The Key Sustainability Aspects of the Organizations Current - Case Study Example

Key Sustainability Aspects of Coca-Cola Supply Chain Management Name Institution Course Date Executive Summary Sustainability in supply chain management has gained significant in the recent years. More and more companies are trying to incorporate sustainability throughout the supply chain process. This paper is based on supply chain management in Coca-Cola Company. First, the paper will provide a brief overview of Coca-Cola. Second, it will highlight the supply chain management of the company revolving around production, distribution and consumption. Third, the report will review the sustainability management practices of Coca-Cola in relation to its supply chain management. Fourth, it will offer a critical appraisal and the relationship between its sustainability practices and supply chain management. Lastly, the paper will offer some recommendations that will ensure the company succeed in its endeavours to close the gap between sustainability and supply chain management. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 3 Overview of Coca-Cola 4 Supply Chain Management of Coca-Cola 5 Representation of Supply Chain Management of Coca-Cola 7 Sustainability Management practices of Coca-Cola 7 Appraisal Analysis 9 Recommendations 10 Conclusion 11 Introduction To gain a competitive edge over the competitors, companies today are striving to meet the needs and expectations of the customers (Aras and Crowther, 2012). Success in doing this is founded upon developing business processes and activities that can strategize, manufacture and deliver the creative, innovative, low-cost as well as quality products and services. Supply chain management is a recent business concept that can be defined as the process of networking and integration of organisations that are involved in bringing a commodity or service to the customers. The concept of supply chain management involves the life cycle activities and processes that guarantee customers receive products and services at a value they demand (Aras and Crowther, 2012). Supply chain management creates a competitive advantage to a service or manufacturing organization hence completely differentiating itself from its competitors with regard to the perspectives of its customers. Therefore, it gives organizations a particular emphasis on low cost operations which brings about high profit levels (Seuring and Muller, 2008). However, today, sustainability has gained importance and has increased pressure on organisations worldwide (Collier and Evans, 2013). Supply chain management is affected by sustainability issues and companies are trying to implement sustainable supply chain management in order to survive in the competitive business world. One company that has implemented sustainability in its supply chain is Coca-Cola Company. This paper will offer an overview of Coca-Cola Company and will describe its current supply chain management practices. The report will also highlight the sustainability management practices adapted by the company and will offer some recommendations for the improvement of Coca-Cola SCM and sustainability practices. Overview of Coca-Cola The Coca-Cola Company has been in operation for more than 120 years and is considered one of the largest beverage companies headquartered in the United States (Coca-Cola Journey, 2014). Coca-Cola is the world’s leading non-alcoholic beverage company in the world and a strong presence in most of its host countries such as Australia. It is involved in the production and distribution of non-alcoholic drinks and syrups. The Coca-Cola Company has developed a 2020 vision that acts as a roadmap to increasing their global operation revenues by focussing on profit, shareholders, productivity, planet and portfolio (Coca-Cola Journey, 2014). The mission statement for the company is to refresh the global society in mind, body as well as the spirit. To inspire optimism through their brands and operations and to create value and make a difference in everything they engage in. The company is considered the leader in the beverage industry having a reputable brand coupled with strong global presence (Coca-Cola Journey, 2014). The Coca-Cola Company operation involves franchising system that has been in existence since 1889. The Company only deals with the production and manufacturing of syrup concentrate that it sells to different bottlers across the world. Coca-Cola Australia started in 1937 as a small non-alcoholic beverage company but today it has a considerably huge presence in the country with leading brands like Coca-Cola Zero, Sprite, Diet Coke and Pump among others (Press Center, 2013). Coca-Cola strategic goals include increasing profit by reducing the costs of its products through efficient production facilities. Another goal is to pay attention to environmental friendly bottling production and implement sustainability in its operations (Coca-Cola Journey, 2014). Also, it aims at diversifying its portfolio through partnership, creativity and innovation and to increase its annual income by 8 per cent for its revenue to double by 2020. The strategic plan of Coca-Cola includes growth and expansion. Through its mission, vision and culture, the company has the ability to spur this growth by 2020 (Coca-Cola Journey, 2014). The key competences