CHANDRAGUPT INSTITUTE OF MANAGEMENT

SUPPY CHAIN MANAGEMENT TERM PAPER

PEPSICO.

GROUP- 5
SESSION- 2019-21

SUBMITTED TO: SUBMITTED BY:

PROF. VIJAYA BANDYOPADHYAYA

POOJA KUMARI – 120030

PRERNA KUMARI- 120031

PRERNA SINHA- 120032

PRIYANKA SINHA- 120033

RAUSHAN KR. TIWARI- 120035

RITWIK ACHARYA- 120036

SAKET KUMAR- 120037

 ACKNOWLEDGEMENT

We express our gratitude to Prof. Vijaya Bandyopadhyaya for giving us the opportunity to
work on the project of Supply Chain Management. It was delight to have a chance to work on
this project and every member of group 5, participated actively in the project. We would also
take the opportunity to thank our director Sir Dr. V. Mukunda Das for motivating us to work
in a team. This project is a small attempt to express our gratitude towards our parents and
teachers.

Dedicated to all our teachers.

Thank You!
 TABLE OF CONTENTS

1. Executive Summary

2. Introduction

 Industry Profile

 Company Profile

3. Main Issues Faced By the Pepsico in the Supply Chain and Logistics

4. Analysis of the main Issues

5. FINDINGS

 Demand Management

 5.2 Customer Service

 5.3 Customer Service Dimension

 5.4 Logistics Planning and Strategy of PepsiCo

 5.5 Logistics System Design of PepsiCo India

 5.6 Integrated Logistics Activities

 5.7 Measuring Logistics Costs:

 5.8 SCM Performance

 5.9 Strategic Integrated logistics Management

 5.10 Benchmarking Supply Chain

 5.11 Designing the Supply Chain Network5.12 Supply Chain Planning:

 5.13 Implementation of Supply Chain Management

 5.14 Role of IT in SCM

 5.15 Supply Chain Strategies

 5.16 Organization and Control in a Supply Chain

  5.17 Purchasing and Supply Chain Decisions

 5.18 Latest Advancements in LSCM

 5.19 Inventory management

 5.20 Transportation Network

6. Conclusion

7. Recommendations
 1. Executive Summary

In 2010, PepsiCo Beverage Company (PBC), an operating unit of PepsiCo Inc. (PepsiCo), the

second largest food and Beverage Company in the world, received the supply chain

innovation award from the Council of Supply Chain Management Professionals (CSCMP).

PBC was formed on February 26, 2010, when PepsiCo acquired two large bottlers, PepsiCo

bottling Group (PBG) and PepsiCo America Inc. (PAS), for US$7.7 billion and named the

combine PepsiCo Beverage Company. Experts opined that the formation of PBC reflected an

effort on PepsiCo’s part to streamline its operations and facilitate faster and more

integrated product delivery to create a more integrated supply chain, strengthen its

distribution channel, and enhance revenue growth.

Supply Chain Brain launched this award in 2005 to highlight and recognize the top players in

the industry when it comes to innovative programs, projects, and collaboration.

PepsiCo Bottling Group, Inc. was the largest bottler of PepsiCo beverage. It accounted for

more than one half of the PepsiCo beverage sold in the US and Canada and about 40%

worldwide.

PepsiCo Americas, Inc. was the second largest bottler of PepsiCo products. It had 19 bottling

plants in the US and had a presence in 11 countries in Central/Eastern Europe and 55

countries in Caribbean. It held 41.1% stake in the PepsiCo Inc.

SKU is the acronym for stock keeping unit. Here, SKUs represent larger collations of Pepsi’s

individual packets, cartons, or other servings — for example a pallet containing a number of

multipacks.
2. Introduction

2.1 Industry Profile

Fast moving consumer goods (FMCG), are products that are sold rapidly at comparatively

low cost. Though the complete profit made on FMCG products is fairly small, they normally

sell in large quantities, so the increasing profit on such products can be large. Examples of

FMCG generally includes a extensive range of frequently purchased consumer products such

as snacks, toiletries, soap, toothpaste and powders, cosmetics, detergents etc, It also

includes drugs, consumer electronics, packaged food products and beverages, while these

are often categorized separately.

Soft Drinks Industry

The soft-drink industry includes companies that make non-alcoholic beverages and

carbonated mineral waters or concentrates and syrups for the manufacture of carbonated

beverages. Sparkling mineral waters have been popular for thousands of years: the ancient

Greeks said that such waters had medicinal properties and bathed in them commonly; the

Romans established resorts around mineral springs throughout Europe. In the 1600’s the

village of Sauna in Belgium became renowned for its waters, which by the early 1700’s were

sold, in bottles, as far away as London, UK.

Progress of the first man-made carbonated or sparkling water is credited to Joseph

Priestley, the British scientist who discovered oxygen. In 1776 he invented a method of

"pushing" carbon dioxide into water by liquefying it under pressure, thus making fairly

continuing bubbles. The technique led to growth of the soft-drink industry. By the beginning

of the 18th century, carbonated water was being manufactured commercially in England,

France and America; shortly thereafter, (normally fruit concentrates) were added to

brighten the taste. In the 1840’s, small carbonated bottling processes were established in

Canada, producing carbonated drinks in reusable bottles which were supplied as medicinal
tonics. Most soft drinks are still carbonated to give drinks a "tangy bite" and to stimulate the

tongue. Furthermore, because aroma is an important part of flavor, the taste’s carried as

vapours in the bubbles that enhance the taste.

The procedure of "pushing" carbon dioxide is still used, however now the water is first

purified in a method known as "polishing." Cooled carbon dioxide is then injected at

pressures of 275-550 pounds per square inch. Some of the initial drinks made in Canada

were called, Cream Soda, Ginger Beer, Sarsaparilla, None-Such Soda Water, Birch Beer and

Sour Lemon. The first carbonated beverage or "pop" bottles were closed with corks held

tightly in place with a wire binding. Because they had to be kept neck down so that the cork

would not dry and let the carbonation to leak away, they were man-made. Other packaging

innovations later in mid-70 include canned carbonated drinks, non-reusable glass bottles

and containers prepared from rigid plastics. However, an effort is being made, repeatedly

through provincial legislation, to increase the use of reusable glass containers.

The most famous competition within the industry has been between Coka-Cola and Pepsi,

which conducted two rounds of "cola wars" in the twentieth century. In the 1940’s and

1950’s, Pepsi faced the industry leader by offering a twelve-ounce bottle for the same four-

cent price as Coke's standard seven ounces. In the 1960’s and 1970’s, "Pepsi challenge"

taste-tests led Coke to alter its formula in 1986, a campaign that failed because it

underrated the affection Coke drinkers had to the tradition and representation of the brand.

