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History PepsiCo is a world leader in convenient snacks, foods and beverages, with revenues of more than $39 billion and over 185, emplo!ees" #he compan! consists of PepsiCo $mericas %oods &P$%', PepsiCo $mericas (everages &P$(' and PepsiCo )nternational &P)'" P$% includes %rito*+a! ,orth $merica, -uaker %oods ,orth $merica and all +atin $merica food and snack businesses, including .abritas and /amesa businesses in 0e1ico" P$( includes PepsiCo (everages ,orth $merica and all +atin $merican beverage businesses" P) includes all PepsiCo businesses in the 2nited 3ingdom, 4urope, $sia, 0iddle 4ast and $frica" PepsiCo brands are available in nearl! 5 countries and generate sales at the retail level of more than $98 billion" .ome of PepsiCo6s brand names are more than 1 *!ears*old, but the corporation is relativel! !oung" PepsiCo was founded in 1975 through the merger of Pepsi*Cola and %rito*+a!" #ropicana was ac8uired in 1998 and PepsiCo merged with #he -uaker 9ats Compan!, including /atorade, in 5 1"

PepsiCo offers product choices to meet a broad variet! of needs and preference ** from fun*for*!ou items to product choices that contribute to healthier lifest!les" PepsiCo:s mission is; <#o be the world6s premier consumer <Products Compan!= focused on convenient foods and beverages" >e seek to produce health! financial rewards to investors as we provide opportunities for growth and enrichment to our emplo!ees, our business partners and the communities in which we operate" $nd in ever!thing we do, we strive for honest!, fairness and integrit!"= &www"pepsico"com' PepsiCo Headquarters PepsiCo >orld ?ead8uarters is located in Purchase, ,ew @ork" #he seven*building head8uarters comple1 was designed b! 4dward Aurrell .tone, one of $merica6s foremost architects" Haidiri Beverages Private Limited, Pakistan #he ?aidiri (everages /roup was set up in 19B9 and is Pepsi6s sole selling agent for Aistrict Cawalpindi and )slamabad" )t is based in the CA$ )ndustrial #riangle, 3ahuta Coad, )slamabad" )t manages the suppl! for several wholesalers, retailers, restaurants, hotels and other such food outlets" )n order to achieve the proDected sales targets effectivel!, the organiEation ensures a comprehensive strategic alignment with the

overall Pepsi Cola:s business strateg!" ?aideri (everages: primar! functions are to conduct a s!stematic manufacturing and suppl! of the product without an! tactical flaws" (acked b! a powerful competitive strateg! and empowered b! some effective suppl! chain strategies, the group has been managing an effective suppl! chain through out the region" )t has set up a sophisticated manufacturing and storage plant in Cawalpindi with multiple production units and huge production capacit!" ?aidiri (everages has different management departments dealing with specialiEed 0arketing, ?uman Cesource, )nformation #echnolog! and .uppl! Chain Processes" )n this section we conduct a brief anal!sis of the basic suppl! chain management functions of ?aidri beverages" PepsiCo6s overall mission is to increase the value of shareholder6s investment" #he! do this through sales growth, cost controls and wise investment of resources" #he! believe their commercial success depends upon offering 8ualit! and value to their consumers and customersF providing products that are safe, wholesome, economicall! efficient and environmentall! soundF and providing a fair return to their investors while adhering to the highest standards of integrit!" $ customer while purchasing a bottle of Pepsi will consider product 8ualit!, price and availabilit! of the product" #hus, Pepsi in Pakistan particularl! focuses its competitive strateg! as to producing sufficient variet!, reasonable prices, and the availabilit! of the product" Marketing and Sales Strategies PepsiCo has developed the national marketing, promotion and advertising programs that support its man! brands and brand imageF oversees the 8ualit! of the productsF develops new products and packaging, and coordinates selling efforts &PepsiCo 5 $nnual Ceport'" Supply Chain Strategy The Customer and Supply Chain Uncertainty a !denti"ying customer needs ?aidri needs to understand the customer needs for each targeted segment and the uncertaint! the suppl! chain faces in satisf!ing these needs" $s ?aidri deals with

