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Reflection

In: Business and Management

Submitted By chynene
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Sourcing issues and opportunities:
Anchoring on the sustainability goals of Coca-Cola, they are currently transitioning into using sustainable bottles that are 100% recyclable. In the design of these packages, they constantly strive at reducing the impact of their production on the environment. Over the past two years, this improvement has resulted in an estimated cost-savings of approximately $180 million.
They have trimmed the weight of their 20-ounce PET plastic bottle by about 25%, lowered their 12-ounce aluminum can by about 30% and lightened the 8-ounce bottle by about 50%.
In sourcing for the right materials in the production of one of their latest breakthrough technologies of Coca-Cola, the company encountered various issues. PlantBottle is the first ever-recyclable PET plastic beverage bottle initially made partially from plants in 2009. It differs from the traditional PET bottle because of the material used in making the bottle. The traditional PET plastic is manufactured by using fossil fuels, like petroleum while the PlantBottle is made using about 30% of plants. They both deliver the same performance e.g. shelf life, recyclability, weight and appearance but PlantBottle reduces the carbon footprints.
In sourcing for the right materials in the production of PlantBottle, Coca-Cola encountered various issues. Interesting the biggest carbon cost of PlantBottle isn’t in the transportation of the materials but in the raw materials used in production.
Raw materials: The company uses responsibly sourced Brazilian sugarcane and converts its natural sugar into b-MEG, which is where they make one of the key ingredients for making PET plastic in India. The result ingredients for making PlantBottle are then shipped to the UK. Due to the world increase in the demand for biofuels, the company cannot sustain its production based on a singular source so they started sourcing for other avenues where the raw materials used in the production of PlantBottle can be obtained. Various research and developmental studies are also looking for ways they can also use plant wastes such as stems, peels, stalks and bark, which can be sourced from pretty anywhere in the world.
Quality: The quality of the bottle posed serious implications on Coca-Cola. Poor quality has an effect the bottom-line. Competition would take the advantage and increase their market share. It was important for Coca-Cola to define their quality standards so that there is mutual agreement with their suppliers.
Cost: There is the added cost in switching from the traditional PET to PlantBottle. Since production of the sustainable sugarcane is done in one country and shipped to another country for production, there is the added cost involved in transportation, insurance, custom issues in reference to exporting and importing, etc. These added costs are normally passed on to the customer who decides if he is willing to pay more for a sustainable product if the customers cares about recycling or switch over to competition who may not be implementing the recycling initiatives and hence may have a cheaper product to offer.
After subsequent researches, Coca-Cola was able to partner with leading biotechnology companies to accelerate the development of PlantBottle now made 100% from plant-based materials. These companies posses the technology to be able to make PlantBottle on a large-scale commercial bases. These companies also have a shared vision on the sustainable initiatives with Coca-Cola so they are also required in making sure all materials are developed in line with Coca-Cola’s recycling requirements.
JBF Industries ltd is one of the companies currently in partnership with Coca-Cola. Currently, there is construction on going in Araraquara, Sao Paulo, Brazil for a new facility that would be completed in about two years. This factory at full capacity would be able to produce about 500,000 metric tons of materials per year. By using plant-based materials instead of non-renewable materials, the company would eliminate approximately 690,000 metric tons of carbon dioxide or the equivalent of 1.5millon barrels of oil yearly. This creates a lot of opportunities for Coca-Cola in reducing the carbon footprint in the environment evaluating the entire system. In some parts of the supply chain, the carbon might increase due to transporting the products from one country to another but overall eliminating the traditional PET bottle that contains non-renewable products is in the best interest of the company. On a side note, one of the biggest challenges in making the production of sugarcane on a commercial platform is that it would take up the limited land space that would be used in growing food in Brazil. The Brazilians are not reaping the positive effect of this transition because the sugar cane that is used to power ethanol cars are owned only by the rich. The poor are forced to clear rain forest in order to grow food because the fertile rounds are turned into sugar cane plantations.