In 2001, the non-alcoholic beverage industry included approximately six hundred U.S.

bottlers with more than 183,000 workforces, and it reached retail sales of more than $60

billion. Americans that year consumed a typical of 55 gallons of soft drinks per person, up

from 48 in 1990’s and 34 in 1980’s. The eight leading companies 96.4 Percent of industry

sales, headed by Coca-Cola with more than 42 Percent of the soft drink market and Pepsi
with 33 Percent. Six individual brands accounted for almost two-thirds of all revenue: Coca-

Cola original (itself with nearly 20 Percent of the market), Pepsi-Cola, Diet Coke, Mountain

Dew (a Pepsi product), Sprite (a Coca-Cola product), Dr. Pepper, and Diet Pepsi. Local sales

growth slowed in the late 1990s because of increased rivalry from coffee drinks, sports

drinks, iced teas, bottled waters and juices,. The industry continues, however, to tap

profitable international markets; Coke and Pepsi each have \operations in more than 120

countries.

2.2 Company Profile

Business Summary

PepsiCo is one of the largest companies there is that is involved in the diet, beverage, and

snack industries. PepsiCo, Inc. is engaged in the snack food, soft drink, juice, and fast food

franchise businesses. The Company, through its companies, markets, sells and distributes

various items in the United States and worldwide, manufactures concentrates of Pepsi,

Mountain Dew and other brands for sale to franchised bottlers in the United States and

transnational markets and produces, markets, sells and distributes juices under numerous

Tropicana trademarks in the United States and globally.

PepsiCo’s local snack food business is conducted by Frito-Lay North America, and its global

snack food business is led through Frito-Lay International. The Company's soft drink

business runs as the Pepsi-Cola Company and is covered of two business units, Pepsi-Cola

North America (PCNA) and Pepsi-Cola International (PCI). In December 2000, the Company

proclaimed an agreement under which a subsidiary of PepsiCo will merge with The Quaker

Oats Company, and Quaker will become a wholly owned subsidiary of PepsiCo. Quaker is a

large international marketer of foods and beverages. It makes and markets Gatorade thirst
quencher, along with hot cereals, cornmeal, pancake syrups, grain-based snacks, hominy

grits, and value-added rice products.

PepsiCo in India

PepsiCo entered India in 1988 with joint venture with the Punjab government PSU Punjab

Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture promoted

and sold Lehar Pepsi until 1991, when the use of foreign brands was permissible; PepsiCo

bought out its partners and terminated the joint venture in 1994. Others claim that firstly

Pepsi was banned from import in India, in 1970, for having declined to release the list of its

ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market soon

afterwards. These disagreements are a reminder of "India's sometimes bitter relationship

with giant multinational companies." Indeed, some claim that PepsiCo and The Coca-Cola

Company have "been major aims in part because they are well-known foreign companies

that draw adequate attention."

In 2003, the Centre for Science and Environment (CSE), a non-governmental organization in

New Delhi, said carbonated waters produced by soft drinks manufacturers in India,

comprising multinational giants PepsiCo and The Coca-Cola Company, confined toxins,

containing lindane, DDT, malathion and chlorpyrifos — pesticides that can lead to cancer, a

collapse of the immune system and cause birth shortcomings. Tested products included

Coke, Pepsi, 7 Up, Mirinda, Fanta, Thumps Up, Limca, and Sprite. CSE found that the Indian-

manufactured Pepsi's soft drink products had 36 times the equal of pesticide residues

legalized under European Union guidelines & Coca Cola's 30 times. The Coca- Cola Company

and PepsiCo together accounts 95% market share of soft-drink sales in India.

In 2006, the CSE again found that carbonated drinks, including both Pepsi and Coca-Cola,

had high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company retain
that their drinks are harmless for consumption and have printed newspaper advertisements

that say pesticide levels in their products are less than those in further foods such as tea,

fruit and dairy goods. In the Indian state of Kerala, sale and production of Pepsi-Cola, along

with other soft drinks, was banned by the state government in 2006.

Mission

The mission is to be the world's premier consumer Products Company focused on

convenient foods and beverages. They seek to produce financial rewards to investors as

they provide opportunities for growth and enrichment to their employees, business

partners and the communities in which they operate. And in everything they do, strive for

honesty, fairness and integrity.

Vision:

"PepsiCo's responsibility is to continually improve all aspects of the world in which we

operate – environment, social, economic – creating a better tomorrow than today."

The vision is put into action through programs and a focus on environmental stewardship,

activities to benefit society, and a commitment to build shareholder value by making

PepsiCo a truly sustainable company.

PepsiCo Values & Philosophy:

Values & Philosophy are a reflection of the socially and environmentally responsible

company they aspire to be. They are the foundation for every business decision which they

make.

The PepsiCo Family

Meet the three major divisions of the PepsiCo family:

 PepsiCo Americas Beverages.

 PepsiCo Americas Foods.

  PepsiCo International.

3. Main Issues Faced By the PepsiCo in the Supply Chain and Logistics:-

Issue 1: Gaps in demand and supply

The main challenge does Pepsi face is the gap between its supply and demand. This happens

due to the lack of presence in the market because their heavy reliance on the distribution

which is outsourced by them. The gap exists in the supply chain when demand is not beaten

by the company through their distribution channel. This gap may exist due to irregular

quantity supplied to retailers. Gaps in this chain may exist due to lack of expertise in their

distribution system.

Issue 2: Channel conflict

Conflict in the channel of distribution is also major challenge faced by the PepsiCo

international. This happens due to the higher interdependency between the various parties

and channels. In this mostly power given to local people which can provide a good service to

customers. It may happen due to cross cultural differences between the local people and

PepsiCo international.

Issue 3: Environmental Impact

The infrastructure also come into challenges of PepsiCo in effective distribution and increase

transit time. The various kinds of roads having poor quality and traffic on that is very

leniently managed which creates more complexity and difficulties in managing that routes.

Partly the fault is also of the distributor’s carelessness.

Issue 4: Theft

This is the common problem in most of the countries. This happens in those countries

mostly where the law is not that much power full which may control by law. mainly at the
port the concentrate is being shipped there is the main risk of theft comes. To decrease this

theft PCI has to deploy the security staff to keep eye on concentrate that is reaches its final

destination safely or not. This adds the cost in the supply chain of the company. After this

also company is not sure that it is going to reached safely or not they have to take risk.

Locals also have the risk of this but as they are localizing so they are very well aware about

this and they know how to deal with such problems.

4. Analysis of the main Issues:

In this company have to make sure that their supply chain should capable of facing the

problems faced by their supply and logistics. It is being proved that the supply chain adds

value up to 80 % of the cost so managers have to make it effective and efficient to earn

profits. The main reason is to heavy dependability on the local companies in their supply

chain. For the solution of such challenges we have following solutions:

Solution 1: Reducing demand and supply gap

An effective distribution channel is that which is being design and structured as per the

customer segment which may help to reach easily. The Pepsi cola international need to

construct their logistic chain as they can easily reach to the demand of rural consumer.in

this they should segment their market as urban and rural so it may help them to create

effective supply chain segment wise. To copy urban consumer rural consumers also

preferring to consume brand so they can create good supply chain because rural people can

support them as all are aware that Pepsi is brand in itself so they can be part of their supply

chain.

