Best Supply Chain Finance Solution Highly Commended: Coca-Cola Refreshments Malaysia Sdn Bhd

Published: Jan 2020


Photo of Adrian Ong, UOB collects the award on behalf of Coca-Cola Refreshments Malaysia Sdn Bhd.

Melvin Tan

Coca-Cola Refreshments Malaysia Sdn Bhd

Kuala Lumpur, Malaysia

Coca-Cola is the world’s leading soft drinks manufacturer with more than 500 brands and 700,000 employees worldwide. Coca-Cola in Malaysia manufactures, markets and distributes over 80 products including sparkling beverages, zero-calorie sparkling beverages, juice drinks, teas, isotonic, water and value-added dairy. Coca-Cola Malaysia has created more than 800 jobs and reaches over 75,000 customers directly with a total reach of 200,000 customers nationwide. Through its programmes and partnerships, Coca-Cola Malaysia aims to make a lasting positive difference in the local community.

in partnership with

A refreshing business model for supply chain finance

The challenge

Coca-Cola Refreshments Malaysia’s principal activities include marketing and distributing over 20 products, ranging from Classic Coke and zero-calorie sparkling beverages, to zero-calorie juices, teas and water.

Coca-Cola’s growth in Malaysia is derived from the sales output of the distribution channels. For Coca-Cola to achieve its double-digit growth aspiration, it was imperative that its distributors were equipped with strong marketing strategy and support, efficient infrastructure and sufficient working capital.

Coca-Cola needed to improve its days sales outstanding (DSO) position from the original 45 days of credit term, to enable faster collection for their receivables, and ultimately resulting in improved cash flow. In addition to supporting Coca-Cola with increased sales output, with Coca-Cola’s distributors consisting mainly of small-medium enterprises (SMEs), many found it challenging to gain access to working capital at a favourable rate.

Additionally, in the fast-moving consumer goods (FMCG) industry where turnover is rapid, it is important to take full advantage of seasonal periods where sales volume is high. It is therefore crucial to access the working capital in a timely manner. Without proper receivables solutions, the company was unable to efficiently perform collections and reconcile receivables, hindering it from operating more effectively and efficiently.

The solution

One of Coca-Cola’s distributors referred the company to UOB Malaysia (UOBM), to investigate implementing its financial supply chain management (FSCM) solution. After lengthy discussions, based on the understanding of Coca-Cola’s requirements and needs, UOBM proposed an integrated FSCM solution for its ecosystem.

The proposed solution was a distributor financing programme (DFP), with Coca-Cola being the anchor and the distributors as spokes. In addition to the FSCM solution provided to Coca-Cola, it also embedded a suite of cash management solutions for Coca-Cola’s distributors. The cash management solutions serve to complement Coca-Cola’s overall financial ecosystem.

‘CashSafe’ facilitates cash collected by distributors from retailers. It entails installation of intelligent commercial cash deposit machines placed in distributors’ premises (as long as they meet the pre-determined security requirements).

After depositing the cash, a detailed receipt is printed, displaying the recipient’s name, total deposit value, employee, date and time, card identification number and denomination. The distributors are also able to view all deposit activities via a real-time, web-based terminal management system.

Best practice and innovation

Coca-Cola strives to maintain its brand identity, and part of this means it runs on a unique distributor selection and support model. Coca-Cola places huge emphasis on service level and market reputation, where only distributors with a good reputation are considered and appointed.

So, when Coca-Cola selected and recommended 41 distributors to be a part of this programme, the same stringent criteria was used. Among the selection criteria for the company were the distributors’ financial standing, market reputation, track record, service quality and historical sales performance.

Of the recommended distributors, UOBM has since approved 13 of them into the programme. To on-board the company’s distributors, UOBM practices a scoring system to pre-assess and determine the distributors’ eligibility. The list of the scoring system’s parameters includes the relationship with the anchor, such as the number of years of purchasing from it, and the number of late payments of over seven days in one year.

Key benefits

  • Increased revenue and market share.
  • Improvement in DSO.
  • Enhanced liquidity and improved cash flow.
  • Real-time visibility which can be customised based on distributors’ management structure.
  • Timely information in a user-friendly manner.

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