Supply Chain Issues in the United Kingdom

Introduction

Panic buying has returned to the United Kingdom (UK) recently on a scale not equalled since the initial stages of the Covid-19 pandemic in early to mid 2020 (Mellor & Dunn, 2021). Shortages of food and drinks in supermarkets have re-emerged as consumers panic about supplies being restricted until the end of the year (Bancroft, 2021).  Whilst the current focus is on the perceived shortage of petrol, the underlying scarcity is qualified Heavy Goods Vehicle (HGV) drivers for the petrol tankers, and a dearth of HGV drivers generally (Holmes, 2021). This situation has arisen because the UK Driver Licensing Agency has an unprecedented backlog of 40,000 driver applications for HGV tests (Mendick, 2021).  However, a shortage of drivers is only one of the supply chain issues, which are threatening the profitability and reputation of British firms (Frost, 2021). Therefore, this paper critically evaluates the extent of supply chain disruption in the UK by means of a case study of Coca-Cola Great Britain (Coca-Cola, GB), with the purpose of establishing how well it meets its promises to customers. This will be achieved by means of an evaluation of the extent of disruption experienced by the company, its potentially damaging effect,  and identifying strategies that the company can adopt to minimise the short term effects

Supply Chain Management at Coca-Cola GB

Strategic Supply Chain Management (SSCM) is based on the value chain model  (Porter, 2008), in which all operations associated with transforming raw materials and delivering them in the form of a product to the end consumer, are conducted with optimum efficiency so that the value created from the client is enhanced.  Therefore, supply chains are described by as “value-adding relations of partially discrete, yet inter-reliant, units that cooperatively transform raw materials into finished products through sequential, parallel, and/or network structures” (Hult, Ketchen & Arrfelt, 2007, p. 1035). In contrast, when the supply chain is used as a strategic tool it is the means to gain competitive advantage over competitors, and therefore  management of it is referred to as SSCM (Cohen & Rousell, 2013). Therefore, supply chain management must be directed to accomplish the goals described in the corporate strategy and, as a consequence, all other operational activities in all disciplines, related processes, collaboration, and performance management must be focused on optimising it (Cohen & Russell, 2013). Strategic thinking is best informed by attempting to identify all the possible scenarios the organisation could encounter and how to manage them, it facilitates identifying many more opportunities and potential damaging issues, and planning to mitigate them (Schoemaker, 1995). However, whilst  Phadnis and Darko (2021) acknowledge the importance of scenario planning in developing strategy, its use in operational settings has been very restricted, and yet it has immense value in focusing on the operational aspects of the supply chain and what could disrupt them. This is important because unexpected shocks in the environment, suddenly disrupt supply chains and without predetermined potential solutions in place, regaining efficiency and service levels expected by the customers is challenging (Ivanov & Dolgui, A. (2020).

Scenarios enable companies to better manage extreme, unexpected events that impact negatively on business operations and performance. They are characterised by four elements that support managing uncertainty; scenarios improve ways of thinking; predictable or almost predictable future events are uncovered; group think is minimised; conventional wisdom can be challenged (Roxburgh, 2009).  By developing a range of possible events that could realistically impact on the business, and the possible incidents from which they might emerge, there is less chance of human tendency to imagine that future critical experiences will be similar to those encountered in the past.  Scenarios should be developed on the basis of four types of defined outcomes: demographic change; economic action and response to it, for instance an energy crisis; how long a current trend will continue such as a novel technology; scheduled events extending beyond the current strategic plan. Effective scenario planning is typified by freedom of speech, expressing ideas without feeling restricted even if they are potentially extreme, and by being able to challenge conventional wisdom, which in normal circumstance may be damaging for an employee’s reputation. Therefore, scenario planning should enable risks from  disagreeing with certain agreed norms to be ignored and complete openness encouraged (Roxburgh, 2009). The ideas that emerge from scenario planning should then be discussed and those considered the most likely prioritised for further discussion. Plans for each of those priority scenarios should subsequently be developed (Roxburgh, 2009; Zahradníčková &  Vacík, 2014).  However, the level of  success of the outcomes from the scenario planning activity will be determined by organisational readiness for these possible shocks. Therefore, regular training and development interventions are required for all employees to appreciate the major scenarios that may occur, and how to respond to them, in order to minimise their impact on performance outcomes (Ramirez & Wilkinson, 2018).

Coca-Cola Supply Chain

The fundamental objective of the entire Coca-Cola Company’s business is “to refresh the world in mind, body, and spirit, to inspire moments of optimism and happiness through our brands and actions, and to create value and make a difference.” (Coca-Cola, 2021a, p.1). Coca-Cola GB is incorporated into the Europe, Middle East, and Africa segment of the Coca-Cola global business structure (Coca-Cola, 2021b). During the Covid-19 pandemic Coca-Cola’s global supply chain was severely disrupted, some bottling partners experienced temporary or total plant closures, reduced productivity, and distribution was often seriously affected so that retailers and end consumers experienced supply shortages (Coca-Cola, 2021c). The company’s 10K report for 2020 anticipated the risk of possible further disruption to supply chain including shortages of packaging materials (Coca-Cola, 2021c). In October 2020, the company’s Chief Executive Officer reported that it had altered its supply chain strategy to a “new, networked operating model better positions the Coca-Cola system to pursue its Beverages for Life strategy and accelerate plans to streamline its global beverage portfolio” (Coca-Cola 2020). In order to be more agile and focused, the company had halved the number of key brands to the 200 with the most growth potential and promised to enhance its marketing efficiency and to be more innovative (Coca-Cola, 2020).

