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Coca-Cola Company: Procurement and supply chain management system

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Table of Contents
Coca-Cola Company: Procurement and supply chain management system..................3

1.0 Introduction..............................................................................................................3

2.0 Supply chain map/illustration for Coca-Cola Company..........................................4

3.0 Kraljic Matrix-based analysis for Coca-Cola Company's Supply chain network....7

4.0 Discussion................................................................................................................9

4.1 Current issues affecting Coca-Cola Company’s supply chain network...............9

4.2 Current trend and expected development in supply chain management for Coca-

Cola......................................................................................................................................10

5.0 Conclusion And Recommendation.........................................................................11

5.1 Conclusion..........................................................................................................11

5.2 Recommendations..............................................................................................12

References....................................................................................................................14
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Coca Cola Company: Procurement and supply chain management system

1.0 Introduction

Coca Cola Company has a rich history that goes back to 1886 when it was founded as

a soda fountain in downtown Atlanta, Georgia. In its early stage, the company just should its

drinks directly to its few consumer in the local area in downtown Atlanta. For example, after

the company was founded in 1886 it was just serving nine drinks per day in its first year.

Since then an over the years the company has grown tremendously into a multinational

company.

Today, it produces and distributes over 2 billion units of its beverage product annually. As a

result of this procurement and supply chain management has become the most important part

of the company that contributes to its success in the international market. Ivo Bjelis, the chief

supply chain officer, states that the company's mission is to become the leading supply chain

function in the beverage industry regarding quality customer services and cost efficiency. Its

vision is to keep its customer engaged, excel in sustainability, reduce operation cost and

establish the best-in-class customer service and responsiveness

Unlike in its early stages, Coca-Cola Company now has to consider dynamic internal

and external factors that influence its capability to deliver its product to its customers in

different part of the world and achieve its goals and objectives. For example, the company

must consider regulation requirements at the national and international level to procure

resources and distribute its products to customers effectively. Since 1886, many things such

as the regulation of environmental sustainability, business processes, logistic processes,

material handling processes, suppliers' rights and customer/consumer rights have also

changed. To address this issue, the company has a strategic procurement and supply chain

management system that effectively adapt to the changes in the international industry/market.
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The purpose of this article is to analyse and evaluate Coca-Coca Company’s procurement and

supply chain management system that allow it to procure the resource it needs and supply its

products to the final consumers globally.

2.0 Supply chain map/illustration for Coca Cola Company

According to Slack & Chamber (2010), the supply network in an organization

involves all the operations and activities with which it interacts with its suppliers and

customers. Based on the interaction the supply network can be categorized into can be

categorized into supply side operations and demand side operations. Slack & Chamber

(2010) identifies that the supply side of the supply network includes a group of procurement

operations that includes a chain of suppliers that provide an organization with supplies

needed to carry out business operations. Maylor, 2010 and Slack & Chamber (2010) on the

other hand, identify that the demand side of the supply network include a group of physical

distribution and logistics operation that distribute products and services to a chain of

customer such as wholesalers, retailers, and final consumer. Moreover, the supply side of the

supply network can be subdivided into different tiers based on the relationship the supplier or

the customer has with the business or organization operations (Maylor, 2010; Slack &

Chamber, 2010). For example, the first-tier and first-tier customers include the suppliers and

customers who have an immediate relationship with the organizational operations. The

second-tier suppliers and second-tier customers include the supplier and customers separated

from the organization's operation by the first-tier suppliers and first-tier customers

respectively. This section uses the supply network concept to illustrate the supply chain for

Coca-Cola Company.

The Coca Cola Company uses a supply network that includes the supply side

operation and demand-side operations. Between these two operations there is also

manufacturing or production operations and warehouse operation. The supply side operation
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includes all the procurement activities conducted by the company to supply its business

operations (See Figure 1 below. For example, the activities carried out within the supply side

include identifying company needs, preparing purchase orders, selecting suppliers, sourcing,

receiving and inspecting delivered assets or raw materials and payment for the service and

goods delivered to the company. The company has two main tier suppliers, including the first

and second tier (Maylor, 2010). The second tier of suppliers includes suppliers from different

parts of the world. These suppliers have direct access to the resources that the company needs

in the first tier of its suppliers, including primary manufacturing plant and packaging plant

