Capacity Planning, Purchasing and Supply and improvement Strategy of Coca Cola Assessment 2 Answer
In this report, the capacity planning, purchasing and supply strategy and improvement strategy of Coca Cola has been described. The following company is an American multinational company that has been established in the year 1892 and Asa Candler has founded the same. The company deals with non-alcoholic beverages and the nature of operation environment of the company is “making products to stock”. The company mainly concentrates on the demand management and distribution. To maintain and improve the market planning, the company needs to identify its capacity and should address the mentality of the company where the company has to face more or less demand of their product in the market. The company has spread over different international countries and in this report; a brief discussion has been made on the capacity management and other operational strategies of Coca Cola, New Zealand. Further, the process to deal with the undesirable effects on the business operation of the company has also been discussed in the report that will help the reader to understand the management capacity of the company to deal with supply chain risk. A performance matrix model has also been given in this report to analyse the operation and provide recommendations regarding competitive factors for the operational development of the company.
Assessment task 2
In this part, a detailed discussion on the capacity strategy of a company (Coca Cola) and issues that are important during changing capacity levels have been made. The term capacity plays one of the most significant roles in the company. Until a company knows its capacity, it cannot design its marketing plan and the supply chain management of the same could get affected (Slack & Lewis, 2017 pg 120). Therefore, capacity holds a key position in the operations strategy. Coca Cola is known for its strong supply chain which is based on partnership with distributors, suppliers and retailors (Ivanov,et.al.,2016). In Coca Cola Newzealand, nature of market demands of their product and they should implement proper capacity planning based on such demands (Slack & Lewis, 2017 pg 122). It has been stated by Slack & Lewis (2017) that capacity strategy helps the company to make effective decisions on the operational configuration of the company and it affects the whole capacity of the company to gain output potentials. Further, the capacity strategy of the company helps to understand the ability of the company and it helps to understand whether the company can deal with the market demand for the products of the company and whether the company has the capability to allocate proper distribution management or not (Benedito et al., 2016). However, a company can change their capacity planning based on the nature of market competition with the help of various methods and techniques (Duffuaa, & Alfares, 2015).This rule can be proved through an example.
In the year 2015, an overall study reveals the fact that Coca Cola is controlling 50% of the global market and with their bottling partner, the Coca Cola Amatil Group in New Zealand has more than 265 million customers consumers in that country. On the other hand, Pepsi Co is governing 20% of the global beverage market and in New Zealand; the company has controlled 10% of the beverage market. Therefore, the market demand of the company can be presumed. However, to deal with such market demand, the company needs to increase its capacity by implementing new strategies (Kurz, 2016).
There are certain factors that help to make change in the capacity levels (Slack & Lewis, 2017 pg 135). According to the authors, risks are there to make decision to change the level of capacity. However, in their book named “Operations Strategy”, the authors have identified certain periods that could help to make proper change in capacity.
Source: (Slack & Lewis, 2017 pg 136)
According to the author, a company should make decisions to change its level of capacity on time and in this matter, the company needs to consider two factors such as operations resources and market requirement. These two factors are based on three generic timing strategies such as lead demand, lag demand and smoothing demand (Slack & Lewis 2017 pg 136). Further, locations, cost of the resources like labour, energy and transportation and community factors are certain reasons that influence the capacity decision of the company to deal with more, equal or less marketing demand. Considering the example of 2015, it can be stated that being one of the biggest multinational beverage companies, it is the duty of the following company to change their capacity based on the market requirements (Slack & Lewis 2017 pg 151). Further, it is to be stated that it is the decision of the company to make their product available in the market to meet the ever changing demand by considering the above-mentioned factors.
There are certain processes by which any company can identify their capacity that is whether their capacity is more or less than the market demand or not. According to social practice theory, Identification of capicity is part of operation strategy formation (Adamides, 2015). Slack & Lewis (2017) in their book have rightly mentioned certain processes by which a company can prove its status of capacity. In this case, the authors have given a chart of three levels such as strategic capacity decisions, medium-term capacity decision and short-term capacity terms (Slack & Lewis 2017 pg 126). Strategic capacity decision based on the market probability and the time scale under this capacity decision is year to months. Medium-term capacity decision is based on the market forecasts and the time scale of the same is months to weeks. In short-term capacity decision, current demand of the product of the company is likely to be adjudged and the time scale under this term is hours to minutes.
