Coca Cola Supply Chain For 2012 London Olympics Economics Essay

It is an incontestable fact that over the old ages logistics has made a significant part to concerns. Today, a figure of companies such as Coca Cola Company has attained competitory advantage through an improved direction of its supply concatenation ( Cooper et al. 1992 ) . Coca Cola ‘s scheme is emphasized on excellence in logistics ; sourcing stuff direction and physical distribution relation to the production location. Coca Cola relies on imported componentized parts from a broad scope of providers in different states to bring forth its merchandises and assemble it in another state. The push behind the logistics and supply concatenation activities has been the transit industries climaxing globalization.

Harmonizing to Cushmann & A ; Wakefield ( 2006 ) the on-going globalization of production inculcating concern patterns such as outsourcing and restructuring every bit good as the integrating of regional economic systems in the logistics market has been matter-of-fact within the European parts and other parts of the universe. This has besides necessitated the creative activity of modern logistics and distribution installations such as distribution Centres, warehouses and reassign terminals to advance efficiency in the pull offing the supply concatenation activities as a whole ( Rushton et al. , 2000 ) .

The London 2012 Olympics is about two old ages in front and the Strategic Supply Chain Managers of a company have been tasked to plan Coca Cola supply concatenation for the event. Therefore the paper aims at strategically planing the Coca Cola supply concatenation for the event runing from the upstream, distribution and downstream flows sing the logistical and material handling activities.

To get down with, it will be important for the directors to do appraisal on

the figure of people that will go to the 2010 Olympic gamess

the figure of coke tins to be consumed day-to-day ( sing the yearss the event will be last )

the figure of containers to be shipped for the whole event.

Second, the directors have to understand the theories and theoretical accounts developed by economic experts so that the directors will strategically bring forth the coca Cola at a topographic point or topographic points where bulk of the natural stuffs and related subsidiary services are located.

Location theory

The definition provides the administrations with a new cardinal focal point that directors has to cover with in deriving advantages ( Carmignani, 2009 ) on the market in respects to placing and turn uping the inputs required in the upstream to be processed into end product for the downstream. McDonald and McMillen ( 2006 ) stated that for worldwide companies such as coca cola the weight-gaining production procedure and the transit cost determines its input location. The inputs could be either the natural stuffs and or labor. Furthermore, it is important for directors to cognize that there is an extra cost associated with the handling of stuffs ( droping and lading ) during the transit system. And most a times these activities occur at the transhipment points which requires labour force for the burden and unloading operations ( Harrington and Warf, 1995 ) . Therefore in the fabrication industry which requires web of assorted administration ( Christopher, 1998 ) , houses think of turn uping to one topographic point where economic activities are located so as to minimise their transit costs ( Glenn et al. , 1999 ) .

Fearon ( 2009 ) expressed his position based on the mathematical theoretical account for turn uping industries ( known as locational trigons ) developed by Weber, that input-oriented houses are more interested in turn uping an industry sing the optimum transit costs of distance to the “ material index ” – therefore the ratio of the weight of the natural stuffs to complete merchandise and agglomeration- therefore occurs when companies locate to an environment because of the sufficient demand for support services such as installations that physiques and services machines. Similarly, writer such as Marshall ( 1920 ) re-emphasised that a house can cut down its conveyance costs in three ways through industrial agglomeration. Marshall foremost argued that a house can salvage its transportation costs by turn uping nearer to its providers or clients. Second, he developed the labor market pooling theory to explain bunch to take advantage of economic systems of graduated table correlated to a larger pool of houses and workers. Third, he built an statement in agglomeration associating to the theory of rational spillovers saying that houses locate to each other to increase the rate of invention through shared cognition ( cited in Glaeser and Kerr, 2008 ) .

