Having interned in the Strategy Consulting practice of Deloitte, I got the opportunity to work

on some very interesting projects for some world renowned client organizations.
One of the projects I worked on was for Hindustan Coca Cola Beverages (HCCB). Deloitte
was engaged by HCCB to provide business process re-engineering (BPR) design and
implementation services across the organization to support their on-going ERP (SAP)
implementation.
The main aim of the BPR project was to assist the ERP (SAP) implementation and also the
delivery of improved HCCB-wide organisational operational efficiency and effectiveness in
the production and distribution functions.
Some objectives of this project were to:

understand and document the current position of HCCB in relation to its processes,
resources and roles
define the optimal arrangements in terms of processes, roles and resources in support
of the HCCBs strategic objectives (To-BE)
design tools and templates for supporting the new processes
provide HCCB with a plan to implement the changes necessary to achieve the optimal
arrangements

We will now focus on the distribution process, out of several processes being carried out at
HCCB like any other organization.

Funnel Model

Fig: Funnel Model

Global Environment
Business Drivers

Growth Drivers
Changing Consumer Preferences
Increased preference for
convenience - rising middle
class & urbanization, working
women
Health-concerns dominate in
developed markets (SARS)
Increasing healthconsciousness in developing
markets
Rising preference for newer
tastes increased travel and
innovation by manufacturers
Increased penetration of
organized retail
Emerging markets highly
under-penetrated
Scaling by MNCs likely to lead
to consolidation likely in the
large fragmented Chinese retail
space
Ramping up by domestic
players in India
Growing private label sales
Newer alternative digital
channels (e.g. online retail)
Continuing margin pressures
Commodity prices expected to
rise further or to maintain their
present high levels
Price seasonality and
fragmented supplier-base in
developing countries

Implications

Changing category preferences

(functional, ready-to-eat)
Stricter food safety regulations
(emphasis on traceability)
Quality and not cost key to success
(esp. for exporters to developed
markets)
Focus on packaging align quantity
& form to evolving fast-paced
lifestyle
Factor local preferences for product
innovation
Country specific channel approach
to deal with retailers account for
market maturity, structure & retail
formats
Big manufacturers, in developing
block, to gain from economies of
scale from retailers drive towards
consolidation
Rising retailer bargaining power to
increase price-pressures
Increase bargaining power with
suppliers
MNCs need to evaluate
merits/demerits of local sourcing;
emerging market firms to consider
global sourcing alternative
Investment in product innovation to

 Beverage move as lots of returnable glass bottles (RGB) which adds

to the transportation cost

50% of the business comes in the peak summer months

Transportation
Seasonality
Managing SKUs

Carbonates typically contribute disproportionately to the volumes

while non-carbs are the future growth drivers. Finding a balance
between the 2 is a challenge
The target consumer is also typically diferent for the two (young
adults vs. mothers)
Trade channels for carbonates (retail) vary from those of non-carbs
(education, hospitality)

Reverse logistics

Companies typically face the challenge in dealing with RGB vs. PET as
it represents an issue of reverse or inbound logistics
Since RGB business model is based on returnability it also creates
an issue of decentralized vs. centralized manufacturing footprints

Transportation

Beverage move as lots of returnable glass bottles (RGB) which adds

to the transportation cost
Natural Mineral Water has to be packaged at source and hence the
high distribution cost

Market moving towards

healthier products

Health and wellness trend is one of the biggest challenges for

carbonated cola drinks
Health consciousness driving demand for non-cola carbonated drinks
Growth in juices, sports/energy drinks market

Switching cost is very low as substitutes are easily available (both in

branded as well as unbranded form) and sometimes even free
On shelf availability becomes paramount leading to high cost-to-serve

Need to counter competitive activity head-on thereby leading to

additional, unplanned expenditure
Several foreign players have entered the Indian beverage market in
past 3 years

Other than white milk, there is very high dependence on front end
marketing activities

Multiple substitutes
Very strong competition
Impulse product category
Challenges

Trends

Global Strategies
Coca-Cola (NYSE: KO) plans to drive revenue growth through innovation, geographic
expansion in developing markets, leading consumer marketing campaigns and improved
bottler relationships, while enhancing margins through effective cost management strategies

Accelerating
Innovation

KO continues to introduce innovative products, product line extensions, and packaging,

to strengthen its product portfolio. During the CAGNY conference management cited
examples of product introductions such as Fanta still beverages in France and readyto-drink coffee brand Illy Issimo in 11 markets. Additionally, the company plans to
extend its Coke Zero platform to Fanta and Sprite. Within emerging markets, KO is
focusing on making its products more affordable for bottlers and consumers by offering
refillable packaging in countries such as Peru and Argentina.

