Refreshing Its Supply Chain Operations
Swire Beverages Unlocks the Full Potential of Its Coca-Cola Supply Chain Network in China
Swire Beverages is the holding company of Swire Coca-Cola HK Limited, the franchise bottler for all brands of The Coca- Cola Company in Hong Kong. Swire's extensive brand portfolio offers both carbonated and non-carbonated ready-to-drink beverages. Currently selling approximately 790 million cases in mainland China annually, it's no surprise that Swire had specific supply chain challenges and needed solutions that could be scaled significantly and provide a fast return.
Bubbling Under Pressure
The phenomenal growth of the Coca-Cola Company brand in China placed pressure on Swire's network of bottling production facilities, which were utilizing a manual system that was rapidly reaching a breaking point. In order to handle the accelerated growth of the beverage market in China, Swire needed a solution to manage the forecasted growth of its 10 bottling plants in central, eastern and southern China, as well as the increasing complexity of its products and supply chain. Each of these plants operates relatively independently, but each facility does not manufacture all stock-keeping units (SKUs) that they sell. As a result, additional plants were needed to supply products due to facility capacity restraints.
The company was also faced with more demanding customer service levels, and as a result, its Advanced Planning and Scheduling (APS) center was tapped to provide planning support for a new supply chain joint venture to service all of China's bottlers, of which Swire is a significant shareholder. The difficulty in accurate forecasting was compounded by the seasonality of the beverage industry, consumer marketing initiatives and the complexity of Swire Beverages' nationwide network.
Swire Beverages, an anchor bottler for The Coca-Cola Company, manufactures, markets and distributes Coca-Cola products in Hong Kong, Taiwan, seven provinces of mainland China and an extensive area in the western U.S. Its extensive brand portfolio includes Coca-Cola, Coke Light, Sprite, Fanta, Nestea, Qoo, Bonaqua, Healthwork and Bing Lu. Swire's franchise territory is comprised of approximately 427 sales offices in China, with a total franchise population estimated at 405.2 million.
Build an agile and intelligent supply chain to support its 10 bottling facilities, 47 beverage plants, 75 production lines, five export markets, 153 DCs, more than 280 SKUs and 1.5 million retailers.
Swire selected JDA Software for a number of reasons: JDA's proven track record as a world-class provider of supply chain solutions, the scalability and ease of integration, the rapid implementation and time to see real benefits, as well as partnering with a company that understood Swire's values and cultural challenges and shared a common desire to make a difference.
Optimizing Swire's Supply Chain Operations
Swire transformed its supply chain operations to synchronize with real-time consumer demand across every channel. Swire selected JDA's supply chain management solutions to better manage its 10 bottling facilities, 47 beverage plants, 75 production lines, more than 280 SKUs, 153 distribution centers (DCs), and 2,700 distributors and logistics partners located across China.
JDA Demand helps support Swire's exponential growth across China with improved forecasting capabilities and also enables Swire to pinpoint and predict customer demand to maximize sales. Incorporating JDA Collaborate allows Swire's bottling plants to easily share information over the Internet. JDA Strategy helps to strategically plan optimal capacity and sourcing based on costs and constraints across Swire's entire network.
“JDA Demand enables us to set up the forecasting structure in a three-dimensional hierarchy — by location, by brand and by customer — for all 10 of Swire's bottling facilities across China,” added Huang.
Additionally, JDA Sequencing was implemented at the plant level to optimize materials and resource capacities across each stage of the bottling process, improve plant throughput by reducing change-overs, and perfect the product mix of the individual bottling lines. JDA Fulfillment positions the right inventory in the right DCs, in the right stores and at the right time, while ensuring that inventory is available across the consumer-driven enterprise. Lastly, JDA Monitor allows users to receive early warning of potential problems across the company's network.
Integrating Swire's synchronized view of demand into all of its manufacturing and bottling activities has helped it evolve into a more consumer-driven enterprise. Swire's clear strategies have resulted in more precise forecasts and supply chain optimization.
Swire Quenches Supply Chain Complexity
Swire effectively managed its exponential growth while also improving or maintaining key supply chain metrics. Swire achieved a 24 percent improvement in forecast accuracy, a 10 percent increase in production line efficiency despite tripling its SKUs, and a 75 percent decrease in its out-of-stock rate. Consumers benefited from increased product availability because of the reduction in stock-outs and low inventory levels. Swire achieved process compliance across all operations, as well as revenue growth, increased shareholder value and improved operating efficiencies. In fact, since partnering with JDA, Swire Beverages' sales in China have quadrupled. The Group's compound annual growth rate for 2002-2011 was 11.6 percent.
“Information flow is key to supply chain management. Assisted by information from other IT systems, we can now provide more accurate inventory, sales and order information and consolidate it into the APS system to ensure a smooth flow of information throughout the supply chain. This could not be done without the powerful integration capabilities of JDA's solutions,” said Huang. “JDA's understanding of Swire's business, combined with the company's expertise and realistic ‘can do' approach, have effectively contributed to the successful implementation and real results achieved.”
Committed to innovation, Swire continues to fine-tune its supply chain. JDA solutions are currently being used to establish a vendor managed inventory system between Coca-Cola's non-carbonated supply chain company and Swire that would enable the two companies to share inventories, reduce out-of-stocks and improve supply chain efficiencies. Pilot projects are underway in bottling plants in Guangzhou and Hanzhou.
Achieving Success While Still Applying Local Principles
Swire has been able to cope with rapid growth in both complexity and sales volume against a background of more demanding customer service levels, while at the same time either improving or maintaining all key supply chain metrics. Swire based its supply chain improvement program entirely around the teachings of Sun Tzu, circa 500 B.C., in which this famous Chinese scholar advocates the importance of communication, clear procedures, quality of input information and teamwork — all of which are just as relevant today.
Swire's success illustrates the importance of effective supply chain management and demonstrates how the growing Chinese beverage industry is embracing supply chain solutions while still applying local cultural principles. From the strategy level to the operational level, Swire synchronized its supply chain network, overcame operational challenges and reinforced its leadership position in China's competitive consumer beverage market.