Operation management in context to Coca Cola - Essay Example

?Case Study of Coca Cola on Operation Management By [Presented to] of Introduction Operation management is concerned with the designing and redesigning of business operations to add extra value to the existing operational framework of organisations (Wilson, (1995). Operation management is all about ensuring that business activities have been performed in an efficient manner with optimum utilisation of sources and resources to meet customers’ expectations and requirements in the competitive business environment. It is concerned with managing wide arrays of processes that convert inputs in desired outputs that create value along with fulfilling the needs and requirements of customers. Thus, it can be said that operation management is one of the key functions of the management that requires utmost sincerity in planning and implementation of ideas and processes. The management of sources and resources in the production, manufacturing and distribution of goods and services is the most important objective of operation management. Most organisations try to enhance their operation management framework in order to add value and benefits to the entire organisational framework in an effective manner (Chase, et al, 2001) The assignment aims at discussing the intricacies of operation management in context to Coca Cola; one of the largest soft drink manufacturers in the world. It needs to be mentioned that every organisation faces operational issues and Coca Cola is no more an exception in this regard. The organisation has a number of business partners located in different parts of the world that sometimes affect the entire operational framework because of the supply chain management issues. The assignment presents an illustrative study of operational issues face by the organisation in terms of manufacturing and distribution of goods in different parts of the world. This will also help in understanding the intricacies and utility of an effective operational framework that can add value to the organisation efforts. Purpose of the Research The primary purpose of the research is to understand the operational issues of Coca Cola along with by defining and understanding the problem along with offering solutions for it. In order to achieve the purpose of the study; it was important to study the literature on Coca Cola and different case studies have been studied highlighting the operational issues of the organisation. There is no denying that the purpose of the study can only be achieved by having an idea over the organisation and the next part presents an overview of the organsiation that will help in understanding the operational and management framework of the organisation in a lucid manner. An Overview of the Organisation Coca Cola Company is an American multinational known for producing concentrate that is sold to licensed bottlers across the world. The company has a history of more than a century and is highly admired for a number of products produced and manufactured by it. The company offers more than 3500 beverages in more than 200 countries that speak about its reach and acceptance in different parts of the world. Coca Cola started its journey as a patented medicine and established itself as a carbonated drink manufacturer in the 20th century. It produces carbonated soft drinks, fruit juices, water sport drinks, energy drinks and other milk products as per the needs and requirements of customers. The company was growing at a rapid pace in the 20th century with little competition and high margin making it one of the highly profitable organisations. However, the franchise model based on offering license to bottlers has been criticized in the past along with raising too many operational issues. Moreover, the complexity of operational framework has increased in the due process making the control and management process management a bit tough and lengthy. Structure of the Report The structure of the report pertaining to the presentation of operational framework of Coca Cola and related problems has been highlighted in a systematic and logical manner. At first, the operational framework of the organisation pertaining to the manufacturing of concentrates has been discussed and based on that five operational issues have been identified. These operational issues have been discussed in length by highlighting the problem, nature of the problem, illustrative analysis of the problem and recommendations. It needs to be mentioned that operational issues are often related to the manufacturing and distribution of goods and services that also include supply chain management and other management issues. The idea is to understand the impact and influence of all these issues on the performance and operations of the company along with recommending points to handle such issues in a logical and analytical manner. The case study has been written to understand and present the operational issues of Coca Cola along with identifying ways to minimise its impact on the overall operational framework of the organisation. There is no denying that Coca Cola is one of the largest organisations operating in the FMCG industry and much of the reference has been taken from previous case studies to understand issues. At the same time, individual perspective has been developed to assess the issue in a logical manner using the knowledge and understanding over the operation management. Overall, five problems have been identified pertaining to control and management issue, management of information technology, wastage issues, quality issues, delay issues, and impact of operational framework on the environment. It needs to be mentioned that all these problems are related to the operational framework and thus need logical and analysis and understanding to underpin the impact and influence over the business and social environment. It is important to discuss operational issues one by one to form a profound understanding in a logical manner. The first issue is pertaining to the management of licensed bottlers. Coca Cola produces concentrate that is sold to bottlers and each bottler has different agreement and contract to sell products in the defined and assigned territory. Defining the Problem The basic problem of having different bottlers in different country often creates mismanagement of sources and resources. As each country has different demographic and environmental