An In-Depth Analysis: Coca-Cola's Supply Chain Management Strategies

This report provides a detailed analysis of Coca-Cola's supply chain management. It begins with an introduction to supply chain management and then focuses on Coca-Cola, examining its product, cash, information, and return flows. The report delves into the company's manufacturing process, outlining steps like water clarification, mixing ingredients, carbonation, and packaging. Furthermore, it explores Coca-Cola's supply chain forecasting methods, including customer surveys, expert opinion polls, and the Delphi method. The report also covers risk diversification and capacity management strategies, as well as recommendations for improving the supply chain. The report concludes with a discussion on margin sustenance and emphasizes the importance of understanding consumer preferences and adapting to market trends.

RUNNING HEAD: Supply Chain Management
Supply Chain Management

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Contents
Introduction......................................................................................................................................2
Analysis of the Key Flows in the Supply Chain of Coca-Cola.......................................................2
Product Flow................................................................................................................................2
Cash Flow....................................................................................................................................4
Information Flow.........................................................................................................................4
Return Flow..................................................................................................................................4
Recommendations........................................................................................................................5
The Make Process............................................................................................................................5
Material Requirement Planning...................................................................................................5
The Process..................................................................................................................................5
Clarifying the water..................................................................................................................6
Filtering, Sterilizing and dechlorinating the water...................................................................6
Mixing the ingredients..............................................................................................................6
Carbonating the beverage.........................................................................................................6
Filling and Packaging...............................................................................................................7
The Supply Chain Forecasting.........................................................................................................7
Risk Diversification.....................................................................................................................8
Capacity Management..................................................................................................................8
Margins Sustenance.....................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
Supply Chain Management can be defined as the process of scheming, planning, implementing,
controlling and monitoring of the various activities involved in the supply chain with the key aim
of creating net value, erecting an economical infrastructure, controlling the global logistics,
coordinating the supply with demand along with determining the performance comprehensively
(Mentzer, 2001).
In other words, supply chain management is the harmonization between the various participants
in the supply chain for the purpose of production, inventory, place and transportation in order to
attain the best mix of approachability and productivity for the target market (Hugos, 2010).
This assignment will discuss about Coca-Cola as the selected international beverage company
and manufacturer, retailer and marketer of non-alcoholic liquid refreshments and syrups. The
Coca-Cola Company was founded in the year 1886 having its headquarters situated in Atlanta,
Georgia, United States. It has functioned a franchised distribution arrangement from the year
1889 in which the company is engaged in the production of syrup concentrates which is further
distributed to various bothers around the world who hold exclusive territories.
In the year 2005, the annual report of The Coca-Cola Company specified that the firm was
engaged in selling beverage products in more than 200 nations. Later on in 2010, Coca-Cola
outdid all the companies and took a leading position in the annual UK grocery sales. It is the
manufacturer of various popular products such as Sprite, Fanta, Minute Maid, Diet Coke, Coca-
Cola Zero, Dasani and many more (The Coca-Cola Company, 2017).
Analysis of the Key Flows in the Supply Chain of Coca-Cola
The supply chain is concerned all about the management of flows. The supply has some major
flows and they are: product flow, financial flow, information flow and return flow.
Product Flow
The product flow consists of a supplier, manufacturer, distributor, wholesaler, retailer and the
ultimate consumer (Schutt, 2004).

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There are various stages involved before a product manufactured by Coca-Cola Company
reaches the ultimate consumer.
Supplier- The key ingredients required by Coca-Cola Company are concentrate and syrup which
are supplied by the 1st tier suppliers. The production of syrup is a combination of caffeine,
caramel, natural flavoring, phosphoric acid and carbon dioxide. The 2nd tier suppliers of Coca-
Cola provide such ingredients, although for the purpose of achieving differentiation in its taste,
Coca-Cola makes its own flavor. The other components of manufacturing such as sugar and
water are also sourced by Coca-Cola from other companies or its nearest location.
Manufacturer- After receiving the key ingredients (concentrates and syrup) from the supplier,
they are delivered to the bottling plant/manufacturer. There are two types of bottling companies
which manufactures Coca-Cola – one is owned by Coca-Cola and the other one is 3rd party
manufacturing concern that are in authority for the manufacturing of finished beverages. Drinks
are then bottled and directed towards the warehouse for further dissemination.
Warehouse and Distribution-After the drinks are bottled, they are delivered to the warehouse so
that the stock can be billed to the distributer. For the purpose of ensuring the flexibility and
smoothness in the process of distribution, software called ‘I das’ is used by Coca- Cola which
looks after and mechanizes the distribution process.
Wholesalers and Retailers- The stock available with the distributors are then supplied to the
various wholesalers and retailers in the different parts of the country. The stock of Coca-Cola is
delivered by such wholesalers and retailers throughout the country by the way of bulk delivery.

