Supply Chain Assignment - Coursework Example

Supply Chain Assignment Contents Contents 2 Introduction 3 Supply chain management for two products 4 Service factors in the Supply Chain 9 Comparison of the operations 11 Identification and description of the modifications to the supply chain(s) 14 Conclusion 16 References 17 Introduction This report will analyse the supply chain management of two well-known products Coca Cola and Pepsi. Supply chain management is all about manufacturing products and developing an efficient channel to ensure that products reach to end customer. In current competitive business environment it is essential to manage supply chain activities appropriately so that there is timely delivery of products and high quality level of customer service. Supply chain management enables companies to improve upon their customer service and helps in achieving competitive position in the industry. These products have acquired strong market position and addresses increased customer demand in the market place. Supply chains of these products would be thoroughly analyzed in order to understand relative performance of these two organizations. Operations of the two companies will be contrasted and compared to identify the degree to which such processes extend support towards customer service. Coca-Cola Company is the marketer, manufacturer and retailer of multinational beverages, having its headquarters based in Atlanta, Georgia. The flagship product of the firm is Coca-Cola. This organization was a part of beverage industry and was founded in 1886. Franchised distribution system had been adopted by the organization, and its products are distributed across the globe. PepsiCo is Beverage and Food Corporation of America, having its headquarters in New York, United States. The company deals in distribution, manufacturing and marketing of beverages, grain-based snack foods, etc. This firm has its products distributed across 200 countries. On basis of revenue margins, the company is largest beverage and food business. Supply chain management for two products A) Coca Cola The common stages of supply chain process involved in production of Coca Cola are customers, retailers, distributors or wholesalers, manufacturers and raw material suppliers. In supply chain management process of Coca Cola, there is forward flow of materials from suppliers to manufacturer, assembly point, warehouse, retailers and finally to end customers. It can be stated the main objective of any organization is to facilitate maximum utilization of resources and enhance productivity level. Coca Cola Company is actively producing syrup or the raw product Coca Cola for customers. The company encompasses a wide array of bottlers located across the globe. Bottling operation is not performed by the company in United States and it eventually leads to further expansion of business. Supply chain management process of Coca Cola has been outlined in below figure. The company intends to make optimum resource utilization. Bottling operation does not fall within expertise of the firm. Hence it is transferred to third party system. It would require lump sum investment in order to set up own bottling plant. This mechanism has helped to save cost which was later utilized in business expansion process across the globe. (still unclear just writing united states doesn’t show much , this doesn’t make sense) It clearly shows that the company follows an efficient supply chain process, where marketing strategy leads to appropriate order planning. Order is placed on the basis of sales strategy and it is then communicated to manufacturing units. Transportation involves direct cost for the company. Goods are dispatched to warehouse locations with the support of transport system. From the storage location, products are either distributed for bulk delivery or small percentage of product delivery (Leeman, 2010). This in turn reaches to respective retail outlets and finally to end customers. Superior quality level is maintained across the entire supply chain process. Production of Coca Cola comprises of quality check mechanisms. This is done to include high quality ingredients into product from suppliers. Coca Cola Company has established subsidiaries to manufacture Coca Cola syrup. This syrup is then sold to different bottlers across the globe that is holding franchise of Coca Cola Company. Exclusive contracts are provided to these bottlers. Finished product is then transformed into bottles and cans, along with sweeteners and filtered water. The bottlers then have responsibility to merchandise the product in retail stores, restaurants, etc (Jespersen and Skjott-Larsen, 2005). Supply-chain network indicates providing services to customers in most cost-effective manner. Customer responsive supply chain is followed by the company for its flagship product Coca Cola. Figure 1: Per Capita Consumption of Coca Cola (Source: Leeman, 2010) Demand and supply factors play an integral role within supply chain operations. During production of Coca Cola, market demand is accessed first and then product is manufactured for customers. It can be stated that Coca Cola’s supply chain operations are totally based on demand in the market place (Hoyle, 2007). Supply chain process of Coca Cola is all about forming strategic partnerships with customers and suppliers. Employee productivity level is largely dependent on such strategic partnerships. The company is able to retain wide base of employees because of higher level of satisfaction. On basis of customer demand, order is placed for production of Coca Cola. The total number of workers at the factory outlets is about 700,000, specifically in factories located in United States. This figure on number of workers varies across geographical regions. There are 110 factories of the company manufacturing Coca Cola around the world. Fleet of more than 500 is maintained by the company in order to facilitate timely delivery of product to retail outlets. These figures are standardized across the globe. The fleet used by the company in its home country and neighbourhood regions is mainly trucks. Deliveries are not outsourced since major objective is to retain brand image of Coca Cola and eradicate any form of increased lead time. This factor can be addressed well only when there is own delivery unit. Decentralized process is followed within