What considerations in terms of planning and control are relevant for the product or service for Coka Cola?

Time - Horizon         

 Coca-Cola Company operates in 200+ countries and has a diverse product portfolio. Although the demand for each product type might vary based on the time of the year for purposes of this project, we are focusing only on the cola product line (“Coca-Cola”). Despite some seasonal variations in demand, for example, increased demand for carbonated beverages due to warmer weather, the nature of the business is very long-term. In addition, the seasonal influences on product demand can be offset by demand fluctuations globally as the northern and southern hemispheres feature alternating climate patterns, winter in South America, Australia and Africa/summer in North America, Europe, and Asia.  For Coca-Cola, long-term operations planning makes sense. Location, the supply of raw materials such as sugar and water, and layout would each benefit from a long-term planning approach.

Nature of Demand

          The general populace consumes Coca-Cola in large unpredictable quantities across the world.   Coca-Cola products are perishable in nature with recommended shelf lives ranging from 75 to 120 days. (Coca-Cola Refreshments Dispensing Operations, 2010).  Also, Coca-Cola products often have a short to non-existent lead time fueled by an impulse buy retail customers and vendors who must have the products on display for customers to make instant purchases. Based on the unpredictable nature of demand, Coca-Cola should follow "make to stock" model.

Market-Requirements           Long-term planning aggregating control towards mass production would facilitate Coca-Cola’s ability to meet relatively short customer demand cycles.           Serving 1.9 billion every day worldwide, Coca-Cola is a high volume product with low, but existent variants including, Original Coke, Diet Coke, Coke Zero, Cherry Coke and Vanilla Coke to name a few.    Although there are variants within the Coca-Cola product design, the production process will be mostly the same for all of the products.  Because of the high volumes of Coca-Cola, it is cost effective to use specialized labor and equipment to produce the product. (James, T., p.40, 2011)

Activity Scheduling

           Loading, sequencing, and scheduling comprise the three components of activity scheduling.            Loading - Finite loading would be the most appropriate process to determine capacity and production volumes.  By taking into account projected shelf lifetimes and forecasting based on past performance, Coca-Cola should be able to predict customer demand in advance and plan accordingly.            Sequencing (Dispatching) - Coca-Cola’s key sequencing consideration concerns delivery reliability, a vital requirement in ensuring product availability to the wholesalers, retailers, and restaurants who comprise the largest purchasers of the product.  The most appropriate sequencing rules to adopt would be a combination of  Due Date Sequencing (DDS) and Priority Sequencing for larger or more important customers.           Scheduling - Mass  Process type scheduling would be more appropriate than batch process type scheduling because although there are variants within the Coca-Cola product design, the production process will be mostly the same for all of the products.             Coca-Cola is a high volume product with low, but existent variants including, Original Coke, Diet Coke, Coke Zero, Cherry Coke and Vanilla Coke to name a few.    The high volumes of Coca-Cola coupled with relatively minor adjustments to the input of raw materials for the different variants make the application of mass process type scheduling cost-effective using specialized labor and equipment to produce the product. (James, T., p.40, 2011). The use of customer demand forecasting will enable Coca-Cola to meet customer due dates and keep the inventory cost to a minimum. Expediting might become necessary in the event of a material shortage, a large-volume customer order change, an equipment breakdown or staffing deficit.           A global enterprise such as Coca-cola should maintain raw material reserve inventory to avoid raw material shortages due to unforeseen circumstances, mandatory preventative maintenance of plants and machinery to reduce plant downtime and sufficient staffing to provide flexibility in scheduling the necessary human capital for production.  Finally, although customer order changes may be difficult to predict accurately, they should be possible to anticipate based on the past course of business.

Centralization         

Based on its business structure, hybrid centralization facilities plan would be most appropriate for Coca-Cola’s inventory management.    A centralized facilities plan would work best for its concentrate, beverage base and syrup manufacturing facilities because, although Coca-Cola is a global company, “the primary way that [its] products reach the marketplace starts with Coca-Cola, which manufactures and sells concentrates, beverage bases and syrups” to over 250 local bottling operations affiliates worldwide. A decentralized facilities level for its inventory management. (Coca-Cola, The Coca-Cola System, 2018).A decentralized facilities plan would work best for Coca-Cola’s “bottling partners [who]manufacture, package, merchandise and distribute final branded beverages to [its] customers and vending partners, who then sell the products to consumers” (Coca-Cola, The Coca-Cola System, 2018).