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Customer- The customers purchase the drinks from different retailers or any glossary shops for
consumption.
Cash Flow
There are two perspectives of the financial aspect of supply chain management. First aspect is
based on the cost and investment and another is based on the flow of funds. Cash flow specifies
an organization’s financial status and flows from the consumer to the raw material supplier after
deducting the various expenses incurred (Jury, 2012). The cash flow of Coca-Cola Company has
been significantly falling over the years due to increased concern of the consumers regarding
their health (Market Watch, 2017). Consumers now want to avoid such harmful pesticides to
harm their bodies. Therefore, the company must aim at improving the quality standards so that
the cash flows start rising again.
Information Flow
Information is the most essential element in the supply chain process of Coca-Cola Company as
no product flows until information flow takes place (Bidgoli, 2014). An effective supply chain
management must provide right information to the right person at the right time. The information
flow is regarding the orders, schedules, forecasts, and demands between the suppliers,
manufacturer, assemblers and retailers (Mentzer, 2004). Moreover, information flow to
customers is also made by the way of marketing, advertisements, etc. for the purpose of making
them aware regarding the latest offers, new products, and other information.
Return Flow
Return flow in case of Coca-Cola Company is mostly for the purpose of returning the empty
glass bottles back to the company after consumption. Moreover, the plastic bottles and cans are
also invited by them for recycling and disposal in order to protect the environment. All the
returns are handled by the company in an efficient manner (Coca-Cola Journey, 2017).

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Recommendations
After the analysis of the key flows of the supply chain, it is recommended that Coca-Cola must
aim at reducing the use of pesticides and chemicals in the manufacturing of their products and
focus on the usage of harmless components. Furthermore, the falling market for the soft drinks
require the standardization of quality and creating awareness in the minds of the consumers
regarding the use of harmless components with the use of effective marketing techniques. The
cash flow will increase with the increase in the demand for the product which will be possible
only with the help of standardized and quality ingredients which do not affect the health of the
consumers.
The Make Process
Material Requirement Planning
Proper planning is the only reason which has led Coca-Cola to achieve new heights in the
industry and therefore being able to sell its drink in different parts of the world. Before
proceeding with the manufacturing process, the key ingredients (concentrate and syrup) and
other components like water and sugar are obtained from the pre-selected suppliers.
The Process
The process starts with arranging all the required ingredients and following the defined process-

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Clarifying the water
The water contains a lot of impurities such as bacteria, organic matter and suspended particles
which are even responsible for degrading its color and taste. Therefore, Coca-Cola uses
traditional methods like filtration, coagulation and chlorination. Floc is mixed into the water
during the process of coagulation which performs the function of absorbing the suspended
articles by making them effortlessly trapped by filters. For the purpose of achieving the desired
pH level, alkalinity is adjusted through the use of lime in the course of clarification process
(How Products are made, 2017).
Filtering, Sterilizing and dechlorinating the water
A sand filter is used to clarify water with a view to eliminate the fine particles of floc. The water
is passed over a layer of sand and courser beds in order to capture the particles. Moreover, for the
purpose of sterilization, a small quantity of chlorine is added to a storage tank filled with water.
It is left there for around two hours so that the reaction is complete. Later on, the water is
dechlorinated with the help of an activated carbon filter such that the residual organic matter can
be removed. It is then passed into a dosing station after the water is de-aerated through the
vacuum pump (Merck, 2017).
Mixing the ingredients
A sequence is predetermined by the Coca-Cola Company for the purpose of pumping the
dissolved sugar and flavor concentrates into the dosing station after considering their
compatibility. After this, the syrup is sterilized with the use of ultraviolet radiation and then the
sophisticated machines are utilized so that the water and syrup can be combined carefully. The
aeration of the mixture is then aimed to be prevented through pressurizing the vessels with
carbon dioxide.
Carbonating the beverage
The Coca-Cola Company then adds carbonation to the finished product produced by them. The
quantity of carbon dioxide to be utilized is completely dependent on the type of soft drink
produced by Coca-Cola Company. In case of fruit drinks like Minute Maid, less carbonation is
required while in case of other drinks like Coke, other liquids are also meant to be diluted with

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the carbon dioxide. It is then moved to the storage tanks and lastly to the filler machine (Coca-
Cola HBC Italia, 2017).
Filling and Packaging
The finished products produced by the Coca-Cola Company are then transferred to the cans or
bottles with pressure-resistant closures. Moreover, it is cooled down to be brought at the room
temperature before the labeling in order to prevent the labels from condensation. After labelling,
the containers are packed for shipment to the distributors.
The Supply Chain Forecasting
The industry in which Coca-Cola operates requires that the direct review by the customers such
that the improvements can be easily made in the quality, taste and various other aspects.
Forecasting of the right demand and supply is the vital for achieving success. Therefore,
customer survey method is the most suitable method for the Coca-Cola Company as it will act as
the direct method of forecasting demand. It will enable Coca-Cola Company to easily determine
the demand for their prevailing products and estimate the future demand accordingly.