supply chain process of Coca Cola. It can be stated that this process initiates flexibility for regional departments. These departments can efficiently handle factory operations and enhance skills or knowledge of workers. Regional office takes into consideration operations of factories located in those geographic regions. There are patent rights issued on ingredients of Coca Cola and hence it is not known to public or rival firms. Before shipment, concentrated syrup is sent to bottling plants for mixing, blending and filling. PET bottles, cans, etc., are then filled with concentrated syrup and shipped to distributors. Coca Cola cans comprise of a special message stating that it cannot be sold separately (Mitra, 2012). This condition is basically valid for bulk delivery which is dispatched to various retail outlets. There are specific units of Coca Cola cans or PET bottles which are dispatched to respective wholesalers or retailers. The manufactured final products are distributed across multiple distribution centres with the support of trucks. From these distribution centres, product is transported to retailers in order to reach out to end customers. B) Pepsi PepsiCo has sets its position in the market place with the support of its flagship product Pepsi. The main aim of the company is to focus on quality level of the product so that customers can be loyal towards the brand. Raw materials are acquired by the firm from a wide base of suppliers (Rushton and Walker, 2007). Just In Time approach is executed by the company to reduce the overall lead time of supply chain process (Wincel, 2004). The company is actively indulged into forming partnerships with women-owned and minority-owned suppliers. This form of partnerships is developed to retain world’s superior quality supplier base. Supplier chain process of Pepsi has been outlined below. PepsiCo possesses its own bottling units and is known for conducting bottling operations of beverages such as Pepsi. This indicates that the company has not transferred its bottling operation to third party. Pepsi is manufactured in company owned bottling units located in operating regions. On time delivery of the product to retail outlets is an area of concern for the firm. From manufacturing units products are dispatched to warehouse locations and then accessed easily by transportation department so that products can be delivered on time to retail outlets. JIT philosophy is implemented by the company to enhance customer satisfaction level in context of value for money, option availability, prompt delivery time and quality assurance (Kirby, 2003). There are factories built for Pepsi production across the globe. In overall context there exists a total 200 factory outlets for production of Pepsi across the globe. Each factory has a total of 2000 to 6000 workers. These factories encompass a total of 120,000 workers approximately. Filling plants are different from production unit of concentrated liquid. Annual report or sustainability report does not highlight production process of Pepsi. The concentrated syrup is mixed with water and sugar in manufacturing unit. This finished product is then transported to bottling unit in order to be filled in cans, bottles, etc. This in turn reaches respective warehouse locations with the support of third party logistics system. Penske Logistics is the third party logistic provider of the company. Not only are they solely responsible for transportation but in addition they manage some of the Pepsi distribution as well. Fleet of trucks are not maintained by the company rather lorries are hired for transportation of Pepsi bottles from warehouse to distributors or retailers, and from manufacturing units to warehouse locations. Penske logistics owns fleet of trucks for Pepsi. These trucks of Penske are referred to as Pepsi IF IT IS. Delivery outsourcing is encouraged by the firm to control external costs. However third party logistics are given proper instructions regarding delivery requirements in order to prevent any form of late delivery issues. Transportation network is so designed that the company can control its associated costs and upgrade its performance level (Chopra and Meindl, 2007). These costs being saved are later transformed to other operational units such as product manufacturing, quality checks, etc. Logistic process at the manufacturer end is to track orders, focus on product assembly and manufacture finished product. Distributors are inclined towards delivery scheduling and packaging activities (Oxley, Rushton and Croucher, 2000). They are in direct contact with retailers and manufacturer. Headquarter takes into account production facilities of Pepsi at various locations. Quality measures are framed by headquarters and then it is standardized across wide array of factories. Shipments have specific batch number and they are distributed to respective wholesalers or retail joints. Finally retailer is responsible for managing customer request, stock display and keeping a proper track of sales data. Efficient fast throughput supply chain management process is incorporated by the company. Customer Service factors in the Supply Chain Customer service factors are closely knitted with the aspect of quality. It has been observed that customers always have a desire towards value for money. This value factor can be addressed by a firm when it is emphasizes on quality level of products being manufactured. Customer service is an integral component for all business organizations. Coca Cola Company over the years has been able to deliver exceptional product quality to their end customers. This has supported the firm to expand on its business operation across global market place. Coke as a flagship product has gained significance in the industry. There are customer service factors encompassed within its supply chain process. Pepsi too is denoted as the flagship product of PepsiCo. This product has benefitted the company in terms of acquiring high profit margins in the market place. Being a perishable product often is viewed as a major challenge for many companies. The stock needs to be replenished within required time frame so as to ensure that quality products reach to end customers. Pepsi and Coca Cola both have high brand value in global market place and this has been because of high degree of customer service (Croxton, Garcia-Dastugue, Lambert