Managing Complexity Through Data Warehousing

Coca Cola Japan uses a solution from NCR Teradata to manage almost 1 million soft-drink vending machines.


Supply chain executives sometimes say their job is simple- just get the right product to the right place at the right time to satisfy customers.

In practical terms, however, this can be a huge challenge, requiring agile logistics coupled with expert use of strategic data to create accurate forecasts, which in turn must be readjusted continually to reflect actual item movement––all while minimizing operational costs. Rather than a simple job, in the real world the supply chain executive's task may be more like juggling flaming torches while balancing on a ball.

For most companies these days, accumulating the kinds of data necessary to drive the supply chain is not the problem. Raw data in today's business world is fairly cheap and plentiful.

The real challenges and opportunities lie in how the mountains of data that may be collected are managed, analyzed and utilized. The crux of the issue is not unlike the central challenge of the supply chain itself: how to get the right information to the right people at the right time, so they can make the right decisions.

The more complex the marketplace, the more complicated the challenge. One example of how some companies are solving this puzzle is provided by the Coca Cola Japan Group, which is using advanced data warehousing techniques to manage vending machine operations.

Complex Market, Short Product Lifecycles

The beverage vending market in Japan is the very definition of complex. The country has an installed base of approximately 2.4 million soft-drink vending machines, including nearly a million that sell Coca Cola products. In Japan, these machines typically supply both hot and cold products, with each machine stocking 20 to 30 different SKUs, including a host of beverage varieties not seen in the U.S.

The durable life of hot products in the vending machines is typically just three weeks.

While the vending environment is saturated, with almost no room to add more machines, the rate of new product introductions continues to increase.

According to the Nikkei point-of-sale analysis, between April 2005 and March 2006 some 995 new drink products were introduced in Japan-a typical annual rate.

With so many new varieties coming into the market each year, it is not surprising that product lifecycles continue to shorten. Many new products come and go in the space of just a few months.

At the same time, the vending market in Japan faces new and increasing competition from other channels, particularly convenience stores. While the vending industry is highly developed and more complex than in the U.S., widespread growth of convenience stores in Japan is a recent phenomenon. In the last five to 10 years, they have become a popular destination for young people in particular, with most now open 24 hours and offering other attractions such as ATMs and kiosk terminals.

C-stores have proved formidable competitors in the beverage market, offering even more choices than Japan's already well-stocked vending machines. This is true particularly in the category of PET-packaged soft drinks, which have grown in popularity compared to the canned products more typically available from machines, in part because PET bottles are re-sealable.

In a market that puts a big premium on novelty, coupled with growing preferences for fresher product and new "healthy" drink varieties, convenience stores and other retail outlets are providing stiffer competition than ever before, resulting in a significant loss of market share for vending operations over the last decade.

From 1998 to 2002, vending's share of the beverage market shrank from 44 percent of total units sold to 38 percent, as the percentage of sales through retail stores grew from just over half to 62 percent of total beverage purchases.

In that same period, the industry average number of cases sold per machine decreased from 290 annually to 254 , while the total number of vending machines grew by less than one-tenth of one percent.

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