C O R P O R A T E R E S E A R C H P R O J E C T – 1

SUPPLY CHAIN MANAGEMENT IN CARBONATED DRINKS INDUSTRY

1

OBJECTIVES

To study the Carbonated Drinks industry in the worldand in United Arab Emirates

To study the role of Supply Chain Management inCarbonated Drinks industry

To understand the best practices in sourcing anddistribution in carbonated drink industry in the world

To study the operations of Supply Chain Management in United Arab Emirates

2

WORLD UNITED ARAB EMIRATES

Coca – Cola Limited

Pepsi Cola Limited

Cadbury Schweppes Ltd

Al Ahlia Gulf Line General Trading Company

Aujan Industries

Dubai Refreshments (PSC)

3

MAJOR PLAYERS IN THE INDUSTRY

MARKET SHARE

Industry expected to exceed $1,900 Billion by year 2015

Consumption Volume expected to exceed $245 Billion Kilograms by year 2015

Soft Drinks market to reach almost $586 Billion by year 2015; Carbonated Drinks to contribute almost 40% of soft drinks market

4

Source: Market Line, 2012

GLOBAL SCENARIO5

Source: Euro Monitor

CONSUMPTION PATTERN (WORLD)6

Source: Market Line, 2012

CONSUMPTION FIGURES7

Source: Euro Monitor

PROJECTED GROWTH IN UAE8

GROWTH

2014 2015 2016 2017

Bottled Water 3% 6% 8% 10%

Carbonates 5% 9% 14% 18%

Concentrates 5% 10% 20% 25%

Fruit/Vegetable Juice 5% 11% 18% 24%

RTD Coffee 40% 100% 180% 300%

RTD Tea 6% 10% 15% 19%

Sports and Energy Drinks 5% 10% 13% 18%

Soft Drinks 4% 8% 12% 16%

Source: Euro Monitor

DISTRIBUTION PATTERN IN UAE9

Percentage off-trade BW Carbonates F/VJ RTD C RTD T

Store-Based Retailing 80.6 99.3 100 96.7 100

Grocery Retailers 80.6 99.3 100 96.7 100

Hypermarkets 26.9 25.8 29 26.5 29.1

Supermarkets 12.6 10.5 11.4 10.8 11.8

Small Grocery Retailers 39.1 35.5 42.5 57.7 56.3

Convenience Stores 11.7 9.1 15.9 37.7 18.1

Independent Small Grocers 19.1 25.9 26.5 20 36.4

Source: Euro Monitor

S U P P L Y C H A I N M A N A G E M E N T

LITERATURE REVIEW10

SUPPLY CHAIN MANAGEMENT

Supply Chain is defined as a group of inter –connected participating companies that add value toa stream of transformed inputs from their source oforigin to the end products or services that aredemanded by the designated end – consumers.

- Dr. Lu, Fundamentals of Supply Chain Management

11

ROLE OF SUPPLY CHAIN MANAGEMENT

Meeting consumer

needs

Involving minimum

costs

Distribution Network

12

DISTRIBUTION NETWORK13

Types

Direct Shipping

Direct Shipping & In – Transit

Merge

Distributor Storage – Last Mile Delivery

Distributor Storage –

Consumer Pick Up

Retail Storage–Consumer Pick

Up

Distributor Storage –

Carrier Delivery

COST FACTORS SERVICE FACTORS

Inventory

Transportation

Facilities and Handling

Information Technology

Response Time

Product Variety

Product Availability

Customer Experience

Order Visibility

Return Ability

FACTORS IN DISTRIBUTION NETWORK

14

DISTRIBUTION NETWORK FOLLOWED

Distributor storage is suitable for industries which have fast moving items inwhich case storage at warehouses also makes sense when consumer wantsdelivery of goods relatively faster.

15

Bulk Breaking

Warehousing

TransportationMarket

Information & Sourcing

Maintainance

DISTRIBUTOR’S FUNCTIONS16

RECYCLING17

Consumer to Recycling Plants

Requires 15% less energy to reproduce

Preserves Environment

Use of recyclable materials

INBOUND OUTBOUND

Raw materials for finished goods

Ingredients, Machinery

Activities for the finished product to reach the consumer

Transportation, Warehousing, Order Fulfillment

18

INBOUND – OUTBOUND LOGISTICS

A L – A H L I A G U L F L I N E G R O U P

( B O T T L E R S O F C O C A – C O L A I N U A E )

19

PRIMARY RESEARCH

PROCESS FOLLOWED20

SUPPLY CHAIN – BOTTLERS21

Supplier Production Transportation

Warehousing Distribution Customer

DEMAND FORECAST22

ForecastSales

ManagerDemand

Plan

Merging in software

Capacity Planning

SWOT ANALYSIS23

Strength

• Large and growing Market

• Basic consumer need

• Low Cost

• Non Alcoholic

Weakness

• Traditional preservation style

• Narrow range of material

Opportunity

• Use of potential public relations

• Innovative packaging

• Replacement of alcoholic drinks

• Replacement of tea and coffee

Threat

• Health Issues

• Environmentalism

• Distribution costs

• Threat of substitutes

PEST ANALYSIS24

• Taxes and Regulations regarding health issues

• Monopoly issuesPolitical

• Demand in developing countries• Financing situation in countriesEconomic

• Healthy substitutes becoming more attractive

• EnvironmentalismSocial

• Innovation in production• Innovation in packagingTechnology

Porter’s Five Force Analysis– Concentrate producer

INDUSTRYCOMPETITOR

S

Rivalry amongexisting firms

BUYERS - Low

Two main buyers are Bottler and Fountain.

