My choice is to write about Coca Cola considering forecasting, capacity planning and inventory planning. The reason for this is because there is not many companies willing to show their strategies to the world so digging out all of the necessery information and Coca Cola seemed to be the most open. First I would like to write a brief introduction on this enterprise:
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. At 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 wich 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 the. 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 a highly successful. Thomas sold the bottling rights to a 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 job to countless people. With its enourmous size they must be do 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 on 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 foecasting customer management, master production scheduling and rouh 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 addresses 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 brought 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 its 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 per cent, compared with its earlier forecast of between 4-5 per cent. They said that the weaker deamand 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 continous inventory which is good because it describes systems of inventory where information on inventory quantity and availability is updated continuosly as a function. This method records sales almost real-time through a computerized management system(point of sale). this continous inventory syster gives a highly detailed view on inventory changes and allows real-time reporting of inventory in stock which accurately refcelts the level of goods. This way of inventory planning is by far the most widely used since it can yield reasonably accurate results if properlyy 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 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 avarage 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.