Solution 2: Reducing channel conflict

To reduce the conflict in the distribution channel, they should go with the relationship

marketing and in this they should take power and control from their local people and give
this to the company supply chain managers. Relationship marketing plays an effective role in

supply chain management. Commitment and trust should be effective tool of local channel

as well as PepsiCo international which can create positive and healthy relationship between

various channels of distribution.

Solution 3: Reducing environmental impact

They have to build short transit system in their supply chain. Alternative transport system

they should use. By taking help of local government authorities they try to create sound

system in particular area. PepsiCo international should take the help of local institution and

NGO’s to build necessary infrastructure for sound and effective distribution channels in rural

India. This is little difficult but it will help in long run to the company.

Solution 4: Reducing theft

Without personal efforts of PepsiCo international’s to find criminal, make their efforts to

resolve their problem or else it is not possible to solve this problem. They may produce

concentrate in the local country too. This can be also become the solution for this problem.

5. FINDINGS

5.1 Demand Management:

Importance

Demand forecasts system the source of all supply chain planning. Forecasts of future

demand are vital for making exact supply chain decisions and confirming the company’s

success. Examples of such decisions - include how much to inventory, how much of the

product to make, how much to replenish & how much to order.

Ease of Forecasting

Beverages are a push product. Forecasting is not easy-going in the beverage industry as

there are possible serious variants in demand due to seasonal changes in summer and
winter, which cannot be easily forecast before controlled. Therefore, certain forecasting can

be difficult at times & there is a margin for error. Having multiple product lines & daily

planning processes decrease risk of error by extreme responsiveness.

Forecasting Methods

Three forecasting methods are used. The following methods are used for the purpose of

sales and demand forecasting:-

1. Time-Series Method: Historical demand data can be effectively used to forecast future

demand.

2. Qualitative Method: Using historical data & market intelligence as a guide, PepsiCo

management follows their own judgment to control the demand forecast.. A yearly demand

plan is forecasted in this way which is further divided into monthly, weekly and daily plans

correspondingly.

3. Causal Method: Causal forecasting acts that the demand forecast is highly correlated with

stable factors in the environment such as- the state of the economy, product pricing and

interest rates that can cause a change in the demand. For example is how by presenting a

product variation, such as Pepsi Twist, can impact on demand for the original product that is

“Pepsi”.

5.2 Customer Service:

PepsiCo, Inc. is one of the world's top consumer product companies with many of the

world's most important and valuable trademarks. Its Pepsi-Cola Company division is the

second largest soft drink business in the world, with a 21 Percent share of the carbonated

soft drink market worldwide and 29 Percent in the United States. Three of its brands--Pepsi-

Cola, Mountain Dew, and Diet Pepsi&mdashe among the top ten soft drinks in the U.S.

market. The Frito-Lay Company division is by far the world leader in salty snacks, holding a
40 percent market share and an even more staggering 56 percent share of the U.S. market.

In the United States, Frito-Lay is nine times the size of its nearest competitor and sells nine

of the top ten snack chip brands in the supermarket channel, including Lay's, Doritos,

Tostitos, Ruffles, Fritos, and Chee-tos. Frito-Lay generates more than 60 percent of

PepsiCo's net sales and more than two-thirds of the parent company's operating profits. The

company's third division, Tropicana Products, Inc., is the world leader in juice sales and

holds a dominant 41 percent of the U.S. chilled orange juice market. On a worldwide basis,

PepsiCo's product portfolio includes 16 brands that generate more than $500 million in sales

each year, ten of which generate more than $1 billion annually. Overall, PepsiCo garners

about 35 percent of its retail sales outside the United States, with Pepsi-Cola brands

marketed in about 160 countries, Frito-Lay in more than 40, and Tropicana in approximately

50. As 2001 began, PepsiCo was on the verge of adding to its food and drink empire the

brands of the Quaker Oats Company, which include Gatorade sports drink, Quaker oatmeal,

and Cap'n Crunch, Life, and other ready-to-eat cereals.

5.3 Customer Service Dimension:

Overall, Pepsi CRM application after trying a variety of new software systems seems to have

improved a lot. They first PeopleSoft, Oracle was used as the other applications, where

currently, PepsiCo, my SAP business applications using. They are very beneficial to the

company, the current CRM application, see. Apart from these small changes, they currently

believe that CRM applications are very promising for PepsiCo.

For PepsiCo, CRM is the most essential tool to give 100% satisfaction to their customers. It

helps them to integrate all the information like 360 degree view of customer base on time

delivery, product inventory close time etc. they have their service representative, helpdesk

to interact with customers.

Improvements in information technology

• Executive Support System (ESS) :-sales / market share & the ability to monitor.

• Decision support systems (DSS) :- reduces the cost of raw materials & supplies.

• Packing Application Specialist (PACS) :- production & logistics processes automates.

• Transaction Processing System (TPS) :- 30 to 50,000 hour workweek saves.

5.4 Logistics Planning and Strategy of PepsiCo

Supply chain management (SCM) is the management of a network of organized businesses

involved in the ultimate provision of product and service packages required by end

customers.

Supply Chain Management spans all movement and storage of raw materials, work-in-

process inventory, and finished goods from point of origin to point of consumption. It also

includes coordination and collaboration with channel partners, which can be suppliers,

intermediaries, third-party service providers, and customers.

Supply Chain Strategy or Design

In order to ensure a good supply chain strategy, Pepsi co. plans two years in advance. It has

several agreements with manufacturers, and receives raw material on a convenient basis.

The company also decides where production plants are to be placed. The production

process is 65% automated. The company has to provide and manage transport for the

delivery of products as well as the plan of third party logistics for the gaining of products.

The shipping department handles orders and the transport department chooses the vehicles

for safe delivery.

Material planning and sourcing is carried out as well. Bases of supply of raw material both

local and foreign are identified and terms and conditions are negotiated.
1. Production

2. Storage: Raw and packing

3. Storage: Finished goods

The supplier is audited by the most cost efficient quality control department. Distributors

are also decided by the company, keeping in mind past performances.

Process Views of a Supply Chain

Pepsi has a seasonal demand. Just in time concept is applicable in non-seasonal period and

not applicable in seasonal period. All processes that are part of the procurement cycle,

manufacturing cycle, replenishment cycle, and customer order cycle are push processes.

Cycle View of Supply Chain: There are five stages in a supply chain (Supplier Manufacturer

Distributor Retailer Customer) and four supply chain process cycles (customer order,

replenishment, manufacturing, procurement cycle).

Pepsi Sales order and processing: The Shipping Manager receives sales order from Sales

Team, distributors through telephone, fax & email one day before dispatch. The sales are

made to base distributors on advance payment against orders then shipping manager plans

according to the demand of distributors on daily basis.

There are three main divisions where the supply chain of PepsiCo lies within: procurement,

manufacturing and distribution. PepsiCo India directly handles over 50% of operations

associated with bottling beverages. The PepsiCo India doesn’t have any association with

other firms to handle large-scale production. There are two divisions called “shipping and

handling” and “planning”. They run SAP software to manage their operational system. These

two divisions work for defining and developing strategic planning for coming years.

