Procurement

Management
(MS 493)
Assignment
on
Procurement Process of
Coca Cola
Junaid Hassan
Reg # 2017173

Lecturer
Dr. Umar Farooq
Contents
1. Procurement Process of COCA COLA: 1) Direct Procurement and 2) In-Direct Procurement. 3
Procurement Process of Coca Cola..........................................................................................................3
Direct and Indirect Suppliers...................................................................................................................3
2. Main challenges in the COCA COLA procurement process and how they are addressing those
challenges?.......................................................................................................................................5
Procurement Challenges faced by Coca Cola...........................................................................................5
Managing Inventory............................................................................................................................5
Managing Suppliers.............................................................................................................................5
Maintaining Safety and Quality of Procured Material.........................................................................5
Risk Mitigation.....................................................................................................................................6
Steps to Address Challenges Faced by Coca Cola....................................................................................6
Transforming, Innovating and Digitalizing Supply Chain......................................................................6
Optimizing infrastructure....................................................................................................................6
Sustainable sourcing............................................................................................................................6
Proactive Innovative Strategies...............................................................................................................7
Automatic Line Changeovers in Manufacturing...................................................................................7
Remote Expert Support through Augmented Reality..........................................................................7
Virtual Plant Visits Through Smart Glasses Xassist Technology...........................................................7
Augmented Reality Vision Picking in Our Warehouses........................................................................7
Advanced End-To-End Planning Systems.............................................................................................7
3. What kind of Procurement Management System (Software) COCA COLA is using?...............7
SAP R/3....................................................................................................................................................7
SAP Ariba.................................................................................................................................................7
References........................................................................................................................................8
1. Procurement Process of COCA COLA: 1) Direct Procurement and 2) In-
Direct Procurement
Cola is one of the most popular drinks in the world anyway and Coca-Cola one of the most
famous brands. More than 1.9 billion servings of Coca-Cola are sold worldwide every day in
more than 200 countries. [ CITATION Wal20 \l 1033 ]

Procurement Process of Coca Cola

Coca-Cola is a global company that operates at a local level. This means that there are currently
around 225 bottling partners worldwide. The supply chain begins with the procurement of raw
materials, which in the case of Coca-Cola also includes agricultural products (e.g., sugar cane or
fruit) and water. The most important ingredients such as water and sugar are sourced locally,
with the partners being able to choose only the type of sugar used. In Europe, mainly beet sugar
is used, in Asia cane sugar and in America sugar from corn syrup. [ CITATION Wal20 \l 1033 ]
One of the first steps in Coca-Cola’s supply chain is the production of the concentrate, which is
mixed with water, sugar and carbon dioxide by the bottling plants. The concentrate itself is
produced at other plants. According to legend, the secret recipe is kept in a safe in Atlanta. The
legend also states that never more than two people should have access to it and know the exact
recipe. [ CITATION Wal20 \l 1033 ]
After mixing, the bottlers package, market and distribute the finished beverages to grocery
stores, restaurants, cinemas, etc. Therefore, the management of supplier relationships and the
continuous monitoring of suppliers is of great importance to the company. [ CITATION Wal20 \l
1033 ]

Direct and Indirect Suppliers

Since the performance of suppliers directly impacts the sustainability performance and
commitments Coca Cola considers suppliers as critical partners, contributing to the ongoing and
sustainable success of our business.
Under a unified procurement framework, we segment our supply base universe of around 19500
suppliers into direct and indirect spend suppliers (actively used for purchasing transactions in
2019).
 Direct spend suppliers include ingredients and packaging suppliers. [ CITATION Coc20 \l
1033 ]
  Indirect spend suppliers include categories such as IT, production equipment, spare parts,
maintenance services, logistics providers, fleet vehicles, utilities, real estate, facilities
management, professional and other consultancy services, personnel and temporary labor.
[ CITATION Coc20 \l 1033 ]

Coca-Cola also segments suppliers into three categories based on criticality and potential
opportunities: [ CITATION Coc20 \l 1033 ]

Group Critical Suppliers 

Group Critical Suppliers are those that fulfil any of the following criteria: high percentage of
spend, critical components (e.g., Sweeteners, Juices, Resin, Cans, Glass, Preforms, Closures,
Aseptic Packaging), limited alternatives and partnership supporting our business strategies.