of Coca-Cola include leadership, collaboration, integrity, accountability, passion, diversity and quality. Its values, mission and competences serve as a compass for its operations and define how the company behave in the world (Coca-Cola Journey, 2014). Supply Chain Management of Coca-Cola Coca-Cola Company Supply chain delivers approximately 1.8 billion servings to consumers a day across the world. Although the recipe of its drinks remains the same throughout the globe, the company uses several formulations in order to enhance supply chain success (Aras and Crowther, 2012). The company’s supply chain management is global but coming to terms with the demand from consumers is a local proposition. Of all its retail outlets, about 10 million require direct delivery which has made Coca-Cola operate locally in each market with local bottling plants meeting the specific demand of the market. Normally, the company’s products are not shipped beyond few hundred miles and this has enabled them to be responsive to the tastes and needs of the local consumers (Mentzer,Stank and Esper, 2008). Coca-Cola has a consumer-driven supply chain. Although the products are similar everywhere, the company leaves the production and supply responsibility locally in order to be flexible enough to satisfy unique market. Although the taste of their products is the same everywhere, the supply delivery techniques are different. Coca-Cola Company utilizes segmentation strategy in its supply chain structure in order to meet the local needs of the consumers (Roth, 2011). For instance, in some regions around the world, refrigerated distribution is required while in other regions people prefer ambient products. Generally, Coca-Cola change and adapt the supply chain structure in order to meet the varying needs. For example, Coca-Cola serves some of its consumers directly while other consumers are served by their distribution partners (Roth,2011). The Coca-Cola Enterprises are responsible for manufacturing, production as well as distributing of products under the Coca-Cola umbrella. The company delivers over 600 million bottles of products to retailers annually which are sold to over 170 million consumers (Press Center, 2013). The Coca-Cola Enterprises have 17 manufacturing sites and much of its sourcing its local in order to shorten and fasten the supply chain. The company makes sure that the products get from the factories to the consumers within 48 hours. The general supply chain of Coca-Cola involved the distribution of syrups to the bottling partners who are responsible for manufacturing, packaging and distributing to local consumers (Press Center, 2013). According to system theory, it is important to bring together different elements of supply chain such as human, financial and material resources in order to develop a larger system of supply chain (Grover and Malhotra, 2003). It is important to implement system theory in supply chain operations so as to understand the factors that influence supply chain performance. Different elements of supply chain management should coordinate in order to ensure products or services reach the consumers at the right time, in the right quality and at the right place. The Coca-Cola Company together with its bottling partners make up a unit referred to as Coca-Cola system which has the ability to offer their products to consumers even in the remote regions (Moye, 2015). The system coordinates together to ensure smooth manufacturer and distribution of products. The Coca-Cola system uses a more traditional method of supplying its products to retailers like hotels, supermarkets, grocery shops, institutions, etc. In addition, the supply chain uses technology to help in the demand input (Moye, 2015). Instead of relying on retail order, Coca-Cola uses a data warehouse to predict customer behaviour as well as market needs. Representation of Supply Chain Management of Coca-Cola This represents the flow of raw materials such as water and ingredients and packaging from suppliers to Coca-Cola system that is made up of bottling partners and the Coca-Cola Company (Roth, 2011). The system distributes products to the end consumers through wholesalers and vending machines. Figure 1. Coca-Cola Supply Chain Management Representation Sustainability Management practices of Coca-Cola In Australia and throughout the world, water systems are at risk as a result of growing populations as well as climate change. Research has concluded that most regions around the world are at risk of drought (Roth, 2011). As water is among the most essential raw material for Coca-Cola Company, the company has a sustainable responsibility to prevent water scarcity. In response to water challenges and suitability challenges experienced across the globe, the company has taken a number of actions with regard to its supply chain management. The company has reduced their water use considerably in the recent years (Seuring and Muller, 2008). Coca-Cola Company has improved water-use ratio by 16 percent which has improved water use efficiency. In addition, the company has implemented a recycling system in its plants. It recycles almost 100 percent of their manufacturing water and returns it to the environment to enhance aquatic life (Roth, 2011). In addition, the company is assessing vulnerabilities of water sources that source their