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In 1886, Coca-Cola was created by a pharmacist named John Pemberton, known as the \”Doc.\” He participated in the Civil War, and when it ended he decided to invent something that would bring him commercial success. In the beginning, everything he made failed. He invented many drugs, but none of them made money. After these failures, he moved to Atlanta and decided himself out in the beverage market. In this time soda was getting its fame. Temperance produced a syrup and carried his product down the street where it was placed on sale for five cents a glass as soda fountain drink.It was carbonated water with his new syrup which was „delicious and refreshing” at once. And this was when Coca-Cola was born. Pemberton had no idea how to advertise his product. This is where Frank Robinson came into the picture. He created the name Coca-Cola, registered its formula, and designed the logo.
Coke did not do so well in its first year. And to make matters worse, Doc Pemberton died in August 1888, meaning he would never see the commercial success he had been seeking. In 1899, Ben Franklin Thomas and Joseph Whitehead approached Candler with the idea of bottling them. Asa was afraid that it would lose its quality and felt bottling unnecessary. However, he did allow an attempt to bottle the drink as long as it would not sacrifice quality. By 1900, however, bottle caps were beginning to surface. In the early 1900\’s bottled Coca-Cola was available at grocers and saloons. Coke bottling was highly successful. Thomas sold the bottling rights to businessmen, and by 1909, 379 bottling plants were set around American cities and towns. Nowadays Coca-Cola operates in over 200 countries worldwide and gives a job to countless people. With its enormous size, they must be done every part of their business perfectly.
At first, I would like to talk about their forecasting. Coca-Cola uses the technique of linear regression using a functional relationship between two or more correlated variables.The relationship is usually developed from observable data and plotted in a graph so the two variables regress to form a straight line. This method is used for long-term forecasting of aggregate planning. This linear regression model is based on the relative increase in consumer sales which is then translated with a separate retailer model into the sell-out sales forecast of Coca-Cola.
One thing to note is with the use of this method you can see the time series forecasting, monitoring and managing demand and supply in a product family and volume levels. Sales and operations planning puts together other separate, but still connected business processes, for example, strategic-, sales, financial planning furthermore sales forecasting customer management, master production scheduling, and rough-cut capacity planning.
In fact, there are monthly “Operational Meetings with Suppliers” which occurs after the final executive S&OP meeting. Face-to-face meetings cover four suppliers representing 71% of total volume. Volume changes are implemented based upon agreed-upon time limits within select time frames. These meetings also address the inventory and demand management issues the service’s defect rates, corrective actions need to be done and improvements that are planned and requested. I bought an example for the forecasting of Coca-Cola for the year 2017. Of course, there is no actual data but I found some information, however, it is not relevant for the year 2018, I only want to express with it that forecasting is not simple and workers must take into consideration plenty of factors apart from the sales numbers of previous periods.
Coca-Cola expected a cut in its sales forecast for the year 2017 as it struggles with a consumer slowdown in China, sending the drinks group’s shares down with more than 3 percent. The Atlanta-based company expects sales, adjusted for acquisitions, divestitures, and currency fluctuations, to rise 3 percent, compared with its earlier forecast of between 4-5 percent. They said that the weaker demand in China was forcing them to drive down inventory. “We have not really assumed China will get better in the rest of the year,” said James Quincey, Coca-Cola’s chief operating officer. He mentioned that juice sales fell double digits in the country and Coca-Cola drinks dropped single digits. “The consumer will take a little more time to come back which is why we’re focusing on a game plan we know that works, focusing on affordability and premium [drinks] in metro areas,” he explained, adding that he’s confident about the company’s power to gain market share in the country and that Coca-Cola is ready for whenever consumer spending picks up again.
After forecasting I would like to describe how inventory planning works. Coca-Cola uses perpetual inventory or continuous inventory which is good because it describes systems of inventory where information on inventory quantity and availability is updated continuously as a function. This method records sales almost real-time through a computerized management system(point of sale). this continuous inventory system gives a highly detailed view of inventory changes and allows real-time reporting of inventory in stock which accurately reflects the level of goods. This way of inventory planning is by far the most widely used since it can yield reasonably accurate results if properly used. It has the competitive edge because reordering is more efficient, interim profit reports can be prepared without doing a stock take, the level of losses or gains can be measured and slow-, and fast-moving lines of inventory can easily be identified. However, it has downsides as well. There is an increased staff necessity because of the additional record-keeping, there is an extra cost, and there is still need for a physical stock take at the end of the reporting period. The stock valuation method is the first in first out. The inventory accounting policy is the following. Since inventories consist primarily of raw materials and packaging and finished goods, Coca-Cola company determines cost on the basis of the average cost.Firms usually try to make the first moved in inventory move out first as well so this way they prevent old items from becoming outdated.
Last but not least I would like to talk about capacity planning. This was the most difficult to find information about and I couldn’t find a method that would be used by the Atlanta-based company. Capacity is the number of products that can be manufactured in a given time. Companies have constant difficulties with satisfying the demands because of the always changing taste the growing competition and the seasonalities. Most companies try to minimize the costs while maximizing the revenue so being economical is the key. With the use of capacity planning the company can help itself with the information about what future changes must be prepared for with increasing, decreasing, or maintaining their capacity. With the growing demand they have to pay attention to their market share but too much capacity would mean unnecessary costs.
Coca-Cola has a huge demand, it is the leading beverage brand worldwide with the revenue of 41,86 billion USD in 2016. To keep their place they must always consider their capacity and as soon as the necessity comes they have to increase their capacity. A recent example for this was when the company expanded capacity in Fast-Growing Indonesian Market with the opening of two production lines which was a 500$ million investment. The chairman and CEO said: “We consider Indonesia a dynamic and promising market and one of the growth engines to achieve our long-term vision. Our Company’s US $500 million investment reaffirms our belief in Indonesia and will help us capture the growth opportunity in one of the largest and most dynamic countries in the world as we enable our system to be even more responsive to consumer and customer needs. We believe by creating more jobs and where possible sourcing locally, we can promote the local economy and contribute to economic growth in Indonesia.” From 2012 to 2015 years alone, Coca-Cola Amatil Indonesia which is a subsidiary of Coca-Cola Amatil (the joint venture with Coca-Cola), commissioned 18 new production lines, deployed 150,000 coolers and built three mega distribution centers to increase capacity and build local capability with total investments exceeding the US $300 million.