Procurement

PepsiCo has assured list of suppliers from which it buys raw materials and determines

pricing for procurement. They position imported raw materials through its global network.
The major raw materials are sugar, mango pulp and bottle resins. PepsiCo has defined policy

with respect to suppliers that key raw material should only be supplied by a supplier to its

competitors. Other raw materials like sugar and bottling are provided by some of the

suppliers and they also supply it to PepsiCo’s competitors. Raw materials are straight sent to

PepsiCo and if it is done nearby than suppliers keep raw materials with them and PepsiCo

reimburse for keeping raw materials. PepsiCo has suppliers who are more operative than

their third party in terms of logistics and they directly send raw materials to PepsiCo and

charge superior price.

Manufacturing:

Third party of PepsiCo in India carries out only 40-45% of the bottling and distribution. The

PepsiCo and third party run the manufacturing plants. Most of the third party bottlers are

families. There is large number of small-scale bottlers. All the bottlers are required to

operate same suppliers as PepsiCo. Third party bottlers can negotiate prices with suppliers.

PepsiCo buys the resins for the bottles and then these are wafted into the bottles. PepsiCo

India also uses glass recyclable bottles for packaging purpose. Once the manufacturing has

packaging ready, the liquid products are packaged and made available for the customers or

distribution network.

5.5 Logistics System Design of PepsiCo India

Initially the focus of the Company remains on reaching all the markets and then the

Company shifts its focus on increasing the frequency of sales in the respective markets so

that the sales and profitability of the Company can be increased. Company (PepsiCo):

PepsiCo India provides the salt to all the bottling plants in the Country that carry out the

bottling operations.
COBO: These are Company owned bottling operations operating directly under the

Company. Out of 32 bottling plants, PepsiCo owns 15.

FOBO: These are Franchise owned bottling operations. R K Jaipuria group does all the

franchisee-bottling operations for PepsiCo India; currently R K J Group has 17 bottling plants

for Pepsi in India.

Warehouses: These are Company or franchise owned warehouses spread over various

locations that cover the respective territories and come under the purview of their

respective Area or Territory Offices. Stocks are sent from the bottling plants to these

warehouses, from where they are sent to the C & F centers and Distributor Points.

Distributors: These are small, associated to C & F centers. Everything at the Distributor point

owned and managed by the distributor, even the salespersons are on the Distributors

payroll.

Wholesalers: These are smaller than C & F centers and Distributor points and get the stock

directly from the Company or Franchisee. They get their stock directly from the Company

and thus get distinct rates and additional discounts from the Company.

Slums: They are generally minor than the Wholesalers are. However, they get special

discounts from the C & F centers and Distributor points. All the different players in the

distribution channel namely C & F centers, Distributor points, Wholesalers and Slums have

different designated markets and are not supposed to operate in the market designated to

any other player.

Retailer: Retailers are the most vital chain in the distribution channel of Pepsi as they are

the only point of contact with the customers. Retailers get their stock from all the other

channel members in the distribution channel.

5.6 Integrated Logistics Activities:

Value chain analysis is an analytical tool used to identify the ways in which businesses create

value for customers. The essence of value chain analysis is illustrated in Figure below:

Primary Activities

Inbound logistics

PepsiCo portfolio comprises 22 brands including Pepsi-Cola, Tropicana, Gatorade, Mountain

Dew and Diet Pepsi and each brand belonging to PepsiCo generated at least one billion USD

in retail sales in 2015. Inbound logistics practices of each brand within PepsiCo portfolio

reflect the nature and quantity of raw materials used, the proximity between the location of

suppliers and manufacturing plant and other set of factors.

The economies of scale can be specified as the main source of value for PepsiCo derived

from inbound logistics primary activity. PepsiCo also benefits from locating its production

sites within close geographical proximity to the main sources of raw materials in order to

save on transportation costs.

Technology is another driver of innovation that provides advantage to PepsiCo’s supply

chain. One of the innovations that PepsiCo is exploring is 3D printing. For example,

RUFFLES® Deep Ridged used 3-D printing technology to create optimal potato chip

prototypes.

Operations

PepsiCo operations are divided into the following the following six operational segments:

1. Frito-Lay North America (FLNA). This segment engages in manufacturing, marketing,

distributing and selling branded snack foods.

2. Quaker Foods North America (QFNA). This segment is assigned with producing,

marketing, distributing and selling cereals, rice, pasta and other branded products.

3. Latin America segment produces markets, distributes and sells a several snack food

brands for Latin American market. These brands include Doritos, Cheetos, Marias Gamesa,

Ruffles, Emperador, Saladitas, Sabritas, Lay’s, Rosquinhas Mabel and Tostitos.

4. Asia, Middle East & North America (AMENA). AMENA segment makes, markets,

distributes and sells a number of leading snack food brands including Lay’s, Kurkure, Chipsy,

Doritos, Cheetos and Crunchy through consolidated businesses, as well as through non-

controlled affiliates.

5. Europe & Sub-Saharian Africa (ESSA). This segment engages in manufacturing, marketing,

distributing and selling a number of snack food brands either independently or in

conjunction with third parties.

6. North America Beverages (NAB). Operations in NAB segment revolve around producing,

marketing, distributing and selling concentrates, fountain syrups and finished goods under
various beverage brands including Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina,

Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist and Mug.

As it is illustrated in Figure 2 below, North America Beverages and Frito-Lay North America

segments are the biggest sources of PepsiCo revenues and they account for 55 per cent of

the total revenues.

PepsiCo conducts its productions operations with use of sophisticated operational systems

and advanced technologies. A particular focus on sustainability issues as an integral part of

its CSR strategy is an important feature of PepsiCo operations and a solid source of value

addition. Moreover, PepsiCo adjusts its products to local tastes and preferences and this is

reflected on operations. For example, PepsiCo has tailored its products to suit the Chinese

palette and introduced various local flavors to the Lay’s brand. The current flavors available

in the market are fresh cucumber, baked lobster, peking duck, hot and sour fish soup, fried

prawn and little tomato.

Outbound logistics

PepsiCo distribution costs amounted to USD9.4 billion in 2015, USD9.7 billion in 2014 and

USD9.4 billion in 2013. PepsiCo creates value in outbound logistics via using multiple
product distribution formats. Specifically, PepsiCo outbound logistics integrate the following

three formats of product distribution:

1. Direct-Store-Delivery. This distribution format is especially popular with product

categories that are re-stocked very often. Direct-Store-Delivery provides PepsiCo the

advantages of merchandizing with maximum visibility and appeal within stores.

2. Deliveries to customer warehouses. Mainly less fragile and perishable products are

distributed in this format and this is the most cost-effective distribution format.

3. Using distributor networks. Third-party distributors are needed in order to facilitate the

distribution to locations far from PepsiCo manufacturing plants and warehouses.

5.7 Measuring Logistics Costs:

The demand in the season is very high and it remains common in every season most of the

time. In Pepsi seasonal demand differ from summer to winter at a decreasing rate. In off

peak Pepsi reduces their price on liter bottle and come up with the new discounted price or

we can say saving schemes to attract new customer. They charges high price in peak season

and low when demand is less. Basically this is the pull and push strategy of PepsiCo.