To understand the level of capacity, the current company can choose any of the three generic strategies such as leads demand, lags demand and smoothing demand (Slack & Lewis 2017 pg 136). A company can identify their leading capacity when they have sufficient capacity to meet the forecast demand and when the company has such capacity that is equal to the market demand, it will be treated as lags capacity. If the present capacity of the company is depending on the supply demand, it will be identified as smoothing capacity. All these generic capacities are based on the competitive objective of the company and help to maintain financial performance of the company. Planning for capacity is must in these days. A recent study has revealed the fact that many companies are just spending most of their money as they could not identify their capacity according to the demands. An estimated claim propels that manufacture companies are spending $70 billion per year as they are investing for over capacity and therefore, it is necessary for the companies to make their capacity planning and identify their capacity according to the market demand. Being a leading beverage company, Coca Cola, New Zealand needs to make their capacity planning and they are required to maintain scale graphs with an intention to avoid lost profit while operating their business. The company needs to assess the market demand of the company’s product and after that, it should be assessed whether the company is producing that much to meet those demands or not. In this regard, the company should make a balance between the demand and the production capacity of the company. To understand the capacity of the company, it is necessary to calculate the capital expenditure and underutilisation of capacity of the company. When the production capacity of the company could meet the forecast demand, it will be treated that the company is operating their business in leading capacity and in case of adverse condition, it will be regarded as lagging capacity. In every business, the nature of future demand is uncertain and hence, the company should identify their capacity as per the market demand for their product.
Assessment task 3
The bullwhip effect is a conveyance tool that used to identify the loopholes of supply chain forecast. It helps to understand the demands of the customers and lift the level of supply chain for the company. The idea originally showed up in Jay Forrester's Industrial Dynamics published in 1961. For this reason, the particular thing is also known as Forester effect. The particular thing is working down its length and under this effect; a wave pattern is there to address the forecast accuracy. An instance can clear the concept. If a company has produced goods in an accurate manner; but the selling focus of the company has move from the consumption behavior of the consumer, it will fall under the bullwhip effect (Grabara & Starostka-Patyk, 2009).). At the point when organizations introduce new products, they gauge the interest of customers on current economic situations. Most organizations make eastimate through market research what they can sell.
In the present period of globalization, production network chance alleviation is significant in associations like Coca Cola to move a hazard or result to an outsider, lessening the effect of a hazard, diminishing the likelihood of an occasion happening and to build up emergency courses of action that decrease the effect after an occasion happens (Mohamed & Omwenga, 2015). As rivalry in global markets is logically endless, supply of appearance time of products just as their quality, coordination among providers and wholesalers has gotten a significant attribute of the Supply Chain. According to a media report, in 2018, the company has mixed Maori language with their English slogan that headed as “Kia Ora, Mate”. According to the language, the heading means Greetings to the death. Such a tag went viral and the supply chain of the company has gone backfired.( (Choudhury, 2019). As the consumer loyalty is a significant benchmark of the achievement of the Supply Chain, powerful administration of the connecting forms is pivotal. Moreover, advertise vulnerability requires Supply Chains to be effectively adaptable to changes in the circumstance of exchange. Such adaptability in supply requires powerful Supply Chain Management.
There are certain strategies by which Coca Cola can deal with all their undesirable effects and problems regarding the supply chain management can be mitigated. The notable strategies in this case are capacity addition strategy, channel flexibility strategy, inventory addition strategy and supply chain responsiveness.
There are certain vulnerable processes that can resolve the issues. Inventory network hazard evaluation procedure can settle on vital choices and operational designs to reduce the amount of store network wastes. Purchasing is also significant part of supply market through which risk of supply management can be dealt in better way (Schiele, 2019). Previously, the predominant reasoning was that the remarkable building, structuring and furthermore amicable and reliable generation activities are the main factors to get to advertise requests and to get more piece of the overall industry and, hence, the associations give a courageous effort to expand effectiveness. In later years, with expanding of enhancement in client's normal examples, the associations were worried about expanding flexibility underway lines and improvement of new items for consumer loyalties.
There are certain categories of purchasing and supply risk mentioned in the book of Operational Strategy by Slack & Lewis (2017). The risks are supply disruption, supply delays, system breakdown, forecast inaccuracy, loss of intellectual property, procurement problems, and inventory costs (Slack & Lewis 2017 pg 192). Supply disruption can be occurred due to industrial dispute or bankruptcy. If the information infrastructure cannot be updated or if the website of the company has been hacked, it will cause system breakdown. If the market forecast has been calculated inaccurately, it will break the supply chain by affecting the sales promotion and incentives (Slack & Lewis 2017 pg 192).