Country Strategic Suppliers 

Country Strategic Suppliers are those which have strategic importance at a local or regional
level.
Both Group Critical & Country Strategic suppliers are considered critical to the overall
competitiveness and success of Coca-Cola HBC.

Tactical Suppliers 
Tactical Suppliers represent low-volume and/or low-spend suppliers, supplying goods or services
where there are many alternative sources available, enabling a flexible supply base.

2. Main challenges in the COCA COLA procurement process and how they
are addressing those challenges?
Coca-Cola has long been a global player. Accordingly, the company is continuously optimizing
and modernizing its supply chain. Due to the high sales of the soft drink, the supply chain
focuses on the management of partner companies. Here, smooth communication with the
partners and the subsequent smooth distribution to the points of sale play a major role. [ CITATION
Jor19 \l 1033 ]

Supply chain managers and directors face issues when managing their supply chain daily. These
problems require quick attention as they could affect the smooth flow of goods and services and
thus cause delays in delivering products and services to the end users.
Procurement Challenges faced by Coca Cola
These are some of the issues faced by Coca Cola;
Managing Inventory
Managing stock may be more than just counting of the boxes, but it may also include a balancing
act, that is, determining when to order and when not to order to prevent stock out inventory from
going bad. Setting an appropriate timing and quantity will likely prevent delays in the delivery
process. [ CITATION Ali12 \l 1033 ]
Managing Suppliers
Large multinational corporations (MNCs) such as Coca-Cola usually have multiple suppliers to
ensure that their goods reach their customers on time. Their supply chain managers, therefore,
are responsible for knowing how many suppliers they will need for their production process, how
they will be able to handle delays on their suppliers' side, and how orders from the suppliers will
be received. Each step discussed above requires the manager to think through it carefully since it
is a significant decision for the company. Besides, the supply chain manager would be needed to
determine the best supplier for the business. [CITATION Aco13 \l 1033 ]
Maintaining Safety and Quality of Procured Material
After globalization was allowed, Coca-Cola had to lengthen its supply chain. As a result, Coca-
Cola was exposed to various health and safety issues. This has remained to be a challenge for its
supply chain managers, and most managers have brought up the concern, especially when a
commodity does not meet the regulatory requirements set by international borders. In such an
instance, the company may be at risk of being recalled and may also face severe fines and
penalties. [ CITATION Mar06 \l 1033 ]
Risk Mitigation
Apparently, going global involves a lot of risks. For example, a corporation may be too over-
reliant on one supplier, and this may make the management fail to meet the required demand.
Other risks that companies may face in their supply chain include political risk, financial risk,
foreign exchange risk, operational risk and so on. Mitigating these risks has always been difficult
for these companies since they face specific problems such as time horizon constraints, inability
to measure costs and benefits related to risk management, possible future uncertainties, the
presence of unrecognized externalities and the presence of data that is not credible. [CITATION Dav
\l 1033 ]

Steps to Address Challenges Faced by Coca Cola

Transforming, Innovating and Digitalizing Supply Chain
To ensure if business is fit for the future, company are investing in advanced technologies and
transforming and digitalizing many of our supply chain processes.
Operating in multiple diverse markets, Coca Cola’s aim is to build a borderless supply chain that
operates effectively, efficiently and enables the corporation to imbed innovative technologies,
fast. By applying innovation within company’s supply chain to expand technical capabilities
while ensuring productivity and cost, energy and water savings is the way. [ CITATION Coc20 \l
1033 ]

To implement this, Coca Cola is investing in advanced technology that will optimize
infrastructure and transform existing plants into efficient mega-plants that can effectively serve a
country or an entire region. This requires utilization of new and different technologies and
processes.
Optimizing infrastructure
Optimizing and developing infrastructure also supports expanding company’s diverse portfolio.
By centralizing production planning system, with each plant serving regional needs, Coca Cola
has been able to meet market demand with speed and agility. This is supported by expanding
production capacity in targeted markets where company anticipate strong future growth.
Coca Cola also upgraded production lines to support product innovation. On top of that
automated warehouses and automatic guided vehicles have also improved both efficiency and
service quality.
Sustainable sourcing
This framework for sustainable sourcing is integrated into internal governance and procurement
processes. Company’s 2025 target for ingredient sourcing is to achieve 100% certification of key
agricultural ingredients against the Sustainable Agriculture Guiding Principles. In 2019, 74% of
the key commodities purchased for use as ingredients were certified, up from 64% in 2018. Coca
Cola is striving to certify key agricultural ingredients that will continue to expand with close
cooperation with suppliers.
Proactive Innovative Strategies
Some other advanced steps Coca Cola is using are; [ CITATION Coc20 \l 1033 ]
Automatic Line Changeovers in Manufacturing
Remote Expert Support through Augmented Reality
Virtual Plant Visits Through Smart Glasses Xassist Technology
Augmented Reality Vision Picking in Our Warehouses
Advanced End-To-End Planning Systems