and Rogers, 2005). The customer service factors ranges from timely delivery of product to end customers to post purchase customer satisfaction. In case of supply chain management process of Coca Cola and Pepsi, customer service is simply viewed as philosophy. The supply chain of Coca Cola is aligned with customer responsive approach. This aspect can be well observed in terms of increased rate of Coca Cola consumption across the globe. Figure 1 depicts the rate of consumption. On the other hand, supply chain process of Pepsi incorporates JIT approach where delivery of finished product to end customers is exhibited on time. Both these supply chain approaches clearly denote that customers are considered to be an important factor for the companies (Kumar, 2007). Customer service factors are maintaining appropriate customer supplier relationship and following customer oriented mechanism. Customer oriented mechanism is all about designing products as per customer preferences and tastes. Well designed operational systems can also be regarded as a customer service factor. This form of designing prevents any form of human error and decreases possibility of lead time. Lead time can be stated as amount of time required for products to be transformed from manufacturer to end customer. Operational efficiency helps in controlling this lead time and products are delivered to specific retail outlets within required time frame. Customer service factor in both the supply chain process also indicates evaluating post purchase behaviour of customers. This makes customers feel valued and it enhances level of brand loyalty. Communication is also another customer service factor closely knitted with these two supply chain processes. There is higher level of employee productivity witnessed in the company and it directly affects level of customer service. Coca Cola and Pepsi specifically possesses strong communication channels in order to take into consideration any form of product related queries or complaint (Wong, Johansen and Hvolby, 2004). These two products have achieved high market visibility simply because of giving importance to customer opinion. Customers preferred to consume healthy drinks or less sugar saturated products. This opinion was taken into consideration by the company and Coke zero or Coke life was manufactured. Communication channels facilitate passing on required information to manufacturers for further improvement. Customer service factors in supply chain well resemble being inclined towards customer benefits rather than just focusing on profit margins. Customer benefits are reflected upon by the company through manufacturing drink in small bottles, big bottles, multipack, etc. Comparison of the operations Operations management in both these companies is efficient and is able to deliver required product. However there are certain aspects which can differentiate operations of both these companies. Pepsi and Coca Cola are well-known brands in current market scenario. These brands have their own set of operations (Lysons and Farrington, 2005). Supply chain process of Coca Cola clearly reflects that it has adopted customer centric approach. Customer demand in case of Coca Cola is analyzed first and then supply chain operations are planned. This demand is forecasted through marketing or sales planning process. It can be stated that this demand aspect represents customers willing to purchase this product or have given positive opinion for the product. This form of data can be efficiently acquired by marketing team (Chase, 2008). The data obtained is analyzed further in order to determine consumer market trend. This form of analysis enables maintaining low level of inventory within supply chain. Low inventory level indicates that overall cost for Coca Cola production can be efficiently regulated. On basis of this trend, raw materials are provided by suppliers and are transported to manufacturing unit. This aspect is not highlighted within supply chain process of Pepsi. The entire process of Pepsi is focused on efficient throughput where just in time approach is given more importance. The inventory turnover rate is managed by the company appropriately so that it serves consumer markets without holding higher level of inventory. Operations of Coca Cola are also aligned with the concept of on-time delivery of products to retail outlets. However this product’s supply chain process does not incorporate just in time approach. Product related information is accessed from the market in order to exercise smooth flow of operations (Deming, 2002). Coca Cola Company mainly undertakes manufacturing of syrup without indulging into bottling activities. This firm has its operations and subsidiaries located around the world. Coca Cola Company expands on its operations through franchisee distribution system. The firm does not own its bottling units unlike Pepsi (Christopher, Payne and Ballanthyne, 2005). Their cost saving strategy has helped in being competitive in the market place. Pepsi encompasses its own bottling units so as to facilitate timely delivery of products to retail outlets. Accessing market demand always is a method through which Coca Cola addresses customer service factor (Slack, 2001). Its operational procedure is such that customer satisfaction is highly valued. Pepsi takes into account this customer service factor through decreasing lead times and delivering products at a faster rate to respective outlets. Quality checks are taken into consideration by supply chain process of Coca Cola and Pepsi. From perspective of Coca Cola Company, it is clearly evident that quality checks enable the firm to maintain strong relationship with customers and other supply chain participants (Kujala and Lillrank, 2004). Pepsi incorporates this quality check to stay ahead of competition and deliver expected quality of product to customers. This quality aspect helps in addressing customer service factor in the form of enhanced level of customer satisfaction (Chan and Lee, 2005). Warehouse improvements are observed in supply chain process of Pepsi. At an average of 13,500 order lines are processed per day. There are a total of 7000 packages containing Pepsi bottles, cans, etc., shipped per day. This form of improvement has been represented in figure 5. Figure 5: Warehouse Improvement (Source: Rushton and Walker, 