Pricing and Revenue Management for Multiple Customer Segments

These are different segments which Pepsi has allocated and targets multiple customers from

these segments such as children, teenagers and adults. The product range is available in tin,

glass bottles, plastic liter bottles and fountain fresh.

Using in Practice

Managers do gather accurate and complete data relating to products, offered prices,

competition and most important customer behavior. For Pepsi it’s equally important to

quantify the expected benefits from revenue management. Historical data and a good

model of customer preferences are being used to estimate the benefits. 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 while also satisfying the customers creating a double impact. Revenue

management tactics have brought in huge profits to the company.

5.8 SCM Performance:

PepsiCo offers the world's largest portfolio of billion-dollar food and beverage brands,

including 22 different product lines that each generates more than $1 billion in annual retail

sales. With net revenues of approximately $65 billion, PepsiCo's employees are united by

our unique commitment to sustainable growth; we believe that investing in a healthier

future for our planet and its people also means a more successful future for PepsiCo.

PepsiCo calls this commitment Performance with Purpose: PepsiCo's promise to deliver

sustained value by providing a wide range of foods and beverages, from treats to healthy

eats; finding innovative ways to minimize their impact on the environment and lower our

costs through energy and water conservation as well as reduce use of packaging material;

providing a safe and inclusive workplace for our employees globally; and respecting,

supporting and investing in the local communities in which they operate.

5.9 Strategic Integrated logistics Management:

Planning (Demand and Supply): The Demand Planner contributes to the success of PepsiCo

NAB by executing the demand planning process within a defined network. The Demand

Planner supports all facets of the forecasting process in order to achieve high forecast

accuracy and to ensure customer service is maintained. This person also supports sales and

marketing teams to ensure innovation launch execution. The Supply Planner contributes to

the success of PepsiCo NAB by assisting with the management of supply chain processes and
projects; including innovation launch execution, supplier development, and production

performance results analysis and reporting.

Warehouse Operations: Associates will work either on a field-based or headquarters-based

team. The key objectives of these teams are to manage inventory, improve warehouse

productivity, and execute shipments to ensure key service metrics are met. These teams

interact with various other areas of the supply chain, including demand & supply planning,

transportation, customer integration, sales strategy, and finance.

Transportation: Associates will partner with transport team members to ensure timely

delivery of raw materials and finished goods to our plants, distribution centers, and

customer. This initiative encompasses many business areas including safety, DOT

regulations, electronic driver logs, cost control, on time shipments, payroll, and driver

routing. Associates will have the opportunity to get hand on experience owning day to day

transport activities.

Customer Integration: Associates serve as a direct point of contact for PepsiCo's customers.

Associates actively partner with Warehouse Operations, Transportation, Supply Chain

Planning and Sales to ensure our customers receive flawless order fulfillment and delivery.

Customer Integration roles deliver a wide range of exposures to critical skills including:

effective communications, influence management, data analysis critical thinking and process

optimization skills.

5.10 Benchmarking Supply Chain:

PepsiCo has announced details of its global sustainability plans and the supply chain

benchmarking:
  PepsiCo will continue to work on the efficiency of its manufacturing and distribution

operations while also broadly extending its environmental stewardship efforts across

its global value chain.

 It will sustainably source both direct and major non-direct agricultural raw materials

by 2020 and 2025, respectively.

 Building on its earlier goal, PepsiCo also intends to invest in the necessary measures

to sustainably source 100 percent of the palm oil and cane sugar it purchases by

2020.

 Building on its support for the United Nations Guiding Principles on Business and

Human rights, PepsiCo is significantly broadening its focus on respecting human

rights across the company's supply chain.

 It will extend the principles of its Supplier Code of Conduct to all franchisees and

joint venture partners. These principles already apply to PepsiCo's direct suppliers.

5.11 Designing the Supply Chain Network:

At the maximum level, performance of a distribution network should be valued along two

dimensions:
The customer needs that are met: influence the company’s revenues, which cost decide the

profitability of the delivery network. While customer service involves of many mechanisms

then they will consider those procedures that are influenced by - the structure of the

distribution network for Pepsi.

Response Time for Pepsi is least as the direct customers for Pepsi are the retailers & then

the final consumers. Pepsi try to find center of gravity in every country, so that it can deliver

its retailer in less time.

Product Variety in Pepsi is huge. They have made their place in market with their unique

product line ranging from chips to water, which includes beverages extending from the

water Aquafina to Mountain Dew, 7 up ,Pepsi, Miranda, Pepsi Max, Mirinda apple &

Fountain Fresh, Pepsi light , Pepsi diet.

Availability: Pepsi availability is very high and the product is always in stock whenever an

order arrives. The Distributors have three days stock as back up with them in order of any

failing of the plant or other external factors.

Customer Experience for Pepsi has always been progressive as they receive the product with

ease and on time. The retailers are the direct regular customers as they place an order to

the distributors. Return ability: Pepsi has always been very robust in a sense that

unsatisfactory items can be returned & changed on the spot. This is factual for both the

retailers and the customers. Pepsi has set down a system through which they can efficiently

manage this requisite.

5.12 Supply Chain Planning:

The goal of planning is to maximize the supply chain surplus. Planning establishes

restrictions within which a supply chain will function over a period of time. Companies start

the planning phase with a prediction for the coming year of demand. Pepsi carries out sales

forecasting for local demand. The annual sales target is conveyed to the supply chain

department, scheduling is carried out on a monthly, weekly and daily basis.

5.13 Implementation of Supply Chain Management:

Company makes decision regarding specific customer orders. The goal of supply chain

operations is to handle incoming customer orders in the best possible manner. During this

phase, firms allocate inventory or production to individual orders, set a date that an order is

to be filled, makes pick lists at a warehouse, assign to shipping, and set delivery and so on.

There is less uncertainty about demand. The manufacture, sales and supply chain

departments get together to decide the inventory usually on a weekly basis.

5.14 Role of IT in SCM:

According to their 24 hours “order to delivery” concept, they have developed a computer

application and created wide network that helps them to achieve its goals. PepsiCo

Information Management System Microcomputers to update inventory information systems

were connected to the central computer system daily PepsiCo. Manages more than $ 25,000

(Rs 12,50,000) a year are estimated to escape from the system.

Management information system:

Effective marketing planning product planning, pricing, promotion and distribution is

required in the case. Such planning is only possible if the company the right to adequate and
relevant information. This is possible through MIS. PepsiCo utilize MIS system to capture the

present market trends, demand forecasting and also oversee taste and preferences of the

customers. MIS facilitates marketing plan and control. It helps PepsiCo to obtain timely

information of pricing, promotion and distribution. MIS gives quick supply chain

information. Therefore, it helps PepsiCo in taking right decisions at right time. They use

some computer applications to enhance their supply chain as well as relationships with its

suppliers and customers:

1. Current enterprise resource planning:

Enterprise resource planning is business process management software that allows an

organization to use a system of integrated applications to manage the business and

automate back functions. ERP software integrates all facets of an operation, including

product planning, development, manufacturing processes, sales and marketing.

