In the current global business context, the function of operations management is incredibly essential as it deals with generating the products and services. Slack, Jones and Johnston (2013) outlines operations management as ‘the activity of managing the resources that create and deliver services and products’. Similarly, operations management is defined by Heizer, Render and Munson (2016) as ‘the set of activities that creates value in the form of goods and services by transforming inputs into outputs’. Slack et al. (2015) explains operations strategy as a combination of actions and decisions that entail visions, goals and operational capacities which consequently bring up competitive accomplishment for an organization. Started at a selling price of five cents a glass in Atlanta, Georgia, Coca-Cola emerged as one of the apex beverage companies today (The Coca-Cola Company, 2014). Coca-Cola carried out research In the 80s and found ‘Coke’ was the second most recognisable word across all languages in the globe, behind only ‘OK’ (Campaign live, 2018). One of the key objectives of the company is to increase its market share-value, which was achieved by operating with associates with the aim of satisfying consumers and valuing consumers’ interest as well as protecting company’s assets and minimizing business risks.
1.1.1 Operations Management Principle:
Operations management is just as important in small organizations as it is in large ones. Irrespective of their size, all companies need to create and deliver their service or products or both efficiently and effectively. Operations Management is concerned with the design, management and development of the systems that create the organization’s goods or services. OM concerns itself with the processes involved in transforming inputs into outputs in the form of goods or services that add worth to the organization. Operations Management strategy mainly depend on the mission and vision of the company (Meredith and Shafer, 207). Coca-Cola, the largest valuable brand all over the world have also important mission and vision where different type of decision areas control the overall operations management of the company.
1.1.2 Operations Management Decisions Areas:
Heizer, Render and Munson (2016) identified the following ten decision areas in operations management for business organizations. Among the ten, three decision areas such as Design of goods and services, Managing Quality and Supply Change Management in Coca-Cola’s context have been selected for critical analysis.
1Design of Goods and Services
6Human Resources Management (HRM)
7Supply Chain Management (SCM)
Table 1: Operations Management Decision Areas
2.1 Design of goods and Services:
Actually Coca-Cola Company provides mostly the products not the service. Product design is a significant decision area for operations management in the context of competitive market. The goal of product design is improvement and accomplishment of the product strategy to achieve the competitive advantage over other business counterparts (Jacobs and Chase, 2014). Products of this company have proven to be the number one soft drink in quenching consumer’s thirst of non-alcoholic soft drinks from Moscow to Montreal and from Beijing to Boston all over the world for more than 120 years of its existence (Study Moose, 2016). Coca-Cola is refreshing consumers with more than 500 sparkling and still brands and nearly 3,900 beverage choices.
2.1.1 Critical Analysis of Coca-Cola Product Design and strategy:
Product Design: It presents aesthetic and functional advantages and demand to both customers’ rational and affecting sides. The Coca-Cola bottle is possibly the most easily recognized containers in the globe. In the early 1900s, it was illustrated by the Pop artist Andy Warhol as the ‘Design Icon of the Decade’. It was a time when both the packaging and the actual Coca-Cola product were being imitated. In 1916, in response to this the company set a brief ‘A Coca-Cola bottle which a person will distinguish as a Coca-Cola bottle even if he feels it in the dark. The Coca-Cola bottle should be shaped that, even if broken, one could tell at a glance what it was’ (Design-technology.org, 2018). Around 94% of the world population is aware of the red and white logo of Coca-Cola (Business insider, 2011). Coca-Cola establishes four core principles of design such as Bold simplicity, Real authenticity, Power of RED and Familiar yet surprising.
