SUPPLY CHAIN OF PEPSI CO.

Bisma Amjad Kumail Zaidi Humera Usman Amna Tariq Nouman Arif Ahmed Sameh Nasir

Introduction
Plans ahead of time

Receives materials from manufacturers on contractual

basis. Placement of production plant is decided by the company Transport for the delivery of products is handled by third parties. Raw materials are sourced from local and foreign suppliers Capacity planning is backed by forecasting sales and production planning Supplier and distributors are selected on the basis of quality

Objectives of supply chain

Aims to increase supply chain surplus. Planning proceeds sales forecasting from the local

demand based on targeted sales provided to the department to be set as a benchmark to coordinate activities.
Planning is done on daily, weekly and monthly basis.

Supply Chain Operation

Individual customer orders in an optimal manner in which

it allocates inventory to each order, set order fulfillment date, pickup lists from the warehouse, decides on shipping and set date.
Demand is less uncertain so the production, sales and

supply chain make inventory decisions weekly basis.

Process Views of a Supply Chain

Push processes Procurement, manufacturing replenishment and customer

order cycle is pushed by seasonal demand. Pepsi Sales order and processing Order received through email or telephone from sales and distribution department
Distributors are given advance payments of orders.

Competitive strategy
safe, economical and environment friendly products by

creating value for their customers and investors.

A customer considers product quality, price and

availability of the product.

focuses on product variety, reasonable price and product

availability.

Supply Chain Strategy

Step 1: The Customer and Supply Chain Uncertainty
Identifying Customer Needs Refreshing drink taken regularly during winter, Increased demand in festivals like New Caters to rural and urban. Consumers require less response time, product availability, reasonable price and variety
Demand Uncertainty and Implied Demand Uncertainty Demand for Pepsi varies by product. Pepsi has a low demand uncertainty as compared to Mirinda. Due to lead need for greater variety and higher level of service, implied demand uncertainty Supply uncertainty is also affected by new products.

Supply Chain Strategy

Step 2: Understanding the Supply Chain Capabilities

In remote areas; somewhat efficient Cost reduction In cities; highly responsive as Pepsi has to meet short lead

time, meet a high service level, handle a large variety of products and respond to wide ranges of quantity demanded especially at the retail stage.

Step 3: Achieving the Strategic Fit

Company has to decide to transfer the responsiveness to

the manufacture stage or to the retailer stage.

Pepsi tends to be more responsive in the cities and less in

towns.
Therefore, transferring the responsiveness to the retailer

and distributor, allowing them to face the higher implied demand uncertainty.
This in return allows the manufacturer and supplier to be

more efficient.

Drivers of Supply Chain Performance

Inventory
Inventory storage within the Storage capacity of 120,000 Sq Ft; area is utilized both horizontally and vertically.

Shipping department is in charge for storage and displacement of product orders.

Established more than 10 storage facilities in Rawalpindi and Islamabad.

Transportation
Multiple supply and demand points which cater to the market demand.

Decides modes of transportation w.r.t speed and size of shipment.

Fast mode of transport increases responsiveness & cost; lowers the inventory holding

cost.
Information
Unit manager utilizes production scheduling system Warehouse in charge uses information to create visibility of warehouses inventory Information sharing improve its responsiveness Timely and accurate information to fix potential stock out or oversupply problems.

Drivers of Supply Chain Performance

Facility
Established a flexible and product-focused production facility. Storage facilities are designed in order to provide maximum possible

capacity for the inventory. Large amount of capacity allows facility to be flexible Facilities have been geographically located close to the market.

Pricing
Fixed pricing is used in seasonal demand e.g in summer. In winter when demand is comparatively low it uses menu based pricing

e.g. Rs. 5 off on 1.5 liter bottle

Sourcing
Raw materials, transportation and distribution is outsourced. Raw materials are procured by Ria bottler who arrange local vendors to

provide raw materials

Distribution Channels
Direct distribution Delivery of handling of key accounts (wholesalers, restaurants and hotels like Pizza Hut, KFC) Indirect distribution
Base market distributors Out-station distributors

Pepsi uses light and heavy vehicles for safe delivery of goods Follows j.i.t; applicable in Non-seasonal period, not in seasonal If distributor does not achieve its sales target, the distribution is

taken back, addition of new distributor is done. Pepsis supply is low supply uncertainty.

Factors Influencing Distribution Network Design

Response Time Minimal as direct customers are retailers and consumers. Locates center in every country, so it can reach its retailer in less time.

Product Variety Large variety. made place in market with their unique product line product variety includes beverages ranging from the water Aquafina to Mountain Dew, Pepsi, 7 Up, Mirinda, Pepsi diet

Factors Influencing Distribution Network Design

Availability Product is always available in stock The Distributors has 3 days stock as back up Customer Experience Positive Image Retailers are direct customers, place orders to distributors

Return ability Unsatisfactory items can be returned and changed on the spot.

