Supply Chain Management - Report Example

Summary This report discusses the importance of supply chain management and why companies are focusing on their own supply chain management and how they can integrate it into their strategy. It then goes on to explain the six rights of logistics that are providing the right product, in the right quantities, in the right condition, to the right place, at the right time, for the right cost and it then elaborates on how these six rights affect coca cola in supplying their product at the 2012 Olympics. Introduction Supply Chain Management is the management of material and information flow in a supply chain in order to achieve greatest amount of customer satisfaction in a cost effective manner. It requires commitment from all the supply chain partners coordinate effectively in terms of order generation, order fulfillment therefore creating an enterprise that is beyond just the producer’s site. Many large organizations that have both a local and global presence have recently begun to understand the strategic importance of supply chain. One of the biggest examples of supply chain integration and its importance to the organization is when Wal-Mart started business in Japan in 2002. Wal-Mart entered the market when the economy of Japan was doing poorly with household income falling by 1.4 per cent. At a time when the customers required quality goods and low prices, being able to cut the middlemen from the long distribution chain became essential for Wal-Mart so that they could transfer some of these cost savings on to the customers. By reducing the number of middlemen, they were planning to increase their margins and ease the cost burden on the consumers. This shows how strategically important once supply chain can be. (Case Study,Hodgettes ,1991) One of the major goals of supply chain management is to reduce the inventory assuming that products should be available when needed. Supply chain management has become really important these days because this global environment has become highly competitive. Especially for manufacturing industries like coco cola, this is important because it allows the company to get a competitive edge through its core competencies. Also supply chain management gives the value advantage to the company and not just production advantage as it gives a differential plus competitive offering. The six rights of logistics are important in order to have an effective supply chain management. These include providing the right product, in the right quantities, in the right condition, to the right place, at the right time, for the right cost. Findings In order to effectively manage the supply chain of coca cola in the 2012 Olympics, the company should focus on the six rights of Logistics which involve getting: 1. the right product 2. to the right customer 3. at the right time 4. in the right condition 5. at the right place 6. at the right price The Right Product Supplying the right product to the customers is very important for Coca Cola in order to be competitive. Pepsi, being one of the major competitors of Coca Cola, is a major threat to the company in terms of gaining market share and competing for the same spot as Coca Cola wants to be in. Therefore if the right product is not provided, the customers can easily switch to Pepsi. Right product here means that Coca Cola should provide its major products including Coke, Sprite, Fanta, Diet Coke and Coke Classic to the customers and the core target at Olympics would be people coming from all over the world to be spectators of this fantastic event. Therefore Coca Cola should make proper arrangements of the different SKU’s. For example people coming for Olympics would require the availability of the products in cans, in 300 ml bottles and 500 ml bottles because it will be difficult to carry the 1.5 litre bottle in the stadium. Therefore Coca Cola requires providing the right kind of SKU’s in order to remain competitive. Thus there should be more supply of the products in cans and in 300 and 500 ml bottles. The supply of its products should be effectively managed to ensure that the shelves and stalls at the games are always stocked. For that Coca Cola should have at least three days of stock with the retailers and should be supplying to them every three days so that no shortages occur. The most important link in the supply chain is the customer and with a consumer good like Coca Cola it is essential that their products are always available to the customer. To the right customer It is important for the company to identify its target customers so that the right products could be made available to them. The major customers are the local households and foreigners coming from abroad to watch the Olympics 2012, and the players who are participating at the Olympics. Products of Coca cola are generally consumed by mass markets with several market segments that the company could target during the Olympics. In order to cater to your target customers, there should be a constant supply to the retailers and vendors and distribution should be swift enough to be able to provide the large amount of people who would attend this event. Care has to be taken when consumers are targeted using the right marketing techniques as a distributor’s job is not just making sure the right product is available but also perform small scale promotional activities that ensure that the right customer can easily access the products and at the right time. As Coca cola is planning to sponsor the 2012 Olympics, the company should keep a constant supply within the stadium especially for the participants. This constant supply should be based on the Total Quality Management principle so that quality products are supplies to the right customers at a lower cost. At the right time Supplying to products to the customers at the right time means that the products are available in the store shelves whenever the customers require the product. Therefore to supply at the right time, the supply should be based on the Just In Time Inventory System (JIT). Under this system, the product is supplied as soon as it is required. In order to improve the supply chain management of Coca Cola, the company