Supply Chain Best Practices Born From Adversity, COVID-19 Learnings

Keith Woods

Group Director, Logistics at The Coca Cola Company

Learning Objectives

The coronavirus pandemic has put supply chains front and center, especially for brands like The Coca-Cola Company where products have a shelf life, and that creates added pressure. COVID-19 has been the “ultimate supply chain audit." Supply chain has been front and center and the pandemic tested Coca-Cola’s supply chain in many ways. It gave the company insights into its leadership capability and flexibility, and raised the importance of communications between suppliers and customers. From the adversity of COVID-19, several supply chain best practices were born.


Key Takeaways:



  • During COVID-19, we've found that leadership has been our greatest asset; more valuable than any technology, process or operations

  • As it relates to consumer buying habits, there was no roadmap. We had never seen anything like COVID-19 and was at a lost when it came to informing the supply chain of demand

  • For many organizations, the ability of its supply chain to successfully execute during COVID-19 determined an organization's success and sometimes it's viability


"I think people are just as motivated and feel rewarded by working in such an environment and want to do those things to make the company successful."

Keith Woods

Group Director, Logistics at The Coca Cola Company

Transcript

Hi, I’m excited to be here with you today. My name is Keith Woods. I am with the Coca Cola company, and part of what we call our product supply system. I am Regional Logistics Director. What I’m going to talk to you today about is best practices as a result of what we’ve all recently gone through with COVID-19. So I’m excited to bring this topic to you. Hopefully, you’ll be able to [inaudible] some things for your supply systems. Again, my name is Keith woods with the Coca Cola company. I’ll be talking to you about supply chain best practices as a result of COVID-19. I’m very excited to bring the topic to you.


I’ve told a lot of people that COVID-19 has been the ultimate supply chain audit. There’s a reason that I say that. If you go back to March, and think about where we were then, I know here at Coca Cola, we were doing quite well. The stock price was up, we were seeing price that we had not seen before. From a supply chain and service standpoint, we were realizing service levels that we hadn’t seen. We determined that by on time in full both of those numbers were looking good. So we were cruising along, and things were certainly going well, and then COVID 19 hit. As you know, our world began to change.


The reason I say that COVID-19 has been the ultimate supply chain audit, because it was at that time, that there was certain parts of our business that we all got tested in those areas. But I was reminded of a saying by Napoleon Hill, and there’s on the left to the other slide, “Every adversity carries with it a seed of equal or greater benefit.” That’s certainly been the case here at Coca Cola because even though we’ve gone through challenges as a result of COVID-19, from that, there’s been born several best practices. That’s what I’m here to talk to you about today. I want to share those things in four areas.


One, our supply chain focus certainly has changed. Collaboration, how we collaborate with not only our customers, but our suppliers. Technology, how we use that technology to bring science to solve, as I like to say. More importantly, leadership. We really had a leadership step up to the forefront of our business. I want to talk about some of those.


I’m sure many of you experienced where you’re spending more dollars on the spot market now because of the reduction and carrying capacity. We also seen our business change and our retail sector. We saw a spike in demand that we couldn’t keep up with and couldn’t produce enough product. Then, we saw an area of our business, such as restaurants and stadiums, where it suddenly tanked. So we’ve had to make adjustments, and both parts of our business as a result of that. The other key challenge was raw materials. We got a lot of raw materials from China, like many of you. As a result of the boards being shut down there, we’ve had to make some supply chain decisions that has allowed us to maintain supply chain continuity.


Probably like most of most of you, you’ve seen a shift in your supply chain focus as a result of COVID—we certainly have. Prior to COVID, we talked about speed, getting things fast just in time to avoid having inventory. We focused on cost, but now we talk about agility, flexibility, being able to change things on a dime, and more importantly, reliability and continuity of supply. Those things are at the forefront now. So what you’ve seen is that conversation and focus change as a result of COVID. A lot of that’s been driven by some of the things that we certainly have gone through in our supply chain, such as carrier capacity being tightened.