2007) As per figure 5, warehouse improvement has facilitated an overall cost reduction of about 4.6% per day. The capacity of warehouse has been improved over the years with more focus on inventory holding capacity. Stock levels are differentiated within the warehouse so as to facilitate easier stock replenishment. Coca Cola Company has authorized set of suppliers for production of Coca Cola. These suppliers are standardized for global operations of the company. The supply chain process of Coca Cola clearly highlights efficient relationship building with suppliers, which is also observed in context of Pepsi production. Operational procedure of Pepsi is dependent on wide base of suppliers belonging to minority-owned segment. To be more precise this strategy has given advantage to this firm in terms of addressing global market demand. The overall process of Coca Cola is aligned with obtaining market data first and then placing order for finished product (Kelemen, 2003). However strategy changes for Pepsi since focus is then on delivery of quality products and offering extra in comparison to competitors. Identification and description of the modifications to the supply chain(s) The supply chain of Coca Cola is relatively efficient in context of beverage industry. It is evident that management of the company is highly concerned about quality of product along with its additional customer service factors. This company is truly focused on production of syrup rather than packaging of finished product. Quality aspect is retained through more focus on syrup production instead of investing in product packaging. There is lack of bottling units of the firm and it can be viewed as its major disadvantage. This firm needs to establish its own bottling units where production of finished beverage shall be comparatively at a faster rate. More of technology based equipments would help in reducing manual labour. Bottling units is recommended to be technology based. This would eradicate human error in the process. Production rate shall improve through this approach and all supply chain participants will be benefitted. It would be advantageous for manufacturer in terms of resource utilization, increased productivity, improved profit margins, etc. Retailers and distributors will also not witness any issue regarding timely delivery of product. In overall context, it shall initiate meeting customer demand appropriately and increasing level of customer satisfaction. Green technology also needs to be included in supply chain process of Coca Cola. This technology would help the firm to reduce environmental impact and upgrade brand image in consumer market. It is also recommended that electronic pick slip report is generated between transportation of product and warehouse facilities. Information technology helps in increasing percentage of accuracy and facilitates immediate information availability (Emmett and Crocker, 2006). This would be advantageous for transportation department and warehouses since orders can be easily tracked and shipped. On the other hand, maintaining safety stock is also recommended as it shall help to encounter sudden fluctuations in market demand. Pepsi is one of the leading beverages across the globe. There are certain limitations of this beverage which needs to be properly addressed. Pepsi has a range of duplicate distribution systems. This form of duplicate systems should be eliminated simply because it adversely affects performance level of supply chain operations. The company currently is dependent on third party logistics and it would not be beneficial for long term growth. Distribution system should be owned by the firm in order to ensure timely delivery of the product to retail outlets. This aspect would benefit retailers, manufacturers and customers. Manufacturers will benefit because less percentage of loss due to inappropriate product delivery. On the other hand, customer satisfaction level would be enhanced because of greater visibility of products. Satisfied customers shall be brand loyal and increase profit margins for retailers. Warehouses of the company are located at distant places and this increases operational cost. Supply chain of Pepsi constitutes higher costs since maximum percentage of funds are allocated to transportation of goods. This factor can be counteracted through minimizing warehouse distances and keeping it nearby marketplace or retail outlets. ABC classification also needs to be maintained at warehouses so as to keep proper track of inventory level. This recommended solution would be beneficial for warehouse manager and distributors or retailers. Inventory replenishment in proper time interval would prevent any form of increased lead time. Conclusion The entire research focuses on various aspects of supply chain management process. Two products Coca Cola and Pepsi have been able to sustain market position in global context. These two flagship products possess an efficient supply chain management process. There are some characteristics which are able to differentiate operational procedure of these products. For instance, supply chain management process of Coca Cola reflects addressing customer demand through placing order on the basis of demand forecasted data. On the contrary, supply chain process of Pepsi is aligned with extensive quality checks and timely delivery of finished product to end customer. Both these supply chains comprises of beverage product. There is further room for improvement in both these supply chain networks. Supply chain process of Pepsi needs to incorporate its own distribution network whereas technology based equipments should be utilized within supply chain framework of Coca Cola. This report clearly demonstrates strengths and weaknesses of different supply chain mechanisms. References Chan, C. K. and Lee, H.W.J., 2005. Successful strategies in supply chain management. Pennsylvania: Hershey. Chase, R., 2008. Operations & supply management. London: McGraw Hill Higher Education. Chopra, S. and Meindl, P., 2007. Supply chain management: strategy, planning, &operation. New Jersey: Upper Saddle River. Christopher, M., Payne, A. and Ballanthyne, D., 2005. Logistics, the supply chain and competitive strategy. 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Supply chain coordination problems: literature review. Aalborg: Aalborg University. Read More