Coca Cola Australia recognizes that their supply chain operations does not start limited to
their specific processes only but starts with their customers and their communications with
stores. Coca Cola has reverse engineered their entire supply chain which best suits customers
at end of process and as per archetype which are evaluated in consideration to buying habits.
Also, Coca Cola utilises information which are gathred during order and utilisation process to
organize remaining processes. The reverse engineering strategy permits Coca Cola to avert
condition such as market myopia and offer services which suits customers regarding product
they desire or the manner in which it is consumed. Understanding demographics is an
important area which is considered when beginning to create dynamic supply chain process
in Coca Cola. They use centres called strategic business units in each of the region they
supply products to meet demands and needs of vast customer base within Australia.
Improvement Programs
The improvement programs which can be adopted by Coca Cola Australia are:
Conducting Yearly reviews - Currently Coca Cola reports annually regarding operations of
their supply chain but it would be more effective if they dedicate research and development
regarding their supply chain on permanent basis which can focus on identification and
development of various new creative methods which can help in increasing effectiveness of
supply chain management. By identifying and developing new methods in their supply chain
management Coca Cola will also be able to outperform competitors.
Water sustainability methods- The entire success of Coca Cola surrounds over delivering
products to their customers. As amount of water which is involved in manufacturing of their
products is huge, so they should focus on developing ways for improving their manufacturing
process by using less water. As a result of global warming water shortages are increasing day
by day and therefore to become sustainable in nature and to protect its image as responsible
corporate citizen, Coca Cola must develop new production techniques which uses less water
and also should focus on conservation of water.
8

PROCUREMENT AND SUPPLY CHAIN
Role of improvement programs in achieving mission, vision
and strategic goals
The improvement programs which are discussed above will help Coca Cola in attaining their
mission, vision and strategic goals such as conducting yearly review regarding effectiveness
of supply chain and developing new water sustainability methods will help Coca Cola to not
only consolidate their leadership position in beverage market and in developing sound
relationship with their suppliers but will also help in portraying themselves as responsible
corporate citizen who care about people, planet and community.
Conclusion
From above analysis it is evident that supply chain of Coca Cola Australia is effective in
nature which helps in widespread popularity of their products. Further, it is evident that
efficiency of their supply chain has increased as result of implementation of IT tools
integration. Though Coca Cola faces some issues regarding management of inventory but still
their overall supply chain can be considered as effective in nature.
9

PROCUREMENT AND SUPPLY CHAIN
References
Bag, S. (2014). IMPACT OF SUSTAINABLE SUPPLY CHAIN MANAGEMENT ON
ORGANIZATION PERFORMANCE: MEDIATING EFFECT OF
LEADERSHIP. Indian Journal of Management Science, 4(3), 10-25. Retrieved from
https://search.proquest.com/docview/1640732700?accountid=30552
Dubey, R. (2014). Supply chain and operations management journals: An overview and need
for a new journal in supply chain management. Journal of Supply Chain Management
Systems, 3(3), 1-5. Retrieved from
https://search.proquest.com/docview/1733231012?accountid=30552
Kraljic, P. (1983). Purchasing must become supply management. Harvard Business
Review, 61, 109. Retrieved from https://search.proquest.com/docview/227791115?
accountid=30552
Lambert, D. M., & Cooper, M. C. (2000). Issues in supply chain management. Industrial
marketing management, 29(1), 65-83. https://doi.org/10.1016/S0019-8501(99)00113-
3
Lee, H. L. (2004). The triple-A supply chain. Harvard business review, 82(10), 102-113.
Retrieved from: http://www.scap.pk/article/SupplyChaindd.pdf
Lee, H. L., Padmanabhan, V., & Whang, S. (2009). Information distortion in a supply chain:
The bullwhip effect. Management Science, 43(4), 546-558. Retrieved from
https://pubsonline.informs.org/doi/pdf/10.1287/mnsc.1040.0305
Li, D., & Wu, W. (2017). Working capital management from the perspective of supply
chain. Management & Engineering, (29), 71-81.
doi:http://dx.doi.org/10.5503/J.ME.2017.29.009
10

PROCUREMENT AND SUPPLY CHAIN
Ma Gloria, V. T. (2017). Supply chain integration and performance. Philippine Management
Review, 24 Retrieved from https://search.proquest.com/docview/1957114443?
accountid=30552
Mamillo, D. (2014). The effect of organization culture and uncertainty in supply chain
management. Theory, Methodology, Practice, 10(2), 49-57. Retrieved from
https://search.proquest.com/docview/1696725212?accountid=30552
Pagell, M., & Wu, Z. (2009). BUILDING A MORE COMPLETE THEORY OF
SUSTAINABLE SUPPLY CHAIN MANAGEMENT USING CASE STUDIES OF
10 EXEMPLARS. Journal of Supply Chain Management, 45(2), 37-56. Retrieved from
https://search.proquest.com/docview/304920577?accountid=30552
Patel, H. J. (2017). Behavioural aspects of supply chain management: Strategy, commitment,
integration and firm performance – A conceptual framework. International Journal of
Supply and Operations Management, 4(4), 370-375. Retrieved from
https://search.proquest.com/docview/2063812838?accountid=30552
Sharma, S., & Sisodia, A. (2014). Comparative multi criteria analysis and dependent
optimisation through integrated supply chain. International Journal of Productivity
and Performance Management, 63(8), 1046-1069. doi:http://dx.doi.org/10.1108/IJPPM-
09-2013-0164
Singh, A. K., & Garg, A. (2015). Impact of information integration on decision-making in a
supply chain network. Production Planning & Control, 26(12), 994. Retrieved from
https://search.proquest.com/docview/1702110975?accountid=30552
Singh, S. C., & Gupta, D. (2014). Green supply chain & profitability: A case study of two
multinational companies. Journal of Supply Chain Management Systems, 3(3), 6-11.
Retrieved from https://search.proquest.com/docview/1733231046?accountid=30552
Zhang, C., Gunasekaran, A., & Yu, C. W. (2015). A comprehensive model for supply chain
integration. Benchmarking, 22(6), 1141-1157. doi:http://dx.doi.org/10.1108/BIJ-05-
2013-0060
11

PROCUREMENT AND SUPPLY CHAIN
12