Classification

          The ABC Classification System allows for tailoring of inventory control based on the number of annual expenditures incurred by inventory item type.  “A Items” which comprise approximately 10-20% of the inventory and account for 60-80% of the annual expenditure need to be controlled closely. (James, T., p.61, 2011).  “B Items” which comprise 20-30% of the inventory and account for 60-80% of total expenditure need a lower level of control than “A Items.”  (James, T., p.61, 2011).  “C Items” which comprise the remaining 50-70% of the inventory and account for less than 25% of the total expenditure need the lowest level of inventory control as the cost of tracking outweighs the cost of holding additional stock. (James, T., p.61, 2011).Models and Implementation           The Economic Order Quantity (EOQ) is ideal for the company as it aids in calculating the fixed inventory order, which is appropriate for Coca-Cola while minimizing annual costs of holding inventory (James, 2011). Moreover, this model takes into account the nature of a constant demand since this beverage has a constant seasonal demand throughout the year. Regarding implementation, Coca-Cola should implement its inventory itself.

3. What considerations regarding capacity management (measure demand; measure capacity; reconcile demand and capacity, and evaluate alternatives) do you consider relevant given your product or service?

 Measure Demand

          Measuring demand is relevant to Coca-Cola’s ability to manage capacity effectively.  The marketing department provides essential information for accurately assessing demand by providing forecasts based on both past performance and variable factors such as seasonal variations. (James, T., p.63, 2011).  For the most accurate results, Coca-Cola needs to tie its response times close to the forecasts so that interim course adjustments are possible when necessary. (James, T., p.64, 2011)

Measure Capacity  

       Measuring manufacturing capacity is vital to Coca-Cola’s long-term success.  Capacity is a variable time-based term, in which some factors must be considered in determining an accurate measure.  (James, T., p. 64, 2011).  Because the Coca-Cola product line has a relatively narrow product range, the most appropriate way for Coca-Cola to measure capacity is to look at it regarding output volume.  Unlike highly variable product lines, Coca-Cola does not change and can be reasonably accurately quoted based on output volume. 

 Reconciling Capacity and Demand        

 Reconciling capacity and demand is highly relevant to Coca-Cola.  The most relevant method is the Demand Management Method.  Rather than setting processing capacity at a uniform level throughout the planning period, as is done in the level capacity method, or matching the processing capacity output to match the demand level over time, as is done in the chase capacity method, the Demand Management Method works closely with marketing to adjust the demand level to meet available capacity by “altering the marketing mix (price, promotion, …).” (James, T., p.65, 2011)

Evaluation Alternatives                 

The three main evaluation alternatives that can be applied to capacity management are (1) Cumulative Representations, (2) Queuing Theory and Simulation, and (3) The Psychology of Queuing. (James, T., p.65, 2011).  Choosing the correct evaluation method requires creating a projection of the likely consequences of the plan.  The Queuing Theory and Simulation method is the most relevant to Coca-Cola because coupled with demand management, it will allow Coca-Cola to  “explore the trade-off between the level of capacity and the level of demand. -—-—-—-—

• Product or service: what product or service has the team has chosen?

Coca-Cola -  Carbonated beverage featuring a patented recipe;  Bottling plants complete the process combining the base syrup with water, sweetener, and carbonation.

• Market and customer: what is the estimated size of the market/customer-base for your product/service market and what are the customer drivers (order winning and qualifying factors)?

Coca-Cola is available to 94% population on this planet, and Coca-Cola serves 1.9 billion servings of its products (Coca-Cola, Who We Are, 2018). The Coca-Cola company is present in 200 countries across the globe and continents.

Coca-Cola has a vast portfolio of products that includes carbonated waters, fruit juice, ready to drink coffee. Coca-Cola is present in more than 200 countries world over. The target addressable market size is everyone in these countries, because Coca-Cola has products for children and adults, and also for every age group. In addition, Coca-Cola has excellent brand recognition. According to Coca-Cola, it is the world’s most valuable brand. (Coca-Cola, Who We Are, 2018).  According to Forbes, it is the world's 6th most valuable brand (Badenhausen, 2018). Availability, brand recognition and product portfolio all drive customers towards Coca-Cola.  It would be interesting to examine the different methods in assessing brand value and understanding how these differing methodologies translate in relation to strategic planning.

• Process Type: what type of manufacturing or service process do you consider most appropriate?

Mass  Process would be more appropriate than a continuous process for manufacturing Coca-Cola.  Coca-Cola is a high volume product with low, but existent variants including, Original Coke, Diet Coke, Coke Zero, Cherry Coke and Vanilla Coke to name a few.    Although there are variants within the Coca-Cola product design, the production process will be mostly the same for all of the products.  Because of the high volumes of Coca-Cola, it is cost effective to use specialized Labour and equipment to produce the product. (James, T., p.40, 2011)

• Layout Type: what type of layout do you consider most appropriate?

Product layout because this type of layout is ideal for manufacturing mass products of high volume such as cola.

• Facility Location: what location do you consider adequate for the facilities where the product or service is performed?