Coca-Cola formula is the secret of the company which is the most held trade secret ever and only a little staffs have access to it. A book, “For God, Country and Coca-Cola”, has proposed a recipe of coca-cola but it may not the absolute original one (softdrinkcolawar, 2012):
Fig 1: Probable Recipe of Coca-Cola
Coke from Mexico tastes nothing like Coke from Thailand, Coke from the USA tastes nothing like Coke from the UK and so on. Though the secret recipe is same but it is possible for the same soft drink to differ slightly in taste due to added factors such as the temperature at which it is consumed, the foods with which it is consumed or the conditions in which it is stored prior to consumption. Even it differs for different fast food company. McDonald’s Coke tastes better than every other fast food chain. Because it follows Coca-Cola’s exacting guidelines to make sure the beverage is as consistent in taste as its bottled soda (Lacsamana, 2017).
Product Differentiation: A differentiation approach is the improvement of a product that offers unique and differentiating attributes which are valued by consumers and perceive to be better than or different from the products of the rivalry (Pezzino, 2011). Coca-Cola Company spends around 20% of their total advertisement budget for maintaining and communicating on its differentiation policy. Many products can be differentiated in the form like the shape, size of a product. Coke redesigned its two liter bottle in 2008 to make it curvier and thus, ‘easier to hold and pour,’ in the words of a Coca-Cola representative. It is that factors such as the size and shape of a product can influence how much consumers desire it.
From a brand loyalty survey it was found that Apple was the top pick, followed by Coca-Cola in the second spot. Amazon and Google tied for third. Respondents believed that quality and customer service are the most important factors in their loyalty to a brand. Price was third and convenience fourth (ClickFox, 2012).
On the other hand, since consumers are becoming more health-conscious by cautiously monitoring their diet, Coca-Cola took into account of this societal trend and developed new products to satisfy this rising market division. Replacing Coca-Cola Zero which was launched in 2006, recent ‘Coca-Cola Zero Sugar’ is the result of years of recipe improvement and modernization. As well as the improved taste, the new product Coca-Cola Zero Sugar and packaging made it even clearer to customers that the drink is sugar-free. This decision was informed by customer research conducted last year which showed that 5 in 10 people did not know Coca-Cola Zero contained no sugar.
Innovation: Innovation is the important trend for Coca-Cola for product development. To develop a new product, Coca-Cola follows the Ansoff Matrix (Appendix: 1 shows the Matrix). Every year, the company develops; tests and launches breakthrough packaging, equipment, merchandising, distribution models, and programs that enhance and refresh both its business and the local communities it serves around the world. In 2016, 16 Coca-Cola innovations that blew consumers’ Minds. For example, Mobile Coca-Cola Vending Machine Delivers Drinks and Smiles (coca-cola company, 2017)
Co-Branding: This approach usually associates the brands of at least two companies with a specific good or service. Diet Coke Sees Fashionable Benefit to Co-Branding. Diet Coke is releasing three new can designs in Europe and UK while partnering with Benefit Cosmetics, American beauty products brand by ‘Love it Light’ campaign,.
2.1.2 Suggestions to improve Product Design performance:
It is inevitable that every product experiences the decline phase of its life cycle. In maturity stage it gains most of the profit of its life cycle. From this view point the organization should go for continuous development of the product for prolonging and sustaining the maturity phase as much as possible. Coca-Cola should make continuous development of its main recipes and other items by adding some new flavor of taste and preferences.
3.1 Managing Quality:
According to Heizer, Render and Munson (2016), improved quality increases productivity through two ways; one is-sale gains and the other is-reduced cost. Operations management at Coca-Cola are guided by Lean Six Sigma (The Coca-Cola Business Process Excellence Program) and Total Quality Management (TQM) principles contained within The Coca-Cola Quality System (TCCQS). Quality management is more crucial and sensitive considering the use of drinking water and substance products for soft drink industry. An authentic and high rate quality management is indispensible for the beverage company. Obviously, the quality management of Coca-Cola should be assessed from this perception. Before assessing the quality management system of Coca-Cola with the help of an appropriate model, it would be worth to throw some light on quality vision of the company. The company Coca-Cola assures that it has the unaccompanied one quality system in its intact global operation. Quality vision of the company is concerns to venture to convene the ever-changing needs of the world, where preserving quality process in the market is the highest business objective of the company. According to the quality vision of Coca-Cola, it comes out that the company not only implements an exclusive quality management system but also flexible to cope with the changes in setting quality standards.