is already using an efficient system with better trucks, happy drivers and thus low cost. For example Coca Cola should use its existing system of delivery in the 2012 Olympics too that is it uses the direct store delivery to supply its products. Coca Cola Enterprise (CCE) uses the 28-ft. and 35-ft. order fulfilling trucks to supply the products at the right time at the right place. Due to continued SKU proliferation (selling not just carbonated drinks, but all those power drinks and juices too), CCE is increasingly “pocket loading”—i.e., picking by order by stop. In other words, CCE is building mixed-SKU pallets that have the various products, in the right quantities, necessary to fulfill a particular store’s order. These trucks have rear-loading doors and are wider than standard bulk-delivery trailers, so they have enough space for a narrow aisle up the middle for the driver to walk down. These trucks allow CCE to load a store’s orders into specially built carts that are fastened to the sides of their trucks. Better thinking about what kinds of trucks it needed in its fleet has allowed CCE to do a better job of optimizing its end-to-end supply chain. Thus this allows Coca Cola to reduce its cost and provide the right products in right quantities to the right customers at the right time. In the right condition The right condition refers to the fact that when the products of Coca Cola reach the end consumers, they should be fresh. Freshness with regards to Coca Cola’s products means that the fuzziness should remain in its drinks when consumed by the customers. Therefore in order to supply in the right condition, the products should be packaged in such a manner that it does not loses its fuzziness. For example when supplying its products, they should be stored in a condition conducive of the product. The products of Coca Cola Company are sold best when they are chilled. Therefore the company should focus on the chillers in the retail stores. The company does provide with the chillers but should check continuously if they are working properly or not. And that no other company products are stored in Coca Cola’s chillers. Chilled products are not supplied from the factory but chilled in the stores. If the chillers are not in the right condition, then the products of the company might not be in right condition and thus needs to be repaired or replaced as soon as possible. By doing so, the company will be able to provide its products in perfect conditions in the 2012 Olympics and thus able to increase its sales at least during that period. At the right place For distribution, Coca cola should use the approach that it uses globally for its distribution that is the Hub and Spoke system. This system uses hub systems instead of the centralized system to distribute the goods through out the area. These Hubs at different area will send parcels of goods to different spokes that could be the outlets and stalls set at the Olympics games. Instead of distribution through the bottling plants these hubs have several advantages such as reduced costs, fewer long journeys with large amounts of units, lesser amounts of heavy vehicles that are not needed. Right Price Coca cola has to keep in mind that any kind of price war will not work as its rival Pepsi co always finds a way to match the reduced price. Therefore it does not make sense to reduce the prices but to provide the right price that consumers find worth paying. For this, Coca cola should offer some discounts to the retailers and promote the product through BTL activities that could be taken care by the suppliers of the product. Recently Coca cola had a dispute with Costco, a retail outlet where price reduction had severely affected their overall profitability within the outlets. Right pricing during Olympics is very important as sales will be high for such a commodity. If Coca Cola under prices then they will lose on profits which will be an opportunity cost. However if they overprice the product the alternative will be able to gain more attraction. Here logistics plays an important part as the entire channel cost falls upon the end consumer or at least part of it, to ensure that the product is not over priced, Coca cola will need to develop a lean supply chain where there are not many middle men who increase the cost of the final product Conclusion In conclusion Coca cola needs to understand the importance of logistics management and the right kind of supply chain implementation needed by the company to ensure a positive presence during the Olympics 2012. The six rights need to be carefully studied and in depth research should be conducted so that the company can increase its efficiency and profitability during this major event. Also as long as they adhere to the six rights and focus their strategy to go and become great sponsors at such a magnanimous event, Coca cola will surely succeed. Recommendation Coca Cola should not go on price wars but offer competitive prices to the customers so that neither margins nor sales are adversely affected. Customer satisfaction is very important and therefore the company should focus on these six rights in depth so that a constant supply with satisfied customers is achieved. Also the company should focus on installing more vending machines as during the Olympics; more machines are required due to increased amount of customers. Lastly, the company should be focusing on the chillers in the stores as the customers can easily be diverted to the alternative products if Coca Cola’s products when required are not chilled. This will help in improving the supply chain management of the company during the Olympics 2012. References: Business dictionary. Retrieved (2010, May 7) from http://www.businessdictionary.com/definition/supply-chain-management-SCM.html Sovereign, R. (n.d.). Importance of supply chain management in the modern businesses. Retrieved from http://ezinearticles.com/?Importance-of-Supply-Chain-Management-in-Modern-Businesses&id=1240176 Banker, S. (2010). Coca-Cola Enterprises: Better Trucks, Happy Drivers, Lower Cost. Retrieved (2010, May 7) from http://logisticsviewpoints.com/2010/04/15/coca-cola-enterprises-better-trucks-happy-drivers-lower-costs/ Read More