factors, there is bound to have differences in the quality of the end product (Calvert, 1990). Moreover, the company has independent owned bottlers and non-independent bottlers with a non control ownership interest in the later. This shows that the idea of having different bottlers having separate contracts and agreements with separate and different terms and conditions has made the operational framework quite lengthy. With operations in more than 200 countries, the number of bottlers can be assumed that has every potential of raising questions over the lengthy operational framework requiring too much control (Chase, Stewart, 1994) Literature Review of the Problem While talking about independent bottlers, it does not mean that the company does not have any control over them. Through the agreement, the company has full rights to ensure that their products are being produced in the right manner along with being distributed in an efficient and effective manner. The agreement also allows the company to exercise power and control to an extent. In spite of controlling the whole act of manufacturing and distribution; one thing that was out of the control was the quality of soft drinks and other products. As the company was responsible for providing only concentrates to bottlers, remaining of the work to covert the input into the output was in the hand of bottlers (Johnston, 1994). One such incident that drew great attention was in Belgium when the Government of France ordered Coke to take its products off the shelves after a number of people who drank the soft drink became ill. The reason behind the illness of people was the use of defective carbon dioxide that was used by a bottling plant in Belgium. This shows that in spite of having a number of bottlers and great control over them; there are chances that operational framework can be thwarted because of such incidents. The excess number of bottlers in the operational framework having license to operate can be questioned but based on the franchise model, there is very little scope of debate and thus the issue can only be criticized and analysed as per the understanding over the subject matter. Another incident happened in the United Kingdom when after introducing Dasani brand bottled water into the United Kingdom; Coke ordered a recall of more than 500000 bottles because of the excess level of cancer causing chemical Bromate was found in the water (Johnson, Jones (2004). This incident also compels to think that whether the franchise based model is good enough to maintain the reputation and profitability of the organisation or whether enhancing the supply chain management in different parts of the world along with focusing on exports will be a good option. This can only be debated as the organsiation continues to find ways of bolstering its bottler’s network along with focusing on the quality of the products and services. Another incident happened in Japan when Coke was forced to recall 54 million cans of Boco and Whiney for using lemon flavoring that was not approved under Japan’s Food Hygiene Law. This also shows that with too many problems being imposed by the bottlers; is it right to have different bottlers in different parts of the world or trusting few bottlers along with enhancing the overall operational framework would be the right approach. There can be a number of answers for it but considering the kind of loss when a company has to recall its products, investing the same amount in strengthening the supply chain can be a good idea. Recommendations for the Problem There is no denying that Coca Cola has a proven record of profitability and value creation in the competitive business environment. However, managing more than 300 bottlers can be a tough ask especially when any of those can come up with something obnoxious in terms of quality. In order to address this issue, Coca Cola can reduce the number of bottlers along with trusting few and strengthening the supply chain management with significant improvements in the logistics management. This will ease the pressure on the organisation along with managing the bottlers in an easy manner. With more than 300 bottlers in different parts of the world, the company can divide the work load by mixing the geographies like having only one bottler in India responsible for distributing products in India, Bangladesh and other nearby countries. The licensed bottler should be verified and tested in terms of quality and measures taken to ensure high level of quality as per the set standards of the organisation. This will help in addressing the issue to an extent along with managing operations in a logical and systematic manner. Defining the Problem The next operational issue discovered is related to the management of information, sources and resources in a systematic and logical manner. However, the decentralized procurement and distribution infrastructure presented too many problems and challenges in managing wide arrays of data and information. It required managing of different set of contracts and information. It needs to be understood that with too many bottlers in the operational framework and each bottler having separate contract and agreement, managing of information and data can be cumbersome task especially when the bottlers are located in different parts of the world. The role of information technology has been immense in shaping the operational framework along with adding great value. This needs to be analysed in case of Coca Cola Literature Review of the Problem As per Jim Small, System and Business Process Manager Supply Chain at Coca Cola Bottling Company, downloading data and information from SAP in excel usually requires too much of time and on top of that frequent data and information were required by individuals working on the purchase order. However, due to the large volume of data, extraction of information was a tough job. Getting operational data and developing reports through those data was a challenging job. The data extraction took long amount of time often delaying the overall operational framework. SE 16 and SQ00 were used to provide tremendous amount of weekly, monthly and quarterly data by exporting to excel (YouTube (2011) Material movement data and reports often used to crash because of the large volume of data and information. This whole act posed great problems for the organisation and especially to managers for extracting information in order to develop weekly, monthly