Coca Cola Supply Chain For London 2012 Olympics Economics Essay

The push behind the logistics and supply concatenation activities has been the transit sector climaxing globalization. Intermodal conveyance focuses on the systematic attack of all the activities performed by the conveyance ironss in an attempt towards the decrease or riddance of break in the uninterrupted motion of goods from upstream to downstream ( Bloomberg, et al. , 2002 ) . Today, irrespective of the production sites coca Cola and other trade goods are moved across transatlantic, transpacific, etc to its consumers. The goods are moved by road/rail or both to lading port, sea passenger car by feeder vas to destination port and on passenger car by road/rail to consignee mill or warehouse.

The pick of a suited transit manner is highly of import for administrations in a planetary hardworking procedure with much attending onto the transit cost, dependability, flexibleness, transit clip and safety of the goods ( Vannieuwenhuyse et al. , 2003 ) . The paper will foreground the location theories and theoretical accounts developed by economic experts to enable the directors of Coca Cola to strategically bring forth the coca Cola at topographic point ( s ) where bulk of the natural stuffs can be sourced from. However, this paper aims at critically measuring the conveyance manners involved in planing the Coca Cola supply concatenation for the London 2012 Olympics.

To get down with, it will be important for the directors to do appraisal on the figure of people that will go to the 2010 Olympics, the figure of coke tins to be consumed day-to-day ( sing the yearss the event will happen ) and the figure of containers to be shipped for the whole event which is shown in the appendix. These factors will assist the directors in sing the figure of companies and states in the supply concatenation design.

Location theory

McDonald and McMillen ( 2006 ) stated that for worldwide companies such as coca cola the weight-gaining production procedure and the transit cost determines its input location. The inputs could be either the natural stuffs and or labor. Besides extra cost associated with the handling of stuffs ( droping and lading ) during the transit system ( Harrington and Warf, 1995 ) makes fabricating companies to believe of turn uping to one topographic point where economic activities are located so as to minimise their transit costs ( Glenn et al. , 1999 ) .

Fearon ( 2009 ) expressed his position based on the mathematical theoretical account for turn uping industries ( known as locational trigons ) developed by Weber, that input-oriented houses are more interested in turn uping an industry sing the optimum transit costs of distance to the “ material index ” – therefore the ratio of the weight of the natural stuffs to complete merchandise. Similarly, writer such as Marshall ( 1920 ) re-emphasised that a house can cut down its conveyance costs in three ways through industrial agglomeration. Marshall foremost argued that a house can salvage its transportation costs by turn uping nearer to its providers or clients. Second, he developed the labor market pooling theory to explain bunch to take advantage of economic systems of graduated table correlated to a larger pool of houses and workers. Third, he built an statement in agglomeration associating to the theory of rational spillovers saying that houses locate to each other to increase the rate of invention through shared cognition ( cited in Glaeser and Kerr, 2008 ) .

Having recognised the theory of location, the directors have agreed to carry on some research on the natural stuffs that will be required in the primary phase of the Coca Cola fabrication ( upstream flow ) including the aluminum coke can and one of the ingredients used in the Coca Cola liquid itself. From the lists of ingredients used in Coca Cola including refined sugar, caramel, caffeine, phosphorous acid, coca foliage and kola nut infusion, lime infusion, flavour sirup, etc ( Huey, 1997 ) , the directors agreed to beginning for sugar for the production.

Aluminum and Sugar bring forthing countries/regions

Aluminum is chiefly produced from bauxite ore. And for logistics grounds, alumina refineries are usually located nearer to the bauxite mines ( European Aluminium Association, 2010 ) . A research revealed the below countries/regions as the chief aluminum production countries.

A

Amalgamate aluminum oxide capacity

State

2007

United States and Canada

60,400

Argentina

0

Australia

50,000

Oesterreichs

60,000

Brazil

50,000

China

700,000

France

40,000

Germany

80,000

India

40,000

Japan

25,000

Mexico

0

Norway

0

Venezuela

0

Other states

80,000

World sum ( rounded )

1,190,000

Table1: the universe aluminum production capacity ( U.S. Geological Survey, 2009 ) .

Sugar is extracted from either sugar cane/sugar Beta vulgariss. Harmonizing to Workman ( 2007 ) three quarters of the universe ‘s sugar processed from sugar cane is grown in the tropical zones including Brazil, India, China, Thailand, Pakistan and Mexico whereas the staying which is produced from sugar Beta vulgariss is located in the temperate zones including France, Germany, U.S.A. , Russia, Ukraine and Turkey.

