Embotelladoras ARCA Uses Operations Research to Improve Territory Design Plans

Abstract

Embotelladoras ARCA was formed in 2001 by integrating three of the oldest bottlers in Mexico and became the second largest bottler of Coca-Cola products in Latin America. The company distributes its products in the northern region of Mexico and, since 2008, in the north of Argentina and Ecuador. The company have soft-drink sales of more than 1.2 billion unit cases and ranks as the third-largest Coca-Cola bottler in the world. The large size of the market and the relevance of a number of problems faced by the company motivate the use and application of operations research models and techniques One of the most relevant problems the company faces is that of how to segment or partition their customers into clusters or territories to accomodate for a better handling of marketing and distribution decisions. This territory design is not entirely arbitrary since it must satisfy several planning requirements such as territory compactness, territory connectivity, territory balancing, and similarity with existing design. Before 2009, these units were defined by “experience” without quantitative tools giving more weight to the territory compactness criterion. This led to a number of undesirable issues such as highly unbalanced territories, that is, the plans ended up with a large disparity in size with respect to both number of customers and total product sales. This imbalance had a negative effect among company workers since each territory (customer order capturing by sales associates, product routing by truck drivers, and so on) is handled by a different team. In this paper, we apply operations research methods to determine better configurations of the territorial units to ensure that each formed territory is relatively similar in size with respect to both number of customers and total product sales while ensuring some other important planning requirements and maximizing territory compactness. The usage of this methodology has resulted in many important benefits for the company, in particular, it has had a significant improvement with respect to the territory imbalances improving from 30 to 5 %. We highlight some other side benefits resulting from this approach. The company has adopted this proposed tool to make their territory design decisions