3.1.1 Critical Analysis of Coca-Cola Quality Management:
Let us evaluate the quality management of Coca-Cola through Fishbone Diagram which is also called Cause-Effect Diagram and developed by Ishikawa (Wilson, Dell and Anderson, 1993).
Figure 2: Fishbone Diagram and Coca-Cola
Fishbone Diagram analysis for Coca-Cola reveals that the majority of the problems that come out in relation to the quality of the products is because of the neglect of the employees, where staffs are not being trained and well skilled is the problem. Likewise, during the products when the company is producing consumable items, special care is expected that they are disinfected and do not generate any health threats. Because a slight neglect in relation to the company might direct to severe situations in relation to the health crisis. Eventually, it might be disastrous to the life of the company and they might even end up dropping the license. Additionally, the management has to be vigilant to this basis and has to guarantee that the labor process of the firm requires to be altered as there are dodges in the process and the dodgers are such that they caused slip-ups for the business. So Coca-Cola ought to guarantee that every employee is properly trained before develop the segment of the manufacturing and operational team of the company. Besides, the company ought to assurance that the machines in the manufacturing and purifying of water ought to be the finest of quality. Even, the management of Coca-Cola requires incorporating more ranks of quality checks and guaranteeing that there is severely monitoring at every steps.
Total Quality Management: TQM is an approach in the improvement of effectiveness and the flexibility of enterprise globally that covers the requirements of consumers and exterior and internal in the firm (Oakland, 2003). It is substantially a way and entire the firm, every department, every individual person in every level. Oakland (2003) takes a mix as well as hard and soft approaches and it illustrates TQM as pyramid which represents five individual components like managerial obligation, quality systems, chain customer-supplier, Statistical tools of control of activity and regular work.
TQM of Coca-Cola is projected to instigate and differentiate actual application of environmental management system. This accomplishment has had been made conceivable by the plant’s commitment to company’s TQM program named The Coca-Cola Quality System (TCCQS). TCCQS includes TQM ranging environment management and supplementary business features in the forms of Safety and Loss Prevention (SLP), packaging quality, processes capability, product quality advancement and consumer satisfaction. The accounting of Quality Management System (QMS) is one from the quality tools in order to assists the firm and to improve the qualitative output. W. Edwards Deming, father of Quality Management Movement, developed the quality management theory that emphasized ‘Joy in Work’. He said that Quality should be stressed at each step of process, not by inspecting the product or service once it is completed (Gitlow, 2001). Karapetrovic and Willborn (2000) also proposed to measure and improve the effectiveness of auditing in every step. The model of measurement of QMS is based on the calculation of probability of availability, reliability and appropriateness of auditing. Every process of auditing is programmed and systematic to aim in the continuous improvement.
Figure 3: Quality Management System of Coca-Cola
Coca-Cola QMS endorses the adoption approach of process at growth, application and improvement of effectiveness of qualitative management system. Consequently, the company is in position covers up the requirements of consumers and then consumers strengthen their satisfaction. Nevertheless, the leading management of Coca-Cola should make sure that the appropriate processes of communication are established in the set up and that the communication is comprehend with regard to the effectiveness of QMS. Further, the leading management of unit Coca-Cola should revise the QMS in programmed intervals in order to ensure the proper application, appropriateness, efficiency, sufficiency and effectiveness.
3.1.2 Suggestions to improve the Quality performance:
Coca-Cola invented an internal system of KORE (KO is its NYSE ticker symbol; RE for requirements) operating requirements covering quality, food safety, environmental, and occupational safety and health policies and began requiring Global Food Safety Initiative (GFSI) certification of all it facilities. It is an integral part of the Company’s 2020 Vision Plan which has a 6P focus like Profit, People, Portfolio, Partners, Planet and Productivity (Coca-Cola Femsa Integrted Report, 2017). In 2017, Coca-Cola began the rollout of new Manufacturing Execution System (MES) plus Statistical Process Control (SPC) platform which integrates microbiology and sensory analysis process control, is designed to digitize all of the manufacturing processes. But till now the company have different problems in quality management system. Since they implement their own quality control system, new employees can be unaccustomed with it. To overcome this, every plant should conduct necessary programs to make relationship between quality system and new employees. Coca-Cola should give more importance on health value from the ground of ethical and corporate social responsibility. Company should look to find the most recyclable packaging available. Auditing and inspection should be made more strengthened and frequent.
