China Coca-Cola Suppliers Share Quest to Become World Class
In the path of continuous improvement, many organizations look to vendor development programs to drive lasting results. The goal of these programs is to improve supplier performance for mutually beneficial results, including reduced costs and lead times, improved transparency and collaboration, and increased customer satisfaction. Supplier development is as much about processes as it is about people – the ultimate goal is to develop strategic partnerships with companies that are as invested in your business as you are.
A success story in supplier development
In 2002, Coca-Cola and its China-based bottlers established the China Bottlers Purchasing Consortium (CBPC), a mechanism designed to share sourcing knowledge and best practices across the Coca-Cola system. Since then, CBPC has become an effective way for Coca-Cola to undertake its supply chain initiatives, including the implementation of World Class Operations (MDOs) through the supply network.
Swire Coca-Cola, a Hong Kong-based Coca-Cola bottling partner with a strong presence in the United States, and its partner in Mainland China, COFCO Coca-Cola, were the first bottlers to start the journey of the OMD, fueled by an offer- chain digital enhancement solution called TRACC. From November 2017, they started to extend the best practices of the WCO to the supply network. The same year, the Swire Beverages WCO Supplier Summit was held to encourage suppliers to join the supplier development journey. Suppliers were asked to complete a survey ranking the main weaknesses, and the results were surprising: People’s capabilities and process improvement opportunities were ranked higher than direct cost opportunities (which included transport costs, inventory level and default rate). The results of the survey indicated that the main concerns of the suppliers were the development of skills and capacities and the improvement of the processes.
Eleven vendors then joined the CBPC WCO journey in the years that followed, and a strong focus on operational excellence has helped them achieve a remarkable turnaround in terms of performance, revenue and growth. From November 2017 to March 2020, the collective value of Profit Improvement Projects (PIP) undertaken through the supplier network totaled over 5 million yuan (approximately $ 800,000).
Besides the financial savings, other notable results to date include:
· Increased competitive advantage
· Reduction of material waste
· Create lasting value for customers
· Reduction of electricity consumption
· Reduced environmental impact
· Reduced water consumption
· Improved cost competitiveness and risk resilience
· Increase in process efficiency
· Create a common vision and language for continuous improvement in order to achieve
end-to-end supply chain
· Reduced CO2 emissions of 490 tonnes and water consumption of 11,000 tonnes
Based on the survey, here are six key challenges vendors face on their way to world class and solutions to overcome them:
1. Development of new talent management strategies
In the age of digital disruption, the talent shortage has become a formidable problem for business leaders. The challenges are manifold: Organizations need to quickly identify skills gaps, develop digital capabilities, and ensure employees stay engaged and motivated. New talent management strategies need to be developed to address these issues and should include the following: skills development programs, partnerships with academic institutions and industry organizations, learning initiatives and programs recruitment and retention. Process automation is also a key factor here—by using technology to automate repetitive processes, more time is available for creative problem solving and innovation. The result is a committed workforce focused on meaningful work.
2. Improved collaboration and product innovation
Suppliers can play a central role in the innovation process – opening the door to collaboration from the early stages of product development results in lower costs and shorter development times. Many organizations struggle to integrate suppliers into the innovation process. The solution is to create clearly defined strategies that fully exploit the capabilities of suppliers.
Here are some practical tips to keep in mind when developing a supplier innovation strategy:
· Determine the general direction of innovation
· Identify areas where innovation is sought from the supplier base
· Build a communication approach with the supplier base that describes the focus area for innovation and details the benefits of participating in the project
· Create supplier forums to share learning and innovation; establish channels through which suppliers can network with each other
3. Build a culture of continuous improvement
Committed leadership is a key determinant of success when it comes to building a culture of continuous improvement. Leaders who invest in employee engagement and enabling technology, and who also consistently implement a regulated improvement methodology, will successfully create a culture of continuous improvement.
Here are six steps leaders can take to promote a culture of continuous improvement:
· Lead by example; participate in continuous improvement openly and with enthusiasm
· Constantly ask for ideas for improvement and respond quickly to those ideas
· Empower employees to integrate daily continuous improvement into their own work
· Emphasize the importance of small incremental improvements
· Help share and spread ideas
· Document and celebrate the results achieved through continuous improvement
3. Improving the organization of the workplace
5S is an essential best practice for establishing order and cleanliness in a work environment. This is typically the first best practice to be implemented in a continuous improvement initiative, and it creates a foundation for other CI best practices to thrive. The 5S concept of sorting, shining, tidying, standardizing and maintaining can be used to teach general waste reduction concepts to your staff.
5S is more than just cleaning – it puts the lean philosophy of continuous improvement into practice through continuous waste disposal. 5S also allows management to illustrate how lean enables employees to make positive changes in their work environment. By empowering team members to act, the philosophy of continuous improvement can be fostered throughout the organization.
4. Optimize KPIs
Key Performance Indicators (KPIs) are critical metrics that help organizations assess the performance of projects, individuals, or the business in general. Key performance indicators clearly indicate where the business is and where it should be; they also steer decision-making and highlight opportunities for strategic and operational improvement.
KPIs and targets should be relevant and practical, and all employees should understand how their KPIs relate to the organization’s strategic imperatives. Optimizing KPIs involves identifying the KPIs that drive profitability; ensure that key performance indicators are clearly understood; measure performance on a regular basis; and updating key performance indicators whenever there is a change in strategic direction or priorities.
5. Develop greater front-line autonomy
Leader Standard Work (LSW)—The process to ensure that standard work processes are in place and consistently followed–is vital to empowering front-line autonomy. LSW drives the right behaviors by shifting the attention of leaders to teaching, coaching, checking, and problem solving.
Here are three ways leaders can help frontline workers improve decision-making and empower them:
Formalize problem solving
Structured problem solving will give your employees the tools they need to uncover the root cause of a problem. By formalizing problem solving, finding solutions becomes an automatic and ingrained response that saves time in the long run.
Organize regular gemba walks
The gemba walk takes senior executives to the “real place” where value is created in a business, be it the workshop, warehouse, on-site utility lines or the office environment. The idea of the gemba walk is simple: get there, watch the process, and talk to people. This encourages leaders to talk to process owners and to observe and understand the procedures performed on a daily basis.
Employee coach and mentor
Leaders should focus on coaching, mentoring, and growing your employees. When engaging with their people, leaders may be tempted to provide solutions to the problems workers face. A better approach, however, would be to coach your employees to solve the problems themselves. It saves you time and helps you build a self-reliant, self-reliant workforce.
Implementing the best practices mentioned above will not only help suppliers generate world-class business performance; they will also strengthen relationships between suppliers and purchasing organizations, which will translate into increased business competitiveness and financial results.
Graeme Faulkner is Vice President, China, at Competitive Capabilities International (CCi, a private global business that enables organizations to deliver sustainable results across the supply chain through TRACC, a digital integrative improvement solution. He specializes in the design and implementation of strategies, systems and processes that unleash the capabilities of people and boost organizational competitiveness. He holds a BEng (Hons) degree in Manufacturing Engineering and Management from the University of Strathclyde in Glasgow, Scotland.