Navigating complexity: Optimizing Vita Coco’s global operations
The Vita Coco Company is built on a novel yet simple idea. Michael Kirban and Ira Larin first learned about the coconut water hype during a chance encounter with two Brazilian women in 2003. When the pair later discovered that coconut processors disposed of the electrolyte-packed, naturally nutritious coconut water, they hatched a plan to bring it to the US.
Since its foundation, The Vita Coco Company has seen exceptional growth. With operations in 31 countries and an annual turnover of 428 MUSD (2022), Vita Coco is today the world’s largest brand in coconut & plant waters.
Key to the company’s success is an asset-light supply chain. Close partnerships with coconut processors across Asia and South America ensure a reliable yet flexible supply of coconut water and oils, as well as processing and packaging capacity. Also, by cooperating with local co-packers, Vita Coco can quickly add production capacity and new capabilities to meet changing demand.
However, synchronizing a supply chain spanning 15 factories (and growing), 20+ market warehouses on several continents servicing every major customer in the US and Europe is challenging. Jonathan Burth, COO of The Vita Coco Company, says, “Finding the right vendor was crucial. We needed an integrated planning solution capable of modelling and optimizing our entire supply chain. With so many nodes, constraints, and alternative supply routes, the only way to maximize profitability is by using true optimization technology. This is exactly what RELEX offers.”
Leveraging RELEX for advanced supply chain planning
When Vita Coco turned to RELEX, the request was for a planning solution to help them meet demand over the medium to long-term horizon.
The project team created a digital twin of Vita Coco’s supply chain in the RELEX supply chain optimization solution. The model captures every node in the company’s supply chain network, including costs, rules, and constraints – effectively framing and translating the planning puzzle into a mathematical problem.
“It was important to get the model right. We can source coconut water from 15 factories with varying costs and lead times. Each supplying factory and co-packer has its own capacity constraints, both item-specific and in terms of total volume. We also need to consider minimum annual order volumes with each supplier to avoid penalties. All these constraints are reflected in the supply chain optimization tool, and the system automatically determines the most profitable sourcing plan,” says Burth.
Another project goal was to provide better support for the logistics department. Shipping costs and import duties can vary significantly depending on the destination and country of origin and can erode margins if not carefully managed.
Burth explains, “We’re importing container tariffs for each possible route and container size into the tool to form part of the optimization. Our logistics department can then work from the planned container requirements when negotiating with our logistics broker.”
Enhanced efficiency: Vita Coco’s strategic gains with supply chain optimization
Today, Vita Coco uses RELEX to convert its demand forecast into a fully optimized 18-month supply plan. The plan serves multiple purposes, from guiding the production scheduling and requirements planning for packaging material and staff at the partner factories to logistics operations and inventory management activities.
The plan also provides the basis for the company’s much-improved S&OP process. Burth explains what has changed since introducing RELEX: “Everyone works from a common supply plan based on one set of numbers. We’re starting the S&OP cycle with an integrated, optimized plan, making the process much more efficient. When people have full visibility and can see the cause-and-effect relationships in the supply chain, you end up with more focused discussions.”
The team at Vita Coco frequently uses RELEX to simulate different business scenarios – a valuable capability, not least for financial planning and during the budgeting process:
“The RELEX supply chain optimization tool is a first-class decision support tool. We can simulate pretty much any supply chain scenario and find out how it will likely impact our costs and delivery performance,” says Burth.
The ability to create optimized plans that consider costs, real-world constraints, and business preferences has led to significant cost reductions at Vita Coco. Burth confirms this, saying, “RELEX has helped us to unlock millions of dollars in cost of goods value, mainly owing to better sourcing and distribution planning. However, it’s worth noting that this only accounts for reduced landed costs. Improved tactical and strategic decision-making is harder to quantify, but likely accounts for much larger savings.”
Overall, Burth is delighted with the project outcome and mentions the importance of working with an experienced partner like RELEX. “Success requires more than a great planning system. The RELEX consultants are not only experts in their field. They have also been extremely responsive. No request or problem is ever left unresolved. They’ve made the system work for us, balancing industry best practices with those special things that make Vita Coco unique.”