Coke

Project Report of Production & Operations Management On COCA-COLA Beverages Pakistan Ltd.

SUBMITTED TO:

Mam. Irum

SUBMITTED BY: Ahmad Bemisal Durrani(8960) M.Junaid Masood Ansari (8952) M.Aqeel Ahmad S.Adeel Shah M.Ashraf Ansari Date of Submission: May 11, 2009

MBA 3rd SEMESTER (EVENING)

NATIONAL UNIVERSITY OF MODERN LANGUAGES

MULTAN

AKNOWLEDGEMENT First of all bow our head before ALLAH ALMIGHTY. ALLAH the Omnipotent, Omnipresent and to the HOLY PROPHET MUHAMMAD (PBUH) for completion of our assignment. Our humble and heartiest thanks are for our best teacher “Man. Irum” to motivate us and encourage us to complete this task.

BBRRRRRRRRRRRRRRRRRRRRRR RR!!!

Introduction Coca-Cola is a carbonated soft drink sold in stores, restaurants and vending machines worldwide (The Coca-Cola Company claims that it is sold in more than 200 countries.). It is produced by The Coca-Cola Company in Atlanta, Georgia, and is often referred to simply as Coke or (in European and American countries) as cola, pop, or in some parts of the U.S., soda. Originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton, Coca-Cola was bought out by businessman Asa Griggs Candler, whose marketing tactics led Coke to its dominance of the world soft-drink market throughout the 20th century. The company produces concentrate, which is then sold to various licensed 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 in cans and bottles to retail stores and vending machines. Such bottlers include Coca-Cola Enterprises, which is the largest single Coca-Cola bottler in North America and western Europe. The Coca-Cola Company also sells concentrate for fountain sales to major restaurants and food service distributors. The Coca-Cola Company has, on occasion, introduced other cola drinks under the Coke brand name. The most common of these is Diet Coke, which has become a major diet cola. However, others exist, including Caffeine-Free Coca-Cola, Diet Coke CaffeineFree, Coca-Cola Cherry, Coca-Cola Zero, Coca-Cola Vanilla, and special editions with lemon, lime, or coffee. In response to consumer insistence on a more natural product, the company is in the process of phasing out E211, or sodium benzoate, the controversial additive linked to DNA damage and hyperactivity in children, of Diet Coke. The company has stated that it plans to remove the controversial additive from its other products, including Sprite and Oasis, as soon as a satisfactory alternative is discovered.

Mission, Vision & Values The world is changing all around us. To continue to thrive as a business over the next ten years and beyond, we must look ahead, understand the trends and forces that will shape our business in the future and move swiftly to prepare for what's to come. We must get ready for tomorrow today. That's what our 2020 Vision is all about. It creates a longterm destination for our business and provides us with a "Roadmap" for winning together with our bottler partners. Our Mission Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. • •

To refresh the world... To inspire moments of optimism and happiness...

To create value and make a difference. Our Vision Our vision serves as the framework for our Roadmap and guides every aspect of our business by describing what we need to accomplish in order to continue achieving sustainable, quality growth. •

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People: Be a great place to work where people are inspired to be the best they can be. Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people's desires and needs. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities. Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities. Productivity: Be a highly effective, lean and fastmoving organization.

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Our Winning Culture

Our Winning Culture defines the attitudes and behaviors that will be required of us to make our 2020 Vision a reality. Live Our Values Our values serve as a compass for our actions and describe how we behave in the world. • • • • • •

Leadership: The courage to shape a better future Collaboration: Leverage collective genius Integrity: Be real Accountability: If it is to be, it's up to me Passion: Committed in heart and mind Diversity: As inclusive as our brands

• Quality: What we do, we do well Focus on the Market • • • •

Focus on needs of our consumers, customers and franchise partners Get out into the market and listen, observe and learn Possess a world view Focus on execution in the marketplace every day

• Be insatiably curious Work Smart • • • •

Act with urgency Remain responsive to change Have the courage to change course when needed Remain constructively discontent

Work efficiently Act Like Owners •

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Be accountable for our actions and inactions Steward system assets and focus on building value Reward our people for taking risks and finding better ways to solve problems

