Friday, November 21, 2014
Coca-Cola Freestyle's Innovative Approach to Supply Chain Management
In preparing for this week’s class, I was particularly interested in the article “How technology can drive the next wave of mass customization.” First, I started to consider all the customized products that I could think of, for example: vistaprint.com, Hungry Howie’s pizza, Charles Tyrwhitt shirts and Starbucks. When I then started to consider technology and supply chains alongside customization, I focused on Coca-Cola’s Freestyle machines.
You may have seen these machines at local restaurants, like Five Guys Burgers and Fries, Qdoba or Moe’s. The machines are soft drink dispensers that allow customers to choose their own beverage from more than 100 options or customize their own drink. The machines are fun and excite customers, but they do more than just amuse customers, they provide valuable supply chain information for Coca-Cola and its partners.
Sean Culley wrote “Transformers: Supply Chain 3.0 and How Automation will Transform the Rules of the Global Supply Chain,” which discusses the innovative Coca-Cola Freestyle project. Culley explains that the machine was designed by an Italian car firm and that it uses pharmaceutical technology to create its specialized beverages. The machine automatically reports supply and demand information to both Coke and the restaurant/organization where the Freestyle is located.
The article quotes a Coca-Cola spokesman, who says, “Freestyle’s data tracking technology gives us the ability to gather consumption data to optimise our product offering and assess where there are opportunities to create new retail brands. These machines also help our trade customers to manage their beverage inventory more effectively so they have the right brands in stock.” Not only does the Coca-Cola Freestyle help the supply chain, it also drives sales up by hundreds of percentage points where it is installed.
In another article, “Driving the Top Line with Technology,” Coca-Cola’s CIO, Ed Steinike, discussed the consumer-packaged goods’ trend of demand driven supply chain systems, and he also talked about the Coca-Cola Freestyle, explaining that it “is effectively a complex and sensitive enterprise-resource-planning environment.”
Steinike describes the machine’s supply chain system: “The computer records all the data involved in every single pour. Each fountain knows when it’s running low on certain products. We are also using automated ordering in many Coca-Cola Freestyle locations, whereby the fountain can build its own orders for supplies and place them directly into the system. It would even optimize the order so that you pay the lowest possible delivered cost.”
The article also conveys that while the machines make customers happy and aid the supply chain, they also serve as an important source of customer data for Coca-Cola. Coke is able to monitor the drink choices of customers, which enables them to develop new products and predict their demand in different regions.
Finally, “Coca-Cola Freestyle Provides Company with Valuable Supply Chain Research” is a blog article that further details the way that Coca-Cola Freestyle gathers continuous and instant data on the preferences of their customers. Richard Gross, Group Director of Enterprise Business Solutions for Coca-Cola, describes the Coca-Cola Freestyle project as allowing Coke to have a “pure demand driven Supply Chain ecosystem.”
I was instantly intrigued when I first saw the Coca-Cola Freestyle, and I thought about all the marketing innovations it brought, but I never considered its ability to aid the supply chain. The technology’s ability to provide instant information on supply levels and demand for products should simplify some of Coke’s business processes and allow them to avoid stock outs. I know that the machines have been used for several years, but I wonder what their plan is for further expansion.
I am also interested to see if other industries or companies will be able to use this technology to create additional instant customization opportunities. Maybe a popcorn manufacturer could create a machine for movie theaters that allows customers to choose special flavors or mixes to create their own personalized snack. Gyms could develop a machine where customers could input preferences and goals, and the machine would create customized, original workouts for them. This machine would be able to collect data about gym preferences to allow the gyms to meet the needs of customers by assuring that the right amount of the right equipment was available. These ideas may already exist or may not be worth the investment, but it is exciting to think about what the future might hold for customization.
1. Have you ever used a Coca-Cola Freestyle? What was your experience? Was it easy to use? Did you notice people experimenting with flavors or sharing ideas for new beverages? Do you think Coke should expand the program further?
2. Can you think of ways to apply this idea or technology to other products or industries?