beverages, which are a fast moving consumer good, it knows the re8uirements of consumers" Pepsi is considered as a drink which is refreshing during summer, and taken regularl! during winter, with demand hiking around festivals such as 4id and occasions such as weddings" ?aidri caters to both cities and rural areas" )t understands the needs of both" $s demand for beverages is seasonal, the 8uantit! of product needed for each lot is taken care of with past demand in mind" Consumers generall! re8uire a small response time, high service level, reasonable price and some variet! &for e1ample health conscious people favor diet versions of sodas'" # $emand uncertainty and implied demand uncertainty Aemand for Pepsi varies b! product" %or e1ample there is a greater demand for <Pepsi= as compared to <0irinda $pple,= which is new" ?ence, Pepsi has a low demand uncertaint! as compared to <0irinda $pple"= #he product <Pepsi= is approaching its maturit! stage in the P+C whereas <0irinda $pple= is in the introductor! stage" Pepsi:s implied demand uncertaint! varies with the product t!pe as well as the customer needs" Aue to decreased lead time &the customer ma! purchase its competitor:s product if Pepsi is not available at that time', need for greater variet! and higher level of service, implied demand uncertaint! increases" #his is true for cities where unmet demand b! Pepsi is met b! Coca Cola, $mrat Cola and other such competitors" .uppl! uncertaint! is also affected b! new products" ,ew products have higher suppl! uncertaint!" c Uncertainty "or the capa#ility o" the supply chain $fter determining the demand uncertaint! it is important to take a look at the uncertaint! resulting form the suppl! chain" <Pepsi= is not a new product and its market is going towards maturation" #he compan! does not have man! difficulties in delivering a product and has a fi1ed deliver! schedule &on dail! basis'" <Pepsi= hence has a predictable suppl! and somewhat uncertain demand depending on market conditions"

Understanding the Supply Chain Capa#ilities

Highly Efficient Somewhat Efficient In towns Somewhat Responsive Highly Responsive

PEPSI in cities

#he efficienc! and responsiveness varies according to the consumer needs, implied demand uncertaint!, product t!pe and market segments" )n remote areas the compan! focuses on being somewhat efficient as other modes of transportation could turn the product to be highl! e1pensive" $ccording to the compan! it does not deal with distributors who do not have 5 to 55 vehicles, therefore as the compan! has focus on cost reduction, uses slow and ine1pensive modes of transportation, the demand is certain, and uses economies of scale in production, the product Pepsi is more inclined towards being somewhat efficient" )n cities, the compan! focuses its attention on being highl! responsive as Pepsi has to meet short lead time, meet a high service level, handle a large variet! of products and respond to wide ranges of 8uantit! demanded especiall! at the retail stage" %chieving the Strategic &it 0aking one stage more responsive allows the other stage to focus on being more efficient" #he Pepsi suppl! chain assign different roles to its different stages, the compan! has to decide either to transfer the responsiveness to the manufacture stage or to the retailer stage" >hile discussing the Pepsi:s suppl! capabilit! it is seen that Pepsi tends to be more responsive in the cities and a bit less in towns" #herefore, transferring the responsiveness to the retailer and distributor, allowing them to face the higher implied demand uncertaint!" #his in return allows the manufacturer and supplier to be more efficient" $t the same time, multiple beverage t!pes contribute to a broader product portfolio causing ?aidri to adDust its strategies accordingl!F tailoring the suppl! chain to best meet the needs of each beverage demand" '(panding Strategic Scope o" Pepsi )n Pepsi the agile inter*compan! scope of strategic fit is essential because the competitive pla!ing field has shifted from compan!*versus*compan! to suppl! chain*

versus*suppl! chain" .trategic scope must cover all bo1es, at least at the suppl! chain end" #he agile inter*compan! scope of strategic fit re8uires the compan! to evaluate ever! action in the conte1t of the entire suppl! chain" $s competition increases, Pepsi is e1panding their strategic scope as the! are increasing their product line b! adding <Pepsi 0a1,= <0ountain Aew= and <0irinda $pple= to their beverage line" &rame)ork "or Structuring $rivers*