3. What kind of Procurement Management System (Software) COCA COLA

is using?
Coca Cola uses several software systems for the procurement management of their almost 900
facility plants all over the world. They’re using SAP blockchain such as SAP Ariba, SAP R/3,
Epicor ERP, SQL enabled Oracle Databases etc.
But the two most widely used Managements Systems are SAP’s R/3 and Ariba;
SAP R/3
With SAP R/3 solution, The Coke Cola Company have increased transparency and efficiency in
their intricate production line. With SAP’s blockchain, inventory information is stored
immutably in a single platform. So, there is a clear record of stock, meaning orders can be filled
quickly and reliably. This also reduces reconciliation time; Coca Cola hopes to see the typical 50
days decreased to under a week. [ CITATION Mir19 \l 1033 ] Coca-Cola optimizes the cooperation
with its partners and the 160,000 orders per day, creating more transparency and reducing costs
using blockchain technology. [ CITATION Wal20 \l 1033 ]

SAP Ariba
Using SAP Ariba, interaction of buyers and vendors have been improved, they no longer needed
to approach the buyer to see where their shipment was because they could see it directly in the
system when the shipment was going to be done, when it was ready and, if it was an import,
what's on the customs and when it was in the plant. [ CITATION Coc20 \l 1033 ]. Before this
software, there was budgeting problem faced by employees, whenever they approved something,
they didn't know exactly how much of their budget was consumed already. Now, with this Ariba
solution, they know exactly, before they are approving, how much of their budget is going to be
spent. [ CITATION Mic19 \l 1033 ]
Other than these there are other several supporting software too that are helping with Coca
Cola’s procurement process; [ CITATION Wha19 \l 1033 ]
 Software AG live
 Taulia
 Clockspot
 Airpush
Implementation of Managements Systems proved to be very effective as due to it Coke Cola
went through a very labor-intensive system where the procurement person was chasing down
every possible permutation of buying and now it's self-service. This type of change involves both
technologies, as well as process and even a cultural shift.

References
Ashby, A. (2012). Making connections: A review of supply chain management and sustainability
literature. Supply Chain Management , 17(5):497-516.

Christopher, M. (2006). Logistics & Supply Chain Management. London: Pearson.

HBC, C.-C. (2020). SUPPLY CHAIN. Zug, Switzerland: Coca-Cola HBC.

Krigsman, M. (2019, May 28). Procurement Management and Transformation at Coca-Cola FEMSA.
Retrieved from CXO Talk: https://www.cxotalk.com/video/procurement-management-
transformation-coca-cola-femsa

Olson, D. L. (2013). Business analytics for supply chain: A dynamic-capabilities framework. International
Journal of Information Technology and Decision Making, 12(01):9-26.

Payman Ahi, C. S. (2013). A comparative literature analysis of definitions of green and sustainable supply
chain management. Journal of Cleaner Production, 52:329-341.

Perez, J. T. (2019, May 29). Procurement Management and Transformation at Coca-Cola FEMSA. (M.
Krigsman, Interviewer)

Walendy, L. (2020, march 23). Amazing Supply Chain of Coca-Cola. Retrieved from All Things Supply
Chains: https://www.allthingssupplychain.com/amazing-supply-chain-of-coca-cola/

Whatasoftware. (2019). The Software Tools That Make Coca Cola Successful. Retrieved from Blog
Whatasoftware: https://blog.whatasoftware.com/the-software-tools-that-make-coca-cola-
successful/

Wood, M. (2019). Coca-Cola bottlers adopt SAP blockchain for supply chain. Ledger Insights.