Distributor Storage with Carrier Delivery

In Pepsi inventory is not held by the manufacturers at the factories but is

held by distributors/ retailers in intermediate warehouses and package carriers are used to transport the products from the intermediate location to the final customer This requires distributor storage to keep high levels of inventory because distributor/retailer aggregates demand uncertainty to a lower level than the manufacturer. Transportation costs are lower because an economic mode of transportation (e.g. truckload) can be employed for inbound shipments to the warehouse, which is closer to the customer. Facility cost is high because of a loss of aggregation and often end up with higher processing costs. The distribution warehouse serves as a buffer between manufacturer and customer. Real-time visibility between customers and warehouse is needed whereas visibility between customer and manufacturer is not required. Response time is also reduced. Customer convenience is high and order visibility with manufacturer storage becomes easier. Distributor storage is well suited for medium to fast moving goods and it can also handle higher level of variety than retail stores.

Value of Distribution System

Storage The storage facilities are designed in order to boost the timely availability of

the product.
The storage facilities are designed to contain the maximum possible

inventory items that are needed at any given time.

Distribution
The Pepsi distribution system linked the entire supply chain for all product

categories.
The major object is to carefully track sales of items and offer short

replenishment cycle times.

Whenever a store places an order it is immediately transmitted to the

supplier through the distribution manager.

Transportation Network
Modes of Transportation Truck TL (truck load) approach. economies of scale and meet service requirements minimizing both trucks idle and empty travel time. Raw materials from the suppliers are brought; finished products are transported to distributors and then retailers using trucks as well. Water small part of the total transport network. used for shipping of empty cans.

Shipment via central DC with inventory storage using milk-runs

Products are transferred to the DC in a particular region

and are stored there. Smaller trucks carry these products to the local retailers as per demand Cost effective Prevents stock outs
Direct Shipping

Used for transporting products to key account holders

such as KFC and Pizza Hut.

Sourcing Decisions in Supply Chain

Raw material for production and packaging is outsourced

through contracts. Inbound and outbound transportation of products from manufacturing place to distribution center and to final customer is outsourced to third party. Supplier Scoring and Assessment replenishment lead time, supply flexibility, supply quality, pricing terms, exchange rates, duties & supplier viability suppliers are asked to send sample of the products i.e. sugar ISO-9001 certified company

Selection of suppliers
sealed bid contract Negotiations are done as win-win basis which states that

if the supplier doesnt negotiate on the particular price then it gives additional product quality and less lead time to cover-up the price it charged.

Raw material Procurement

The basic components of raw material are: concentrate,

CO2, sugar and gas. Local and foreign both suppliers are used. Management advertises in newspaper when they need suppliers . Selection Criteria of Distributors Efficient and well-placed distributors are essential for ensuring product availability, which is the main target of the company

 Product Categorization by Value and Criticality

Revenue Management
In winters demand decreases. Lower the prices in off peak periods. Pricing and Revenue Management for Multiple Customer

Segments targets multiple customers from segments such as children, teenagers and adults. The product range is available in tin, glass bottles, plastic liter bottles. Pepsi differentiates between the customers who truly need the supply chain asset during peak period and those who will benefit from moving their order to the off-peak period. This approach increases profits for the firm

Customer relationship management system:

CRM plays an important role in retaining the customers. Pepsi is using CRM to simplify the timely delivery process,

reduce inventory costs and to get customer information.

Pepsi is using CRM system of oracle to give its customers

superior customer experience.

The overall focus of CRM system is to find attract and attract

new potential customer and retain the old customers.

Information technology in the supply chain of PepsiCo

Software and hardware used by PepsiCo Oracle E-business suite to increase the reliability of beverages manufacturing machinery and

avoiding failure in the development process Uses the FTA methodology to determine the reliability of production equipment and predict where and when a failure will occur. I HP Hardware PepsiCo is systematically controlled by central data department by HP globally Protection of software application Norton Antivirus PepsiCo have ranked IT security as one of their top priorities as increasingly sophisticated attacks, new data protection regulations, financial fraud and data violation threaten to damage their businesses. Oracle Database Firewall is the first line of defense for both Oracle and non-Oracle databases. Monitors database activity on the network to help prevent unauthorized access, and other external and internal attacks.

Coordination in the supply chain of the company: the performance and the obstacles involved
Pepsi Co has enabled it to achieve a market leader status in

Pakistan with an estimated 65 % of the market share.

This has been made possible by the widespread distribution of Pepsi

to the rural population of Pakistan

Some of the obstacles when coordinating in the entire supply

chain include
In time flexibility plants do not operate continually and are left idle . territory in the remote areas of the country where access is not that

easy.
Outsourcing the production to third parties like shamim bottlers in

Multan may hamper the communication process.

Recommendations
PepsiCo should follow design collaboration while making

sourcing decisions. The design of product, transportation and logistics should be transmitted to the relating department In order to coordinate the activities.
Riaz bottlers should adopt the proper technologies for

better performance of supply chain.

The operational performance can be achieved by

streamline the manufacturing, production and distribution backed by technology which is backed by EDI, ERP and RFID