Embotelladoras ARCA Uses Operations Research to Improve Territory Design Plans

Abstract: Embotelladoras ARCA is a Mexican company dedicated to the production, distribution, and sales of soft drink brands owned by The Coca-Cola Company, ARCA, and third parties. One of the most relevant problems the company faces is that of how to segment their customers into territories to accommodate the most efficient handling of marketing and distribution decisions. This territory design must also 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 method of definition 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. In this paper, we apply operations research methods to determine 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 complying with other important planning requirements and maximizing territory compactness. The usage of this methodology has resulted in significant enhancements with respect to the territory imbalance issue. We highlight additional benefits of this approach. The company has adopted this proposed tool to make their design decisions.