Upstream flow of Coca Cola

The directors of Coca Cola have decided to strategically concentrate on the full production of coca Cola in China. This because China has bunch of mills capable of treating the natural stuffs ( bauxite ore and sugar cane ) into aluminum tins and sugar. Besides China have the work force, energy and substructures including roadways, railroads, waterways, ports and terminuss ( CIA, 2010 ) . The diagram stand foring the Coca Cola supply concatenation design is shown in the appendix as figure 2.

Harmonizing to the Huazhou ( 1989 ) two-thirds of China ‘s bauxite ore sedimentations is located in the Shanxi and the staying in Guizhou states with their chief towns as Taiyuan and Guiyang as shown in the map, figure 1. Petry and Junyang ( 2009 ) one-year study on sugar identified the chief sugar cane bring forthing countries in China to be located in Guangxi, Yunnan, Guangdong and Hainan states. And their several towns of production are shown in the map ( figure 1 ) as Nanning, Kunming, Datong and Haikou. The extraction of the ore will be done in Taiyuan. And apart from the dumper truck that will be used in between the extraction site to the decrease factory, train will be used throughout in the conveyance of aluminum production processes during the staying phases to Tianjin where the can mill and bottling works are located as shown in the figure 2 of the appendix. Furthermore, the sugar to be used will be beginning from Datong since is closer to the bottling mill in Tianjin, Simultaneously the sugar will besides be sent to the bottling works where the supply concatenation converge for the full canned coca Cola production.

Figure 1: map of China ( Beginning: Adapted from Professional China Tour Service, n.d )

Distribution flow of Coca Cola

The transcribed coca Cola will be palletized and stowed in containers for the transit because of the world-wide criterion equipments which is capable of adhering to containerization. Furthermore, container reduces managing, loss, harm and storage of goods ( Shaw, 1993 ) . Harmonizing to Long ( 2003 ) the usage of containers in supply concatenation activities has facilitated the motions of multiple manners of conveyance for cargos. The coordination of hauling, rail and ocean transportation for cargo is term as intermodalism. The estimated sum of coca Cola to be loaded in a 40ft containers based on the computation shown in the appendix would be transported in batches to the European distribution Centre in Munich, Germany.

The containers will be loaded onto container ships bound for deep-sea transportation from the Tianjin Port which will do a halt at Hamburg Port. The passenger car of containers on a container ship is term as fishy-back. As indicated in figure 4 and 5 of the appendix, the sea paths on which the ship will voyage through are the Strait of Malacca – Indian Ocean – Suez Canal – Mediterranean Sea – North Atlantic Ocean – English Channel. Harmonizing to Lloyd ‘s ( 2008 ) the 20,000km sea ocean trip takes 35 to 38days.

In the Hamburg Port, the arrived containers onboard the container ship will be discharged onto train utilizing shore Cranes for an on passenger car ( Zilski, 2008 ) . The train so transport the containers from Hamburg to the European Distribution Centre in Munich, Germany. The passenger car of containers on rail waggons is term as piggy-back. The rail path from Hamburg passes through either Berlin-Frankfurt/Dusseldorf-Stuttgart paths to Munich ( Martin, 2003 ) as shown in figure 6 of the appendix. Coca Cola uses Germany as its distribution Centre in Europe because it serve as a hub-and-spoke repositing systems that straight make supplies to the assorted regional distribution Centres of the European states ( Wagner, 2008 ) . Furthermore several east-west trade paths run through Germany ( Cushmann & A ; Wakefield, 2006 ) as shown in figure 6.

Downstream flow of Coca Cola

The containers will be transported by rail from the distribution Centre in Munich to Port of Le Havre since the port uses railroad web in its operations ( Damas, 2001 ) to be loaded onto transhipment ( feeder ) containerships edge for short-sea transportation that makes a direct call to the Tilbury Docks. The container ship navigates through the English Channel to Tilbury Docks. The Tilbury Docks located in Essex which is under the Port of London Authority serves as London ‘s major distribution hub for South East England ( Forth Ports Plc, 2010 ) .

In 2004, the Tilbury dock was upgraded with railroad lines to augment the container motions ( Cuthbert, 2004 ) . When the container ships arrive in the Tilbury Docks, the containers will be discharged unto train and conveyed to the Regional Distribution Centre. Harmonizing to Bozarth and Handfield ( 2006 ) the Regional Distribution Centre serves as a break-bulk repositing where supplies are provided to the jobbers and retail industries. The writers ‘ farther claim that warehousing assures higher degree of client service and overall logistics public presentation by agencies of bettering supply concatenation inefficiencies, stock list direction, logistics truth and serves as consolidation point. This

Advantages and Disadvantages of the selected intermodal picks

The combine usage of two or more transport manners provides overall benefit in footings of velocity of bringing, cost economy or environmentally acceptable option ( CIPS, 2003 ) . Throughout the full production and transit of the palletized canned coca Cola, the directors considered greater use of railroad web on the land-based manners for the supply concatenation activities whereas the ships was used across the oceans. However the grounds for the intermodal picks in planing the Coca Cola Supply Chain for the London 2012 Olympics are luxuriant below.

