I have spent the weekend writing midterms. Often for these exams, it’s nice to have an example of a process for students to work through. Fortunately, I didn’t even think about orange juice. A glass of Minute Maid should be easy, but as Businessweek explains, it’s more complicated than you’d think (Coke Engineers Its Orange Juice—With an Algorithm, Jan 31). Check out the eye candy!
Here’s a little more on the Black Box mentioned in the diagram:
Black Book isn’t really a secret formula. It’s an algorithm. Revenue Analytics consultant Bob Cross, architect of Coke’s juice model, also built the model Delta Air Lines uses to maximize its revenue per mile flown. Orange juice, says Cross, “is definitely one of the most complex applications of business analytics. It requires analyzing up to 1 quintillion decision variables to consistently deliver the optimal blend, despite the whims of Mother Nature.”
The Black Book model includes detailed data about the myriad flavors—more than 600 in all—that make up an orange, and consumer preferences. Those data are matched to a profile detailing acidity, sweetness, and other attributes of each batch of raw juice. The algorithm then tells Coke how to blend batches to replicate a certain taste and consistency, right down to pulp content. Another part of Black Book incorporates external factors such as weather patterns, expected crop yields, and cost pressures. This helps Coke plan so that supplies will be on hand as far ahead as 15 months. “If we have a hurricane or a freeze,” Bippert says, “we can quickly replan the business in 5 or 10 minutes just because we’ve mathematically modeled it.”
This is an interesting example of process control. Coke has a vested interest in having a consistent product. It’s the essence of branding that the product is the same every time. McDonald’s faces the same problem with its Big Macs. But while there is certain to be variation from cow to cow, McDonald’s can count on seasoning and special sauce (which it can carefully control) to compensate for that variation.
Coke doesn’t have it so easy. Weather may cause the same grove to produce very different fruit form one year to the next. Weather may also knock out an entire grove in some years with an ill-timed frost. However, as long as Coke wants to claim that there is nothing but oranges in the carton, it can’t compensate for variation with additives and flavorings. A process that deconstructs the fruit like a Sartre novel then becomes necessary.