Let me talk about some things here that we’ve done as a best practice. If you follow Coca Cola, you probably heard that we are eliminating up to 200 brands or SKUs. So as part of that effort, we shifted focus and prioritize SKUs during COVID, and made a decision that instead of providing the full portfolio of our SKUs, we will produce the limited amount of those SKUs. So those are things that we have done here as a result of COVID, and has lend itself to the SKU prioritization effort that we’re doing as a company.


The other thing I talked about, with some of the borders being closed, such as China. We’ve had to revise our strategy in terms of single sourcing certain items, ingredients, raw materials, [unintelligible] producing somehow finished goods at one plan. We’ve had to revise those strategies and dual source some of those things to ensure redundancy, so that we can better respond to in times like this where our hands are not as tied. So those have been good things that have come about.


Lastly, we revised our inventory strategy. I talked about just in time. Certainly, that was a focus for a lot of us. Less inventory, less carrying costs. But we’ve found that, strategically, plan inventory allows you to mitigate some of the risks and the things that we’re seeing as a result of COVID. So we revised our inventory strategies. All good practices as a result of shifting our focus from speed and cost to agility and continuity of supply.


Another best practice that we’ve done that has been accelerated, and that is leveraging different modes of transportation to obtain capacity. I talked to you about spinning more money on the spot market as a result of reduced capacity. So one of the things we’ve done and has become part of our overall strategy is we have a facility in Monterrey—production facility. What you see on the slide there is our distribution point for that product is made in Monterrey is immediately shifted over to Laredo, Texas, and is distributed out to different points throughout the US. So what we’ve done is instead of relying just on over the road transportation to move that product, we’ve developed strategy around ocean movement. So now we’re moving that product up through the port. So that’s less than some of the reliance on over the road capacity. Not only that, we’re starting to move product via [unintelligible] or rail.


The introduction of those modes have lessen our reliance on over the road capacity. Not only it has addressed our capacity issues, but it’s also addressed some other challenges, such as environmental sustainability. We’ve seen carbon dioxide saving as a result of leveraging those different modes. We’ve also seen shipping costs go down because those modes, coincidentally, were cheaper than going over the road. So, again, another best practice as a result of having to respond to these times. The other area where we’ve been able to leverage and do what I like to call putting science to solve. Again, I’ll talk about some of the challenges that we faced during COVID.


07:45

Like many of you, we struggled at the dock because of reduction of employees having to quarantine, actually having to stay out because of having COVID, so fewer workers to do work. We also faced some strange supply chain system as a result of our suppliers not being able to produce raw materials, ingredients, and some of the packing supplies. So we’ve had to adjust to those things as well. We’ve also had to deal with some of the border crossing, not only here in North America, but again, overseas where we rely on products coming from afar.


08:30

As I said before, through these times, we have come up with some best practices. While we had invested in a digital supply chain, we accelerated those projects and that focus. So we are moving faster toward transforming our supply chain and having a digital DNA, which is so important to being able to survive these days.


08:55

The other areas where we’ve done some really good work is route real time visibility, because what we’ve found is to enable the best use of our resources, we’ve had to have real time visibility to understand where a truck was relative to some of our loading facilities. I’ll tell you one of the areas where we’ve seen a real benefit, where we’ve turned some waste into more use of our labor capacity has been on the dock. We have one facility that was picking products, staging it, getting it ready for pickup, only to not have a courier a show up because either we can get the courier or they were late or they were delayed because they were held up for eight hours at a customer because of COVID concerns, what have you, and resulting in just wasted labor. So what we’ve done is implemented and leverage forecasts to give them real time visibility to when that truck was arriving. As a result of that, they are able to make decisions now of when they need to [inaudible] how they use those resources, so they don’t pick that product at unless they know that drivers about four hours away. So another example of bringing science to solve resulting in a better use of capacity.