Having recognised the theory of location, the directors have agreed to carry on some research on the natural stuffs that will be required in the primary phase of the Coca Cola fabrication ( upstream flow ) including the aluminum coke can and one of the ingredients used in the Coca Cola liquid itself. The ingredient used in Coca Cola includes refined sugar ( or calorie- safe for diabetics ) , caramel, caffeine, phosphorous acid, coca foliage and kola nut infusion, lime infusion, flavour sirup, vanilla, purified H2O and C dioxide ( Huey, 1997 ) . The directors have besides agreed to beginning for usage sugar during the production.

Aluminum and Sugar bring forthing countries/regions

Aluminum is chiefly produced from bauxite ore which undergoes three major stairss ; the bauxite excavation, alumina production and electrolysis. And for logistics grounds, alumina refineries are usually located nearer to the bauxite mines. Aluminium production involves tonss of resources and for it production to be sustained, the manufacturers engage in recycling aluminum from procedure bit and used aluminum merchandises ( European Aluminium Association, 2010 ) . Therefore the usage of aluminum drink can is seen as the most sustainable packaging stuff because it protects its contents, is cost-efficient and can be recycled after it use ( International Aluminium Institute, 2009 ) . A research revealed the below countries/regions as the chief aluminum production countries.

Figure1: the chief aluminum production countries ( EAA, 2010 ) .

It is an incontestable fact that aluminum production requires tonss of energy

Sugar is extracted from either sugar cane/sugar Beta vulgariss. Harmonizing to Workman ( 2007 ) three quarters of the universe ‘s sugar processed from sugar cane is grown in the tropical zones including Brazil, India, China, Thailand, Pakistan and Mexico whereas the staying which is produced from sugar Beta vulgariss is located in the temperate zones including France, Germany, U.S.A. , Russia, Ukraine and Turkey.

Primary production of Coca Cola

The directors of Coca Cola have decided to strategically concentrate on China for its primary production. This because China is endowed with natural stuffs such as bauxite ore and sugar cane and mills that processes the natural stuffs into aluminum tins and sugar. Furthermore it has extended supplies web in states like India, Thailand, etc ( Schwab and Porter, 2008 ) who besides produces some sum of sugar and aluminum. Besides China have the work force, energy and substructures including roadways, railroads, waterways, ports and terminuss ( CIA, 2010 ) . In support to its energy resources, China in 2009 commissioned an tremendous unlimited hydroelectric dike built on the Yangtze river near Yichang which is capable of bring forthing 1/9 of China ‘s entire power end product ( CGEE, 2009 )

Harmonizing to the Huazhou ( 1989 ) bulk of China ‘s bauxite ore sedimentations is located in the Shanxi, Shandong, Guizhou, Henan, Guangxi and Yunnan states. From the below map, the towns within the states where the ore will be extracted from includes Taiyuan, Quindao, Guiyang, Nanning, Zhengzhou and Kunming. The ore is transported by trucks to the decrease factory where the ore is reduced into calcine – a dressed ore that is ready for smelting. Trucks so transport the calcine to the smelting and turn overing mill to treat it into aluminum oxide ( AME Mineral Economics, 2010 ) . Harmonizing Rio Tinto ( 2010 ) the smelting and hot and cold peal phases are integrated. And this refinery procedure is called the Bayer procedure. This uninterrupted procedure, so instantly the aluminum oxide is produced it undergoes the hot and cold peal factory which is processed into aluminum molten through electrolysis. This farther processed into turn overing metal bars or sheets ( European Aluminium Association, 2010 ) . This aluminium sheets is conveyed to the can mill by train to be manufactured into coke tins in Beijing, Tianjin and Shanghai.The above procedures are carried out around the same locality in each town to cut down costs and ease the procedure ( Goliath, 2008 ) .

