Coors Wins the 2001 Circle of Excellence Award

Coors Brewing Company combines excellence in supply-chain collaboration with high product quality and a strong commitment to environmental responsibility.

Each year, the Distribution Business Management Association (DBM) presents the Circle of Excellence Award to a leading company in a particular industry segment that represents the highest standards of quality and technology, and provides an environmentally responsible supply chain model.   

This year's Circle of Excellence competition centered on the beverage industry.  The winner selected from five finalists was Coors Brewing Company, Golden, CO.  Accepting the award on behalf of Coors was Robb Caseria, Group VP, Demand Fulfillment and key members of the Coors team.  The following discussion is based on Robb Caseria's presentation at DBM's 2001 Conference.

The Coors Story

As the company responsible for introducing the aluminum beverage can and aluminum can recycling in the U.S. in 1959, Coors Brewing Company has a heritage of environmental responsibility.  In March 1990, the company formally adopted the Adolph Coors Company Environmental Principles to provide clear direction for the activities of all Coors businesses.  

Top management is integrally involved in developing and upholding the company's environmental principles.  Chairman Pete Coors signed the latest environmental, health & safety principles document, which is posted throughout the company.  The company has received numerous awards, including two from the U. S. Environmental Protection Agency.  

As stated in its principles, "Coors believes that, individually and as a company, we can harness human creativity to continuously drive down pollution and waste, reducing both economic and environmental costs, and enhancing the health and vitality of our organization, employees, customers, and communities."  The following are examples of the company's achievements in this area:  

Ÿ         Coors has successfully pursued a three-pronged strategy to improve its packaging:  reducing packaging weight, increasing recycled content, and improving recyclability.  

Ÿ         Reductions in the weights of certain bottle sizes since 1988 have provided annual savings of   72 million pounds of glass.  A redesign of bottle boxes cut the amount of corrugated used by Coors by 8 million pounds annually.  

Ÿ         Post-consumer recycled content of glass bottles manufactured by Coors grew from 9% in 1989 to about 35% today.  Recycled content of both aluminum and corrugated used by Coors is about 70%.  

Ÿ         Most of Coors' paper packaging, which a few years ago could not be recycled, is now 90% recyclable.  

Ÿ         Energy use per barrel of beer produced was down nearly 5% last year, continuing the five-year downward trend for energy consumption.

Ÿ         Significant reductions in solid waste (trash) have been achieved.  Although Coors has always recycled cardboard, the installation of a cardboard baler in Golden improved the effectiveness of that effort and substantially reduced the amount of cardboard that had previously been sent to landfills.  

Ÿ         Process-related hazardous waste generation has continued to decrease.  In 1999 it was slashed by 42% and these gains were maintained in 2000.  

Helping suppliers and peers get greener

Coors' procurement department requires that any suppliers working on-site must strictly adhere to the company's environmental principles and policies, and are evaluated accordingly.  The company has adopted a "reward" approach that fosters competition among suppliers, and rewards the most environmentally friendly ones.  Each year it awards--and rewards--its top barley supplier/growers for outstanding environmental practices.  

Coors works jointly with other Colorado companies to set new pollution-oriented goals.  In 2000, the company was recognized for achieving an environmental performance exceeding legal requirements as part of the Governor's Pollution Prevention Challenge, which invites Colorado's largest facilities to set voluntary--beyond compliance--measurable goals to prevent pollution.  The companies involved in the challenge look for ways to improve their production processes, use less toxic chemicals, institute recycling, and identify ways to improve energy efficiencies.  

Coors is willing to share not only information with other organizations interested in improving the environment, but funding as well.  Between 1990 and 1998, the Coors Pure Water 2000 program provided more than $2.5 million to support more than 700 environmental projects.  The company and its distributors have worked with local organizations to clean up rivers and streams, restore habitats, create wetlands, monitor water quality and assist with water conservation and education programs.  Beginning in 1999, Coors has focused its environmental funding for "on-the-ground" projects located near its facilities in Golden, CO, Memphis, TN and Shenandoah, VA.  

The supply chain challenges

In addition to its environmental commitment, Coors faces three major challenges in its supply chain business climate:  1) logistics,  2) maintaining ongoing highly quality, and  3) global consolidation.  

Logistics.  Coors operates the largest single-site brewery in the world.  It is an impressive facility.  However, it presents a logistical disadvantage vs competition, because it takes more miles to get products to customers.  In today's market, where the customer has more choices than ever, even an extra day or two for distribution is unacceptable.  Thus, the company has to be on the cutting edge of web-based ordering, inventory management, and finished goods shipment.  

Product quality.  Coors' stated purpose is to provide generations of beer drinkers with its refreshing "Rocky Mountain" style beer.  However, because of competitive and logistical challenges, it has become more difficult to deliver fresh, refrigerated beer to customers.  The company is therefore working with its distributor partners to ensure that fresh products are delivered on time, in the quantities desired, and in the most efficient way possible.  

