The Coca-Cola Company
An amazing 1.8 billion servings of Coca-Cola products are sold around the world every day, according to Steve Buffington, vice president of supply chain development and director of supply chain, Bottling Investments Group for The Coca-Cola Company. Making sure that every one of its thirsty clients gets the right product, at the right time and in the right price range is Coca-Cola’s supply chain priority.
Buffington, a 34-year veteran with The Coca-Cola Company, has been involved in a variety of strategies for growth and operations excellence. He has led new developments in the Coca-Cola supply chain around the globe, from bottler consolidation in North America in the 1980s, to procurement and supply chain strategies in Argentina in the ’90s. In the mid-2000s, Buffington took over management responsibility for the Bottling Investment Group in Brazil, Uruguay, India, Philippines and Singapore as Coca-Cola focused on strengthening bottlers in these key markets.
Since 2009, Buffington has been responsible for development and implementation of strategies to support and enhance the Coca-Cola supply chain system.
One of the main goals of the supply chain arm of Coca-Cola is to have every customer receive tailored services from the system, whether that customer is in New York City, Tokyo or a rural area in an isolated part of the world.
“We have 16 million retail outlets around the world that sell Coca-Cola [products], and we have to have common practices, processes and capabilities no matter where we operate in the world,” Buffington explains. “We do direct store delivery to more than 10 million of those [retail outlets]. We make sure we get the product on the shelves in a consistent way from a quality and collaborative standpoint, doing it very efficiently by leveraging our global best practices and building capabilities at the local level.”
Although Coca-Cola is a global company, its products never travel far to reach the final consumer, making it a local company in each market where it operates. “Our business is a local business,” Buffington relates. “We typically don’t ship Coca-Cola more than a few hundred miles; it’s all about being responsive to the customer’s needs and the local tastes of the consumers in every market.”
This approach is what Buffington calls a customer-driven supply chain. “Coca-Cola is the same formula everywhere in the world,” Buffington notes. “The concentrate comes from a few places around the world, so we’re pulling from the same global commodity pool, but we still have to understand the individual customer requirements.”
On the commercial side, Coca-Cola works with its customers in what it calls “brand, pack, price, channel architecture,” determining what packages to order, what equipment to use and what service requirements will deliver the picture of success the client has in mind. “How you serve a hypermarket such as Carrefour or Wal-Mart is quite different to how you service a mom and pop in a rural area,” Buffington says. “Our supply chain starts at the shelf, and with customer service design, that is how we’re demand-driven.”
The logistics flow of the supply chain enables the company to tailor its services to its clients’ needs. “It’s all in our demand and supply planning and in our sales operations planning,” Buffington explains. “Planning supply is driven by forecasted customer demand input, seasonality and also by promotions or changes in merchandising in the store.”
Coca-Cola’s diverse portfolio and package mix is geared to meet its diverse consumers’ and customers’ preferences. “Some customers are primarily take-home for future consumption and some are very immediate consumption, on premise,” Buffington says. “Many customers offer a large range of products, so you need packaging at different price points and multi-packs; the portfolio needs to be wide enough to serve all the beverage needs.”
More Than One Supply Chain
The level of customer care Coca-Cola offers requires a specific model of supply chain structure, what Buffington calls “segmentation.” “Segmentation is the type of supply chain that you have based on your customers’ needs or your product attributes,” he explains. “More and more, we are understanding that we have to have different types of supply chains within our local operations.
“If we are in an area that requires refrigerated distribution, that is a very different supply chain than if it’s an ambient type of product. Some products require aseptic filling and packaging, which is very specialized and requires different platforms. Then, some products have high volatility and are hard to forecast, which requires a different supply chain.”
These variable conditions mean that the supply chain has to be modified depending on the particular attributes of both product and client. “For some products, the most efficient way to the market is for us to deliver to the store, yet for others, the most efficient way to go to market is through the customer’s distribution channel or through third-party distribution partners,” Buffington explains.
Segmentation allows Coca-Cola to understand and implement best practices and meet its customers’ requirements in relation to their individual portfolios. “There is efficient supply chain, there is responsive supply chain and there is agile supply chain,” Buffington says. “Depending on the customers’ needs and their portfolio, the supply chain can be efficient-dominant, agile or responsive-dominant. It depends on the attributes of the portfolio and the requirements of the client.”
To be able to offer that localized customer service worldwide, Coca-Cola six years ago established the world’s largest lean-Six Sigma supply chain operation to leverage best practices, processes and operational excellence programs. “It’s all about being local, being responsive, being market-driven and also being able to leverage the brand, the innovation, the technology and what we’ve learned of best practices in our global system,” Buffington explains.
The key elements for Coca-Cola’s operational excellence programs are “culture and capability,” according to Buffington. “It’s very important that all of our 700,000 employees – whether they’re administrative, financial, merchandising or delivery – have a culture of continuous improvement, a culture of zero defects and perfect quality.”
Working collaboratively with suppliers ensures that the best practices established by Coca-Cola are applied across the board.
“The first point of integration in the supply chain is between the Coca-Cola company and our bottlers, some of which we own and operate, but the majority of which are independent companies,” Buffington notes. “We own the brands, do the marketing and product innovations. We supply the concentrates and are involved in organizing procurement on a global basis. We provide franchise leadership, technology, and capability and strategy development.”
Coca-Cola works closely with its bottlers around the world on procurement and commercializing new products and new packaging technologies. “We are building a common lean-Six Sigma program around the world,” Buffington explains. “We share development and deployment of training programs for leadership, middle management and front-line supervisors, so the first level of integration is that between Coca-Cola and our bottlers.”
Coca-Cola’s supply chain is focused on delivering on its brands’ promises for great products. “We sell refreshments and a few moments of joy to people all over the world, so we want to keep it as affordable as we can,” he notes. “Productivity and eliminating waste and inefficiencies is very important from the supply chain standpoint to maintain that availability.”