Figure 2: map of China ( Beginning: Adapted from Professional China Tour Service, n.d )

Harmonizing to Petry and Junyang ( 2009 ) one-year study on sugar, Guangxi is the dominant sugar cane bring forthing state which accounts for approximately 60 % of China ‘s sugar production. The other state includes Yunnan, Guangdong and Hainan. Sugar fabrication company is located in towns of the mentioned states including Nanning, Kunming, Datong and Haikou, shown in figure 2. The sugar production processes affecting the sugar cane cultivation and harvest home, so transported by truck to the processing works where the sugar is produced which involves extraction of the cane juice, juice intervention, juice boiling, cleanliness and outputs ( SCTD, n.d ) . The sugar is produced within the mentioned towns. Besides in Guangxi state, the sugar cane foliages and tree barks is used to bring forth electricity for the sugar production ( Xinhua, 2010 ) .

Whiles the empty coke tins is eventually moved to the bottling mills in Beijing, Tianjin and Shanghai by trucks, the sugar is besides be transported to the same bottling mills where the Coca Cola liquid itself will be produced ( Coca Cola Company, 2009 ) . The train paths which are used is shown in appendix ; figure

The production of the aluminum can and saccharify is within these countries dur to Webers theory of location.

Distribution flow of Coca Cola

The manufactured coca Cola in Beijing, Tianjin and Shanghai will be transported to the European distribution Centres based in Munich, Germany. In the Beijing bottling mill, the palletized canned coke will be packed into 40ft containers and moved to the chief Beijing-Hamburg railroad terminus by train. The containers will be loaded onto cargo train to be transported from Beijing to Hamburg. The train paths passes through Mongolia, Russia, Belarus and Poland to the Hamburg rail terminus ( BBC study, 2008 ) . The rail cargo will take 15 to 18 yearss ( Lloyd ‘s, 2008 ) .

Meanwhile the palletized canned coke produced in Tianjin and Shanghai will besides be packed into 40ft containers and moved to the Tianjin and Shanghai Ports severally by train. The containers are so loaded onto container ships bound for deep-sea transportation from the assorted ports which will do a halt at Hamburg Port. The sea path associating the China ports and Europe passes through the Southern parts of China, Malaysia, through the Suez Canal to Malta, Belgium to the Hamburg Port ( Xinhuanet, 2004 ) . Harmonizing to Lloyd ‘s ( 2008 ) the 20,000km sea ocean trip takes 35 to 38days. Branch ( 1996 ) viewed transportation as the transit of goods from topographic point of low public-service corporation to topographic point of high public-service corporation. The goods may be in the signifier of either natural materials/intermediate/finished merchandise transported in majority lading cargo to a refinery or scope of lasting consumer merchandises shipped in containers.

In Hamburg the containers that were transported by rail from China will be unloaded and transferred onto another train for on passenger car. This is termed as. Besides the staying containers that were shipped by sea when unloaded in Hamburg will besides be transferred onto train for on passenger car. This is known as. The trains so transport the containers from Hamburg to the European Distribution Centre in Munich, Germany. The rail path from Hamburg passes through either Berlin-Frankfurt/Dusseldorf-Stuttgart path to Munich ( Martin, 2003 ) .

Coca Cola uses Germany as its distribution Centre in Europe because it has the logistics whereby several east-west trade paths run through Germany ( Cushmann & A ; Wakefield, 2006 ) . Besides the Centre ensures effectual stock list direction system, advanced monitoring and client information system, dependability and flexibleness in administering the coca Cola to the clients across the part ( European Intermodal Association, n.d ) .

Downstream flow of Coca Cola

From the distribution Centre in Munich, the containers will be transported to London. Because of the logistics cost and lead times, the directors agreed to convey the containers by rail to Hamburg Port. The containers are unloaded from the train and loaded onto available feeder container ships bound for short-sea transportation that makes a direct call to the Tilbury Docks. The container ship navigates through the English Channel to Tilbury Docks. The Tilbury Docks located in Essex which is under the Port of London Authority serves as London ‘s major distribution hub for South East England ( Forth Ports Plc, 2010 ) .