(Quayle, 2005). The primary manufacturing plant sources different ingredients such as cherry

flavouring, vanilla flavouring, lemon flavouring, lime flavouring, and sugar from the second-

tier supplies to produce the concentrated soft drink syrup. The packaging plant sources raw

materials such as glass, aluminium and plastic from second-tier suppliers to produce

aluminium cans, plastic bottles and glass bottles that the company uses to package the final

beverage products processed in the secondary manufacturing plant. Currently, the company

has about 900 bottling plants and 225 bottling partners in different part of the world such as

Oman, India, Nepal, Malaysia, Singapore, Philippines, Cambodia, Vietman, Myanmar and

Bangladesh (The Coca-Cola Company, 2022a). These bottling plants and bottling partner are

responsible for producing bottles for packaging different beverage drinks processes in the

secondary manufacturing plants. The secondary manufacturing plant also source water and

CO2 to process the soft drink syrup from the primary manufacturing plant into the final

product. It also gets the packaging bottles from the packaging plant that it uses to package the

final processed soft drinks into packages of different size and amount.

The next process from the secondary manufacturing plant is the material handling and

warehousing process. Most of the warehouses are located within or close to the secondary

manufacturing plants of the company. This allows the company to easier handle and transport
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the final product in bulk into the warehouse. During the material handling and warehousing

processes, the company uses modern material handling solutions and equipment such as

shuttle cars with digital trolleys, steering shuttles and dispatch shuttle. It also uses infeed and

outfeed bays, and infeed and outfeed vertical pallet lifts. This equipment allows the company

to optimize its material handling and warehousing processes. Coca-Cola HBC (2019) reveals

that most of the activities in the material handling phase are done using automated Guided

vehicles that can move pallets, pick them up and deposit loads unit without human

intervention. When the machines do the heavy work, the company also uses its employees in

the material handling and warehouse department to coordinate, manage and control all the

processes and operations needed to ensure effective management of the inventory, shipping

activities, and communication processes.

From the warehouse, all the company operations shift from supply side operations to

demand side operations. In this section the company focus on the logistic processes which

include physical distribution and transportation activities for the final product to be delivered

to the wholesalers, retailers, fountain sellers such as restaurants and vending machines. The

Coca-Cola Company (2022b) reveals that that company currently has about 1.2 million

locations with vending machines distributed with a total of 2.4 million vending machines.

This diverse distribution system allows the company to achieve 2 billion serving to the final

consumers daily (The Coca-Cola Company, 2022a).

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Warehouse

Retailer

Manufactur E.g convenience

stores, malls,
Plants that supermarket e.t.c
produce soft
drinks syrup
ing 2nd Tier
2nd Tier
Cherry favouring 1st Tier 1st Tier
Consume
Genral public
Vanilla flavaring Consumer
Supplier
Lemon Flavouring
Supplier r
or Consumer
Other flavourings
Wtaer suppliers
CO2 Suppliers Distribution

Glass Suppliers
Aluminium
suppliers
Plastic suppliers Vending machines

Packaging plant

Figure 1: Supply Chain Illustration for Coca Cole Company (Maylor, 2010; Slack &
Johnston, 2010)

3.0 Kraljic Matrix based analysis for Coca-Cola Company’ Supply chain network

The Kraljic matrix is a model that allows an individual or organization to segment the

purchase or supplies of a company based on the supply risk and profit impact in business

operation. The matrix is divided into four sections, categorizing supplies into leverage, non-

critical, bottleneck and strategic items (Perdana & Mulyono, 2021). The leverage items

include those supplies that have considerable financial impact in business operation but are

standardised in abundant supply. The Non-critical items include those supplies with low

financial impact, are abundant in supply, and are standardized. The bottleneck items include

those suppliers that have low financial impact in business operation but can only be acquired

from one supplier or have a potentially unreliable delivery system (Kusumastuti, 2021).
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Finally, the strategic items include those supplies that have a significant financial impact on

business operations and are scarce.