Learn from our outcomes -- what worked and what didn’t Be the Brand- Inspire creativity, passion, optimism and fun •

History International History The first Coca-Cola recipe was invented in Columbus, Georgia at a drugstore by John Pemberton; originally as a coca wine called Pemberton's French Wine Coca in 1885.He may have been inspired by the formidable success of Vin Marini, a European coca wine. In 1886, when Atlanta and Fulton County passed prohibition legislation, Pemberton responded by developing Coca-Cola, essentially a non-alcoholic version of French Wine Cola. The first sales were at Jacob's Pharmacy in Atlanta, Georgia, on May 8, 1886. It was initially sold as a patent medicine for five cents a glass at soda fountains, which were popular in the United States at the time due to the belief that carbonated water was good for the health. Pemberton claimed Coca-Cola cured many diseases, including morphine addiction, dyspepsia, neurasthenia, headache, and impotence. Pemberton ran the first advertisement for the beverage on May 29 of the same year in the Atlanta Journal By 1888, three versions of Coca-Cola—sold by three separate businesses—were on the market. Asa Griggs Candler acquired a stake in Pemberton's company in 1887 and incorporated it as the Coca Cola Company in 1888.The same year, while suffering from an ongoing addiction to morphine, Pemberton sold the rights a second time to four more businessmen: J.C. Mayfield, A.O. Murphy, C.O. Mullahy and E.H. Blood worth. Meanwhile, Pemberton's alcoholic son Charley Pemberton began selling his own version of the product. In an attempt to clarify the situation, John Pemberton declared that the name "Coca-Cola" belonged to Charley, but the other two manufacturers could continue to use the formula. So, in the summer of 1888, Candler sold his beverage under the names Yum Yum and Koke. After both failed to catch on, Candler set out to establish a legal claim to CocaCola in late 1888, in order to force his two competitors out of the business. Candler purchased exclusive rights to the formula from John Pemberton, Margaret Dozier and Wool folk Walker. However, in 1914, Dozier came forward to claim her signature on the bill of sale had been forged, and subsequent analysis has indicated John Pemberton's signature was most likely a forgery as well. In 1892, Candler incorporated a second company, The Coca-Cola Company (the current corporation), and in 1910, Candler had the earliest records of the company burned, further obscuring its legal origins. Regardless, Candler began marketing the product, although the efficacy of his concerted advertising campaign would not be realized until much later. By the time of its 50th anniversary, the drink had reached the status of a national icon for the USA. In 1935, it was certified kosher by Rabbi Tobias Geffen, after the company made minor changes in the sourcing of some ingredients.

Coca-Cola was sold in bottles for the first time on March 12, 1894. The first outdoor wall advertisement was painted in the same year as well in Cartersville, Georgia. Cans of Coke first appeared in 1955. The first bottling of Coca-Cola occurred in Vicksburg, Mississippi, at the Biedenharn Candy Company in 1891. Its proprietor was Joseph A. Biedenharn. The original bottles were Biedenharn bottles, very different from the much later hobble-skirt design that is now so familiar. Asa Candler was tentative about bottling the drink, but two entrepreneurs from Chattanooga, TN, Mr. Benjamin F. Thomas and Mr. Joseph B. Whitehead, proposed the idea and were so persuasive that Candler signed a contract giving them control of the procedure for only one dollar. Candler never collected his dollar, but in 1899 Chattanooga, TN became the site of the first Coca-Cola bottling company. However, the loosely termed contract proved to be problematic for the company for decades to come. Legal matters were not helped by the decision of the bottlers to subcontract to other companies, effectively becoming parent bottlers. Coke concentrate, or Coke syrup, was and is sold separately at pharmacies in small quantities, as an over-the-counter remedy for nausea or mildly upset stomach. On April 23, 1985, Coca-Cola, amid much publicity, attempted to change the formula of the drink with "New Coke." Follow-up taste tests revealed that most consumers preferred the taste of New Coke to both Coke and Pepsi. Coca-Cola management was unprepared, however, for the nostalgic sentiments the drink aroused in the American public. The new Coca-Cola formula caused a public backlash. Protests caused the company to return to the old formula under the name Coca-Cola Classic on July 10, 1985. In April 2007, in Canada, the name "Coca-Cola Classic" was changed back to "CocaCola." The word "Classic" was truncated because "New Coke" was no longer in production, eliminating the need to differentiate between the two. The formula remained unchanged. In January 2009, Coca-Cola stopped printing the word "Classic" on the labels of 16ounce bottles sold in parts of the southeastern United States. The change is part of a larger strategy to rejuvenate the product's image.