#he framework is based on a motive to create strategic fit between the competitive and suppl! chain strateg!" Pepsi Competitive strateg! stands to provide a large variet! of products ver! 8uickl!F simultaneousl! the suppl! chain strateg! stands to materialiEe the availabilit! of that variet! of products" Pepsi mainl! follows a responsive suppl! chain strateg!" $lignment of Pepsi:s business strateg! to a corresponding suppl! chain strateg! is achieved through proper deplo!ment of suppl! chain drivers" Pepsi has to deal with different set of market segments simultaneousl!" 0ost of the time the approach needs to be responsive enough to grow substantiall! to be able to compete with uncertain demand, while in man! areas demand is certain and ver! much predictable, so there it incorporates an efficient suppl! chain strateg!"

The !nventory $river

?aidri has established a comprehensive plan to ensure the sufficient inventor! levels to keep up with the market demand effectivel!" %or this purpose the main inventor! storage has been established within the main plant area 3ahuta road, Cawalpindi" )t has the storage capacit! of 15 , .8 %t and the area is being utiliEed both horiEontall! and verticall!" #he shipping department is in charge for storage and subse8uent displacement of the product orders" #he inventor! capacit! is being utiliEed and maintained in coordination with the production department and is based on the term production estimates" $part from the main storage house, ?aidri has established more than 1 storage facilities nearer to the market in Cawalpindi and )slamabad" )ncreasing inventor! makes the suppl! more responsive to the customers" $t ?aidri (everages, managers bear a high inventor! cost to ensure ma1imum levels of inventor! and to reduce the production and transportation costs" The Transportation $river #ransportation driver has a large impact on the responsiveness of the business" %aster transportation of the products allows ?aidri to maintain sufficient levels of stock on the shelves" ?aidri:s transportation network is the collection of routes, modes and locations along which the product can be shipped" >ith the help of several distributors the product is being supplied to the market" #here are multiple suppl! and demand points within the twin cities which cater to the market demand" ?aidri decides and selects different modes of transportation having different characteristics with respect to the speed and siEe of shipment" #he transportation network has been designed with a view to ensure responsiveness and boost the availabilit! of the product" %or ?aidri using fast mode of transport increases responsiveness as well as the transportation cost but lowers the inventor! holding cost" The !n"ormation $river Connects all the suppl! chain stages effectivel! allowing them to coordinate and ma1imiEe total suppl! chain profitabilit!" )t is also crucial to the dail! operations of each stage in the suppl! chain" #he unit manager utiliEes the production scheduling s!stem that is based on information on demand to create a schedule that allows ?aidri (everages to produce the right amount of product" #he warehouse in charge uses this

information to create visibilit! of the warehouse:s inventor! items" )nformation sharing helps this firm improve its responsiveness within the market" )t helps to accuratel! forecast demand and realiEe fre8uenc! of updates, measurements of the effects of seasonal factors influencing the production, measurements of variances from the plan and the ratio of demand variabilit! to order variabilit!" #imel! and accurate information enables the distribution managers to fi1 potential stock out or oversuppl! problems" The &acility $river )n order to ensure the responsive strateg! implementation, the role of facilities is of prime importance in the suppl! chain of ?aidri (everages" Pepsi has established a fle1ible and a product*focused production facilit! in order to respond effectivel! to the variabilit! in demand" #he storage facilities are designed in order to provide ma1imum possible capacit! for the inventor!" #he large amount of e1cess capacit! allows the facilit! to be ver! fle1ible and to respond to wide surges in demands placed on it" )n alignment with the responsive suppl! chain strateg! the facilities have been geographicall! located close to the market" $istri#ution Channels

