Strategic Asset Management Review for Coca-Cola after Acquisition

This report examines Coca-Cola's strategic infrastructure asset management, particularly following its acquisition of Sunshine Sugar. It addresses critical issues such as asset and operational risks, maintenance and capital budgets, and the need for a comprehensive capital plan. The report employs a desktop asset risk review methodology to identify key concerns, including higher maintenance costs, potential equipment breakdowns, and the integration of software solutions for improved inventory and performance management. Anticipated findings suggest weaknesses in Sunshine Sugar's asset management system, impacting its ability to meet production capabilities and manage costs effectively. The conclusion emphasizes the importance of strategic infrastructure asset management in mitigating risks and providing a framework for Coca-Cola to make informed decisions regarding its acquisition and future operations. The report also highlights the value of desktop reviews in assessing the operations of the acquired company.

Strategic Infrastructure Asset
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Context Issues.........................................................................................................................1
Resource Requirements..........................................................................................................2
Review Methodology.............................................................................................................2
Review Schedule....................................................................................................................3
Key issues/concerns to be considered....................................................................................3
Anticipated findings .............................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Infrastructure asset management relates to the effective process of development,
operation, maintenance, up-gradation and disposition of assets in consideration of costs, risks
and performance of such assets. In layman terms, it relates to the asset management of physical
assets rather than financial assets. This project report addresses the risk assessment and review of
assets, desktop asset risk review and devising a plan thereof for Coca-Cola after its acquisition of
Sunshine Sugars as a strategic move to secure its supply chain1.
MAIN BODY
Context Issues
Coca Cola is a global corporation that continually acquires companies for enhancing its
business processes all around the world. New South Wales produces 5% of the total sugar
produced in Australia. Sunshine Sugar is one of the major manufacturers of raw and refined
sugar products. Coca Cola acquired Sunshine Sugar on June 1, 2017 to secure its supply chain.
Sunshine contributes A$200 million to its local economy with secured partnerships in
organisations such as Bon-Sucro, SQF, Halal and Kosher. Some of the issues of Sunshine that
Coca Cola can face in context to infrastructure assets are as follows:
 Asset and Operational Risk:
Sunshine Sugar has three mills and a refinery in Condong, Broadwater and Hardwood. Seasonal
production would not only increase idle time but Coca Cola would also incur high acquisition
and production cost annually. Thus, there is a higher failure risk attached to such assets with
longer repair time as such assets are difficult to be replaced.
 Maintenance and Capital Budget:
Sugar cane production is seasonal based on fluctuations and recoveries in sucrose levels,
therefore, a higher maintenance cost is expended during the idle period of machineries2. A higher
1 Bird Ron, Harry Liem, and Susan Thorp, Infrastructure: Real assets and real returns
European Financial Management (2014) 802-824 20.4
2 Molenaar P, 'Case Study - Asset Management fulfilment in the sugar industry using the
indirect supply chain model', Dspace, South Africa, 77-79 accessed on 11 February 2018,
<https://dspace.nwu.ac.za/bitstream/handle/10394/9718/Molenaar_P_Chapter_8.pdf?
sequence=9>
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Capital Budget would be required for Sunshine Sugar's possessions as they are overvalued in
comparison to their usage.
 Capital Plan:
A dedicated Sustainability Capital Plan is important for ensuring futuristic operational security of
infrastructure assets. As sugar industry operates based on sucrose levels, an expensive capital
plan would lead Coca Cola to allocate a higher amount of their capital to this plan in regards to
its other assets.
 Risk Register:
No separate mitigation plans are allocated in the risk register for these assets in relation to the
attached operational risk factors. This would overlook the specific requirements that are to be
met with for preventing failures in the machineries of sugar mills. Since Coca Cola is a beverage
based company identification of all types of risks in such plants would be expensive as they
would need external help.
Resource Requirements
In order to resolve the issues mentioned above, Coca Cola would require to ensure a
sustainable Environmental Performance of Sunshine Sugar's assets which would not only enable
better quality production but also cost effective and long-lasting3. Another resource requirement
is the need to apply a 'whole-life' methodology for each asset by developing a time horizon for
every mill and refinery. This would ensure proper planning of life-cycle of infrastructure assets
based on the seasonal requirements. Diversified Risk and Decision Support Systems to control
risk and enable performance is important for making sure that the company can reduce
replacement and repairing costs on such assets. Additionally, from investigation point of view,
Senior asset manager of Coca cola will be required to retrieve annual reports and various
industry journals or articles to review assets management system of Sunshine sugars to analyse
issues and relevant findings.
Review Methodology
The methodology adopted for review of risks in infrastructure assets includes a Desktop
Asset Risk Review of Sunshine Sugar. A Desktop Audit or research refers to the data collection
technique from existing resources, it may be internal or external based on the researcher's
3 Council G.T. C, Strategic Asset Management Plan (2016)
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requirements4. This is a low-cost technique for Coca Cola to adopt for Sunshine Sugar since
sunshine sugar is a sugar-based corporation with different asset class requirements.
Review Schedule
Key issues/concerns to be considered
As per the aforementioned issues, there are some key issues relating to Sunshine's asset
management that need to be addressed by Coca Cola:
 Incursions for higher maintenance, repairing, replacement as well as production costs of
machineries in the mills and refineries of Sunshine Sugar.
4 Weber, Barbara, Hans Wilhelm Alfen, and Mirjam Staub-Bisang, Infrastructure as an
asset class: investment strategy, sustainability, project finance and PPP (John wiley & sons
2016)
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 Mitigation plans in regards to plant and equipment breakdowns in each mill and refinery
of Sunshine Sugar.
 Integrated software solutions in relation to inventory management, procurement, human
resources, CMMS, time and attendance for each mill based on their size, nature,
production capacity and other requirements.
 Performance measurement standards for each mill to evaluate and ensure sustainability in
production derived from infrastructure assets of each mill.
 Proactive Maintenance practices in place for Sunshine sugar assets since the company
includes seasonal operational capabilities.
 Operations and Shut-down Management systems of Sunshine Sugar and costs related to
such systems.
Anticipated findings
From the desktop risk review it is anticipated that a weak asset management system is
integrated in Sunshine Sugar. This has resulted in difficulty for the corporation to pay off its
liabilities on a regular basis. Apart from this, the physical inventory management system of
Sunshine is based on a system that always leaves it closing stock undervalued. Due to this,
Sunshine is not able to meet its production capabilities to the fullest resulting in higher carrying
costs and buffer stock level violations on a regular basis5. This also has resulted in wastage by
employing low sucrose-level raw material in its production and not meeting recovery
requirements in due time by the management of Sunshine Sugar.
CONCLUSION
From the above discussion it can be concluded that strategic infrastructure assets
management is important to deduce and prevent risks related to infrastructure assets. In addition,
desktop review system is also helpful in providing an overall view of Sunshine Sugar's
operations for Coca Cola which has limited knowledge in operations of sugar industry and its
asset management practices. This risk review plan has proved to be successful in identifying key
issues and strengths of Sunshine Sugar for Risk Review Board based on which Coca Cola can
5 Brown, Kerry and others, Infranomics: An integrated approach to strategic asset
management (Cham Springer 2014)
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decide to effectively acquire Sunshine by paying adequate in return of Sunshine's infrastructure
assets.
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REFERENCES
Books and Journal
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