Concentrate producers have cooperative merchandising agreements with bottlers.

The number of bottlers had fallen continuously.

ENTRANTS - Low

It’s hard for new entrants to market, because they need a lot of resources and distribution channels are dominated by previous concentrate producers.

SUBSTITUTES - Low

Two concentrate producers(Coke and Pepsi) have dominated the market.

SUPPLIERS - Low

Concentrate producers have established long term relationship with suppliers.

Switching cost of suppliers is low.

Concentrate producers often maintained relationships with more than one suppliers.

Bargaining

power of

suppliers

Threat of

new

entrants

Bargaining

power of

buyers

Threat of

substitutes

POTTER’S ANALYSIS – CONCENTRATE PRODUCER

Porter’s Five Force Analysis– Concentrate producer

INDUSTRYCOMPETITOR

S

Rivalry amongexisting firms

BUYERS - High

The market seems to be saturated.

Switching cost is low.

Rivalry between Coca-cola and Pepsi is very high.

ENTRANTS - Low

Bottlers’ profit is low.

Making new distribution channels is hard and expensive.

The market growth has decreased.

SUBSTITUTES - Low

Bottlers cannot be easily replaced by other marketing channels.

Selling soft drinks through bottlers still has a big portion of Concentrates’ sales.

SUPPLIERS - Medium

Concentrate producers have obtained small bottlers.

Bottlers have maintained relationship with more than one supplier.

Bargaining

power of

suppliers

Threat of

new

entrants

Bargaining

power of

buyers

Threat of

substitutes

POTTER’S ANALYSIS – BOTTLER

LOGISTICS INVOLVED27

Average Order Size

Order Placement

Transit Time

Order Frequency

Inventory Management

Unsold/Damaged Stock

Technology

Mode of Transportation

Warehousing

Stock Keeping

FUTURE CHALLENGES28

Consumers getting health conscious

Retailers launching own drinks

Emergence of non soda drinks in the market

Environmentalism

Rise of substitutes

Increasing regulations from the government

RECOMMENDATIONS29

Focus on low calorie drinks

Increase waste water treatment

Recycling bins at major consumption areas and recycling campaigns

Develop Research and Development for new drinks in market

Widen the target audience to senior citizens

Focus on product differentiations

Focus to change the image and perception to fit healthy living trend

January 2014

Team formation

Topic decision

February 2014

SOP submission

Meeting with the mentor

Discussion on the SOP and initiation of Secondary Research

March 2014

Research on the secondary data

Visit to Dubai Statistics Centre

Primary research on the basis of a visit to the beverage industry.

April 2014

Analysis and interpretation of

data

Final drafting of the report

Presentation of the report.

TIMELINE30

RESEARCH FRAMEWORK31

Setting Objectives

Literature Review on Supply Chain

Secondary Research on the Industry

Primary Research by meeting Industry Experts

Analysis and Interpretation

QUESTIONS PLEASE32

P R E S E N T E D B Y

A N A N T B A N S A L

K O M A L S A G A R

S A N K E T G O L E C H H A

33

THANK YOU

34

ADDITIONAL

COSTING RELATIONSHIPS

Inventory Cost + Facilities Cost + Transport Cost= Total Logistics Cost

35

Source: Chopra and Meindl, 2001. “ Supply Chain Managemet”, Printice Hall NJ

PERFORMANCE CHARACTERISTICS36

Cost Factor Performance

Inventory Higher than Direct Shipping model

Transportation Lower than Direct Shipping model, lowest for fast moving items

Facilities and Handling Higher than manufacturer storage with larger difference for slow

moving items

Information Simpler infrastructure compared to Manufacturer storage

Service Factor Performance

Response Time Relatively faster than other models

Product Variety Lower variety compared to other networks

Product Availability Higher cost to provide same level of availability as in Direct Shipping

Customer Experience Much better than Direct Shipping

Order Visibility Visibility much more and easier compared to direct shipping

Return Ability Easier than direct shipping model

DIRECT SHIPPING

Manufacturer storage or Direct Shipping is best suitable for an industry whichinvolves large variety but low demand which are highly valuable and customersare ready to wait for deliveries and have scope for advance and partialpayments. Direct shipping is also suitable when customization of product isinvolved.

37

CONSUMER PICK UP

Consumer Pick up is best suitable for companies where response time requiredis minimum and consumers need to choose from a variety of similar products.This design involves high handling costs at pick up points which should to betaken care off while implementing this pattern.

38

DISTRIBUTION OVERVIEW39

Plant Warehouse

Direct Route

Market

Indirect Route

Distributor Market

Direct Route: The Bottler partner has direct control of the activitiesIndirect Route: An organization which is not a part of the Coca–Cola systemhas the control of distribution activities