Domestic History Coca cola started its operations in Pakistan in early sixties. The brand became very popular in a very short span of time and the company broadened its operations to meet its increasing demands. The coca cola inaugurated their plant in multan at Vehari road in 1965. This is still situated at the same place. Initially it was introduced as a franchise basis. The owners who took the franchise was not focusing on the quality of coke very much and the were unable to meet the standard of coke internationally. They were loosing the market share against Pepsi. So the coca cola company now has taken over it in Pakistan.

Product Line Beverages A beverage is a drink specifically prepared for human consumption. Almost always it largely consists of water. These include: • • •

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Water, from the tap or from a bottle Juice, for example fruit juices, vegetable juices Soft drinks o Lemonade o Carbonated drinks (generally called sodas in the Eastern U.S., pop in the Midwestern U.S., and cokes in the Southern U.S.), including just carbonated water  Cola  Ginger ale  Root beer  Cream soda Sports drinks Infusions o Coffee o Tea Dairy drinks, for example milk, yoghurt drink, chocolate milk, milkshake Alcoholic beverages Cocktails - mixed drinks Hot beverages, for example coffee, tea, hot chocolate, hot cider

Product Line of Coca Cola The coca cola beverage industry is currently producing different types of beverage products. The most famous are:

COCA COLA

FANTA

SPRITE

KINLY water

SPRITE 3G

MAAZA MANGO

The bottles that are filled in this plant are 250ml and 1 liter bottles. The pet bottles tin packs are not filled. The bottles are also not produced in this plant.

Plant Location & Layout As we previously mentioned that the plant is situated on Vehari road. This plant coves the area of 2 Akers. This plant is supplying three main regions which are:  Multan  Sahiwal  D.G. Khan The plant is situated in the center of the area where supply is produced. The important decision of plant location which we’ve studied is completely taken into confederation as the plant is centrally located to cover the 3 regions. As the company is multinational organization so all product designs are prepared in head offices at USA. All the product themes designs and layouts are kept confidential for local production. The company aim is to keep designing setup decentralized because of different culture, people and taste.

Technology & Capacity The multan plant is 90% automatic and human involvement is very least at the initial phase and at the absolute end. The advanced technology of the plant is giving the competitive edge to the company because automated plants where reduce labor cost there also increase the productivity. The company is highly focused and thoroughly belives in elimination of any king of human involvement in the entire production process. For this purpose the are bringing more 100% automated machinery soon. The Multan plant has the wide capacity of producing 24000 bottles per hour and approximately 600,000 bottles in a day. This strategy shows the company is fully aware of the significance of modern technology. Therefore the decision for installation of modern plant is taken.

Operations & Production Operation Manager The company by grasping the importance of operations has designated the Operation Manager as General Manager. Mr. Madin Asif is currently supervising all the operations of Multan plant. He is a foreign qualified business graduate with specialization in operations.

General Manager

Production Manager

Sales Manager

HR Manager

Production Manager Mr. Jaffer Hussain is working as production manager and has a vast experience of 27 years of beverage industry. Formerly he was the employee of Pepsi but now he is working with Coca Cola. Professionally he is chemist and a qualified production manager.

Quality Control in Production The company highly conscious about quality control. The Coca Cola beverages in No1 company in quality control in Pakistan. They are following six sigma quality control. Six sigma is a quality standard that establish a goal of no more than 3.4 degree per million & procedures.