The directors resolve to utilize more rail freighting in the coca Cola supply concatenation design because of its chief advantage in conveying higher proportion of heavier burden trade goods over long distances at greater velocity and extinguishing cargo traffic from congested route webs ( CIPS, 2003 ) . Rail motion is most economical in complete train burden operations and in circuit working ( Branch, 2001 ) . Furthermore research conducted by Beier et Al. ( 1979 ) in footings of fuel efficiency on ton-miles per gallon reveals that rail conveyance consumes less fuel than route conveyance. Mentioning an illustration, if there are 50 containers to be transported from point A to point B by either truck or rail. Whiles the truck consumes more fuel per tone-mile in transporting 1 containers each for 50 consercutive times covering the same distance, the train will be able to transport those 50 containers on two back-to-back times.

Trains were used extensively in China because it has the good railroad substructure ( CIA, 2010 ) as shown in figure 3 in the appendix and their velocity will ease the production of the coca Cola for the Olympics 2012. Besides rail cargo is typically cheaper per tonne-kilometre compared to route ( Rushton et al. , 2000 ) . In Europe, the best agencies of transporting the cargo will be by rail from Hamburg Port to Munich and Munich to Port of Le Havre. The Port of Le Havre was chosen since the distance from Germany ‘s havens located at the North of the state ( CIA, 2010 ) to London is twice more than the Port of Le Havre to London as shown in appendix, figure 6. In the Tilbury Docks, trains will be used to rush up the lading operation every bit good as cut downing congestions in the port. Harmonizing to Feitelson and Verhoef ( 2001 ) the rail conveyance is more environmentally-friendly than other signifiers of conveyance by breathing about 10 % of CO2 emitted from tantamount route cargo. Rushton et Al. ( 2000 ) continue to show that particular rates or contracts can be negotiated for rail cargo and comparatively it provides high security for the lading particularly with containers and closed waggons. Furthermore the rail conveyance are least affected by bad conditions compared to all the land-based manners ( Ballou, 1997 ) . However, one of the major failings of the railroad is the built-in inflexibleness of operation due to its fixed paths and lading gage limitations ( Gubbins, 1988 ) , therefore lacks the versatility compared to route.

On the other manus, the directors agreed to utilize sea conveyance for the cargo of the 10,899 containers across the oceans from Tianjin to Hamburg and Le Havre to Tilbury because of its chief advantage to transport greater volume of lading across long distances compared to the other conveyance manners ( Branch and Stopford, 1997 ) . Branch ( 1996 ) viewed transportation as the transit of goods from topographic point of low public-service corporation to topographic point of high public-service corporation. The goods may be in the signifier of either natural materials/intermediate/finished merchandise transported in majority lading cargo to a refinery or scope of lasting consumer merchandises shipped in containers. Sea conveyance besides remains the most effectual and economical agencies of transporting containerize lading across the oceans ( Cushmann & A ; Wakefield, 2006 ) . Carr ( 2009 ) claim that the usage of sea conveyance significantly lowers emanations and reduces supply concatenation cost. Equally, Davies ( 2009 ) stated that transportation is the most carbon efficient and sustainable agencies of transporting cargos, claiming that freshly built ships emits 5g of CO2t/km compared to 50g of CO2t/km of heavy trucks or 540g of CO2t/km of modern lading plane. Furthermore sea conveyance is less affected by inauspicious conditions conditions compared to aerate conveyance and there is high security degree in procuring the lading ( Rushton et al. , 2000 ) . However, for sea conveyance velocity is non quintessence ( CIPS, 2003 ) so it suffers the disadvantages of being comparatively slow compared to other conveyance manners ( Badger et al. , 1993 ) . As a consequence of that, the directors will negociate for the best cargo with three/four renowned transporting lines to convey the goods in batches from Tianjin Port and Port of Le Havre. Besides the usage of gauntry Crane at the ports will ease the supply concatenation activities in order non to detain the ships in ports since it is perceived that ships make money during sea ocean trip than remaining in port ( Branch and Stopford, 1997 ) .