Production changes:
One major strength Coca-Cola possesses is its ability to conduct business on a global scale while maintaining a local approach. The company takes pride in being a worldwide business that is always local. Bottling plants are with some exceptions. They can be locally owned and operated by independent business people who are native to the nations in which they are located. Bottlers provide the required capital for investments in land, buildings, machinery, equipment, trucks, bottles and cases. The company supplies the concentrates and beverage bases used to make its products and provide management assistance to help its bottlers ensure the profitable growth of their businesses. In line with the shift into using recyclable bottles, Coca-Cola partnered with independently owned companies to pioneer the production of these bottles.
The PET bottle is manufactured from two combinations. Mono-ethylene glycol (MEG), which makes up about 30% of the PET by weight and Purified Terephthalic Acid (PTA), which makes up the other 70%. Coca-Cola was able to find a way to make MEG from plants that makes up the 30% combination. After further research, Coca-Cola was able to finally come up with a way where 100% of the PET where able to come from plant based materials.
Currently, PlantBottle is made using sugarcane ethanol from Brazil. Sugarcane ethanol is the only first generation biofuel that is widely accepted and recognized for its unique environmental and social performance. Most of the sugarcane is grown on degraded pastures that is located over 2000km from the Amazon, so it has a lower impact on biodiversity. The farms in which Coca-Cola sources from use effective cultivation processes so the sugarcane using rain water for its nutrients.
Coca-Cola is committed to growing their business and not their carbon emissions. In focusing on the entire system (LCA) they are constantly looking for ways they can make the most positive change. They have incorporated more fuel-efficient modes of product delivery and this has reduced fleet and transportation emissions.
Coca-Cola currently has the large heavy-duty hybrid commercial fleet in North America. This has resulted in approximately 30% reduction in emissions and fuel consumption. Electric, zero emissions trucks have been added to the fleet of alternative fuel vehicles. They are also currently training about 11,000 drivers on eco-driving techniques which involves minimal braking, early gear changes etc. The summation of all these efforts has helped in making sure less energy is consumed along the system.
The new production would reduce waste and landfills. In 2010 alone, the company eliminated about 30,000 metric tons of carbon dioxide, which is the equivalent of 60,000 barrels of oil from the PET plastic bottle.
Talk more about energy conservation/waste/lean production.
Distribution, Logistics and reverse logistics
Coca-Cola is a franchised operation although most people refer to the company as if it were a single entity. The head office in Atlanta handles all of the operation of the company as it relates to branding, marketing, product development, advertising and so on. Each country has its own bottlers and they operate as a separate entity. Majority of the bottlers are totally dependent on Coca-Cola because they do not bottle anything else.
Coca-Cola produces concentrate, which is then sold to Coca-Cola bottlers throughout the world. The bottlers, who hold territorially exclusive contracts with the company, produce finished product in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola to retail stores and vending machines. However, in developing countries like Africa, a different distribution model is adopted. They practice what is known as the Manual Distribution Center model (MDC). This distribution model operates within densely populated areas. The owners of MDCs generally own the bottles and crates they use. They advertise a ‘liquid only’ wholesale price. First time customers (without crates and empty bottles to return) will have to pay for the bottles and crates they take away as well as the liquid they contain. This system of distribution is solely by itself a sustainable practice. Since the company sells liquid only, the empty bottles are not discarded but they are returned back to the retailers or distributors and they in turn return them back to the factory for reuse.
The bottles are then cleaned, washed and ready for reuse. The only time when the company would not be able to achieve a 100% reuse rate is when the bottle breaks within a very specific time from manufacture.
Reverse Logistics
Distribution is usually once a week or twice depending on the location of the retailer and the turnover rate. A truck carrying several deliveries for different suppliers would arrive with the pre-ordered supply. This supply is manually offloaded off the trucks and exchanged for empty bottles. The distribution center would then in turn distribute to smaller retailers and they also return empty bottles in crates in exchange for the bottles with the Coca-Cola product. This system is set up such that Coca-Cola handles its own closed loop system. Returns or pick up of empty bottles occur the same time of delivery of the Coca-Cola product. These returns are transported back to the production facility where they are washed and passed through various cleaning processes for reuse. This is one mechanism Coca-Cola is able to implement as one of their recyclable initiatives.
This system can be said to be close to 100% sustainable save for some bottles that break as a result of either careless handling or accidents. Bottles are 100% reused and not thrown into landfills like the PET bottles.
In developed countries, the distribution is set up somewhat differently. Coca-Cola products are stored in plastic bottles, which are cheaper than bottles and the convenience of not having to have an empty bottle when purchasing a Coca-Cola product. This can be inconveniencing since the purchase of Coca-Cola products are not usually planned and customers might not have the empty bottles on them to exchange when the product is purchased. In order to provide for this convenience, the company started using plastic bottles. Initially, there was no recycling plan in place and the disposal of these bottles was a concern. The environmental impact was obvious due to landfills and improper disposal systems. The company carried out its first LCA in 1969. Although the result of the study hasn’t been made public, the company started making strategic changes to its system. In 1991 they launched the first plastic beverage bottle made with recycled material and in 2009, they launched the worlds largest bottle-to-bottle PET recycling plant. Today they have a 100% recyclable bottle.
The new PlantBottle is fully recyclable and can be used back in the production of new bottles or wide variety of other products made from recycled PET today.

