October 31, 2007

Suppliers go better with Coke

By DC Velocity Staff

At the Coca-Cola Co., suppliers are treated like good customers.

At first blush, that may seem backwards, but the Atlanta-based beverage giant maintains that it's a formula for success. Coke's supplier relationships are based on customer relationship management (CRM) systems, said Martha Buffington, manager, procurement process improvements for the beverage giant. "We are using value to sell them on doing business with us," she noted during an educational session at the CSCMP conference.

Coca-Cola holds an annual conference for its biggest suppliers every year, and executives on both sides of the table meet periodically to make sure they're on the same strategic wavelength. Coke also holds an "innovation showcase," where suppliers can bring their ideas for new products and process improvements. In addition, Coke helps its suppliers improve their own performance, keeping quality high and costs low.

The company does this with a specific objective in mind—to become a "customer of choice" for suppliers of sugar, flavorings, containers, and more. In Coke's definition, a customer of choice consistently receives preference for resources from strategic suppliers. By making those relationships airtight, the company expects to reduce its risk of encountering supply shortages or delays.

Coke uses a four-step approach that includes reviewing business strategies and determining which supplier capabilities could be leveraged to achieve those objectives; segmenting suppliers according to their strategic and tactical values; determining actions and the associated resources required to carry them out; and monitoring those activities and measuring the results.

It's a successful model that Coca-Cola has begun applying worldwide. Suppliers are evaluated less on volume and cost and more on a cross-functional view of risk versus rewards. The company also works with suppliers to jointly solve problems based on shared metrics and to find value in areas other than cost cutting.