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The Red Systems, Insourcing, and other logistics-related problems of Coca Cola Bottlers Phillipines Inc.

Coca-Cola is one of the largest beverage producing companies in the Philippines today. CocaCola s history in the Philippines is intertwined with the country s own. Throughout the years, they have become so much a part of everyday Philippine life through a shared heritage. From its beginnings in 1927 until now, Coca-Cola remains one of the most loved beverages by Filipinos. The establishment of Coca-Cola Bottlers Philippines Inc. (CCBPI) in June 1, 1981, transformed Coca-Cola into the dominant player in the industry as one of the world s largest Coca-Cola bottlers. From their beginnings in 1927 until today, Coca-Cola in the Philippines is now the 8th largest market in the world. Coca-Cola is the leader in the Philippine soft drink industry. Over 70 million consumers from Luzon, Visayas and Mindanao enjoy the wide portfolio of beverages that Coca-Cola offers. Their marketing and distribution networks cover 16 commercial territories and over 243 sales offices. Upon spending almost three arduous months of on-the-job training and field work with Coca-Cola I decided to elaborate on their Logistic systems of delivering their products to their end-users. Through this logistic capabilities, they are able to reach 10 million Filipino homes to bring refreshment and fun. They are also able to share in every aspect of Filipinos lives. Through birthdays, celebrations and holidays, Coca-Cola is always there and is almost a common household necessity, they are simply referred to as Coke in most of Pinoy household. There are 19 Coca-Cola bottling plants in the country. One of which we are very lucky to be able to visit in one of our mandatory semestral plant tour last two semesters ago, the Coca-Cola Sta. Rosa Plant. And in all of these plants they have they ensure that they take extra careful measures to protect and preserve the environment. One concrete example of their Corporate and social responsibility measure is their Coca-Cola Billboard along EDSA which is the first eco-friendly billboard in the Philippines, it is made from plants that absorb air pollutants. They also employ state-of-the-art waste water treatment facilities and embark on education drives to inform communities about the importance of protecting and rehabilitating our rivers. Truly, Coca-Cola is a leader among companies who are socially responsible to our communities. They as well work towards preventing air and land pollution through various special projects and initiatives. Coca-Cola in the Philippines employs over 9,000 people from Coca Cola Bottlers Philippines Inc. (CCBPI) and The Coca-Cola Export Corporation (TCCEC), the Philippine arm of Coca-Cola in Atlanta. Providing work opportunity and career to our impoverished and poverty-stricken country. They value the contributions that each Coca-Cola member gives. This is done by providing training and development courses to help people become the best that they can be in their jobs through their Center for Learning and Development program. In July of 2001, Coca Cola Bottlers Phil. Inc. returned to the San Miguel Corporation after being a part of Coca-Cola Amatil Ltd. for several years. The merge brought about the acquisition of The Cosmos Bottling Corporation which was once the owner of Pop-Cola. This introduced many new drink variants into the Coca-Cola portfolio of beverages. To date, Coca-Cola in the Philippines offers the widest selection of beverages to fulfill every hydration and lifestyle requirement. They offer many beverages for different needs like soft drinks, water, juices, teas, sports and energy drinks. Everyday they strive to give their consumers what they need as a total beverage company.

Truly, the story of Coca-Cola in the Philippines is that of the country s itself. Upon training and being with this company for a short period, I have learned and experienced a lot of things that may be vital to my career in the near future. Their Logistics partner, the Red Systems Company, Inc., is an independent logistic subsidiary of Coca-Cola Bottlers Philippines, Inc. it was formed exclusively to cater the ever-growing logistics needs of Coca-Cola Bottlers Phil., Inc. back then when the Red Systems Company, Inc. was not yet formed, CCBI has its own division of its logistics operation. Upon studying this in our Logistics management class, I have tackled this growing trend in most of established companies. Coca-Cola Bottlers Phil. Inc. made a different Logistics company to provide more jobs and to be able to focus in a more specific field like production and sales. By giving their logistics operation into a different subsidiary company. The creation of The Red Systems Company, Inc. is an insourcing move. We can better understand this by defining this term. Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility. This step of Coca-Cola has both an upside and downside on it according to one manager of The Red Systems Company, Inc. we have interviewed. According to him he was once a part of Coca-Cola Bottlers Phil. Inc. for twenty five (25) years already then and was asked to resign and was awarded with benefits that of twice his working years at CocaCola Bottlers Phil. Inc. This may sound a good deal but in the long run it was only a salvage attempt to lay-off their employees in order to pave way for the change of their system. Prior to the formation of The Red Systems Company, Inc., the said manager, who I wish not to name because of private and ethical security purposes, was then reinstated again in the newly-formed and newly-insourced logistics division of Coca-Cola Bottlers Phil. Inc., The Red Systems Company, Inc. but of course he was back as a newly hired employee and is receiving the starting salary of a manager again, had he not been forcefully laid-off from his previous job, he would have been getting the salary of an employee who has been working in this company for twenty eight (28) long years now. Now that we have discussed with the various internal affairs of Coca-Cola Bottlers Phil. Inc. and its locally insourced logistics partner, The Red Systems Company, Inc. I will now try to explain their purpose and different problems.