Based on the Kraljic matrix, the leverage items for Coca-Cola Company are cherry,

lemon, vanilla and other ingredients for making soft drink syrup. To procure these supplies

for the primary manufacturing plant, the company should negotiate price frequently or switch

suppliers regularly to achieve the best value. The non-critical item in the company are water

and CO2 because they are in abundant supply and have a low financial impact on business

operations. When procuring this item Coca-Cola Company should reduce the administration

burden to minimize the cost of handling them since it may outweigh their value. The

bottleneck item in Coca-Cola Company's supply chain network are raw material used to make

bottles such as aluminium, glass and plastic. These items have low financial impact on

business operation but can only be acquired from a few suppliers and sometimes the suppliers

may be unreliable. When procuring these items, Coca-Cola Company should have a strategic

supply chain system that allows it to reduce dependence on these suppliers and ensure

continuity of supply. The packaging bottle is a strategic item in the Coca-Cola Company's

supply chain network. The company have invested heavily on the bottling plants, resulting in

a significant financial impact on business operations. The bottles are also unique and scarce

since they are only produced the bottling plants and bottling partners established by the

company. By producing this item, the best thing the Coca-Cola Company can do is to use

collaboration and strategic partnership to supply risk and financial impact in its supply chain

network and business operations.

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Leverage Items
Cherry favouring Strategic Items
Lemon favouring Packaging Bottles
Vanilla Favouring
Ingredient for making soft drink syrup

The Kraljic Matric

Bottleneck Items
Non-critical Items Aluminium
Water Glass
CO2 Plastics

Figure 2: Kraljic Matrix for Coca-Cola Company (Kusumastuti, 2021; Perdana & Mulyono,
2021)

4.0 Discussion

4.1 Current issues affecting Coca-Cola Company’s supply chain network

In the recent years, the need for an organization to consider global sourcing has

increased significantly. Slack & Brandson (2019) suggest that unlike before, where most

organizations that exported their products internationally could source their supplies locally,

The process has shifted into global sourcing. Typically, it is considered that sourcing globally

can be cost saving for an organization through sourcing from the low-cost supplier countries.

It is also considered that global sourcing can give an organization a better opportunity to

source for high quality supplies and have access to multiple suppliers. Nonetheless, global

sourcing also comes with limitations and issues such as increased complexity in procurement

and supply chain processes and increased distance between the suppliers and an organization

(Slack & Brandson, 2019). These are of course challenge that affect Coca-Cola Company

just like our other organization in the current era. For example, when the Coca-Cola

Company is sourcing raw materials such as aluminium and glass from China, Russia, Canada,
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Germany, France and India it may experience delays due to external factors such as political

issues, war or natural disasters beyond its control. It is also possible for the company to face

legal restrictions that create barrier during the global sourcing processes.

Concerns for diversity, sustainability, health and safety in the supply chain

management have also increased significantly in the recent years. Public awareness for

diversity, equality inclusion, environment sustainability, and an individual's rights to good

health and safety has increased rapidly during the 21st century (Mani et al., 2018). As a result

of this increase in public awareness, the demand for diversity, equality, inclusion,

environmental sustainability and protection of individuals health and safety has also

increased in the supply chain management. With this in mind, Coca-Cola Company should

become more socially responsible for its business operation to match the changing

perspectives in the public and among its customers (Mani et al., 2018). It should identify the

public and consumer interest in the economic and environmental, social, cultural and political

factors.

4.2 Current trend and expected development in supply chain management for Coca-Cola

Over the years, Coca Cola Company has managed to grow and develop while

extending in procurement and supply chain network globally. Currently, the company has 59

plants, 279 production lines and 98 distribution centres in different part of the world.

Additionally, under the framework of the Guidelines for Sustainable Agriculture (PSA), the

company has attained 80% certification of agricultural produce on aggregate in all CCH

pertaining crops. It aims to achieve a 100% certification by 2025 (Coca-Cola HBC, 2019).

However, the company requires its tier I suppliers to gain certification to the ISO 9001, ISO

14001 and OHSA 18001 standards which provide the industrial standards for quality,

environment sustainability and health and safety respectively, for it to achieve a 100%
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certification by 2025. It also requires the ingredients and packaging suppliers to gain

certification to FSSC 22000 standards for the global food safety initiative (GFSI).

Recently the company has also collaborated with Tech Partners to create Bottle made

from 100% plant-based materials. The advancement will allow the company to source

sustainable raw materials and make renewable and environmentally friendly packaging

bottles for its beverage products. The Coca-Cola Company (2022) reveals that the company

has already made a new prototype of the plant-based bottle and is ready to start commercial

scaling. This sustainable solution will help the company enhance its environmental

sustainability effort in the supply chain management system. It will also give the company a

competitive advantage over other competitors in the industry since it will create a positive

perspective about its effort to improve environmental sustainability in the society.