4.1 Supply Chain Management:
Supply Chain Management (SCM) includes the preemptive managing of the evolution of goods, services, data, and capital between the raw materials phase to the consumer (Trent, 2007). An amazing 1.8 billion servings of Coca-Cola products are sold around the world every day. Coca-Cola’s supply chain priority is to create sure that every one of its thirsty clients gets the right product, at the right time and in the right price. Coca-Cola’s supply chain changes throughout its life cycle from traditional mass merchandising, inventory management and cost containment, supplier and customer alliances, relationship formation, innovation and the future capabilities of its supply chain.
4.1.1 Coca-Cola’s Supply Chain Management: A Critical View
Since Coca-Cola extended worldwide by including licensed bottlers and distributors, the company recognized the need to control inventory and related cost. The advent of material requirements planning (MRP) systems and manufacturing resource planning (MRPII) systems along with improved computer capabilities provided organizations like Coca-Cola the ability to track inventory accurately. Reduction of inventories such as new and used bottles, syrup, sugar, and other ingredients occurs along with developments in communication indicating that further acquisitions are required. While not implemented, Coca-Cola realizes the significance of radio frequency identification (RFID) as a benefit for the future. Coke found itself competing internationally with other soft drink producers, most remarkably PepsiCo. Producers investigated ways to provide low cost and high quality products while maintaining high consumer service levels. Coca-Cola implemented just-in-time (JIT) and TQM strategies to develop quality, manufacturing efficiency and delivery times (Wisner, Leong, ; Tan, 2012). World’s largest lean-Six Sigma supply chain operation was established by Coca-Cola to leverage best practices, processes and operational excellence programs.
(APPENDIX: 2 & 3 shows the Coca-Cola Supply Chain Process and Supply Chain Circle)
For more than a decade, Booker, UK based wholesale retailer has placed its stocks diversely in over 100 warehouses across the country. Due to lack of inefficiency, CCE (Coca-Cola Enterprises) has managed to develop a new inventory management system, known as VMI (Vendor-Managed Inventory). Mentzer (2001) declared that the success of supply chain management is based on the flows of information chain. In theory, VMI might be an implementation of JIT philosophy that commonly aimed to eliminate waste. CCE obtained demand data from Bookers’ store as an exchange to help the sales. Besides the importance to understand the demand fluctuations, this practice of synchronization helps Booker to deliver greater asset utilization, also it simultaneously affects Coca-Cola’s brand value. Nevertheless, Booker could improve their supply chain performance by the reducing the cost of inventories as well as to avoid overstocks with all the support from the supplier. CCE established a uniform IT program across 17 European plants and trained the employees. As a result, Productivity and transparency increased, cycle time decreased and decision making improved.
Organizations, facing increased competition and uncertain economic conditions, use business process reengineering (BPR) to reduce waste and increase performance. For example, to support developing processes, effecting and store deliveries, SAP software has been installed by Coca-Cola. This software executes the tasks of the whole Enterprise Resource Management Software (ERP) for the company and its global operations. This software is used to manage the information related to geographical sales, per capita utilization trends and response from new product, seasonal variations, sales forecasting, consumer relationship management data, fleet management data and related information (Tallant , 2010).
Already a market leader, Great Plains raised the bar by creating a seamless, real-time process framework that mitigates the disruptive effect of a complex and unpredictable demand chain. Whereas its JIT processes were a good foundation, gaps in its order processing flow kept the company from achieving true optimization. Great Plains worked with IBM Business Partner eTech Solutions to redesign and integrate its order processes in a way that delivered seamless real-time data flow from the field to factory floor. This synchronized data throughout the company and tightened its just-in time processes. 30 percent reduction in inventory costs due to tighter just-in-time processes.