It is a fact that if a company depends on its supplier in most of the time, risks will be generated therein (Slack & Lewis 2017 pg 194). The supply chain of a company can be broke down due to several internal and external environment-based matters. If a company could not mitigate such problems, the company could face huge loss due to this (Slack & Lewis 2017 pg 194). Being an international company, Coca Cola is depending on its worldwide supply networks. In this way, the capital investment of the company has been reduced and the works can be done efficiently. However, additional dependency can pose huge risk to the company (Slack & Lewis 2017 pg 190). Further, due to supply disruption, the rate of market capitalization has been reduced 10% globally (Slack & Lewis 2017 pg 191).
Assessment task 4
Where the scientific knowledge is applied on business operation for practical purpose, it is known as process technology strategy. There are certain technological processes required to be evaluated from the perspective of feasibility, acceptability and vulnerability. In case of feasibility of technology, proper evaluation of time, money and efforts are assessed. In case of acceptability, the process of strategic objectives is assessed. In case of vulnerability, the risks for selecting technologies are assessed (Slack & Lewis 2017 pg 217). Feasibility is the process to find out the availability of resources. Acceptability means expected performance of a strategic option. Vulnerability means the position of the company for managing the situational crisis. In their book, Slack & Lewis have mentioned certain process technology strategies to deal with certain present and future incidents. In this report, the financial requirements are assessed.
One of the most important questions for operating business is whether the company can bear all the financial investments to meet technological requirements or not. In this case, it is important to simulate the cash flow of the company (Slack & Lewis 2017 pg 2019). At present, a detailed study on Coca Cola’s operational strategy is going on and the perspective of feasibility, acceptability and vulnerability, it is required to evaluate financial strategy of the company.
A company can bear the financial investment by calculating total inflow of cash and subtracting the same from total outflow of cash. In such way, the company can get its net funding requirements (Lewellen & Lewellen, 2016).. In this case, both the cash inflow and cash outflow are required to be considered. Further, the expected performance of the company to deal with the financial needs is also necessary. The business operation of the current company is spreading in over 200 countries and more than 3300 brands are produced in the company. Further, in respect of the global trend, the company has 300 bottling partners. In New Zealand, the company has an access to 265 million customers and there are 700,000 active partners(Coca Cola Global Marketing Approach, 2019). With an intention to increase the sale capacity of the company up to 65%, the company is evaluating certain process strategies to meet their financial expectancy.
Source: (Slack & Lewis 2017 pg 221)
One of the main strategies to develop the acceptability of an organisation is to calculate the net present value of the company and if the current interest rate of the company is 10% p.a. and the received invested money is €100 p.a., then the calculation process to derive the net present value of the company is as follows:
Source: (Slack & Lewis 2017 pg 222)
Net present value helps to assess the cost value of the organisation and provides opportunities to receive money properly and invest the same behind the technological inventions with an intention to implement good process strategies. Further, when a company is taking new technical steps or implementing strategies, it is quite common that the process is risky or the process can be failed. Therefore, every company should make certain vulnerable strategies to deal with these situations. In the year 1985, Coca Cola had faced such a situation where the company had decided to sell out their soft drink production and decided to sacrifice the older customers. There were many risks. However, due to the vulnerable process, the company has succeeded and earn huge profit afterwards.