Over the last decade Coca-Cola Company has been helping the global community

overcome different challenges in their life. It has been using the Project Last Mile to leverage

its marketing, supply chain and logistic capabilities to facilitate and increase accessibility to

health care services in different parts of the world. For example, the company has been

contributed its financial resources to help improve access to HIV and Malaria medication

across different countries in Africa (The Coca-Cola Company, 2022). Since the outbreak of

the Covid-19 pandemic, Coca-Cola Company has also been working with USAID and The

Bill and Melinda Gates Foundation to help speed the physical distribution of the Covid-19

vaccines across the world.

5.0 Conclusion And Recommendation

5.1 Conclusion

Coca-Cola Company has a well-established strategic supply chain management

system in its business operation. The supply chain network is well integrated, allowing the

company to optimize its procurement and supply chain operation and activities. This ensure
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that the company has a smooth flow of the resources or supplies needed in the business

operation and a smooth flow of goods and service to the end consumer. The tiers suppliers

allow the company to access multiple suppliers and practice global sourcing in its

procurement processes. The tier customers allow the company to take advantage of having

multiple distributors in the business-to-business and business-to-consumer perspective who

ensure that the goods and services delivered meet demand.

During the procurement processes, supplies such as flavours, ingredients for making

the soft drink syrup, and packaging bottles may have significant financial impact Coca-Cola

business operations. On the other hand, supplies such as packaging bottles, aluminium, glass

and plastic may have significant supply risks. Additionally, the increase concern on issues

concerning diversity, equality, inclusion, sustainability, health and safety may have significant

impact on procurement and supply chain processes in the Coca Cola Company today.

Overall, Coca-Cola Company has made significant progress toward addressing this issue and

enhancing its social responsibilities in different aspects such as environmental sustainability

and providing community supports.

5.2 Recommendations

The Coca-Cola Company can enhance its supply chain management in several ways.

For example, it can improve its social responsibilities by increasing the commercial scale

production of the plant-based bottle and maintaining the recycling program for several more

years to remove the non-biodegradable bottles in the in the ecosystem and increase the

number of biodegradable bottles in supply chain network. During the logistic process, the

company should also use electric vehicles and equipment to physically distribute goods and

services. This will reduce the amount of carbon foot print the company released into the air

during the procurement and supply chain processes. It should also regularly change or adjust

its procurement and supply chain practices to adapt to changes in the industry and market,
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such as issues related to diversity, supplier health and safety to perform its business operation

effectively.
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References

Coca-Cola HBC (2019). Supply Chain Overview. Coca-Cola HBC. https://www.coca-

colahellenic.com/en/about-us/what-we-do/supply-chain

Kusumastuti, M. R. D. (2021). Categorizing Suppliers in an Indonesian Shipping Company

Using Kraljic’s Portfolio Model. In 2nd South American Conference on Industrial

Engineering and Operations Management, IEOM 2021 (pp. 1683-1691). IEOM

Society. http://www.ieomsociety.org/brazil2020/papers/636.pdf

Mani, V., Gunasekaran, A., & Delgado, C. (2018). Enhancing supply chain performance

through supplier social sustainability: An emerging economy

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https://www.academia.edu/download/56446049/Mani_et_al_2018.pdf

Maylor, H., (2010). Project Management. Pearson education.

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a Case Study in Open Pit Coal Mining. Indonesian Mining Professionals

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percent-plant-based-plastic-bottle
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The Coca-Cola Company (2022a). Coca-Cola System. Coca-Colacompany.com.

https://www.coca-colacompany.com/company/coca-cola-system

The Coca-Cola Company. (2022b). Coke Vending. Australia.

https://www.cocacolaep.com/au/about-us/coke-vending/

The Coca-Cola Company (2022c). Iteration, for Good: How Project Last Mile supports

COVID-19 Vaccine Distribution in Africa and Beyond – News & Articles. The Coca-

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vaccine-distribution

Quayle, M. (Ed.). (2005). Purchasing and Supply Chain Management: Strategies and

Realities: Strategies and Realities. IGI Global.

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