Expanding
Emerging
Market
Business

KOs growth strategy is focused on developing consumption in emerging markets by

creating distribution infrastructure and maximizing volume; building consumer loyalty by
providing maximum value in developing markets; and maximizing profit and funding
future growth in developed markets. Emerging markets today make up 16% of our
total volume globally, but it will be 60% of incremental volume going forward to 2020.
Personal wealth is going to double in emerging markets in the next ten years.
Developing markets actually represent value growth. They currently [represent] about a
third of our total volume and will be about 25% of our future volume growth. We expect
these countries to add about $3,000 in purchasing power per person by 2020.
-President & CEO, Muhtar Kent

Driving
Global
Beverage
Leadership

KO aims at continued leadership in beverage market through sustained and innovative

consumer marketing campaigns. In January 2009, Coca-Cola unveiled a new
integrated global marketing campaign Open Happiness, which is focused on
reconnecting our flagship brand with our consumers in a most effective way. Open
Happiness essentially takes up where the award-winning Coke Side of Life campaign
left off and reminds consumers of the simple but powerful joys of everyday life, including
sharing a Coke with friends and with family. -President & CEO, Muhtar Kent

Enhancing
System
Leadership

KO is focused on improving its relationships with bottlers to increase profit margins

within its bottling system. Last September we gathered our top 40 bottling partners
who represented approximately 80% of our global volume for a meeting to begin the
creation of a shared vision going forward to 2020. I'm happy to report that we have
greatly improved our system margins in critical countries like China, India, Philippines,
Germany and other markets under the leadership of our bottling investment group, and
this significantly puts us into a significantly better position as we confront the current
economic crisis. -President & CEO, Muhtar Kent

Cost
Management

While it continues to invest in marketing and advertising, KO is focused on sustaining

its single digit SG&A as a percentage of revenue position. The companys cost-saving
program launched in 2006, aims to generate $500 million in operating savings by 2011.
We have reduced the number of ad agencies from over 80 to less than 35 globally,
focusing on fewer, bigger, better agencies to drive coordination, scale and lower fees.
(Opportunity) also exists in streamlining and enabling our $60 billion supply chain.

The Organization

Organizationally HCCB is divided its market into 8 zones. Each zone reports into
corporate.
Zones reflect the same functions as that of corporate and are led by a zonal VP
Zonal VP is a profit center and so is the Operations VP at corporate level
Commercials is responsible for sales force training, key account management, coolers
management and DME
Operations look into sales execution
Each zone identifies its HVOs (High Volume Outlets). Operations extends various
trade discounts to HVOs. The discounts are primarily controlled by seasonality, type
of product sold and competition pressure.

HCCB has also made significant investments in Systems across the Supply Chain, including a
comprehensive ERP system, Order taking and Route Settlement Hand-helds, Datawarehousing, Work-flow systems and these have been well received across all levels of users.
HCCB has recently created a new Organization Structure to reduce the number of layers in
the Supply Chain
The objective of the assignment was to provide strategic direction to business and to prepare
HCCB for its next wave of sustainable and profitable growth over the next five years by
reviewing, redesigning and implementing key processes

Business Process
From raw materials to sales to the customer the following is the high level end to end
business process:

KO manufactures and sells concentrates and syrups to its bottlers, who are responsible for
manufacturing, packaging, and distributing final KO products to customers and vendors.
The Coca-Cola system comprises of KO and more than 300 bottling partners worldwide. KO
manufactures and sells brand concentrates and syrups of its brands to bottling operations and
conducts brand marketing. KOs bottling partners are responsible for the more capital-

intensive processes of manufacturing, packaging, merchandising, and distributing the final

KO-branded beverages to customers and vending partners.
KO owns bottling operations outright, and has smaller ownership stakes in others. KO does
not own or control most of its bottling partners. Specifically in FY08, bottling partners, in
which KO did not have controlling interests, distributed 78 percent of KOs worldwide unit
case volume.
The distribution process is an integral part of the complete business process since this is
how the beverage reaches the retailers and finally the consumers.
For distribution, HCCB divides the areas into direct and indirect markets.