Risk Management
Every company faces risks that can endanger the survival, competitiveness and the revenue that can be generated. Coca Cola’s brand image is very important because it influences its market share due to competition. To mitigate risks, Coca-Cola has Risk Management Steering Committee that is comprised of a cross-functional group of senior managers. Along with the committee, it has several programs like Incident Management and Crisis Resolution, Business Continuity Planning, Emergency Planning and Disaster Recovery.
Coca-Cola’s production process is based on selling the beverage concentrates and syrup to authorized bottlers mixes and packages the final product before selling it. This process minimized risks since production will be local. However, there are many concerns that should be considered. Choosing suppliers and bottlers is crucial for having an effective supply chain. Obtaining important and reliable data while working with suppliers overseas can be a challenge. Most time, the best option is to travel to these local sites. Countries with poor infrastructures are sometimes avoided because they might not have the system in place to adequately distribute or transport their products to their customers. They also carefully consider catastrophic incidents such as earthquakes, war, strikes, types of government and floods. Such events can interrupt production that, in turn, will increase costs because labor and equipment will be idle.
Some of the risks companies face are reputational risk, operation risks, financial risk, compliance risk, etc.
Every risk carries its own weight but in my opinion, reputational risk can be more damaging than the rest. It harms the brand name of the company and this, eventually, will have a negative effect on its demand. For example, several years ago, Coca Cola was blamed for contaminating groundwater in India. Several campaigns were set up to discourage customers from patronizing the company. It lead to the company eventually shutting down its plant.
Water is very important to the operation of Coca-Cola. It is one of the main ingredients in their product and part of the manufacturing processes. It is very essential in the sustainability of their business. There are about 900 bottling plants across their world wide operation These plants source their water locally. They realized the health of their operation is dependent upon the health of the people, communities and ecosystem they operate from. They focus their water stewardship efforts on improving water efficiency, recycle the water used in operation and replenish the water used. They have also set up several water management projects as part of its risk management tool and its corporate social responsibility. Coca-Cola donated its extensive water risk geospatial information to create water risk map. This helps to mitigate operational risk of not having good supply of water for its operation.

http://www.coca-cola.co.uk/faq/environment/transporting-plantbottle-materials-from-brazil.html
http://www.environmentalleader.com/2012/10/01/coke-jbf-plan-worlds-largest-bi-glycol-facility-for-plantbottle/

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