Six Sigma Quality Standards According to their production manager, the decision regarding quality control is primary focus of the organization which is making them distinctive among their competitors. For quality control coca cola has 3 major processes. A. Water treatment B. Syrup solution & preparation C. Scanning & filling of Bottles Water treatment is very initial and very important phase. In this phase likelihood any king of contamination is eliminated from the water. The primary focus is to remove the micro organisms and bacteria, germs and any aspect of water quality is tested. Different chemicals are used to remove them and to maintain the quality of water. The water mineral levels are also maintained. If the mineral elements are less they are added and if the y are in large quantity they are removed. The process of reverse osmoses & water coaglosim system. For this purpose the company has lunched the latest machinery and stopped the old machine.

The latest machine for water purification process

The old machine was used for water purification

Latest CO2 purifier machine

Syrup Preparation is imported directly from Georgia, Atlanta USA. In syrup double refined sugar is used & the syrup is performed 100-200 tests during production process to make it hygienic. The exact formula of Coca-Cola is a famous trade secret. The original copy of the formula is held in SunTrust Bank's main vault in Atlanta. Its predecessor, the Trust Company, was the underwriter for the Coca-Cola Company's initial public offering in 1919. A popular myth states that only two executives have access to the formula, with each executive having only half the formula. The truth is that while Coca-Cola does have a rule restricting access to only two executives, each knows the entire formula and others, in addition to the prescribed duo, have known the formulation process. Scanning & Bottle Filling are also the very important part of production and quality. In initial scanning empty bottles are tested and scanned to avoid any types of unhygienic particles. Clean bottles are filled and final scanning is conducted to check the fill level and again dust particles.

Production Unit

Maintenance Mr. Anwar Sultan Noor who is qualified mechanical engineer , is Maintenance Manager and responsible for plant maintenance. According to them there 3 types of maintenance:

1. Run to Failure 2. Predictive Maintenance 3. Preventive Maintenance The run to failure is taken during the production process. If during production any type of problem is occurred the run to failure is applied. The predictive maintenance is made on daily basis on important area of machine where there is threat of any type of failure While preventive maintenance is made on monthly and yearly basis. The plant remain close for a month for yearly maintenance.

Forecasting The company pays high level of attention and acknowledges the importance of this tool. The company was previously using the exponential smoothing technique in forecasting. But now for the last 2 years they are using seasonal index on weekly & monthly basis & average use. A group of sales manager, general manager & finance manager consult each other on the basis of previous collected data and take the vital decision of production. Because beverage industry in Pakistan is on peek production in summer season, forecasting technique plays very important role in the production.

Sales The sales department is responsible for the entire sales of the products. They have the coordination with production, distributors and retailers. The sales department is headed by the Sales Manager Mr. Imran Hashim who is very experienced and high profile person in coca cola. He is achieving sales target every year effectively with his energetic team through out 3 regions. As he is heading 3 regions so he has 92 distributors in 3 regions and 26 in Multan region. According to Sales Manager they are now taking a very big competitive edge on Pepsi by offering Better Product with Better Quality. And now they have achieved 35% of the market share in 3 regions and they are continuously achieving it.

35% Pepsi CocaCola 65%

The upper pie chart is showing the market share of coke and Pepsi in 3 regions. Internationally the coke is the most famous brand and the market share of coke is very high than Pepsi the result of share survey

Inventory

et Share

The plant has very large capacity to store the inventory. They store the inventory of 7 days on daily basis and maintain & record it daily, approximately the plant has to store 25000 crates per day. To maintain the inventory they have two types of softwares which are S.A.P & BASIS. They take help the forecasting technique to make their inventory that how much inventory they need to be store.

25.00% 20.00%

20.40%

Human Resource Management

In our visit to Coca-Cola plant in Multan Pakistan, we got some interesting facts to mention. The HR Manager Asim Ameen told us that Coke has direct investment in Pakistan and all plants are not franchised but owned by the company. Overall employees of Coke Pakistan are 10,000, out of which 3000 are permanent, 3000 are on contractual basis, and 4000 are temporary. He further told us that each office of coke in Pakistan have got their separate HR departments. However, the automation and approving authority remains under the control of HR department of head office. As hiring and recruitment of all offices is under control of 1) National Manager 2) Training Manager 3) Coordinating Manager

The HR Manager Asim Ameen handles the following tasks:

1) Recruitment 2) Selection 3) Benefits 4) Training 5) Internships 6) Management Training The approximate number of employees of HR department is 200 while those working in head office are 6. The Industrial Employee Relation Manager and Payroll Manager are hired recently. The employees’ turnover rate on the average is 6-8% annually. The Manager HR was kind enough to share with us the Human Resource Department structure also: Managing Director

Director HR

Research & Developme nt

Training & Developme nt

Employee Relation

Admin

CoOrdination

HR Co-ordination Management Training HR

Asim Ameen told us that the company has been using a locally and custom developed HRIS until it crashed resulting into the disturbance of HR activities that created a kind of mess. According to Asim, a new HRIS called SAP is just under the installation process and will be linked and enabled within a month. This HRIS is powerful enough to automate HR activities from job openings to maintaining and payrolls. It helps very much in record maintaining and decision making. He again emphasized that this is a great tool for decision making. On asking, Asim told that our MIS (Management Information System) is helping us link our departments. He says that SAP will also be integrated with it. Since the HR process is going to be automated with the installation of SAP, right now they use Rozee.pk’s provided services for recruitment. Asim Ameen further disclosed their plan to launch their very own career portal that will further help them with job openings and automation of the hiring process. Mr. Asim also told about equal employee opportunity & employee safety. If a first like worker following some rules then a manager will also follow the same rules. For example no 1 is allowed to smoke in any area except a special smoking area. Same the production workers and production manager have to wear special shoes. While employee safety, they also very conscious for employee safety. The employees are strictly instructed to wear special shoes head wear gloves special glasses ear wear. The first aid is also available there . if any employee gets any type of serious injury, he is taken to Khawaja Fareed Hospital immediately.

Supply Chain Management

The coca cola has its suppliers who are nationally and internationally approved. They have major suppliers for their syrup, plastic, glass, CO2, chemicals. In Multan plant there is no supply chain management available. The supply chain is in head office Karachi, Raheem Yaar Khan. In very near future the coke is making their supply chain on every unit. For this purpose they also hiring the Project Managers whom add is on internet www.rozee.pk. The coca cola company have many suppliers for each product for example for glass they have 8 suppliers. They have very good relation with their supplier and they have no type of partnership with them. They also have an e-commerce system with their suppliers to place orders time to time. As previously mentioned that Multan plant have 3 regions and have 92 distributors. So these distributors are helping then to supply product to end consumers. The plant have 5% of logistic and using 95% of logistic of their suppliers. They only have truck vehicles and use only the road way they do not have any type of air ways for their supply locally.

Conclusion By visiting the coca cola plant, we observed that after 2000 the market share is continuously increasing. The coke has strictly focused on the quality of their product and followed the top ten OM decisions. By following these decisions coke is increasing its productivity and market share continuously

References  The General Manager Mr. Madin Asif  The Sales manager Mr. Imran Hashim  The Production Manager Mr. Jaffer Hussain

 The Sales Executive Mr. Saleem  The General Manager finance (raheem yaar khan plant) Mr. Saeed  http://en.wikipedia.org/wiki/Coca-Cola  http://www.thecoca-colacompany.com/heritage/ourheritage.html  http://lcweb2.loc.gov/ammem/ccmphtml/colahome.html

Appendix Questionnaire •

What is the name of operation manager?

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What is his qualification?

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How many products you are offering?

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What is the design of your product?

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What is the theme behind this design?

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How do you define the quality of your product?

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Who is responsible for quality?

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What process will these products require?

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What capacity will these products require?

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What equipment & technology is necessary for these processes?

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Why did you chose this location?

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Who are your competitors?

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What is the structure of this company?

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Who is your HR manager?

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How are you providing reasonable work environment?

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How many employees you have?

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What is your forecasting system?

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What is the time horizon of your forecast?

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On which bases you make forecast?

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Who is your project manager?

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How do you control your projects?

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What is your supply chain?

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Who are your suppliers?

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Which advantages you are getting from them?

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How many suppliers you have?

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Are suppliers your partners?

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Do you have e-commerce program for your suppliers?

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Study complete supply chain management?

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How much inventory for each time should your company have?

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When do you record it?

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Who is responsible for maintenance?

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When do you do maintenance?

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How many distributors you have in multan?

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How do you taking competitive edge in multan?

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Ask for financial report?