and quarterly reports. It needs to be understood that developing quarterly reports can be delayed as information can be extracted even if the system is slow and not responding much because of the high traffic but in case of extracting operational data, the system was posing great problems. More importantly, in order to track purchase orders being uploaded in SAP, there is a need to extract them, put them into the excel and use them for further actions. However, with Material movement data and reports often getting crashed and extraction being placed in queues, there was wastage of time. Thus, it can be assumed that managing operation tasks is highly dependent on the efficiency and effectiveness of information technology being used in the short as well as in the long run. There is no denying that Coca Cola was taking required initiatives to deal with the matter in order to ensure high movement of information without too much of trouble. Recommendation for the Problem Coca Cola leveraged the integrated solution of mySAP Business Suite that enhanced the interaction between infield associates and inside sales and logistic teams along with reducing the cost and enhancing stakeholders’ satisfaction level. In order to deal with the issue, Coca Cola needs to develop an IT framework capable of handling large volume of data and information like mySAP business suite. At the same time, same application and usage should be communicated to stakeholders so that they can equip themselves to the latest technology. This will help in easing the situation along with enhancing the flow of information in an effective and efficient manner. Operational information needs to be extracted in an easy and simple manner without waiting too much in order to strengthen the operational framework along with maintaining the smooth flow of information and data. Defining the Problem It needs to be mentioned that operational framework of organisations differ in other countries. Coca Cola also faced operational issues while operating in India as people protested against the business practices of the organisation. The problem was based on creating water shortages in Kerala State where the company has a large bottling plant. It needs to be mentioned that different countries have different set of operational rules that need to be followed by foreign companies in order to create a smooth flow of operational activities. However, in this case, the operational activities were thwarted by large movements against the company that hampered its production and distribution to an extent. This operational issue is based on not understanding the operational framework of a foreign country and continuing the operational activities as per the personal understanding and requirements. The end results affected the smooth flow of operational activities along with raising questions over the organization’s business practices. Literature Review Coca Cola operations came under sever scrutiny as many communities were facing severe water shortages along with contaminated ground water and soil because of the Coca Cola operations in the state of Kerala, India. A massive movement was carried out against the company criticizing its business activities and approaches. The Coca Cola largest bottling plant was closed for 17 months as the village did not renew the license blaming the company for shortages of water and contamination of soil. Several protests were carried out in fear of water depletion and contamination. At the same five other states and few schools also imposed the ban on the operations of Coca Cola. It needs to be mentioned that wastage of any sort along with hampering the natural resources is against the ethical operational practices. Coca Cola is a foreign company and thus the onus of being ethical and responsible is all the more in terms of extending the reach and presence in other foreign countries. It needs to be mentioned that non operational activities for 17 months must have impacted the operational framework of organsiations and its bottling division in India. Operation management is all about ensuring that business activities have been performed in an efficient manner with optimum utilisation of sources and resources to meet customers’ expectations and requirements in the competitive business environment. In this particular case, business and operational activities were not carried in an ethical manner. However, the company was utlising its sources and resources in an effective and efficient manner but stakeholder satisfaction was missing that resulted in poor management of operational activities and good amount of loss. A number of initiatives would have helped the company to continue its operational activities in the presence of proper understanding of the stakeholder’s expectations. However, that was lacking and thus creating a big issue. Recommendations for the Problem It becomes very important to study the social and economic factors of a country in order develop and implement an effective operational framework. The company should have studied the availability and scarcity of sources and resources and accordingly should have designed its operational framework. It was important to ascertain reasons behind the scarcity of water along with analysing reasons behind the contamination of water and soil. For this purpose, a discussion should have taken place between the village authority and the company to discuss the use of sources and resources. The benefits of the operational framework along with disadvantages needed to be communicated in a lucid and honest manner. It needs to be mentioned that any failure in the operational activities causes loss along with crippling the entire production and distribution process. Thus, a thorough analysis of the internal and external factors affecting the environment needs to be studied, evaluated and analysed before developing and implementing any operational framework in any part of the world. This not only helps in smooth flow of business activities but also ensures problem free continuation of business activities in different business environments. Defining the Problem Quality of products can be considered as one of the most important part of operation management. As operation management is concerned with business activities being performed in an effective and efficient manner to offer desired value and satisfaction to customers, quality of becomes very important in every sense. It