plants in order to ensure that they are not affecting the water resources. The company carries out risk management to ensure that they do not affect the access ability of water users (Moye, 2015). In addition, the different elements of sustainable supply chain management for the company include bottling plants, distribution of products and supply of raw materials. Coca-Cola has direct suppliers of things like packaging, market equipment, etc. and suppliers of raw material (Moye, 2015). The supply element of the company is legislated by Supplier Guiding Principles. Coca-Cola through SGP check for the compliance of social and environmental sustainability through third-party audits carried out after every three years (Mohammady, 2009). The company has extra requirements that the suppliers of raw materials should adhere to which also cover farm management systems. Sustainable supply chain also involves logistics factor. Sustainability can be affected through the amount of fuel used for transportation purposes. However, Coca-Cola does not have a huge impact on sustainability with regard to fuel usage since it produces its products locally and avoid long distance transportation of products. In addition, the company source almost all of its raw material locally (Roth, 2011). According to social network theory, there are different behavioural and social aspects of networks of relationships which assist an individual or organisation get from one point to another. Social Network Theory emphasizes on the importance of social networks as they offer technical, financial and social assistance (Grover and Malhotra, 2003). Without social networks, it is almost impossible to achieve effective supply chain. Organisations are therefore encouraged to form social networks in order to enhance their supply chain management (Grover and Malhotra, 2003). Coca-Cola has formed relationships with World Wildlife Fund and other non-governmental organisations in order to create sustainability awareness. The relationships have helped them in building networks and find sustainability solutions (Moye, 2015). For instance, World Wildlife Fund has assisted the company to make its supply chain sustainable through implementation of water and energy saving strategy in its factories. Coca-Cola is making an effort to ensure sustainability sourcing of raw materials and ingredients. Most of the company’s ingredients start from the farms. In general, the raw materials used by Coca-Cola are the main cause of carbon emission across the value chain (Roth, 2011). In ensure sustainability sourcing the company has made a point of cooperating with the suppliers in ensuring improved agricultural practices in order to minimize greenhouse gas emissions and preserve and conserve soil and water (Moye, 2015). In addition, the company is working towards ensuring that the farming of its ingredients takes place in a way that protects the working conditions and the rights of the farmers. Appraisal Analysis The Coca-Cola Company trend is accountability for sustainability across the supply chain from farming and harvesting, to manufacturing, from storage to distribution. The integration of supply chain sustainability of Coca-Cola entails cooperation with partners like the suppliers and sharing information about what materials or processes are sustainable or unsustainable for the supply chain (Moye, 2015). The Company has embraced sustainable supply chain management through sustainable sourcing of raw materials, reduction of water usage, reduction of logistics and ensuring less emission of greenhouse gases. With the rise in awareness of sustainability supply chain management, companies are pressurized to implement sustainable supply chain practices (Collier and Evans, 2013). Coca-Cola Company of the years has tried to adapt to sustainability practices in order to ensure they minimize environmental and social impacts as well as gain competitive advantage. Although Coca-Cola has made an effort to ensure that its supply chain is sustainable, it is still a long way from ensuring all of its supply chain processes are sustainable from zero waste and organic farming to distributing healthy products to the consumers (Moye, 2015). One gap that exists between its supply chain management and sustainability practices is prioritizing in three sections of its supply chain that have impacted on sustainability; they include packaging, cold-drink equipment and the health aspects of its products. Most of the Coca-Cola products are packed using plastic packaging material and this is considered unsustainable due to their impacts on the environment (Roth, 2011). Nevertheless, the company has announced 2030 sustainability goals when it comes to its packaging. It has started using recycling products for its packaging which will help in its sustainability endeavours. In addition, the company’s cold-drink equipment is a source of increase energy use. Its vending machines and coolers have been associated with increase in energy use which contributes to climate change (Roth, 2011). The company has done little to solve this issue. Although Coca-Cola has come up with the initiative to minimize water use, there has been a number of complains in countries where Coca-Cola operates. For instance, Coca-Cola has been criticised for overusing water, making it hard for other water user to access (Moye, 2015). In India, the company has been blamed for over-using the safe underground water which acts as a source for farmers and people in the region. In addition, they have been blamed for violating pollution norms by releasing polluted water to the environment without recycling (Moye, 2015). Although Coca-Cola has invested time and resources in ensuring that it incorporates sustainability in its supply chain management. There are a lot of efforts the company has done when it comes to its supply chain management and ensuring that its supply chain processes are sustainable (Bevilacqua, Ciarapica and Giacchetta, 2007). However, there are still some gaps between its supply chain management and sustainability efforts since some elements of its supply chain management are still unsustainable. The company needs to prioritize its sustainability supply chain effort in order to ensure smooth sailing of its operations. Recommendations Game theory argues that organisational decisions involving many actors often present itself as a strategic and a sequential game (Grover and Malhotra, 2003). Co-operative behaviour is generated when actors in decision making interact on a repeated basis. Repeated interactions ensure that people know each other more and trust is able to be built thereafter. When there are no repeated interactions or when the intention of one actor is unknown, the actors will behave competitively. According to the theory, actors are rational but often faced with information problem (Grover and Malhotra, 2003). However, they are ready to co-operate to create greater value and utility. From the theory, Coca-Cola should form a trusting and transparent relationship with the suppliers and the buyers, sharing information through methods such as open book costing in order to enhance their commitment to sustainability issues. In addition, research studies have highlighted that it is very challenging to solve sustainability supply chain challenges as an individual company. Therefore, there is a need for industry-wide collaboration (Bras, 2009). Coca-Cola should collaborate with other companies working in the same industry in order to ensure sustainability. Coca-Cola Company is found in an industry with companies that share similar supply chain operations. They should come together to form set of standards for sustainability performance. Collaborating with other companies will enable Coca-Cola escape audit fatigue, paperwork for suppliers and sustainability-related costs (Bras, 2009). If Coca-Cola decides to work with its peers, it will also be able to share knowledge about sustainability of their supply chain. Another way Coca-Cola can use to improve sustainability throughout the supply chain is through training and capacity building programs (Esper, Fugate and Davis, 2007). One paramount way to share knowledge in the supply chain operation is to leverage the best sustainability practices from excellent companies at annual conferences, capacity building campaigns and training and development seminars. Coca-Cola can ensure that the employees involved in the supply chain process undergo training and development in order for them to gain knowledge of the importance of sustainability practices (Esper, Fugate and Davis, 2007). In addition, the company can train its suppliers and partners and communicate to them about sustainability. Conclusion In conclusion, to gain a competitive advantage, companies today are striving to meet the needs and expectations of the customers. However, with the growing acknowledgement of sustainability, there is pressure for companies to incorporate sustainability practices in their operations. Supply chain management is affected by sustainability issues and companies are trying to implement sustainable supply chain management in order to survive in the competitive business world. Coca-Cola Company has been in operation for than 100 years and has grown considerably in recent years. The Coca-Cola’s supply chain management is global but coming to terms with the demand from consumers is a local proposition. The supply chain management in Coca-Cola involves local production of its products to ensure that they do not use a lot of time in transportation. The company only produces the syrup that it sells to its partners who then manufacture and distribute to the consumers. The Company together with its partners has formed a system that is responsible for offering quality products to the consumers at the right time and location. Generally, Coca-Cola need change and adapt the supply chain structure in order to meet the varying needs. Coca-Cola has adapted a number of sustainability practices throughout the entire supply chain. The different elements of sustainable supply chain management for the company include bottling plants, distribution of products and supply of raw materials. For instance, it has collaborated with the suppliers to ensure that the ingredients are related to sustainable farming practices. Nevertheless, although Coca-Cola has implemented sustainability, it has a long way to ensuring that the entire supply chain is sustainable. To improve sustainability supply chain management, Coca-Cola needs to collaborate with industry peer, train its suppliers and employees and ensure transparent partnership with suppliers. 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