Even, Coca-Cola Freestyle machine automatically reports supply and demand information to both Coke and the restaurant/organization where the Freestyle is located. It’s an example of pure demand driven Supply Chain ecosystem.
In Belgium, CHEP collaborated with Coca-Cola Enterprises, Colruyt and Van Dievel to make the collective supply chains more efficient. These customers saved money and cut CO2 emissions by 30% by reducing the distance that trucks had to travel.
4.1.2 Suggestions to improve performance of Coca-Cola’s SCM:
Coca-Cola should appropriately follow supply base stages such as, supplier monitoring, evaluation, development, negotiation and contracting. Preplanning is essential for improving organizational performance of Coca-Cola. Pepsico formulates a well-timed preplanning in contracting with suppliers.
Multiple transportation provision and warehouses are necessary to avoid hindrance in logistics. Company should expire their trade with unethical suppliers.
Requiring transparency from its bottling partners could eliminate domain conflict issues that occur when one bottler tries to sell its products to another bottler’s region to meet the sales quotas (this issue has been seen in Coca-Cola’s Asia Pacific market).
At the opening of each bottle’s journey when raw ingredients enter the plant, to the very end when it is chilling in the fridge; collaboration, innovation, efficiency and sustainability are the key factors that make that plant to fridge journey seamless and successful.
5.1 Evaluation of Strength and Weakness of Coca-Cola Company:
Coca-Cola is the leading manufacturer and retailer of non-alcoholic beverage in the globe (APPENDIX: 4 shows Interbrand Best Global Brands 2017). SWOT analysis of the company is shown at APPENDIX 5. Only Strengths and Weakness are described here:
?Coca-Cola strengths lie in their brand awareness and robust distribution network (DeFranco, 2015). It is the best global brand in the world in terms of revenue, profits, performance, brand image and stock market. Almost 22,000 Coca-Cola beverages are consumed every second.
(APPENDIX: 6 shows The World’s Top 10 Food and Beverage Companies 2017 )
?The company holds the largest market share (almost 40%) of the cola industry.
?Coca-Cola recognized in 2016 for its Innovative Supply Chain Leadership Program which is broadly known as the ‘Oscar for the Supply Chain Industry’. Coca-Cola continues to use its Freestyle smart delivery systems to tailor supply chain solutions by market and segment. In 2016, Coca-Cola Ranking: 15 where Quality of Products Ranking: 3, Quality Management Ranking: 2 (Forbs Magazine, 2016)
?The firm enjoys having one of the most loyal consumer groups.
?The company is increasing focusing on sustainable programs like energy conservation, packaging, water recycling etc. Coca-Cola is certainly the pioneer in ISO Management Standards implementation by rolling out management systems across its organization integrating ISO 9001 Quality, ISO 14001 Environmental, ISO 22000 Food Safety and ISO 26000 Guidance on Social Responsibility (Lambert, 2012).
?Principle focus of the company is aerated beverages like Coke, Sprite and Fanta. However, this limited focus might prove detrimental for the company if the world is moving towards healthier drinks.
?Product portfolio of Coke unlike that of Pepsi is highly undiversified. While Pepsi has diversified in both food and beverages, Coke has concentrated only on drinks. This singular focus on carbonated drinks may cost the company if markets for such drinks shrink in future.
?Coca-Cola has 8 billion dollars of debt in the market which is another negative point.
?Coke has faced flak from experts who have criticized the water consumption policy of the company in regions with water scarcity.
?Finally although Coke sells more than 500 types of product; yet only a few products result in more than 1 billion dollars sales.