also needs to be mentioned that quality of products can be tested during the conversion of inputs into outputs. This offers good amount of time to organisations to assess the quality of their products before making them available to customers in different markets. However Coca Cola has failed to do so in many instances. Literature Review In 1999, Coca Cola regretted problems faced by the European customers pertaining to the quality of the admired soft drinks. As per the report published in BBC News (1999), more than 100 people in Belgium and Franc reported cases of headache, dizziness, anxiety and stomach upsets after drinking canned soft drinks manufactured by Coca Cola. It was because of the defected carbon dioxide being used by the bottler based in Belgium but the issue was reported to Coca Cola as the product was sold under its patent and organsiation. It needs to be mentioned that quality is one of the most important aspects of any operational activity and lack in quality can make or break customers. With a strong and proven legacy of high performance and acceptance in the complex business environment, this was a serious issue for the organisation that questioned its operational activities and management and control over them. The company’s CEO, Douglas Ivester took the responsibility of lack of quality in the soft drink manufactured by the company and promised to take steps in order to enhance the overall quality of end products. After his statement, countries like Belgium, France, Netherlands and Luxembourg started taking Coca Cola’s soft drinks off their shelves offering great set back to the organsiation in terms of proving its operational framework; a failure not being able to offer perceived quality of products (Hays, 1999). The sale of canned soft drinks was suspended resulting in good amount of loss along with raising questions over soft drinks manufactured by the company (BBC News (1999) Other brands like Fanta, Sprite and Bon Aqua were also banned making the mockery of the operational framework developed by the company in an indirect manner. This was considered as a major problem and issue for the company and steps were taken to meet the stated health quality standards along with ensuring high quality of products and services. Another Incident pertaining to the quality of products happened in India when the Nongovernmental organisation in New Delhi stated that aerated water produced by soft drink manufacturers in India contains toxins like Indane, DDT, Malathion and Chlorpyrifos. All these are pesticides that can cause cancer along with breaking down the immunity system. Tested products include Coke, Pepsi and other soft drinks and traces of these pesticides were found. Coca Cola tried to safeguard its interest by stating their products are severely tested against pesticides and meet desired health and quality standards (Coca-Cola website (2006). However, with the involvement of the government and fear amongst customers; Coca Cola witnessed 11% dip in sales in 2003 that also affected its profit a bit (Business Standard (2009). It can be assumed that these cases were related to the quality failure that is an important part of the operational management and should have been addressed well before the distribution of products but Coca Cola failed to do so. This act can also be considered as a failure of operational framework and an important operational issue affecting the operational activities of the organsiation. Recommendations for the Problem It is very important to ensure high quality of products and services and for this Total Quality Management can be implemented. Total quality management talks about improving the quality of products and services and processes by understanding the needs and demands of customers along with improving processes and activities pertaining to operations to enhance the overall quality of products and services (Ahire, 1997). Along with this, the organisation also needs to understand the quality standards and parameters of each country and accordingly products should be developed. It is important to test the products before distributing in order to have an idea of the quality. This will also help in avoiding quality issues to an extent along with adding value to the existing operational framework of the organisation. Defining the Problem One of the major problems pertaining to the effective management of operations is distribution of goods and services across the world. It needs to be mentioned that Coca Cola products have been distributed by the bottlers across the world. The licensed bottlers are responsible to distribute products in the assigned territories using marketing programs and initiatives. However, in the recent run, Coca Cola along with PepsiCo has been distributing its Powerade drinks directly to Wal-Mart (O'Reilly (2011). It needs to be mentioned that most bottlers distribute products and services based on the relationship shared with retailers and wholesalers and in case of companies selling directing to the big names; things can be become a bit worrisome for a number of bottlers. The operational issue in this particular case is based on the inventory management and forecasting that is calculated by the bottlers as per the demand of the products. In case of Coca Cola distributing directly to retail companies, there whole analysis and forecasting pertaining to the inventory management can go south and thus can impose big problems in the present as well as in the future. Literature Review As per the report published in Food Production. Com (2006), more than 50 bottlers have lined up to sue Coca Cola in the US to stop its move of supplying Powerade drinks directly from its warehouse to the retail giant, Wal-Mart. As per the report, bottlers and Coca Cola have signed an agreement that prohibits delivery of Powerade drinks straight from the company’s warehouse. This not only affects the business of bottlers but also put them in a spot of bother where they do not know the state of their control and management. There is no doubt that operational framework and operational activities are bound to suffer because of such initiatives and acts. Coca Cola stated this act as a trail but did not please the bottlers. The whole issues suggest that the increasing number of retailers has created tension in the supply chain with everyone fighting for the market share and a piece of larger profit in the complex business environment. This also