By research and study we will understand it more by defining Logistics. According to Wikipedia Logistics is the management of the flow of goods between the point of origin and the point of use in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and often security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modeled, analyzed, visualized and optimized by plant simulation software, but is constantly changing. With Coca-Cola, the need for a big logistics partner is very evident because their products are very dependent on it. The area that I have been assigned was the Coca-Cola Bottlers Phil. Inc. Bagumbayan Sales Office. It is a Crossdock type of warehouse where in the Coca Cola products from the main plants are delivered and sorted for distribution. The flow of

release of products starts from the plant to their warehouses and then to their distributors called, Market Logistics Partner (MLP) and Market Exclusive Partner (MEP) who in turn delivers these products to the stores in their respective areas of distribution. The order of delivery starts from a store who wish to procure Coca Cola products by booking their orders from Account Developers (AD) or Market Developers (MD) and then these Account Developers or Market Developers then encode the data they have gathered each day to their handheld devices which are hooked and connected into a system which is fed on the computers of their logistics partner, The Red Systems Company, Inc., after these data are collected, the Red Systems Company, Inc. s computers automatically feeds these orders to the main plants. And after these the plant now prepares these orders and delivers the bulk amounts by territories. Each territory has several warehouses to keep their supplies. But a cross dock warehouse such as the one I was assigned to is a special kind of warehousing which moves the products from the manufacturing plant in Sta. Rosa and delivers it directly to the customer with little or no material handling in between. Cross docking not only reduces material handling, but also reduces the need to store the products in the warehouse. But this was not really exercised in the Bagumbayan cross dock. By crossdocking, Coca Cola Bottlers Phil. Inc. aims to reduce the labor cost because products do not really need to be stored anymore, they are just brought down from the haulers and then transferred to the delivery trucks already. Cross docking also aims to reduce the span of time from the production to the customer, which helps to greatly improve customer satisfaction. It could also reduce the need for warehouse space, as there is no requirement to the storage of the products. The only downside to a cross dock is that because there is no inventory, there is no immediate supply for emergency purposes or if a customer orders a rush purchase such as in a special event. The logistic system in the Bagumbayan Sales Office, as it is supposed to be a cross dock does not really strictly complies to it, there are still inventories lying all over after the morning and afternoon delivery trips this is primarily because of booking problems such as double bookings or simply the Account Developers or Market Developers accidentally inputs orders twice which will be interpreted by the computer systems as regular orders. This mistake will then be transmitted via computer data direct to the production plant which does not have the human capacity to distinguish the mistake. This mistake causes the extra supply of stocks which will naturally would not be included in the delivery baggage of the truck who will receive these products because anything in excess would be charged to their wages if it cannot be sold. As the logistics partner of Coca Cola Bottlers Phil. Inc., The Red Systems Company, Inc. is still just a newly formed subsidiary which is yet to be improved. It is still understandable that these mistakes are occurring in such a young and promising company maybe because their synchronization is not yet familiar or optimal. These minor mistakes however poses a great loss in the company because instead of reducing the cost of inventory it actually adds up to the expense because all of the excess products will need to be returned to the production plant and cannot be sold regardless of what circumstances occur. By transporting it back to the plants they will have to incur additional transportation cost again.

The only problem I could think of this event lies with the system of booking the orders, as it is highly automated and does not have counter measures to check, it is prone to errors. If only there would be a single system that can pinpoint the validity of the orders we can greatly eliminate these double entry booking and consequently reduce the needed cost of transportation. Although this seems to be a minor problem the cumulative savings of the company can actually amount to bigger gains which can in turn finance other areas for investment. This problem is only a personal observation of mine from my experiences in my stay at Coca Cola. I have enjoyed and learned a great deal of experience in my practicum which I think is a wise learning experience which I cannot learn inside the classroom alone. I very grateful that I made the right choice of choosing Coca Cola as my training ground and for San Beda College for arming me with the proper knowledge to understand these learnings. Truly I have been blessed for this very enlightening and rewarding experience from working at Coca Cola Bottlers Phil. Inc.