The Design of the Possible Coca-Cola Supply Chain

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Introduction

The supply chain is generally regarded as the pledge of successful marketing activity in any particular geographical region. Originally, the supply chain for the Coca-Cola Company entails numerous suppliers and a broad network of dealers and consumers. Thus, these are not only suppliers of raw materials for the drink itself, but also the materials required for cans and bottles. Thus, for Coke lovers could enjoy this drink, the company needs to collect all the necessary resources, including the ingredients for the beverage, raw materials (ore and coal, or glass) for cans and bottles, and paper and paints for the advertisement and label. Thus, the aim of the paper is to design the possible Coca-Cola supply chain for London 2012 Olympics.

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Industry Overview

The most important factor that supply chain managers need to consider is the necessity to create a unique and particular supply chain for effective business performance during the Olympics. Originally, this particularity will be closely associated with the global trends in 2012, and the most common is the Maya prediction on the matters of the end of the world, and the spirit of the Olympics. These factors may essentially influence the marketing principles and strategies of global trade. This will inevitably influence the supply chain principles. (Carter and Jennings, 2008)

Considering the fact that competitors of the Coca-Cola Company will not miss their chances, there is a strong necessity to start preparations in advance, for the reserves of the Coke were sufficient by the beginning of the games. The supply chain principles should be restructured in order to meet the anticipated demands, and the results of the restructuring should entail the increased levels of canned Coke supply.

Thus, the company needs to increase the network of dealers and find out who will be allowed to arrange the vending points within the Olympics area. Thus, the signed contract with Wal-Mart may be regarded as the effective tool for restructuring the further supply chain, nevertheless, the contract is associated with bottled production. The anticipated sales volumes and the possible restrictions of attending the sports area will require the introduction of the canned production.

On the one hand, visitors and guests will be able to attend the areas where bottled production is prohibited (stadiums and other public places), on the other hand, the production of canned production is less costly in comparison with the glass bottles, and the manufacturing and recycling of plastic bottles is dangerous for the environment. Moreover, the year 2012 may originate the increased environmental protection concerns (associated with the apocalypse forecasted), consequently, canned production will be the best solution for London 2012 Olympics.

The framework elements for the supply chain design are the following:

  • Marketplace. Considering the needs and expectations of the target audience, the Coca-Cola Company will have to provide mutually advantageous retail and vending agreements for the consumers, distributors and local communities.
  • Workplace. The company positions itself as environmentally friendly, consequently, the production should be safe for the surrounding world, and the potential harm for the people should be minimized. Considering the fact, that crowds and public indignations absence can not be granted, the glass and plastic bottles production should be minimized for the period of Olympics as potentially dangerous items.
  • Environment. Environmental protection issues are included in the business strategy implemented by the company, consequently, the materials, used for the production are ecologically safe.
  • Community. These factors play an important role in the creation of the corporate strategy, moreover, the restructuring of the supply chain for the Olympics will consider the changes of the social moods, which have been already defined.

Supply Chain

Considering the necessity to create the supply chain for the two raw materials required for the Coke production. One of the key components is the high fructose corn syrup, which is used for the replacement of sugar. The supply of this substituent is closely associated with corn production. On the one hand, it is cheaper in comparison with traditional sugar production; on the other hand, it contains fructose instead of glucose. As for the HFCS supply, Christopher and Peck (2007, p. 319) emphasize the following statement:

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HFCS became an attractive substitute and is preferred over cane sugar among the vast majority of American food and beverage manufacturers. Soft drink makers such as Coca-Cola and Pepsi use sugar in other nations but switched to HFCS in the U.S. in 1984. Large corporations, such as Archer Daniels Midland, lobby for the continuation of government corn subsidies.

Originally, this company is regarded as the largest supplier of this component; consequently, the Coca-Cola Company should initiate the corresponding agreements, aimed at purchasing the required amounts of HFCS. It should be emphasized that the production of HFCS in Europe is mainly for pharmaceutical needs; therefore, the supplier will be the Mexican plant of Archer Daniels Midland Company. Then, the syrup will be supplied to Coke plants, where it will be added to the final product. The fact is that a sufficient part of the syrup may be stored in warehouses as a reserve, which will be used for the manufacturing of the production, aiming for the Olympics.