10:13

The other area where we say real growth is around demand forecasting. As you’re aware, once COVID hit, there was no roadmap in terms of consumer buying habits. We’ve had to revise how we think about demand forecasting where we got the signal from to ensure the integrity because that is the piece of information that determines what your supply chain is going to do. So certainly, we realized that, particularly during these COVID times, and we’ve seen some real wins in that areas as well.


10:50

Another area in terms of where we brought science to solve is in the area of having contactless transportation. Once a driver comes into our facility using electronic bill to enable that driver to interface with our facility without coming into human contact with someone else. Therefore, reducing their exposure not only to drivers exposure, but those that work at our facilities. Again, bringing science to solve. Now, I’ll talk about how that technology work.


11:26

The other area, while not it process, but certainly integral to any supply chain, has been metrics. We have leveraged Power BI to create what we call one source of truth. That’s been very important in terms of us monitoring and determining our success in supply chain. So using those types of tools have given everyone at one source of truth, where we’re able to revise and shape the things we do to be successful here in our Supply Chain. Again, I’ll talk more about leadership a important as any technology or process.


12:05

Here’s some of the technology and some of the partnerships that we’ve created to enable our Supply Chain, where we’ve gotten a lot of the best practices that I just mentioned. In terms of execution, we use Oracle Transportation Management System to open one of our partners in terms of getting visibility into load capacity at the lane level. Here, we’ve been able to leverage that application to create visibility into how much capacity we’re going to need in a lane that informs our conversation with the carrier. It allows them to better position their equipment to meet our needs. So, again, another best practice.


12:51

I talked about visibility. One of the partners we partner here with is [unintelligible] in getting real time tracking into when that low is arriving. Therefore, as I’ve talked to before, that we can make good decisions in terms of our labor capacity, when, and where to use it. Certainly, that’s been enabled by [unintelligible].


13:13

Market insights. We’ve seen a lot of gains there, where instead of looking at our internal walls, we’re trying to understand what’s going on in a larger market as it relates to transportation, supply, things of that nature, what dynamics are at play. So we’ve leveraged that information to better inform some of our negotiations, and doing benchmarking to understand where are we relative to other benchmarks in the industry, where we can start to improve and understand some of those gaps. So, again, bringing science to solve.


13:51

I talked about the digital bill lanes that enable someone to contact with low process. So this is just an overview of how that process works. If we look over to the left, this is an example of a digital bill of lane information flow, and how it works. Basically, the driver checks into the facility. He uses a QR code, which is a quick response code to create a unique shipment identifier number. That information is then sent to the driver. The driver in this typically transmitted via a cell phone, which everyone has. Once that driver gets that information, checks down on it. He’s checked out, he signs off on a bill lane, and he’s off and running again. Again, it does enable us to create a more safe environment not only for that driver, but also for those that work inside a box facility.


14:47

We’ve talked about technology and other things, but we’ve also seen a change in collaboration. That’s changed in terms of how we collaborate with key partners. Those key partners could be transportation providers, they can be [indistinct] operations and warehousing. We also use a lot of co manufacturers. It could be with customers that we provide product to that can be in terms of returns, [inaudible], or demand forecasting. Even things like contract compliance, those have become a topic of conversation, because of some of the shared risks that we’ve seen as a result of COVID.


15:34

Here’s some of the things that we’ve done that I think once COVID goes away, you’ll still see these things as part of the way we go to business and collaborate. One is developing a carrier friendly focus and strategy. We came up with a 12 point plan, because we realized, in this market, how important it is to to get that carrier selection, in terms of which freight they will pick up and not pick up. So we wanted to position ourselves to be carrier friendly because we wanted to win that choice. We put together 12 point plan to make sure that that thing happens, we get that driver.


16:17

We’ve also evolved that S&LP processes. I talked about demand forecasting. So we we’ve leveraged our technology to get a richer signal, where we are collaborating and sharing that information and talking about it any gaps against the demand and capacity. We’re proactively mitigating against those thing, and we’re doing that in conjunction with our customers. You’re seeing that more as a result of this COVID environment and the lack of a consumer buying roadmap. So you’re seeing the need to better collaborate around demand signals.


