Logistics
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Executive summary
Coca-cola bottling company consolidated (CCBCC) as the second largest bottler in the United states, which build-up a famous brand name in the soft-drink bottlerÐЎЦs world. This company must be synchronizing their deliveries to more than 200,000 consumer day-by-day. At the same moment, the company sales volumes fluctuate according the price changes, promotions, competition and so on.
In such of a volatile market, equalize efficiency with higher inventory level. CCBCC should be facing how to introduce the new products to the marketplace in this situation. Moreover, CCBCC employ Manugistics to adopt the strategy, how can bring successful to CCBCC in this supply chain management, just going to discuss below.
1. The problem identified and their causes
Coca-cola Bottling Co. Consolidated (CCBCC) is a strong branding of soft drink in the world. However, most of the people have perception of coca-cola is not healthy soft drinks. (Kent R. Rieske, 2002). Moreover, the possible substitutes that endure to put pressure on Coca-cola (Paul R. La Monica, 2002) Therefore, CCBCC is trying to diversify its range of products, which ensure to protect their beverage market shares.
Lack of dependable demand forecasting
Brian Wieland, a director of demand planning at CCBCC, which intend to introduce 150 new products to marketplace. Nevertheless, he is facing a great challenge of CCBCC. At first, the demand forecast of the product is not perfectly performance its reality. In this manufacturing world, the forecasting is very important as it allows logistics manage to primarily be proactive rather that reactive. (Lambert, Stock, Ellram, 1998, p188)
The customers of CCBCC have frequently promotions and aggressive discounting to public. Sometimes, the field of sale manager also did not know their customers needs, so they cannot do any adjustment before the promotions. The communication between CCBCC and their customers is still having a hamper. Then, the shelves have continuously stockouts in retail store. The demand of visibility is not clear, the bottling plants and distribution centre confront the breakdown of information flow from customer to CCBCC.
Slow reaction to market
CCBCC attempted to reduce the stockouts for improving customer service level, but they really do not know how to transfer the right product to the right place at the right time. The five bottling plants have separately do forecasting and production by themselves. The production planning and scheduling is absolutely disaccord to the customer behaviour and the on-time delivery.
Because of there are so many grocery stores having a lot of safety stock for buffering. However, the packaging of coke and sales of volume cannot respond that place customers. The sales staff of CCBCC did not input the dynamic data information to the date-based system. Thus, the demand forecast accuracy decreased, the sales also affected to the revenue directly.
Higher inventory level
Due to demand forecast inaccuracy, CCBCC is accumulated a lot of inventory in the warehouses, the inventory holding cost also increase by those volume inventory. If Wieland makes decision to introduce the more new product on the store shelf, CCBCC should be release the space for storage or increase the numbers of new warehouses from 10 to 15, but there is a huge capital investment involved. Holding a lot of inventory also ties up the capital, the money can be use for other types of investments. (Lambert, Stock, Ellram, 1998, p153) In addition, CCBCC should be deliberate to know about the investment for warehouse.
2. Chosen solution
Get help from Collaborative Planning and Replenishment (CPFR)
To optimizing demand forecast system and reduce the higher inventory in this market, CCBCC chose Manugistics as a partner , which adopted Collaborative Planning, Forecasting, and replenishment (CPFR) to solve the above problem. By using this approach, the members of parties, which involved in the supply chain, can utilize available Internet-based technologies to collaborate from planning through implementation. (Coyle, Bardi, Langley, 2003, p83)
CPFR have developed into several procedures was illustrated at Figure 1. (VICS, 2004) The first stage is most important, it is a planning which include the front-end agreement and joint business plan. The next stage is the forecasting, which process the sales-forecast collaboration and the order forecast collaboration. Thirdly, replenishment generates the order and fulfils the order through the above stages. After that, make sure to do an analysis for performance assessment.
Figure 1 CPFR Process Model (source: VICS, 2004)
First, on the front-end agreement of this collaborative solution, there is so difficulty gathering the information with enormous and different customer base. All supply chain partnersÐЎЦ requirements and objectives in the collaboration should clarify (Luc Cassivi, 2006)
Before doing this, there are none of partners really focus on information sharing between all of partners. All parties were rightly afraid to exchange any information with their competitors. (M. Christopher, 2005, p17) Therefore, CCBCC arranged meeting for several possible vendors to Manugistics. The opportunity give Manugistics explain to vendors how to eliminate the discomposure and analysis the benefits of CPFR. Manugistics should clarified all partners have a key to open the door of collaboration.
Under CPFR, both buyer and seller were required to exchange sales and order forecasts through a platform. Thus, the using of Internet is most popular and low-cost which provided indifferent platform to all users. At the same time, both of supplier and buyer input their forecast into system through Internet. Both of them are empowered to change the forecast within acceptable parameters (Coyle, Bardi, Langley, 2003, p83, 85)
On the other hand, Manugistics enhance the demand forecast accuracy through the first two