DUE DATE 11 SEPTEMBER 2023
1.1 Compare and contrast the transportation principles of economy of scale and economy of distance. Illustrate how they are applied in efficiently transporting drinks manufactured by Coca-Cola. (2½ theory, 2½ application)
Economy of Scale:
As elucidated by Bowerso...
, Introduction:
In the realm of supply chain management, beverage giants like PepsiCo and Coca-Cola stand
as titans of industry. These global conglomerates have mastered the art of efficiently
managing inventory, a critical aspect of their supply chain operations. This comprehensive
analysis delves into the strategies, techniques, and practices employed by PepsiCo and Coca-
Cola to navigate the complexities of inventory management.
1.1 Compare and contrast the transportation principles of economy of scale and economy of
distance. Illustrate how they are applied in efficiently transporting drinks manufactured by
Coca-Cola. (2½ theory, 2½ application)
Economy of Scale:
As elucidated by Bowersox et al. (2020Economy of scale seeks to fully utilize fixed assets to
achieve the lowest, total landed cost.
Economy of scale refers to the cost advantages that a company can achieve when it produces
or transports goods in larger quantities. In other words, as production or transportation
volume increases, the cost per unit of production or transportation decreases.
In the case of Coca-Cola, economy of scale can be applied when transporting beverages from
production facilities to distribution centers or retailers. Here's how it works:
Larger Shipments: By consolidating larger quantities of products into a single
shipment, Coca-Cola can take advantage of bulk transportation rates and reduce the
transportation cost per unit of beverage.
Cost Reduction: As the quantity of drinks in a shipment increases, certain fixed costs,
such as truck maintenance or rail freight charges, can be spread over a greater
number of units, resulting in lower costs per unit.
Efficient Use of Resources: Economy of scale allows Coca-Cola to optimize the
utilization of transportation resources, such as trucks or railcars, by carrying more
products per trip.
Application in Coca-Cola's Transportation:
Long-Distance Transportation: For long-distance transportation between Coca-Cola
production facilities and major distribution centers, economy of scale is often
leveraged. This may involve using large-capacity trucks, rail transportation, or even
intermodal transportation.
Bulk Shipments: When distributing drinks in large quantities over significant distances,
it's more cost-effective to use transportation modes that can carry a substantial
volume in one go.
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