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Expert’s Opinion Poll- It will help Coca-Cola Company to obtain expert opinion regarding the
product as these experts are generally sales representatives who are in close touch with the
customers and are aware about their tastes, preference, perceptions regarding the competing
products and future purchase plans. Through this method, demand can be easily estimated in a
simple and less expensive manner (Nitisha, 2017).
Delphi Method- This method is cost effective and allows subjective decision making through the
help of group of experts who provide their opinion regarding the future demand of a product.
The forecasts obtained from the experts are cross checked for attaining more accurate decision
making (Crandall, Crandall & Chen, 2014).
Market Experiment Method- Various experiments and studies on consumer behavior are
conducted for the purpose of collecting the required information related to the existing and future
demands for a product. The market experiments consider factors like changing prices and
expenditure so that the resulting changes can be easily recognized.
Risk Diversification
In order to manage risks associated with demand, supply, inventory problem, etc. the Coca-Cola
Company must maintain good relationship with the distributors, wholesalers and retailers as it
will allow them to manage a smooth and flexible supply chain. Moreover, it may use multiple
suppliers of assembling the raw material such the overall risk can be diversified (Lee & Lee,
2010).
Capacity Management
Survey method will enable the company to recognize that the consumers are increasingly
becoming health conscious. Now, they have started preferring fruit drinks over soft drinks.
Moreover, the usage of pesticides in the soft drinks has made consumers reluctant regarding its
use. Also, it will help Coca-Cola to find out the opinion of its customers regarding the new
entrants in the market (Samson & Singh, 2008).
Margins Sustenance
With the help of survey method, the demands of the customers can be easily recognized in a
cost-efficient manner and enables the company to attain high level of profitability by making the
desired changes.

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The process of product development will be benefitted through the forecasting models and also
assists in detecting the emerging markets for the business. Coca-Cola can rely on the Survey
method of forecasting as it will provide the present opinion of the customers on their product
along with its competitors.
Conclusion
The Coca-Cola Company now serves over 200 companies and achieved the position of number
one beverage company. Its large operations therefore require some rectifications to be made in
the improvement areas. For the purpose of achieving betterment and smooth running of business
in future it is recommended that forecasting must be emphasized. High quality processes must be
employed such that standardized products are produced that meet the high expectations of
consumers. The maintenance of close relationship with franchisees will significantly help in
achieving total quality management as the quality standards will be met every time along with
improvement in performance. Its competitor Pepsi frequently comes up with innovative
marketing strategies and is also one of the leading brand in beverage market which have the
significant impact on the sales of the company and therefore must be kept in mind while strategic
decision making.
It is also recommended that some transparency must be created with its bottling partners. It
would help in solving domain conflict problems. The Coca-Cola Company is continuously
taking the needed steps with the view to achieve improvement in the supply chain by affiliating
with different suppliers and bottlers. At the end, it can be concluded that the strategies of supply
chain management has helped Coca-Cola Company to beat most of its opponents and become
competitive in the global market. The recommended improvements will further enhance the
working and support the supply chain of the organization.

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References
Bidgoli, H. (2014). MIS5. Cengage Learning.
Coca-Cola HBC Italia. (2017). Plants and Processes. Retrieved November 8, 2017, from
https://it.coca-colahellenic.com/en/our-activities/plants-and-processes/production-
processes/
Coca-Cola Journey. (2017). Sustainable Packaging. Retrieved November 8, 2017, from
http://www.coca-colacompany.com/stories/packaging-recycling
Crandall, R. E., Crandall, W. R. & Chen, C. C. (2014). Principles of Supply Chain Management,
Second Edition. CRC Press.
How Products are made. (2017). Soft Drink. Retrieved November 8, 2017, from
http://www.madehow.com/Volume-2/Soft-Drink.html
Hugos, M. H. (2010). Essentials of Supply Chain Management. John Wiley & Sons.
Jury, T. (2012). Cash Flow Analysis and Forecasting: The Definitive Guide to Understanding
and Using Published Cash Flow Data. John Wiley & Sons.
Lee, C. F. & Lee, J. (2010). Handbook of Quantitative Finance and Risk Management. Springer
Science & Business Media.
Market Watch. (2017). Coca-Cola Co. Retrieved November 8, 2017, from
https://www.marketwatch.com/investing/stock/ko/financials/cash-flow
Mentzer, J. T. (2001). Supply Chain Management. SAGE.
Mentzer, J. T. (2004). Fundamentals of Supply Chain Management: Twelve Drivers of
Competitive Advantage. SAGE.
Merck. (2017). Soft Drink Processing. Retrieved November 8, 2017, from
http://www.merckmillipore.com/IN/en/ps-learning-centers/beverage-production-learning-
center/applications/soft-drink-processing/PBeb.qB.mB0AAAFC_rpYZnxr,nav?