16:18

The other area has been shared risk. As you know, because of force majeure, suddenly, that is a clause that is typically a contract language, whether or not a company exercise that has meant collaborating and understanding the cost impact of those things on both sides of the equation. So now we’re having conversation about how to create win-win situations, so that both companies come out okay, and share the risk of the times that we’re going through.


17:33

In terms of collaboration, we’ve developed strategies with regard to our suppliers and how we get to business. So recent national bid that we have with our carriers, we’ve come up with a program that rewards dependability. So those carriers that have given us capacity, we can depend on day in and day out, we want to make sure that they are rewarded in future bids for doing those things. We’ve scripted out an incentive program for those who who meet our needs at the time that we made them to make sure that they become strategic partners for the long term. Again, a lot of this has been forced as a result of these COVID times.


18:20

Lastly, but not least, is leadership. I will say, of anything I’ve talked about in terms of technology or process, leadership is as important of an item of anything that we have here. Certainly, at Coca Cola, we’ve seen our share employee health concerns, having plants and producing products and things of that nature. We’ve lost productivity as a result of absenteeism. We’ve also experienced the social challenges. We’re served to communities that fell under assault as a result of police shootings and desperate, tumultuous political divide. So we’ve had to mitigate all these things. We’ve had to motivate a workforce in the space of these in the face of these obstacles to continue to come in to work to produce products that we need for our consumer, all while showing empathy for what they’re going through when they go home. We’ve done a great job here at Coca Cola doing those things.


19:26

How do I know we’ve done a great job? Because we continue to supply our customers with products that they need every day with minimum supply chain continuity disruption. You don’t do that unless you convince people that you care about them, and that you have their best interests at heart so that they can continue to do those things they do for you weigh on every day. We’ve done that here at the company.


19:53

Some of the things that have enabled us to do that investment employee safety. We’ve we’ve done the pay increases. We’ve enacted the shift separation, even though they’ve lost productivity. We’ve invested in the temperature scanners and the PPE. So our employees have seen us write the checks in terms of ensuring their safety, so that they can come in and do the things that we want them to do well. That really resonated with our workforce.


20:23

The other area we’ve done a great job is in leveraging Yammer. Yammer is our social media platform, so to speak, that allows our employees to have a voice. Everyone from the shop worker to the executive uses this platform. They openly discuss the concerns of the day, whether or not is how they feel about some of the social challenges that are going on. Those things are discussed openly. They’re in a transparent manner that allows everyone to bring all of them to work and feel like they can be heard. I really think that’s really done well with our employees in terms of showing care and empathy.


21:06

The other area that I’ve seen come to life for us here at Coca Cola is just the power of transparency, and really allowing and showing empathy with employees in terms of how we really feel about what’s happening not only in our workplaces, but our communities. Just the power of transparency has really solidified relationships. I think people are just as motivated and feel rewarded by working in such an environment and want to do those things to make the company successful. It’s not hard for them to—I know it’s certainly not hard for me to get out of bed and go to work—because of a lot of those things in place.


21:17

Last is just the authentic and assessable executive leadership. I know, during the George Floyd shooting, it was a tough time for the country. We wanted to hear from our leaders. We wanted to know what our leaders thought about what was going on in our communities. I have to applaud our executive team here. They not only stepped up during that time, but they spoke with passion. They spoke in a way that you felt that we were not only authentic, but assessable. You felt like the pain of the community was sincerely felt by them. They were not insulated from what was going on. That really resonated with associates—I know it did for me. Of anything I talked about today technology process, I would say leadership has been our biggest differentiator, and a lot of best practices as a result of having gone through this COVID time and having to motivate a workforce to keep going despite COVID, despite some of the social challenges. Those things will serve us well when we’re well past COVID.


23:07

It’s been my pleasure to bring this to you today. I would invite you to leave any questions or input that you have below. Again, my name is Keith Woods for the Coca Cola company. I’ve enjoyed, and I look forward to meeting everyone once we’re past this COVID pandemic. Thank you.


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