Coke finds MRO is the real thing
It’s information. It’s involvement. It’s indirect materials. Coca-Cola Enterprises got its arms around its MRO spend through a centralized procurement strategy and the input of a commodity council.
-Paul V. Arnold
Twenty years ago, a gallon of unleaded gas cost $1.20. A postage stamp was 20 cents. You could buy your kid a pack of baseball cards for 50 cents. And, a can of Coca-Cola from a vending machine cost 50 cents. Today, that gallon of gas is $1.56 (a 30 percent rise). Stamps are 37 cents (an 85 percent jump). The average pack of baseball cards is $3 (up 500 percent). But you can still get a can of Coke from a vending machine for 50 cents. This was the conundrum faced a few years back by Coca-Cola Enterprises (CCE), the world’s largest Coca-Cola bottler. “This is not a high-margin business,” says Gregg Waterman, CCE’s corporate procurement manager for MRO materials from 2001 to 2003. “The price of our products hasn’t changed much since the 1980s. The only way we could maintain a competitive edge was by increasing operating efficiencies or reducing waste and cost. We had to find where the opportunities existed.” In the past, the solution may have been to purchase expensive manufacturing equipment or to restructure the production lines. “We realized we needed to think differently and look at areas where we could take cost out,” says Waterman. MRO/indirect procurement turned out to be the easy choice. “The company was doing a good job on direct materials, but in doing the homework it was apparent that we weren’t doing anything on the indirect side,” says Waterman. “This huge spend was not being managed. We didn’t even know how much money we were really spending. Needless to say, it was a huge opportunity.” After benchmarking procurement practices at 22 Fortune 100 companies, CCE built an initiative from scratch. It moved to a centralized procurement model, utilized local representatives in a “commodity council” to make key supply decisions and used technology to enable the whole process.
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