The determination of a facility location requires consideration of supply-side factors, such as distribution costs, labor costs, energy costs, site and construction costs and intangible factors, and also demand-side factors, such as labor skills, location image, and customer convenience. (James, T., pp.43-44, 2011).  Although Coca-Cola is a global company, “the primary way that [its] products reach the marketplace starts with Coca-Cola, which manufactures and sells concentrates, beverage bases and syrups” to over 250 local bottling operations affiliates worldwide. Coca-Cola’s “bottling partners manufacture, package, merchandise and distribute final branded beverages to [its] customers and vending partners, who then sell the products to consumers” (Coca-Cola, The Coca-Cola System, 2018). To best integrate supply-side factors with demand-side factors, Coca-Cola employs a location strategy entitled BIG (Bottling Investment Group) to find qualified bottlers.  (In this way, the manufacturing process requires one central location for the production of concentrates, beverage bases, and syrups which can be transported to local bottlers and retailers worldwide for the final stage of production.  (Coca-Cola, The Coca-Cola System, 2018).  The creation of a location web of local facilities tied into the larger corporate manufacturing facility allows for adjustment on a local level about each of the factors to be considered while also allowing for the Coca-Cola brand to lend value to the location image regardless of the location of the individual bottling plants.

• Process Technology: what process technologies do you consider adequate for your product/service?

Enterprise systems (ES) and Supply chain management (SCM) are needed since the core job of manufacturing cola is the flow of materials, information, and customers through the supply chain.

• Product / Service and Process Design: what elements of the design process do you think are more relevant given your product/service?

The critical elements of the design process are (1) Idea Generation; (2) Feasibility Study; (3) Preliminary Design; and (4) the Final Design. (James, T., p. 47, 2011).  The most crucial element for Coca-Cola is the Idea Generation aspect.  This element allows for the innovation of a well-established product.  Coca-Cola has been around since 1891.  Although the basic formula remains the same, Mass customization based on innovative idea generation allows Coca-Cola to “mass produce  a basic family of products ... which can still be customized to the needs of individual customers...increas[ing] variety while reducing production costs.” (James, T., p. 49, 2011). Thus, idea generation is a crucial element of the design process.

• Work and Job Design: what elements do you consider important to the design of the job and work required to manufacture your product or offer your service?

Work and job design deal with the “behavioral aspects which impact employee motivation and the physical effects of work.” (James, T., p. 50, 2011).  James identifies five desirable core characteristics (1) Skill Variety (SV); (2) Task Identity (TI); (3) Task Significance (TS); (4) Autonomy (AU); and (5) Feedback (FB).  (James, T., p. 50, 2011).  James states that these psychological states can be analyzed on a 7-point scale by conducting opinion surveys and then applying the following formula to provide a motivating potential score (MPS): MPS=((SV+TI+TS)/3) x AUx FB with Autonomy and Feedback weighing heavily in the equation.  (James, T., pp. 50-51, 2011) 

The goal of the MPS analysis is to promote the presence of (1) experienced meaningfulness; (2) experienced responsibility; and (3) knowledge of results. (James, T., p. 51, 2011).  James posits that the presence of these three psychological states equates higher motivation and quality of work performed. (James, T., p.51, 2011). 

The physical aspects can be realized in planning for the physical capacities of the workers.  Are the physical tools to perform the job ergonomically designed? Can the workers easily reach the mechanisms that they need to use to accomplish their tasks?. If a button must be pushed, is it at a level where the worker can easily push it without straining or creating an unworkable long-term environment?  The physical aspects can be analyzed using work measurement studies to determine the times needed to perform a job and to streamline and create efficiency in the process. 

Coca-Cola would benefit significantly from job simplification and the adoption of a Taylorist structure because of the assembly line nature of its manufacturing process.

References

Badenhausen, K. (2018). The World's Most Valuable Brands in 2018. Forbes Retrieved from https://www.forbes.com/sites/kurtbadenhausen/2018/05/23/the-worlds-most-valuable-brands-2018/#18ed71ef610c

Calloni, G., de Montgros, X., Slagmulder, R., Van Wassenhove, L., Wright, L. (2005). Inventory-Driven Costs.  Harvard Business Review.  Retrieved from: https://hbr.org/2005/03/inventory-driven-costs

Journey Staff. (2012). Coca-Cola Journey. Offices & Bottling Plants. Retrieved December 2, 2018, from https://www.coca-colacompany.com/stories/q-bottling-plants

James, T. (2011). Operations Strategy. bookboon.com  Retrieved from https://my.uopeople.edu/pluginfile.php/358620/mod_page/content/9/BUS5116James.pdf

The Coca-Cola Company.  (2018).  Who We Are.  Retrieved on 11/27/2018 from https://www.coca-colacompany.com/careers/who-we-are-infographic

The Coca-Cola Company.  (2018).  The Coca-Cola System.  Retrieved on 11/27/2018 from https://www.coca-colacompany.com/our-company/the-coca-cola-system#ath

The Coca-Cola Company. (2010). Coca-Cola Refreshments Dispensing Operations. Retrieved from https://www.cokesolutions.com/content/dam/cokesolutions/us/documents/foodservice-quality/foodservice-quality-syrup-quality.pdf

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