$irect distri#ution* o Aeliver! of post mi1 c!linders G handling of ke! accounts; #he ke! accounts are different wholesalers, restaurants and hotels like PiEEa ?ut, 3%C, 0etro which serve as a place for ke! sale" #hese are known as national ke! accounts and are ver! important in terms of competition" o 41port Parties !ndirect distri#ution* o #hrough (ase market distributors o #hrough 9utstation distributors (efore delivering the product some certain guiding principles are followed for the assessment of distributor:s capabilit! b! ?aidri;

 $pplicant must have 5 to 55 vehicles &depending on the area'" $pplicant must have 5 , cases of empt! bottles" , as a securit!"

$pplicant must deposit Cs"1,

?aidri uses light and heav! vehicles for safe deliver! of goods to the distributors for timel! deliver!" )t follows the Dust in time concept which is applicable in ,on*seasonal period and not applicable in the seasonal period" +evie) and +evise $istri#ution #his is usuall! done through taking over ke! revenue areas" )f the distributor does not achieve its sales target, the distribution is taken back and an addition of new distributor is done" #herefore Pepsi:s suppl! is low suppl! uncertaint!" .ome of its suppl! source capabilities are; +ess breakdowns ?igh 8ualit! %le1ible suppl! capacit! 0ature production process &actors !n"luencing $istri#ution ,et)ork $esign $t the highest level, performance of a distribution network should be evaluated along two dimensions; -. Customer needs that are met /. Cost of meeting customer needs #he customer needs that are met influence the compan!:s revenues, which along with cost decide the profitabilit! of the deliver! network" >hile customer service consists of man! components we will consider those measures that are influenced b! the structure of the distribution network for Pepsi" +esponse Time for Pepsi is minimal as the direct customers for Pepsi are the retailers and then the consumers" .o with over 3 deliver! trucks in )slamabad, Pepsi is readil!

available to ever! retailer within 3 minutes" Cawalpindi has 7 warehouses from where the suppl! to the market is done through .hehEore or small cars" Product 0ariety in Pepsi is large" #he! have made their place in the market with their uni8ue product line ranging from chips to water" $s we are dealing with ?aidri, the product variet! includes beverages ranging from the water $8uafina to 0ountain Aew, Pepsi, Pepsi 0a1, B 2p, 0irinda, 0irinda $pple G %ountain %resh" Customers $esire Pepsi and 0ountain Aew the mostF 0ountain Aew has the highest consumption in /uDranwalla" Cecentl!, the sales for 55 ml bottles has decreased but the! are tr!ing to increase it as it gives the compan! higher profits" %vaila#ility of Pepsi is ver! high and the product is alwa!s available in stock whenever an order arrives" >henever the distributors feel that after one loading there could be a stock out the! place an order to ?aidri (everages in advance Dust to keep the floor with enough stock in hand" #he Aistributors have 3 da!s stock as back up with them in order of an! malfunctioning of the plant or other such e1ternal factors" Customer '(perience for Pepsi has alwa!s been positive as the! receive the product with ease and on time" #he retailers are the direct customers as the! place an order to the distributors" #here has never been a shortage or a dela! for Pepsi in 0etro or PiEEa ?ut which are the ke! accounts for the compan!" 1rder 0isi#ility in Pepsi is not reall! an electronic phenomenon where !ou can track !our order through computer" )t is more of person*to*person contact and one can easil! track down their orders through the designated staff in each sector of )slamabad and CawalPindi or for that sake all over Pakistan" +eturna#ility of Pepsi has alwa!s been ver! strong in a sense that unsatisfactor! items can be returned and changed on the spot" #his is true for both the consumers and the retailers" Pepsi has laid down a s!stem through which the! can effectivel! manage this re8uirement" #he retailers are told to take down the comments and the address or phone numbers from the person who is returning the bottle" )t seems at fist that a customer alwa!s wants the highest level of performance along all these dimensions, in practice however this is not alwa!s the case"