states that the operational framework and responsibilities need to be defined further in order to strengthen the overall operational activities. Stakeholders standing against the company in rage cannot be considered as a good sign especially in the business environment that is driven by synergy, cooperation and trust. However, in this case, there is a serious hint of anger, frustration and little trust amongst the stakeholders for Coca Cola. There is no denying that this act will affect the operational activities of bottlers and may affect their business dynamics in case Coca Cola continues to add more responsibilities to its existing operational framework in the present as well as in the future (Lovelock, (1992) Recommendations for the Problem The only recommendations for this particular problem can be by discussing the share of operational framework in an illustrative manner. Bottlers need to enquire about the purpose of changing the existing operational framework and the organisation needs to state its view point on change in the business and operational strategies. It needs to be understood the organisation is responsible for everything in terms of success, mishaps, failures and allegations. Thus, if the organisation changes the operational framework by changing the structure of supply chain as per the will, it needs to explain the issue and urgency to its stakeholders else it will be considered as a violation of the agreed contract. The success of organisation’s operations is dependent on the operational strategies that need to be lucid and honest. In this case, operational strategies seem to be a bit vague making stakeholders frustrated and irritated. This act may act as a hiatus in the long run operational framework of the company as bottlers are responsible for distributing the end products to end customers. Conclusion It needs to be mentioned that operation management is one of the most important activities needed to create value in the competitive business environment. As operation management is concerned with managing wide arrays of processes that convert inputs in desired outputs that create value along with fulfilling the needs and requirements of customers; it becomes very important to identify its benefits, advantages and objectives in the success and development of the organisation. Operation management can often make and break the image of an organsiation through the value creation process. The creation of a quality output requires coordination and integration of wide arrays of approaches and sources and resources. The discussion revolves around the operational management issues of Coca Cola. The organisation has been operating in the business environment from last hundred years effective and efficient operational framework has helped it to grow and develop as a highly admired and desired organisation across the world. However, with certain operational issues, the operational activities of the organsiation have been thwarted in the past that also impacted the operational framework to an extent. It needs to be mentioned that operational issues are all those issues that affect the operational activities of organisations. It includes activities pertaining to the production, distribution, waste, quality, management and control and supply chain management. Thus, operation management has a broader framework that needs to be redesigned and reassessed at regular intervals especially for organisations having reach in different parts of the world. The operational management issues in context to Coca Cola are mainly related to management and control of bottlers, wastage issues, quality issues, management of operational information and conflict in operational activities because of the lack of trust between the company and stakeholders. In order to avoid all these operational issues, the organisation needs to redefine and reassess its operational framework along with redesigning it as per the need and requirements of stakeholders. If the organisation fails to create value for the internal stakeholders, it will be very hard to create value for the external stakeholders. The operational framework should be centralized based on ethical and honest practices. It means that quality and value should be two parameters of developing and implementing operational activities in different parts of the world. It is very important to develop quality operational framework to avoid quality issues that happened in India and Europe. At the same time, wastage control should be on the top of the agenda as this can often hurt the emotions of people along with accusing the unethical business approach of being irresponsible towards the environment. Along with this, the franchise based model needs to be redesigned and reassessed in terms of quality and value. With a number of bottlers, the amount of information flow can be huge and managing that flow can be a cumbersome task. There is no denying that technology has changed the face of the business environment but human interface is very much needed in order to control technological interfaces. Until and unless, there is a systematic approach of managing information in a centralized manner, the organsiation will always face challenged in terms of ineffective flow and extraction of information (Stauss, 1993). Coca Cola also needs to distribute its products after checking the overall quality along with considering the emotions and sentiments of people. The organisation needs to understand that stakeholders need to be satisfied and if bottlers or customers in part of the world are not satisfied, operational framework will be disrupted. This will lead to serious complications in the present as well as in the future. Based on the overall analysis of the operational framework and issues of Coca Cola, it can be assumed that the history of hundred years of operations still require regular redesigning and reassessment. The bottlers’ issue in the US needs to be sorted out along with developing operational activities as per the culture and acceptance of countries across the world. This will help in reducing operational issues along with enhancing the overall concept of operation management in the competitive business environment by adding value and satisfying the needs and wants of a number of stakeholders associated with the organisation (Zeithaml, Parasuraman, Berry, 1990) . REFERENCES Ahire, S. L. (1997). 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