Consequently, Coca Cola GB’s current marketing slogan Open to Better is hinged on creating hope and optimism in 2021, as a response to the challenges experienced by its consumers by supply chain disruptions relating to the Covid-19 pandemic (Coca-ColaGB, 2021). As part of this campaign Coca-Cola GB has given its distributers in the hospitality industry substantial marketing support, for instance a platform for that provides guidance an expertise for social media advertising, billboard space and to generally identify and consider new ways of attracting customers (Coca-ColaGB, 2021).

Current Supply Chain Issues

Coca-Cola has been experiencing a shortage of aluminium cans since the end of August 2021, which has resulted in consumers reporting shortages of Diet Coke and Coke Zero recently (Partridge, 2021). The Coca-Cola Chief Financial Officer responsible for distribution and sales in Europe, Middle East and Africa segment in which Coca-Cola GB located, suggested the problem was related to several logistics problems, but only mentioned HGV drivers as one example, and this was merely associated with delivering manufactured products to retailers (Partridge, 2021).  Factory staff shortages are also mentioned as a contributor to the unavailability of Coca-Cola GB products (HCA, 2021). The company was additionally threatened with a shortage of carbon dioxide in late September, as the British Soft Drinks Association noted it was amongst manufacturers at risk of manufacturing stoppages as suppliers of the gas were preventing orders being placed more than 24 hours in advance. One of the main factories supplying the gas as a biproduct of its main fertiliser business, ceased the secondary activity owing to the sharp, unexpected rise in gas prices (Buckley, 2021). The company is also vulnerable to shortages of plastic bottles as its major supplier in AlfaUK has been threatening strike action.  The strike is a reaction to the low pay increase offered by AlfaUK of 2%, considered particularly insulting because employees had  maintained operations throughout the Covid-19 pandemic One day strikes are threated from 31 October, 3 November, and 16 November (Ridler, 2021).

Coca-Cola has very recently responded to the shortage of manufacturing materials,   by commissioning three large shipping vessels that are usually employed for transporting grain and coal, in order to compensate for the shortage of container space for its raw materials and finished goods,  owing to the shortage of HGV drivers. Although the vessels may solve the problem, major ports are blocked owing to lack of appropriate labour at the docks, and the company’s Procurement Director of Global Operation suggested it would try less popular ports in an effort to accelerate arrival of the raw materials. Simultaneously locating the materials has become most difficult and costs have increased (Walsh, 2021).

Evaluation and Potential Solutions

Whilst the Coca-Cola company has supported its distributors to generate greater demand, it has not ensured the supply of its products to do so, with the inference that its Open to Better campaign has failed for retailers (Coca-ColaGB, 2021). The demand for Coca-Cola products by consumers has also exceeded supply so that they are also unable to experience optimism and happiness (Coca-Cola, 2021a). The Open to Better campaign was launched despite the high risk of supply chain disruption noted in the 10K report (Coca-Cola, 2021c).  It appears that Coca-Cola and its subsidiary Coca-Cola GB have not learnt how to manage supply chain disruptions as a consequence of their experiences in the Covid-19 pandemic; the new networked system is not functioning appropriately (Coca-Cola, 2020). The shortages occurring in the UK suggest too high a reliance on specific suppliers of plastic bottles and aluminium cans for overseas sources which are managed by procurement executives. The possibility of shock events such as strikes and HGV driver shortages was not foreseen by the company, but it seems to have also failed to manage production staff shortages, despite Covid-19 restrictions on employment practice having been removed in July 2021 (Ferguson, 2021). The Coca-Cola company has shown innovative thinking (Coca-Cola, 2020) in identifying barges as an alternative transportation means but this has been of limited impact with the issues at most large ports.  Therefore, overall, it can be concluded that the Coca-ColaGB has failed to manage its supply chain issues effectively and has not been able to deliver the performance it promised to either its distributors or its end users.

Recommendations

Several actions could be taken to prevent another recurrence of supply chain disruption at Coca-ColaGB and the damage to its reputation associated with the last two interruptions

• Implement scenario planning relating to operations into supply chain activities
• Ensure all employees are involved in scenario planning development and know how to implement the major plans selected
• Identify alternative suppliers for major raw materials and packaging within the UK
• Avoid instigating marketing strategies that have high risk of not being accomplished
• Improve internal people management systems to ensure productivity can be maintained at targeted levels

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