In 2004, the Tilbury dock was upgraded with railroad lines to augment the container motions ( Cuthbert, 2004 ) . When the container ships arrive in the Tilbury Docks, the containers are discharged unto train and conveyed to the Regional Distribution Centre. In the Regional Distribution Centre, the seal of the containers are broken and the palletized transcribed cokes are unstuffed from the containers into trucks deliver the points to the right retail merchants at the right topographic point, in right clip, right status and at right cost ( ) . The retail merchants will travel canned coke to the Olympics sites by lorries.

As portion of their corporate societal duty ( CSR ) , coca Cola in partnership with Waste & A ; Resources Action Programme ( WRAP ) is shiping on a strategic recycling inaugural by establishing ‘Recycle Zones ‘ in Southampton City which to day of the month hold collected 20 metric tons of stuff for recycling ( Harry, 2009 ) . This sustainable concern attack is aim at accomplishing continual zero waste during the London 2012 Olympics and foreseeable hereafter. Coca Cola is be aftering to make 80 Recycle Zones by the terminal of 2011. The high profile locations include the London oculus to shopping Centres, infirmaries, Thorpe Park, Manchester Airport, university campuses and metropolis Centre locations ( Guha, 2010 ) .

Advantages and Disadvantages of the selected intermodal pick

Harmonizing to Branch and Stopford ( 1997 ) the chief advantage of transportation is the ability to transport majority lading across long distances. It besides remains the most effectual and economical agencies of transporting heavy goods ( Cushmann & A ; Wakefield, 2006 ) . Carr ( 2009 ) claim that the usage of sea conveyance significantly lowers emanations, reduces supply concatenation cost and congestion on roads. Equally Davies ( 2009 ) stated that transportation is the most carbon efficient and sustainable agencies of transporting cargos, claiming that freshly built ships emits 5g of CO2t/km compared to 50g of CO2t/km of heavy trucks or 540g of CO2t/km of modern lading plane. However, for sea conveyance velocity is non quintessence ( CIPS, 2003 ) so it suffers the disadvantages of being comparatively slow compared to other conveyance manners ( Badger et al. , 1993 ) . Besides tides do curtail the motion of vass in and out of ports.

On the other manus, the rail freighting besides offers the advantage of conveying big volume of goods over long distances at greater velocity and extinguishing cargo traffic from congested route webs ( CIPS, 2003 ) . Rail motion is most economical in complete train burden operations and in circuit working ( Branch, 2001 ) . Besides it is perceived that railroads are more environmentally-friendly than other signifiers of conveyance ( Gubbins, 1988 ) . The railroads are to the lowest degree affected by bad conditions compared to all the land-based manners ( Gubbins, 1988 ) . However, one of the major failings of the railroad is the built-in inflexibleness of operation due to its fixed paths ( Gubbins, 1988 ) , therefore lacks the versatility compared to route.

The route webs provide the most flexible and various signifier of cargo conveyance and omnipresent offering door-to-door theodolites, pieces supplying the chief aggregation and distribution web when other manners are used for the chief draw ( Badger et al. , 1993 ) . Vehicles are comparatively dependable with small damage/loss in theodolite and comparatively inexpensive to keep ( Gubbins, 1988 ) . Furthermore it ‘s easier to cipher the cost of operations on route draw than on the railroad because the transporter is able to imagine profitable and non-profitable contracts ( Lowe, 1989 ) . However, it is perceived that the environmental impact of vehicles is terrible as they produce noise, air pollution, structural harm and ocular invasion ( Lowe, 2003 ) . In footings of passenger car of majority trade goods, vehicles have low capacity compared to barge/coastal ship and train ( Gubbins, 1988 ) .

The design of the coca Cola supply concatenation will non affect the usage of air conveyance even though it provides greater velocity of travel. This because of its limited capacity ( CIPS, 2003 ) . Furthermore air conveyance is really expensive for shippers ( Branch, 2001 ) .