Assessment task 5
Business operations of Coca Cola NewZealand using the importance performance matrix
The companies are implementing operational strategies with an intention to improve their base and develop their performance scale. There are many factors like six sigma, leadership, employee engagaments that contributes to make these operational strategies success (Kouri, 2018). The strategic view will help the company to get long-term advantage. In modern times, the companies are opted to develop their strategies with an intention to enable the persons to make easy connection across the globe. Coca cola New Zealand has adopted various competitive strategies that enable the company to get long-term benefit. The competitive factors can be stated as quality assurance, speed, dependability, flexibility and cost (Slack & Lewis, 2017 pg 244). The company has taken all these competitive strategies to retain their brand image and has hired the staffs that are skilled and experienced in their field. Further, to satisfy the consumers, the company has maintained good relationship and maintain proper cash flow to retain the rate of profitability. However, in the below, an importance-performance matrix has been given that will help the company to get an idea regarding the market requirement. Importance- performance model is used to understand the relationship between importance and performance (Deng & Pierskalla, 2018). The significance of the importance-performance model is to understand that there are differences between the demands of the customers and demands of the market. Further, it helps to understand that it is not necessary to improve a product if there are customer demands for that. Concurrently, if the nature of the operation is not good compared to other competitive organisation, it also does not mean that the same is required to be improved (Slack & Lewis 2017 pg 247). Under the chapter named “Importance-performance mapping”, Slack & Lewis have mentioned a chart and elaborately described the chart. The chart is given below:
Source: (Slack & Lewis 2017 pg 248)
In this chart, there are four zones such as appropriate zone, improve zone, urgent-action zone and excess zone. Appropriate zone is that where the performance level of the company is quite satisfactory. Improve zone is that where any competitive factors lies lower to the appropriate zone. In case of critical competitive factors, there is an urgent action zone. In case of excess zone, the level of achieved performance is quite high.
Importance performance matrix of Coca Cola, New Zealand
Compared to other competitors like Pepsi, in this chapter, matrix chart of Coca Cola has been given. It will help to understand the level of performance of the company. Further, it will help to understand which competitive method should get proper importance by the company. The importance-performance matrix of Coca Cola is as under:
|Criteria||Company Performance |
1 very good performance; 9 very bad performance.
|Importance for customers |
1 very imp, 9 not at all imp
|Criteria 1- price||2||1||Excess|
|Criteria 2- Performance of the company||3||2||Excess|
|Criteria 3- Importance for customer||5||6||Urgent action zone|
|Criteria 4- Delivery performance||3||4||Appropriate|
|Criteria 5- Delivery flexibility||5||6||Urgent action zone|
|Criteria 6- documentation service||6||7||Urgent action zone|
|Criteria 7- volume flexibility||5||6||Urgent action zone|
|Criteria 8- Quality||2||2||Urgent action|
In the above-mentioned matrix, it has been observed that Criteria 3, 5, 6 and 7 are falling under urgent action zone. Criteria 1 and 2 are falling under the excess zone and criteria 4 are falling under the appropriate zone. Hence, based on the matrix zone strategy mentioned by Slack & Lewis (2017), it can be stated that the company (Coca Cola) is doing good in the field of pricing and distribution quality. However, according to the matrix, the company needs to make urgent action regarding the enquiry leading time, delivery flexibility, and documentation service and volume flexibility. In case of delivery performance, the company has marked as appropriate. This is like IPA analysis that is based on two dimensions-importance and performance (Lai & Hitchcock, 2015).
It has therefore been observed that the company has rightly strategized their pricing and quality of the distribution and made appropriate approach regarding the distribution performance. However, there are certain other competitive factors where the company needs to take urgent action. The future development of the business is based on the satisfaction level of the customers and therefore, the company needs to provide much importance to the demand of the customers.
A comparison with the Pepsi reveals the following facts in regards to the competitive factor analysis: The distribution quality of Coca Cola is much better compared to Pepsi by Frucor Suntory. It can be stated that Pepsi by Frucor Suntory responds faster to the issues of the customers than Coca Cola. Delivery performance and delivery flexibility with rival company is almost same. Frucor is much better than Coca Cola in case of documentation service. With compeitior like Pepsi, Coca Cola New Zealand is as par with quality, variety of products and distrubution system. However, Coca Cola has failed to provide full documentation of their product to all customers; whereas Frucor provides full documentation to the customers. Further, Pepsi has provided much importance to the customers and based on their demand, the company has implemented all its strategies. From the above matrix, it can be sttaaed that Coca Cola is required to follow the same process. Differences can be observed even in the case of volume flexibility where the matrix of Coca Cola shows urgent action zone.
In this report, certain operational strategies have been formulated and the importance of capacity management, purchasing and supply strategies, process technology strategy and improvement strategy of the Coca Cola, New Zealand have been given. Further, in this report, certain comparative discussion has been made over the importance-performance matrix of Coca Cola, New Zealand. This report will help the reader to understand various aspects of operational strategies and will help the organisations to calculate their capacity in order to make a balance between the market demand and its capacity program. The significance of this report is that it helps the organisations to understand the performance-based strategies and evaluating their process technologies from the perspectives of feasibility, acceptability, and vulnerability. Every company should follow the operational strategies to avoid lost profits and develop the base of the company by maintaining and managing supply chain risk.