Furthermore, the directors agreed to prosecute less usage of route conveyance because of the big volume of transcribed coca Cola required for the Olympics. The route webs provide the most flexible and various signifier of cargo conveyance and omnipresent offering door-to-door theodolites, pieces supplying the chief aggregation and distribution web when other manners are used for the chief draw ( Badger et al. , 1993 ) . In planing the coca Cola supply concatenation, dump truck trucks will be used in the ore excavation site and the sugar cane plantation site because of its flexibleness ( CIPS, 2003 ) and the topography of the excavation country every bit good. Thus the trucks are able to travel into distant countries than other manners where it will non be possible/economical to even make ways for the other manners. Besides the sugar cane and ore are weight loss stuffs. The route conveyance in most logistics activities is used for short draw tally ( Badger et al. , 1993 ) . Furthermore it ‘s easier to cipher the cost of operations on route draw than on the railroad because the transporter is able to imagine profitable and non-profitable contracts ( Lowe, 1989 ) . However, it is incontestible fact that the environmental impact of vehicles is terrible as they produce noise, air pollution, structural harm and ocular invasion ( Lowe, 2003 ) . In footings of passenger car of majority trade goods, vehicles have low capacity compared to barge/coastal ship and train ( Gubbins, 1988 ) because of the axle-load limitations and the hazard of harm to civil technology constructions ( Collins, 1984 ) .

The design of the coca Cola supply concatenation will non affect the usage of air conveyance even though it provides greater velocity of travel. This because of its limited capacity ( CIPS, 2003 ) . Furthermore air cargo and airdrome storage is expensive compared to sea cargo ( Branch, 2001 ) . Rushton et Al. ( 2000 ) claim that air conveyance besides releases greater C dioxide emanations compared to the other manners of conveyance. Hence the usage of air cargo will non financially profit the intentional activities. To reason, it is clear that transporting and inveigh cargo still remains the most sustainable and cost-efficient agencies of transporting goods in majority and let go ofing less emanation into the environment. And even though ships are non fast compared to other manners, the inflow of container ships into the transporting market by vas operators for line drive services has made transporting efficient in footings of delivering of lading.

Appendix ( Group of two )

COCA COLA SUPPLY CHAIN

Figure 2: Coca Cola Supply Chain Diagram

Estimated Can of Coca Cola Drinks to be Produced for the London Olympics 2012

Number of Tickets available for the London Olympics 2012 = 8 million

Beginning: Telegraph.co.uk ( 2010 ) ; BBC Sport Olympics ( 2005 )

Estimated Athletes for the London Olympics 2012 = 10,250

Beginning: hypertext transfer protocol: //www.freebase.com/view/en/2012_summer_olympics

Estimated Voluntary Workers for the London Olympics 2012 = 70,000

Beginning: hypertext transfer protocol: //www.london2012.com/get-involved/volunteering/index.php

Estimated non-voluntary Workers for the London Olympics 2012 = 34,750

Estimated Entire Population for the London Olympics 2012

= 8 million + 10,250 + 70,000 + 34,750

= 8.115 million

Entire Duration of London 2012 Olympics = 16 yearss

Beginning: hypertext transfer protocol: //www.freebase.com/view/en/2012_summer_olympics

Maximal figure of Palletised Canned Coca Cola in a 40ft container = 21pallets

Maximal figure of Canned Coca Cola Trays per palette = 130

Maximal figure of Canned Coca Cola per Tray = 24

Entire Number of Canned Coca in a 40ft Container = 21 ten 130 ten 24 = 65,520 tins

Beginning: hypertext transfer protocol: //www.himfr.com/buy-coca_cola_tray/

Estimated tins of Coca Cola to be consumed per twenty-four hours = 8.115 million ten 5

= 40.575 million tins ( presuming a individual consumes 5 tins of Coca Cola daily )

Estimated tins of Coca Colas to be consumed for continuance of London 2012 Olympics

= 40.575 million ten 16

= 649.2 million tins

Estimated Assorted ingestion ( +/- 10 % ) = 649.2 million ten 0.1

= 64.92 million tins

Estimated Entire Coca Cola cans to be consumed for the London 2012 Olympics

= 649.2 million + 64.92 million

= 714.12 million tins

If a 40ft container can incorporate 65,520 tins, so entire figure of containers to be shipped from China to Germany and eventually to United Kingdom for the London 2012 Olympics will be

= 714.12 million / 65,520

= 10,899 Containers

A can of Coca Cola contains 330ml of Coca Cola ( 0.33l of Coca Cola ) . Therefore Total Estimated Volume of Coca Cola to be produced will be

= 0.33l x 714.12 million tins

= 235.6596 million Liters of Coca Cola

Figure 3: China Rail Network ( Beginning: – hypertext transfer protocol: //www.johomaps.com/as/china/chinarail.html )

Figure 4: Sea Route from Tianjin Port ( China ) to Hamburg Port ( Germany )

( Beginning: hypertext transfer protocol: //www.china-shipping.de/schedule/routes.html )

Figure 5: World Map

( Beginning: hypertext transfer protocol: //studentweb.cencol.ca/wtsang15/COMP % 20213/Midterm/world-map.gif )

Figure 6: European Railway Network

( Beginning: www.alleuroperail.com )