2. Current supply chain management:

PepsiCo has many bottling plants situated across the globe. The company makes sure that

all their suppliers are integrated in their individual logistics activities. My Sap business suits

application helps suppliers to communicate with each other and forecast demand according

to that. PepsiCo is also trying to increase their supplier base. Therefore, they are indulging

into encouraging minority and women. By doing this, they are successful in increasing their

supplier base as well as market share.

5.15 Supply Chain Strategies:

There are three major sustainable advantages that give PepsiCo a competitive edge as they

operate in the global marketplace:

1. Big Muscular Brands built through well market positioning and hefty investment in

advertising and promotions;

2. Proven ability to innovate and produce differentiated products through superior

operating base;

3. Powerful go to market system built with the help of superior relationship base and an

faultless sales and distribution network. Making it all work are the extremely talented and

dedicated people who are an vital part of PepsiCo India.

Supply Chain Strategy

Step 1: The Customer and Supply Chain Uncertainty

a) Identifying Customer Needs: Pepsi needs to understand the customer needs for each

targeted segment and the uncertainty the supply chain faces in satisfying these needs. Pepsi

deals with beverages, which are a fast moving consumer good, it knows the requirements of

consumers. Pepsi is considered as a drink which is refreshing during summer, and taken

regularly during winter, with demand hiking around festivals like New Year, Halloween

occasions such as weddings. Pepsi caters to both cities and rural areas. It understands the

needs of both. As demand for beverages is seasonal, the quantity of product needed for

each lot is taken care of with past demand in mind. Consumers generally require a small

response time, high service level, reasonable price and some variety (for example health

conscious people favor diet versions of sodas).

b) Demand Uncertainty and Implied Demand Uncertainty: Demand for Pepsi varies by

product. For example there is a greater demand for “Pepsi” as compared to “Mirinda

Apple,” which is new. Hence, Pepsi has a low demand uncertainty as compared to “Mirinda
Apple.” The product “Pepsi” is approaching its maturity stage in the PLC whereas “Mirinda

Apple” is in the introductory stage.

Pepsi’s implied demand uncertainty varies with the product type as well as the customer

needs. Due to decreased lead time (the customer may purchase its competitor’s product if

Pepsi is not available at that time), need for greater variety and higher level of service,

implied demand uncertainty increases. This is true for cities where unmet demand by Pepsi

is met by Coca Cola and other such competitors. Supply uncertainty is also affected by new

products. New products have higher supply uncertainty.

Step 2: Understanding the Supply Chain Capabilities

The responsiveness & efficiency disagrees according to the consumer needs and wants,

which implies demand uncertainty, product market segment and type. In isolated areas the

company emphases on being efficient as other modes of transportation, which lead the

product to be highly expensive. The company it does not deal with distributors who do not

have 20 - 25 vehicles, therefore as the company has focus on cost reduction, uses

inexpensive modes of transportation and slow modes of transportation, when the demand

is certain, & uses economies of scale in production then the Pepsi is more inclined towards

being efficient. In urban areas, the company pay attentions on being highly reactive as Pepsi

has to meet a high service level, short lead time, handle a large variety of products &

respond to broad ranges of quantity required particularly at the retail stage.

Step 3: Achieving the Strategic Fit

The Pepsi supply chain give different roles to its different stages, the firm has to decide

either to transmission the responsiveness to the manufacture stage or to the retailer stage.
While analysing the Pepsi’s supply capability it is seen that Pepsi tends to be more reactive

in the cities and less in towns. Therefore, transferring the openness to the distributor &

retailer, which allows them to face the higher implicit demand uncertainty. In return

company allows the supplier and manufacturer to be more efficient. At the same time,

several beverages types give to a broader product portfolio triggering Pepsi to adjust its

strategies appropriately; modifying the supply chain to meet the needs of each demand.

5.16 Organization and Control in a Supply Chain:

For Pepsi, outsourcing results in the supply chain function being accomplished by a third

party. It is one of the most important issues facing the firm. Raw material for manufacturing

and packaging is being outsourced through contracts. Incoming and outbound

transportation of goods from the manufacturing place to the delivery center and then to the

final customer is also being outsourced to a third party. The considerations are:

 Looking for sources of supply and negotiate with suppliers

 Finding of raw material from local and foreign suppliers

 Determining terms and conditions with supplier

 Managing activities and documentation with suppliers

 Comparisons of cost and quality assurance.

It makes the decision from where to outsource by inviting bids for proposals in the local

newspapers. The proposal works as a general offer to all the concerned parties whether

they are related to the delivery of raw material or distribution vehicles. Sourcing process of

the company comprises the selection of supplier, product design collaboration, design of

supplier contracts, gaining of material and services and assessment of supplier performance

in case of raw material procurement.

Supplier Scoring and Assessment

When comparing suppliers, Pepsi does not only concentrate on the mentioned price but

also other factors that may affect the total cost of the supplier. The factors other than

mentioned price are as follows:

 Replacement Lead Time

 Supply Flexibility

 Supply Quality

 Pricing Terms

 Exchange Rates

 Duties And

 supplier viability.

For Pepsi, the supplier scoring and assessment is based on the supplier performance, in

terms of replacement lead time and on time performance, differentiate themselves

amongst their competitors. Soon after the tender notice for the procurement of raw

materials is marketed, they are requested to send sample of the products. For example, for

the production of Pepsi, concentrate and sugar are demanded of high quality which is the

specialty of the company. These samples are verified in the total quality laboratories. The

sales department selects the particular supplier if the samples match with the standard set.

Being an ISO-9001 certified company, Pepsi cannot sell low quality products, hence it has

strict criteria set for the purchase of raw materials from suppliers.
5.17 Purchasing and Supply Chain Decisions:

Raw material Procurement

In the manufacturing of Pepsi products the raw material consist packaging materials, cans of

big size and small sizes, sugar and particular concentrate etc.. There are two sources of raw

materials one is local suppliers and other is foreign suppliers. The material required to

manufacture is primarily come from the country only in which they are manufacturing.

PepsiCo international already have the list of different suppliers of sugar so they select the

supplier from where manufacturer have to buy. And the concentrate which is the main raw

material of PepsiCo is direct come from PepsiCo international. Here management advertises

their tenders into the newspaper to invite suppliers of such raw materials so by this they can

get the cost benefit.

Selection Criteria of Distributors

Distribution selection is the main step in supply chain which is very critical step, because

mainly all retailers are handled by the distributors so while taking the decision they have to

check their efficiency and accuracy of the work, how well they are. Because efficient and

well placed distributors are very important to keep to ensure the availability of product.

Which every company keeps as a main target.

