For Coca-Cola Mexico, things go better with logistics

 Written by: Ricardo Castillo Mireles 2005

    Coke's supply chain serves customers even in the furthest reaches of Latin America

Delivering the right shipment to the right end customer can be easier said than done -- but the success or failure of a company depends accomplishing just that task. With this thought in mind, here is a continually evolving success story.

    As a younger reporter, back in 1972, I went to a village named Cancuc in the southeastern Mexican state of Chiapas, 50 miles from the Guatemalan border. After an exhausting climb up the hill on which this Mayan town is located, I went to the village's sole grocery store, only to find the shelves were virtually empty. The only two products for sale were animal crackers and Coca-Cola.    

    After taking some photos and trying to talk to the villagers -- there's no Spanish spoken in Cancuc, just Mayan -- I trekked downhill to the village of Oxchuc. On the trail, I came across a man who was obviously the Coca-Cola supplier. He held a whip in his hand which he used to gently touch a mule's hind as they moved uphill. He was on foot, constantly cajoling the mule, which was loaded down with eight wooden crates holding 24 glass bottles each of Coca-Cola and a couple of boxes of animal crackers.

    This remembrance taken from my reporter's notebook is not all that important except for the fact that then, as now, the Coca-Cola Co. continues to improve its distribution capabilities every day. It has an impressive logistics system involving its 13 franchised bottling companies, 60 production plants and 428 distribution centers (DCs) spread throughout Mexico, manufacturing and distributing 15 brands of non-alcoholic beverages, ranging from traditional Coke to PowerAde.

    To continue its success in the second largest consumer market outside the U.S., Coca-Cola has established an umbrella organization in Mexico City where it controls the distribution network for all areas. Hands-on distribution is handled by its 13 franchisees. Only Coca-Cola Mexico (as the Mexico City offices are known) reports to corporate management in Atlanta, while the franchisees report directly to Coca-Cola Mexico.

    The relationship with franchisees is very close. The main office distributes "secret formula" syrup to them on a come-and-get-it basis, and designs and leads advertising campaigns in which franchisees participate at their own level.

    Importantly, the Mexico City office designs point-of-sale service management tactics, involving a veritable army of order-takers furnishing it with data. Coca-Cola Mexico's major contribution to its franchisees is to deliver the correct logistics strategy for each of them, who in turn place products at the point of sale. 

    揂ll bottlers now have computing systems which, within a few hours, review all routes and sales territories,?explains says Antonio Grife, Coca-Cola Mexico's supply chain, warehousing and transportation officer. 揟ruck and workload scheduling for point-of-sale distributors used to take months but now are fully sensitive to real-time market demands.

    The franchisees are in charge of physical distribution, and in a nation of stark contrasts between urban and rural areas, no two distribution routes are the same.

    Antonio Elizondo, supply chain management planning assistant manager for the company, says operations are seamless. At its headquarters, "Coca-Cola delivers to the bottlers planning processes developed for the entire supply chain, going from raw material to final customer deliveries,?he notes. 

    In the end, however, bottlers design their own distribution plans.

    Rafael Trespalacios of  CIMSA, which bottles and distributes in a franchised territory in the western Mexico state of Michoacán, notes that rural distribution is a way of life in which trucks have to be ready all the time. For instance, we service the town of Huetamo three times a week over a dirt road,he says. To be efficient, trucks have to be constantly fine-tuned. A truck in bad shape can seriously alter distribution schedules due to a breakdown.

    All franchisees own their distribution centers, trucks and whatever type of transportation is required for efficient distribution. From Huetamo redistribution is made to farms and hamlets by whatever means necessary, including by burro.

    In total, the 13 franchisees own approximately 21,000 vehicles servicing 11,000 established routes, which total 3.5 million visitations a week by sales personnel. Routing, however, is constantly changing due to rapid population movements within Mexico, requiring daily updating to keep production consistent with demand.

    It's like conducting a daily census.

    "Coca-Cola Mexico constantly studies available computing software and technology devoted to better business practices," says Elizondo. "All of it is aimed at creating a horizontal distribution scheme in which are located our customer's [mom-and-pop] retail stores as well as larger stores and supermarket chains. With this data we can better forecast and recommend route optimization and more strategic positioning of DCs."

    Changing seasons and holidays influence Coca-Cola sales. Peak demand times are at the beginning of the hot season, during Easter season, as well as during the Christmas holidays. In autumn, sales drop a bit just as they during the winter months of January and February.

    Two of the 13 franchisees are considerable larger than the others. Coca-Cola FEMSA is Latin America's largest bottling company, with a presence in Costa Rica, Venezuela and Argentina. The Monterrey-based company is part of a large conglomerate. FEMSA (Mexican Economic Foment Inc.) has four other divisions, including beer, packaging, marketing -- with over 1,300 Oxxo and Matador convenience stores in the country -- and FEMSA Logistica, which designs distribution operations for the rest of the companies in tandem with Coke's U.S. headquarters.

    Coca-Cola FEMSA covers almost half of Mexico, including the 23 million inhabitants of the Mexico City metropolitan area.

    The second biggest franchisee is Arca, a rather new company created through the merger of smaller bottlers in northern Mexican border states. 

    While FEMSA favors double-dollies for distribution in heavy Mexico City traffic, Arca distributes in flat-nosed trucks, known as "chatos," which can carry more bottles and are fuel efficient. For urban distribution in the hot cities in northern Mexico, the truck's short fronts can easily make turns in the narrow streets of smaller cities and towns.

    In Merida, in the Yucatan peninsula, a smaller company, Grupo Peninsular, needs a wide range of vehicles. Roads are not always available due to summer rains from constant storms. Often hurricanes from the Caribbean force the bottler to employ different truck designs. Grupo Peninsular is constantly experimenting with new trucks.

    "An evaluation of a vehicle is made through performance tests to determine if the size, motor, transmission and differential meet our demands," explains Raul Cruz, the company's transportation and logistics director.