As for the raw materials required for can manufacturing, it should be stated that these may be purchased in any developing country, where the prices for the raw materials are lower. Thus, Russia is regarded as the largest supplier of bauxite ore, for the European market.

Then, these materials will be shipped to ALCOMET AD (Russian or Bulgarian department) – the largest aluminum producing plant, where the bauxite ore will be melt in the shape of thin sheets for further can production. Thus, the company will have to address the CLIMA aluminum can production plant, as the CLIMA technology is regarded as the most effective and environmentally safe. Moreover, the quick and effective production of the CLIMA factory will allow this company to complete the large order by the Coca-Cola Company.

Originally, the central question of the supply chain design is closely associated with the matters of finding the vendors and suppliers, who will be able to either proceed with the required raw materials or provide the ready production, which will be used for the final production. Thus, in the case of bauxite ore, the company may purchase the ore, and search for those who will process it, or the company may purchase the ready aluminum sheets, required for the can production. (Hosford and Duncan, 2004) Originally, these two options require different amounts of time, effort, and costs. The first option is more reliable; nevertheless, it takes more costs and human resources. The second option is more expensive; however, the company may focus its efforts and resources on solving problems that are more important.

The problem of the raw materials, in general, is resolved in accordance with the key business and strategic principles aimed at maintaining high production and quality levels. As it is stated by Hosford and Duncan (2004, p, 48):

The prices for these raw materials fluctuate depending on market conditions. Substantial increases in the prices for our raw materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, would increase the Coca-Cola system’s operating costs and could reduce our profitability.

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Distribution Flows

Considering the fact that Germany is regarded as the largest European market, it should be stated that it would be the effective distribution channel in 2012. The fact is that the second largest problem of supply chain design and management will be resolved. This problem is closely associated with the effective search of the distributors in places. Thus, while the German department will be regarded as the regional distributor, the search of the local distributors may be partly delegated to this department.

The midstream distribution flow to London will be performed by the German department of the company. Up to 80% of the manufacturing capacities will be aimed at serving the London flow in 2012. The aim of this decision will be to put new capacities at the disposal of the account managers of the German department. Moreover, the store-merchandising aspect of distribution will be extended for increasing the capacities of the existing distribution channel.

Strategy Overview

The entire logistics strategy will be aimed at serving the anticipated demand increase, which will be associated with Olympic Games 2012. The supply chain should be restructured in accordance with the requirements of environmental protection and decrease of bottled production in order to prevent citizens from the possible injuries and discomfort while consuming beverages from glass or plastic bottles. In general, the entire strategy will be based on the following elements:

  • Communicate with suppliers and distributors, as well as the target audience and future companions.
  • Convene the appropriate contracts for the agreed terms and conditions.
  • Arrange reliable audit practices
  • Correct the possible mistakes in time
  • Measure progress, and compare the suppliers for searching the better supply and distribution channels.

The downstream flows will be aimed at a steady decrease of the distribution volumes, as the average consumption rates are essentially lower in GB than the expected volumes during the Olympics. The production capacities will be lowered, while the other distribution channels should be slightly expanded in order to compensate for the distribution rates failure in London and UK.

Conclusion

The logistics principles, associated with the anticipated demand increase during the London Olympics 2012 will be closely associated with the necessity to restructure the supply chain design. Thus, the necessity to increase the canned production will originate the cooperation with Russian plants and the bauxite mining industry, as these are the closest possible suppliers for the German regional distributor. Nevertheless, some of the raw materials required for beverage production will not be available in Europe, thus, the supply chain will start in Mexico, where the largest HFCS is located.

Referene List

Carter, C. R., & Jennings, M. M. 2008. Logistics Social Responsibility: an Integrative Framework. Journal of Business Logistics, 23(1), 145.

Christopher, M., & Peck, H. 2007. Marketing Logistics (2nd ed.). Boston: Butterworth-Heinemann.

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Hosford, W., &. Duncan, J. 2004. The Aluminum Beverage Can. Scientific American. 12(36), pp. 48-53.

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