The Distribution Process

Looking specifically at distribution in direct markets like Delhi and Mumbai.
AS-IS PROCESS:

Fig: Distribution in direct market

The Area Sales Manager (ASM) instructs the MD/Sales Agent to take orders from outlets in
the Area. The area is divided into beats which have outlets. The MD takes the orders from the
stockist and as many outlets as he can, the Depot Tel-Sell takes the orders from the outlets
where the MD could not visit.

These orders are then documented and sent to the ASM who then forwards them to the depot
where the Delivery Van is loaded. The MD accompanies the Delivery Van and delivers the
stock to the outlets.
The outlets are divided into 5 categories Diamond, Platinum, Gold, Silver and Bronze,
depending on their average order quantities and discounts are given accordingly to them.
Stockists are supposed to make deliveries to smaller outlets which are not covered directly by
the MD.
As deliveries are made, empty bottles are collected along the same path and taken back to the
warehouse/depot where the finance function employee evaluates the deliveries, returned
bottles and revenue collections.

Inefficiencies
In the previous process we see there are certain inefficiencies like

Duplication of effort
Opportunity for automation
Steps that need to be checked, improper controls

1. A major issue was the manual documentation of orders collected by the MD, and the
Depot Tel-Sell which was sent to the ASM and finally forwarded to the Depot
Warehouse
We see that in this case there is not just redundancy but also scope for
automation especially with the implementation of advanced systems including
ERP by HCCB.
2. Another issue we see in this process is concerning different discounts to various
outlets. Greater discount is given to Higher Volume Outlets (HVOs) which are given
discounts on the basis of the category they belong to. This fact is manipulated by the
MDs for personal gains unethically.
How this happens- The MD has to takes an order from 3 outlets 1 diamond,
1 gold and 1 bronze. The diamond outlet places and order of 10 cases, the gold
outlets places and order of 7 cases and the bronze outlet places an order of 3
cases. He will report this order to the ASM as 14 cases for the diamond outlet,
5 cases for the gold outlet and 1 case for the bronze outlet. He manipulates the
order in such a way that the total remains the same and while delivering he
makes sure the delivery is made according to the original order, ultimately the
sales promotion from HCCB reaches the pockets of the MD rather than the
outlets.

To Be State after Re-engineering

Different kind of recommendations can be made to move towards the To Be state. These
recommendations can be put under the following categories:

Automation of manual activities

Work elimination
Transfer of responsibilities and personnel from one department to another
Job redesign
Measurement plan for tracking process performance
Documentation of work procedures
Training to cover the new procedures
Re-arrangement of the work force

In the To Be state efficiencies are achieved primarily by implementation of RoadNet

software and it integration with the ERP. All the orders are now collected by the MD/Sales
Agent using handhelds which directly upload the data to the RoadNet server and the RoadNet
server will on the basis of the order generate the route and quantity map and rpvide the same
to the warehouse from where the Delivery Agent will accompany the Delivery Van to the
outlets. In this scenario, the Sales Agent will no longer accompany the Delivery Van but
Delivery Agent will (SOD is implemented).
Even the finance function now only has to access the handheld for the correct record of
deliveries and empty cases saving a lot of time.

Design Attributes for Order Collection and Delivery Process:

Element

Attributes

Input
Processing

Output

Collection of orders on handhelds

Automated collation of data
Order processing and route generation is done
by automated system RoadNet
Manual data forwarding is eliminated
SOD at order collection and delivery to avoid
loss of sales promotion
Faster process, best possible routes generated
Loss of sales promotion reduced