5.2 Operations Management Strategy of Coca-Cola and Competitive advantage: a critical view
A good competition approach should highlight on the weaknesses of the rival but avoiding the strengths. The company then commences attacks against the weak points of the competitor. This would facilitate one company to achieve a competitive advantage against the other companies. Differentiation, differentiation focus, cost focus and cost leadership are some strategies put forward (Michael, 2006). For example, Coca-Cola and PepsiCo, two analogous companies competing for the identical market can utilize these tactics to exceed each other.
Differentiation: This is meant by adding uniqueness in the products. The secret recipe for Coca-Cola, which debatably tastes better than other cola drinks for 130 years. Even Company believe that packaging is a silent sales man considering least expensive type of advertising and every package is a five second commercial. Coca-Cola continued supremacy in the beverage market though PepsiCo is fiercely competing with it.
Cost Leadership: An organization acquires competitive advantage by delivering products to the customers with low cost. The production techniques of Coca-Cola are so well developed that it costs a portion of the selling price to produce their product, resulting in high turnover. But recently Coca-Cola makes bottles smaller and hikes prices in a bid to beat the sugar tax in UK. Its’ 1.75ltr bottles shrink to 1.5ltr and go up 20p to £1.99, while a 500ml bottle is also going up from £1.09 to £1.25.
Response: It ensures dependable and swift response as well as stretchy performance in product development and delivery. Coca-Cola is often available in abundant supply to people in areas where other consumer goods companies would never consider delivering their products. African continent is an superb example where it is reasonably common to see a small shop selling cold Coke in the center of nowhere.
There are five competitive priorities relating to operations strategy such as cost, quality, speed, flexibility and dependability (Slack et al., 2015). Coca-Cola always intends to deliver error free products in case of quality. Its product flexible since it introduces new products to meet the customer requirement. It also upholds reliability by keeping the delivery promises to its customers.
Global operations strategy options:
Coca-Cola is globalized in two dimensions. Vertically, Coca-Cola is globalized along the supply chain and of relevance to the franchising system. Horizontally, Coca-Cola is globalized in different regions by building six operating; groups –Africa, Latin America, North America, Europe, Eurasia and the Pacific and employing around 146,200 associates. Due to more franchising its political and cultural risks are diminishing. This is how Coca-Cola achieves competitive advantage (The Coca-Cola Company, 2017).
Conclusion and Recommendations:
The analysis on Coca-Cola operations management activities and operations strategy clearly indicates that global business is gradually becoming more multifarious and competitive. In the circumstances, for successful business operation a strong integration between operation management decisions and operations strategy is highly required. Flexible marketing policy and amazing innovation power make Coca-Cola keep leading position in soft drink world. Conversely, the labels of ‘Junk Food’ and ’cause obesity epidemic’ are the original sins of soft drinks. To get rid of this reflection, Coke not only window dressing its brand image but also make profits from other non-soft drink areas. Coca-Cola’s biggest strength is its brand image based on the inventor John Pemberton’s legacy along with huge popularity of its secret Recipe, which can be the greatest source of achieving competitive advantage over its competitors.
To overcome the weakness and optimal utilization of Strengths, this Report also suggest some recommendations to improve the overall performance of the Coca-Cola Company-
?The Company should emphasize on the strengths and work for the improvement of threats and weakness of operations management decision areas.
?Coca-Cola needs to remain their brand relevant by relentlessly innovating, adapting, and sharing their standards with evolving customer tastes, such as baby boomers, who want healthier, tastier and further unique choices.
?While increasing the scope of Coca-Cola’s business in the international arena, there should always be room for the customers’ betterment and not only of the company’s.
?Research and Development wing of Coca-Cola should be more vibrant and globally competent to provide quality product at right time in right place in right price.
?The Company needs to Identify evaluate and proactively address environmental risks and emerging trends. The business should look to find the most recyclable packaging available.
Last but not the least, Coca-Cola as a world-class company must learn and apply how to balance, control, anticipate and compensate for the betterment of the society as a whole with Continuous process of Innovation, Process Optimization, Re-Engineering, Product Development, Quality Management, Supply Chain Management, Customization, Cost Rationalization, Localization and Globalization.