Supply Chain Management True or False: Coca-Cola's Essay

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Supply Chain Management

True or False:

Coca-Cola's Experience with Inventory Forecasting

Supports the Principles Set Forth by CPFR

In a one-word clear stand: true.

The Collaborative Planning, Forecasting & Replenishment (CPFR®) System promoted by the Voluntary Interindustry Commerce Solutions (VICS) Association (Voluntary Interindustry Commerce Solutions Association, 2011) was piloted between Wal-Mart and Warner-Lambert in April 1996 (Purpura, 1997). Their CPFR collaboration allowed Wal-Mart and Warner-Lambert to jointly evaluate the supply chain in process, particularly regarding "Listerine," a Warner-Lambert product. That joint evaluation and inter-company feedback gave Wal-Mart more accurate selling rates and inventory of the product while giving Warner-Lambert more efficient predictions of amounts, types and times to supply the product to Wal-Mart (Purpura, 1997). Over a period of 5 months, Wal-Mart increased in-stock levels of "Listerine" "from 87% to 98%" (Purpura, 1997) while reducing inventory of Wal-Mart's "Listerine" products by approximately 20% (Purpura, 1997), reducing inventory-related costs. In sum, the pilot project achieved several of CPFR's main objectives by inventory reduction, higher efficiency and lower costs.

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Encouraged by the efficiency of this pilot project and others, various large companies, including the Coca-Cola Bottling Company Consolidated (CCBCC), studied the possibility of applying CPFR to their own supply chains. Prior to 2002, the Coca-Cola Retailing Research Group found that efficient supply chain management could result in a 1.5% - 2.5% cost savings potential in end-consumer prices (Seifert, 2002, pp. 22-23). Once CCBCC opted for CPFR, it did so wholeheartedly, developing "upfront collaboration" linking trade directors with sales and marketing in the field, incorporating a "Look for Success" plan and establishing step-by-step opportunities in sales (Coca-Cola Bottling Company Consolidated, 2011). CCBCC also invested heavily in supply chain integration, concentrated on agility and skills and encouraged "thought-leadership" (Coca-Cola Bottling Company Consolidated, 2011), which can be defined as "having the answers to the biggest questions on the minds of your buyers" (Brenner, 2011), and possibly including "your unique perspective on hot topics relevant for your customers" (Brenner, 2011)......

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