Analysis of Coca Cola Supply Chain Strategy

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Analysis Of Coca Cola Supply Chain Strategy

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From 1920’s, Coca Cola grown to become the most recognized brand globally to be nearly 500 brands and more than 2.0 billion servings sold each day to consumers. It has continues a successfully keep growing, even there’s wide range of beverages like sprite, Fanta, water and juices etc. In order to keep succeeding, Coca Cola uses strategy is strategic, planning and operations decisions. Their goal is for their supply chain still maximizing the profits by the low cost of margin. So far, Coca Cola driving revenue and profit growth with a clear role across every market. However, their market is to keep developing long-term revenue strategies decisions based on their volume, price investment and profit expectations to a successfully chain supply that manages flows of product, information and funds to provide a high level of products to customers while keeping it low. There are their following 3 decisions:

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Strategic Decision: Coca cola system produces a certain amount of syrup which is concentrates then is sold to various bottlers throughout the world who hold an exclusive territory. The company has its own anchor bottler in North America by the name of Coca-Cola Refreshments. Other Coca-Cola bottlers hold territorially exclusive contracts with the company, who produces to the finished product in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers then sell, distribute and merchandise the resulting Coca-Cola product to retail stores, vending machines, restaurants and food service distributors.

Their supply chain is divided into different levels of bottlers. It will mainly be focusing on the upstream or downstream activities of the product which entails partnerships with different bottlers, distributors and channels used to reach different retailers.

Planning Decision: the company upstream activities are limited to the manufacturing of the concentrate only. The actual formulas is used to manufacture the syrup is a very tightly held trade secret so there is little information regarding the exact ingredients and thus little information on the costs of their supplies. Furthermore, the original copy of the formula is held in SunTrust Bank's main vault in Atlanta. Yet, the company's 2009 income statement revealed that the cost of goods sold was in excess of $10 million and the operating margin was around 25%.

Operations Decision: Each bottling partner services the assigned geographical area through a head office which controls most of the operations and it serves as the hub for different entities in the supply chain. The bottler's head office is working in close collaboration with a regional office which is under the direct supervision of The Coca-Cola Export Corporation. The bottler's head office links the production plant with different distribution and sales centers and multiple trade zones together to form a complete supply chain.

After receiving the concentrate from The Coca-Cola Company (Atlanta) through one of the regional offices under the supervision of The Coca-Cola Export Corporation, the bottler ships it to one of its manufacturing facilities. The facility produces the final drink by mixing the syrup with filtered water and sweeteners, and then carbonating it before putting it in cans and bottles, which the bottlers then sell and distribute to retail stores, vending machines, restaurants and food service distributors. The bottling production plant has its own supply chain which mainly consists of two types of items.

  • General Items
  • Key Ticket Items (sugar, empty bottles, crowns, caps, crates).

The production information including forecasting measures, the capacity management, multiple vendor management and other sales figures are kept at the production plant as well as the head office.

However, if Coca Cola decided to sell those 9 productions plants, there will be highly rated benefits that could be clearer sense of vision, sharp focus on the brand and improve the understanding of an ever changing environment. The low margin business will bring a higher return in financial that make to strive the logistics improvement internally and externally in the Coca Cola Company.

Selling the production will help other big independent corporations to be recognized but also be aware of the risk of bottling that are sold bearing their name. Independent bottlers will be aware of the looming danger such as making profit with 2nd or 3rd distilleries such as big and well-known brand (Coca Cola ) have a huge advantage.

So, it gives the opportunity to independent bottlers for large domestic market in their supply chain. Since, the company will have to stick to Coca Cola's ground rules; it’s like buying a franchise but company has to go under Coca Cola grounds and rules without any change.

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