5.18 Latest Advancements in LSCM:

Companies need to be willing to make necessary and difficult changes. Success requires

reducing cost base through control on expenses and redesigned work processes. Logistics

cost which is incurred as a percentage of GDP is 11.6%. In order to improve their

productivity, they need to work on new products and trends. Some of the new innovations

are as follows:
Vendor Management Inventory (VMI)

VMI is a distribution channel operating system whereby the inventory at the

distributor/retailer is monitored and managed by the manufacturer vendor. It is a family of

business model in which buyer of a product provides certain information to the supplier of

that product and the supplier takes full responsibility for maintaining an agreed inventory of

the material, usually at the buyer’s consumption location. It includes several activities

including determining appropriate order quantities, managing proper product mixes. VMI is

also QRIS (Quick response inventory system) The vendor’s computer acquires data

electronically, no manual data entry is required at the recipient’s end which help in reducing

the lead time and in eliminating the vendors recording errors.

Collaborative Planning Forecasting and Replenishment (CPFR)

CPFR can be defined as a collaboration where two or more parties in the supply chain jointly

plan a number of promotional activities and work on synchronized forecasts, on the basis of

which production and replenishment processes are determined. The term CPFR was first

introduced in 1995, in connection with a pilot project between Wal-Mart. Warner-Lambert,

Benchmarking partners, SAP and Manugistics. The objective of CPFR is to better align supply

and demand through trading partner data interchange exception-based management and

structured collaboration in order to eliminate issues and constraints in fulfilling consumer

expectations. CPFR is a business practice that reduces inventory costs while improving

product availability across the supply chain. The CPFR process begins with an agreement

between the trading partners to share information with each other and to collaborate on

planning with the ultimate goal of delivering products based on true market demand.
Cross Docking

Cross docking is a practice in Logistics of unloading materials from an incoming semi-trailer,

truck or rail, car and loading this material directly into outbound trucks, trailers, or rail cars,

With little or no storage between them. It is a function of warehouses or distribution

centers, which was introduced by Wal Mart. Cross docking is a system in which the vendor’s

ship merchandise to a distribution centres in pre packed quantities required by each store.

The merchandise is delivered to one side of the distribution centre; the floor ready

merchandise is then transferred to the other side of distribution centre for delivery to a

store. Cross docking is a process by which products are aptly room the inbound dock to the

outbound dock, avoiding the need to store and prepare order replenishment. It either

picked or moved directly from the inbound dock to the outbound dock, avoiding the need to

store and prepare order replenishment. It not only reduces material handling but also

reduces the need to store the products in the warehouse.

Radio Frequency Identification (RFID)

It is a technology that uses communication via electromagnetic waves to exchange data

between a terminal and an object such as product, animal, or person for the purpose of

identification and tracking. it is a device that contains a chip and an antenna , which can be

physically inserted or stuck to a product. The basic information about the product can be

stored in this chip. The tagging of this chip enables companies to identify and track their

goods at various levels in a distribution chain. The reason this technology is being

increasingly used is due to its extraordinary ability to track almost anything and know where

it is at any step of the distribution process. The end result, companies become more

efficient increase sales and reduce costs.

Advanced Planning and Scheduling

It is also referred to as APS and Advanced Manufacturing. It refers to a manufacturing

management process by which raw materials and production capacity are optimally

allocated to meet the demand. APS is especially well suited to environments where simpler

planning methods cannot adequately address complex trade-offs between competing

priorities. Traditional planning system utilize a stepwise procedure to allocate material and

production capacity. This approach is simple but cumbersome, and does not readily adapt to

changes in demand, resource capacity or material availability. APS has commonly been

applied where one or more of the following conditions are present

Make to order manufacturing

Capital intensive production processes, where plant capacity is constrained

Products that require a large number of components or manufacturing tasks

Advanced planning and scheduling software enables manufacturing scheduling and

advanced scheduling optimization within these environments.

Electronic Data Interchange- (EDI)

It is the structured transmission of data between organizations by electronic means. It is

used to transfer electronic documents or business data from one computer system to

another computer system. It also be called as electronic document interchange. It is the

exchange of business information through standard interfaces by using computers. It

interoperated as transmission of business data between organizations in a computerized

format that does not require the rekeying information.

PepsiCo use innovation in its supply chain to benefit the entire organization:

At PepsiCo, there are following global priorities that all impact the supply chain:
1. Brand Building,

2. Innovation,

3. Execution,

4. Productivity, And

5. Driving Cash Returns.

5.19 Inventory management

Distributor Storage with Carrier Delivery

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

distributors / retailers in transitional warehouses & package carriers are used to moving the

products from the intermediary location to the final customer. This needs for distributor

storage to keep high levels of inventory because distributor / retailer total demand

uncertainty which directly to lower level than the manufacturer. Transportation costs for

Pepsi are lower because an economic mode of transportation like truckload can be used for

inbound shipments to the warehouse, it is closer to the customer. Facility cost is high

because of a loss of aggregation & often end up with higher managing and processing costs.

The information structure necessary is not that multifaceted. The distribution warehouse

serves as a buffer between customers and manufacturer .Real-time visibility between

warehouse and customer is needed whereas distinguishability between customer and

manufacturer is not needed. Response time is also concentrated.

Order visibility with manufacturer storage becomes easier and Customer convenience is

high. Distributor storage is well matched for medium - fast moving goods and also handle

higher level of range than retail stores.

Value of Distribution System

There are two components of distribution which are as follow:

 Storage

 Distribution

The storage facilities of Pepsi are planned in order to enhance the timely availability of the

product. For this reason the distributors are totally equipped with facilities which are

needed to ensure exhaustive supply of the product. The storage facilities are intended to

contain the maximum possible inventory items which are needed at any given time.

The distribution does not available between particular supply chain mechanisms but it a

basic function of combination amongst all supply chain mechanisms. In case of FMCG -

Pepsi, the value of efficient distribution process cannot be demoralized. The Pepsi

distribution system related the entire supply chain for all product classifications. The

distribution information network and its center play a key role in that concern. The major

object is to carefully track sales of elements and offer short replenishment cycle times.

Whenever, a store places an order it is direct transferred to the supplier via the distribution

manager.

5.20 Transportation Network

Pepsi supply chain strategy is closely related to the proper use of transportation. In a typical

market, quick response supports supply chains to meet the customer demands for shorter

lead times, and to coordinate the supply to meet the troughs & peak of demand. The main

emphasis is to determine the activities that are to be combined in the supply chain network
with their equivalent suppliers, distribution centers & the allied transport links between

them.

Modes of Transportation Network

Land: Truck offers benefit of door to door shipment, a shorter delivery time & no transfer

between pickup and delivery. Pepsi uses the TL (truck load) approach. This approach

provides covers the way for economies of scale and is able to meet service necessities while

minimizing both empty travel time & trucks idle time. Truck loads are more appropriate for

Pepsi because of the use of warehouses & larger shipments which makes it cheap. Raw

materials from the suppliers are taken by using trucks; finished products are transferred to

distributors, then retailers using trucks. Pepsi have its own taskforce of small and large

trucks & vehicles for carrying goods, raw material. While the other distributors also use their

private vehicles.

Water: This mode forms only a very small part of the total transport network. It is used for

shipping of empty cans.