Consolidation.  As a result of global consolidation, the top 20 beer brands now account for 57% of the world's beer sales--a 20% increase in just seven years.  This means that Coors and other brewers are now competing against fewer brands whose scope, influence, and customer base is much larger than in the past.  This kind of global competition puts pressure on the company's entire supply chain.  

The supply chain solutions

To meet its market challenges and provide supply chain leadership, Coors has embarked on several major initiatives, a few of which are described below.  

Innovative carrier equipment.  The first initiative is to use more innovative carrier equipment in order to maximize payloads and reduce the number of trucks required to meet supply chain needs.  New, lightweight equipment allows for up to 51,000 pounds in lading versus the conventional 45,000 pounds--meaning that the company can now ship nine trucks instead of ten in order to get the same amount of product delivered.  This innovation leads to thousands of fewer trucks each year, saving on fuel, simplifying business, helping the environment, and better serving distributor customers.  

Focused logistics teams.  For almost a decade, the logistics team was split modally, between truck and rail.  Yet the sales organization and distributors were aligned geographically.  Last year, Coors reorganized its transportation and warehousing functions into a "one stop shop", with a small team responsible for all logistics in an assigned geographic area.  The reorganization has improved customer service and responsiveness.   

Transportation management system.  To improve transportation performance, Coors introduced a web-based transportation management system (TMS).   TMS benefits include automated carrier selection based on cost and service, as well as an opportunity for continuous moves, vehicle capacity management, and more effective rate management.  Thanks to the new system, carriers now receive timely and more accurate information through automated notification and load tendering. 

Warehouse network optimization.  Six years ago, Coors had 24 warehouses located throughout the U.S.  Today, Coors has cut that number in half and is working to improve the efficiency of its warehouse system even more through its Network Optimization ("Net Ops") initiative.  The "Net Ops" program allows Coors to optimize its distribution network based on manufacturing source, warehousing and transportation lane costs, and customer service.  It allows the company to put less inventory in the market, but more importantly, in the right places.  The program also allows for more direct loading from packaging lines into railcars and trucks, thereby significantly reducing double handling.  In addition, the company's internal supply chain is capable of increased throughput, thereby offsetting the need to build more capacity.  Net Ops is expected to cut warehousing costs, avoid capital spending, and help improve brewery operations. 

By-products produce revenue

Many companies are finding that environmental responsibility can also be good business, in that recycling and various aspects of total reverse logistics can be revenue-producing activities.  Coors Brewing Company is finding that true also in the case of by-products its processes generate.  By converting by-product streams into secondary sources of revenue, the company also reduces the impact on environment and ecology, by making commercial products out of materials that would be landfilled or otherwise treated as trash.  A general description of Coors' by-products operations is as follows:

Waste beer is processed through an evaporator to produce syrup and an alcohol condensate.  The syrup is sold as liquid feed to a major pet food company, and the condensate is distilled into fuel-grade ethanol for use as an octane enhancer in gasoline.  

Spent grains are sold as cattle feed, in both wet and dried pellet forms.  

Used fermenting yeast is dried and sold to a major pet food manufacturer for use in pet food.  

Other by-products that were formerly landfilled are now sent to a third party hauler/processor and turned into compost, in the largest composting operation in the state of Colorado.  Coors provided seed money to get the operation off the ground; it is now self sustaining.  

What's in the future?

Coors estimates that in the near future, it will completely package to order--any product, at any time, and in any country.  In this environment, the company will do away with forecasts and maintain only minimum inventory.  This scenario will be made possible by three forces:

Technology.  Coors plans to rely heavily on web-based, instantaneous information and communication.  It will make widespread use of automated data capture, and focus near-term efforts on building compatible systems that make it possible to pull all data and processes together.  

Strategic alliances.  The company envisions being at the center of a "spider web" of strong third-party alliances that include suppliers, 3PL's, and even its own distributors.  Its role will  increasingly be to act as the master coordinator of product flow.  

Globalization.  Coors will increasingly be a global company with a significant presence overseas.  The supply chain "spider webs," which will include purchasing, sourcing, and supply management, will be managed globally.  The company's supply chain management professionals will also be well versed in country-by-country tax structures and currencies, and will know how to gain advantages from them.

To sum up, Robb Caseria, Coors' Group Vice President, Demand Fulfillment, puts it this way:  "All companies must continually seek ongoing improvements and opportunities in a changing business environment.  They have to move forward--and fast.  In a world of dizzying change, the most successful business leaders will be those who not only learn to anticipate, understand, and manage these changes, but who have the courage, fortitude, and stamina to lead change efforts."