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$esign 1ptions "or $istri#ution ,et)ork $istri#utor Storage )ith Carrier $elivery )n Pepsi inventor! is not held b! the manufacturers at the factories but is held b! distributorsH retailers in intermediate warehouses and package carriers are used to transport the products from the intermediate location to the final customer" #his re8uires distributor storage to keep high levels of inventor! because distributorHretailer aggregates demand uncertaint! to a lower level than the manufacturer" #ransportation costs for Pepsi are somewhat lower because an economic mode of transportation &e"g" truckload' can be emplo!ed for inbound shipments to the warehouse, which is closer to the customer" %acilit! cost is high because of a loss of aggregation and often end up with higher processing costs" #he information structure needed is not that comple1" #he distribution warehouse serves as a buffer between manufacturer and customer" Ceal time visibilit! between customers and warehouse is needed whereas as visibilit! between customer and manufacturer is not re8uired" Cesponse time is also reduced" Customer convenience is high and order visibilit! with manufacturer storage becomes easier" Aistributor storage is well suited for medium to fast moving goods and it can also handle higher level of variet! than retail stores" 0alue o" $istri#ution System #here are basicall! two components of distribution; Storage $istri#ution

#he storage facilities of ?aidiri (everages are designed in order to boost the timel! availabilit! of the product" %or this purpose the distributors are full! e8uipped with facilities that are needed to ensure intensive suppl! of the product" #he storage facilities are designed to contain the ma1imum possible inventor! items that are needed at an! given time" ?aidiri (everages has established several storage units nearer to the market in order to boost availabilit!" #ransportation conducts inventor! movement from point to point in suppl! chain of ?aideri (everages" )t incorporates a combination of modes and routes at different stages" #ransportation choices have a large impact on the responsiveness

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strateg! of the business" ?aidiri has several contracts with several distributors with multiple transport facilit! that ensure the ma1imum possible transport of inventor! within a short period of time" #he distribution does not work between specific suppl! chain components but it performs a basic function of integration amongst all suppl! chain components" )n case of %0C/ like Pepsi, the value of s!stematic distribution process can not be undermined" #he Pepsi distribution s!stem linked the entire suppl! chain for all product categories" #he distribution centers and its information network pla! a ke! role in that regard" #he maDor obDect is to carefull! track sales of items and offer short replenishment c!cle times" #he distributors offer stored deliveries too man! retail outlets in the twin cities" Aifferent products are being delivered convenientl! on pre*orders" #he distribution s!stem is fle1ible enough to alter deliver! schedule depending on customer demand" #he #erritor! Aistributor 0anagers maintain a contact with the retailers in order to book and place the orders" >henever a store places an order it is immediatel! transmitted to the supplier through the distribution manager" ,ow ?aidiri receives orders from all distribution centers and the shipment department delivers the orders" $t the distribution centre, products from the manufacturer are delivered into different trucks and each truck makes deliveries to multiple retail stores" #he number of stores depends upon the sales volume" #he s!stem works on trust and does not re8uire the deliver! person to be present when store personnel scan the deliver!" #his reduces the deliver! time at each store"

Bi#liography Chopra, 0eindl &5 Operation 7' Supply Chain Management: Strategy, Planning and

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www"pepsico"com http;HHwww"pepsico"comHP4PICitiEenshipHsustainabilit!HperformecoHcommunit!Hin de1"cfm www"deviantart"com #he ,ews 9nline ?aidri (everages 0anagement http;HHwww"geocities"comHprpakistanI!ellowIpagesIofIisbHbeverageImfrsIGImfr s"htm

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