Air: It is again a very small part of the entire transport network.

Design Options for a Transportation Network

Shipment via central DC with inventory storage using milk-runs: This is the main mode used

for transporting goods to consumers who are far away. Products are transmitted to the

distribution center in a particular region & are stored there. Tinier trucks then convey these

products to the local retailers as per the demand in smaller vehicles using milk runs. This

method is cost effective the reason behind this it saves on extreme transport cost that

would have been involved in transferring to each retailer directly to the supplier & also

inhibits stock outs because inventory is maintained closer to the retail outlets.
Direct Shipping: This method is used for shipping products to key account holders such as

pizza hut and KFC.

Direct Shipping with Milk-Runs: This method is used for shipping post mix cylinders to

retailers within the for source fresh Pepsi. The shipment is made in milk runs.

Just –In –Time

Difficulties without Just-in-Time

 Without Just-In-Time, the production manager tries to maximize production-

oriented goals such as labour efficiency, equipment utilization and uptime which

results in large batch sizes which are dependent on availability of raw-materials. This

optimizes the labour and equipment utilization regardless of the expense.

 The purchasing manager tries to lower the overall cost of the company. So, they

concentrate on getting the best price without concerning about reliability of the

suppliers.

 The transportation manager gets raw materials in and the finished goods out of the

operation. They try to optimize distributing network. They also try to lower cost and

reliability of logistics but it is possible only when the purchasing team could

negotiate with the supplier.

Improvement with using Just-In-Time (JIT)

 For delivering perishable products, just-in-time is one of the most effective solutions.

In just-in-time, delivery on time is a necessity.

  Just-in-time defines the way in which a manufacturing system should be managed. It

satisfies customers by assuring quality, availability of products, quick delivery and

value of money.

 The Pepsi brand and Pepsi-Cola products captured approximately one-third of the

total sales of soft drinks in the US.

 PepsiCo collaborated with 3PL provider Penske Logistics for managing its

transportation. Warehouse management is also provided by Penske for two Pepsi

distribution centers in North America.

Implementation

➢ In 2000, Penske changed transportation management technology of Pepsi from propriety

software to i2 transportation optimization solution. This increased flexibility and gave better

control on the transportation operation. It also made track of shipments and

implementation of alternative plans easier. By doing so, Pepsi has been able to achieve its

on time delivery goal.

➢ Pepsi’s transportation is joined to a central location to reduce costs. Penske established a

nationwide transporter rate re-negotiation and service valuation which improved cost

structure. With this centralization, allows intervention in a large scale to get the best rates

and services.

➢ Furthermore, Pepsi’s orders are acknowledged electronically and boosted to ensure

lowest transportation cost. Advanced technology is installed to select the lowest cost

carrier, consolidate shipments and find the best routes.

➢ PepsiCo used the JIT process for its supply chain management. To make this possible,

Pepsi partners with Penske which has provided them with i2 transportation optimization

solutions which has satisfied their consumers with on-time delivery and the advantage to

the company as it has also reduced transportation cost.

Limitations of Pepsi Supply Chain over Coco-Cola

1. PepsiCo has supplementary distribution systems for its beverages. Coca-Cola has for the

most part preserved distribution of its entire beverage line-up through its bottlers.

2. Pepsi bottling system is more disintegrated than Coca-Cola's

3. In a combined system negotiations involve less players and therefore take less time to

gain agreement which may be reason that why the Pepsi system has insulated in system

efficiency efforts. PepsiCo & its bottlers have proven a purchasing supportive to gain

purchasing power in buying raw materials.

4. While PepsiCo has been following international beverage acquisitions, those investments

will consumed time to produce major operating income.

5. PepsiCo alliance puts pressure on the impartial system bottlers to more voluntarily

consider agreements for warehouse distribution.

6. Conclusion

The primary objective of the report was to know distribution channel Strategy of PepsiCo &

to know the significance of Distribution channel strategy in Positioning of the product. The
data collected delivered a effectively for understanding the general organizational set up of

PepsiCo in India. By exploring the data & the literature review, the Sales & Distribution

Network of Pepsi is very solid and almost perfect. PepsiCo India had the first mover benefit

when it entered the market & it capitalized on that benefit to attract the market.

Franchisee- based operations combined with the Companys operations add asset to the

whole presence of the Company in the market. It is very significant to progress good

relationship with the retailers by delivering them better services & schemes. Maintaining

the good relationship with the distributors are essential for the firm because they are the

core -part of the distribution channel.

PepsiCo is the world‘s largest beverages firm. It has twenty two brands under its product

portfolio & each generate more than $1 million turnover yearly. PepsiCo believes in out-of-

box‖ strategy & before it has been positive brand. Because their success is their effective

supply chain & logistics. There are three divisions in their supply chain- procurement,

manufacturing & distribution. They have third party explanations for their logistics

operations. They have my Sap business suits uses for their daily operations. With the help of

those applications- they can simply manage their day-to day operations. PepsiCo consider

hub & spoke model for in the supply chain process. PepsiCo has achieved well to timeout its

paths. Now PepsiCo is standard brand.

7. Recommendations:

 Pepsico doesn't have proper enabling technologies such as EDI , ERP , RFID and EDD

in India . They should be having that for the better performance of its supply chain

activities.

 These engagements would identify specific opportunities to improve operational

performance and reduce costs within the manufacturing, assembly, supply chain,

and customer support processes

 Pepsico should define specific process changes and the auto-id technology required

to streamline each process step.

 Pepsico should address the business, manufacturing, logistics, information

technology, and financial implications of RFID including starting points and scale-up

plans.

 To improve efficiency, PepsiCo India should work to streamline fleet logistics and

balance day-to-day delivery routes.

 Pepsico should also maintain key supplier/delivery relationships.

8. Bibliography:

 Anand. (2012, May 13). Business Today. Show TIme, pp. 1-6.

 Armstrong, P. K. (2002). New Delhi: Prentice-Hall ofIndia Private Limited.

 Datta, S. (2000, March-April). Globalisation and Representations of Supply Chain in

Indian Social Scientist, 28(3/4), pp. 71-82.

 DNA. (2016, Spetember 26). Pepsico leading in Supply Chain in India, pp. 1-8.

 Ernst and Young. (2011). Spotlight on India's Beverage Industry. Mumbai: Ernst and

young.

 Supply and demand. (2017). Retrieved from India One Stop:

http://www.indiaonestop.com/film.htm

 FOLMSBEE. (2011). Can the Indian supply chain managemtn startegies go global? The

Hindu, 1-5.

 Gaikwad, S. (2017, March 6).Pepsico over Coco Cola in Supply Chain. pp. 1-3.

 Guo, J., & Noor, I. (2011). A study on SCM of Pepsico in India. International Journal of

Business and Social Sciences, 2(22).

 Harper W. Boyd, J. R. (1999). In Marketing Research - Text and Cases (p. 360). Delhi:

All India Traveller Bookseller.

 Harper W. Boyd, J. R. (1999). Marketing Research - Text and Cases. Delhi: All India

Traveller Bookseller.