The Coca-Cola Company
 Develops products
 Produces the advertising and
programs to support those products,
and
 Sells syrup concentrate to Coca-Cola
Enterprises and other bottlers, etc.
Coca Cola Enterprises
 Combines the product concentrate
with other ingredients to
manufacture and package our
beverages.
 Markets and distributes products to
retail customers and consumers.
Coca Cola Enterprises
 The largest soft-drink bottler in the world,
 The Coca Cola Company owns 42 % of
the outstanding common stock of CocaCola Enterprises
 Net concentrate/syrup sales to Coca-Cola
Enterprises were $3.1 billion in 1998 or
approximately 16 % of sales.
 3.8 billion unit cases in 1998
 Net operating revenues of $13.4 billion
 EBITDA $1.989 billion
Full Service Business
 CCE’s vending machine operations
 Owns and operates approximately 200,000
vending machines in the US
 North Metro Atlanta Sales Center
 approximately 2,000 machines
 approximately 8 drivers
 area covering 190 sq. miles
Vending Machines
 Support 4 to 12 flavors
 Hold 8 to 12 columns of cans
 30 cans per column
Our Example
 5 Flavors
 10 columns
 Customer service -- in-stock probability for
all flavors 99%
Issues
 Which flavors do we stock?
 How many columns do we stock for each
flavor?
 How often to we restock the machine?
 How do we build driver routes?
 How many drivers and trucks do we
need?
Other related questions
 Can we make some of these problems go
away?
 Vending machine design




Size
Flexibility
Number of flavors
…
Current Operations
 Machine put on 7, 14, 21, … day schedule
based on volume
 Drivers assigned routes to cover machines
 Missed machines rolled over to next day
 Driver allocates columns to flavors and
fills
 Drive pay partly based on cases loaded
 Company prescribes some flavors
 Core flavors and new flavors
Which flavors do we stock?
 What are the drivers?
 Revenue



Our set up
 Flavors we must carry
 Coke
 Diet Coke
 Sprite
 Other flavors we’ll consider
 Caffeine free diet coke
 Minute Maid
 Nestea
What data do we need?
Maximize Revenue
 What flavors?
Flavor
Coke
Diet Coke
Caff. Free
Sprite
Diet Sprite
Minute Maid
Nestea
Cans/Hour
A better model?
 Customer profiles
 Diet anything
 Any variety of Coke
 “Healthy”
 Fraction of all customers fitting profile
 Choose flavors that satisfy the greatest
fraction of the population
Example
Profile
Any Coke
Any Diet
No Caffeine
Healthy
Coke
Diet Coke
Caff. Free
Sprite
Diet Sprite
Minute Maid
Nestea
%
Coke Diet Coke Caff. Free
Sprite Diet Sprite Minute Maid Nestea
30%
4
4
4
20%
4
4
5%
4
4
4
10%
12%
4%
2%
6%
7%
3%
2%
4
4
4
4
4
4
4
4
4
An Optimization Model
Profile
Any Coke
Any Diet
No Caffeine
Healthy
Coke
Diet Coke
Caff. Free
Sprite
Diet Sprite
Minute Maid
Nestea
Selected?
% Coke Diet Coke Caff. Free Sprite Diet Sprite Minute Maid Nestea
30%
4
4
4
20%
4
4
5%
4
4
4
10%
11%
4
4
4
4%
4
2%
4
6%
4
7%
4
3%
4
2%
5
4
1
1
0
1
1
1
0
How many columns?
 We have chosen flavors
 We know expected sales rates (possibly
based on what else is in the machine)
 We stock so that...
The Bottleneck
 First run out of some flavor as late as
possible
Flavor
Average Cans/hr
Lanes Run out Time
Coke
Diet Coke
Caff. Free
Sprite
Diet Sprite
Minute Maid
0.54
0.17
0.08
0.25
0.29
0.13
Nestea
0.08
Total
1.54
2
2
2
2
2
10
110.77
360.00
720.00
240.00
205.71
Minimum run out
110.77 hours
4.62 days
How often to restock?
 What are the issues?
Service Level
Restock Interval
7 days
Coke
Stock Level
Demand Rate (cans/hr)
Probability in Stock
Service Level
120
0.54
1.00
Diet Coke Caff. Free Sprite Diet Sprite Minute Maid
Nestea
30
0.17
0.69
30
0.08
1.00
60
0.25
1.00
60
0.29
0.95
65%
Poisson CDF: Probability of at most Stock Level arrivals
in Restock Interval days
Service Level vs Interval
Service Level
120%
100%
80%
60%
40%
20%
0%
1
2
3
4
5
Restock Interval
6
7
8
9