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Inventory Management Of Pepsi

Name ID
Nusrat farheen 1820667
Raisa Tasneem 1820136
Mahamud Hasan Mehedi 1820787
Md Abrar Jawad 1830724

Course Title- Introduction to Operations Management

Course Code- Mgt 330

Submitted To- Dr.Md Kharshiduzzaman

Submitted By- Team Vikings

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Letter of Transmittal

Date

Dr.Md Kharshiduzzaman

Adjunct Associate Professor

School of Business and Entrepreneurship

Independent University, Bangladesh (IUB)

Subject: Project submission of Inventory Management

Dear Sir,

We, the student of section 2, MGT330 have completed the project on contrasting Inventory
management systems of Pepsi. The project has been completed by the knowledge that we have
gathered from the course “Introduction To Operations Management”.

We, would, also like to draw your attention that we have tried our level best to complete this
project correctly, and gather appropriate information as much as possible. We have tried our best
to live up to your standard.

May we, therefore wish and hope that you would be cordial enough to our hard work and oblige
us thereby. Thank you very much for your support and patience.

Yours Sincerely,

Members Of Team Vikings

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Executive Summary

The purpose of this project is to research what goes under inventory of Pepsi. Inventory provides
a current, comprehensive profile of how all the products sold by Pepsi are marketed and branded
as well as suggest what consumers’ current perceptions are based on. Moreover, this inventory
serves The company currently positions itself based on the following positioning statement: To
many young, active urban natives, Pepsi is the brand of refreshing non-alcoholic beverages that
offers a wide selection of products to hydrate and quench the thirst of consumers while satisfying
taste buds with sweet and bubbly formulas. Like many high-volume manufacturing plants,
Pepsi’s primary focus is on quality and productivity, with less attention given to issues like parts
inventory and technology migration. As a result, the company’s inventory of sensors swelled
over the years to include more than 120 different varieties. Many of these included multiple
styles of the same product stocked under different brands. A similar problem was developing
with its drives inventory, which had grown to over 50 different part numbers.The wide variety of
sensors made it progressively more complex and time-consuming to replace a faulty device.
Despite its fast, high-performance machinery, the increasingly lengthy and more frequent
downtime was beginning to impact the company’s ability to meet its productivity goals. In
addition, operating costs were on the rise due to the excess spares inventory. Pepsi currently
offers a variety of beverages its consumers want with quality and trusted primary ingredients.
For many decades, Pepsi has utilized aggressive strategies in its marketing support programs to
further increase brand awareness and recognition of the iconic brand. Pepsi greatly benefits from
various marketing promotions including social media campaigns, print and digital advertising,
philanthropic activities, grassroots marketing, athletic and event sponsorships as well as product
sampling and its infamous Super Bowl commercials.
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Introduction

Pepsi co. is infect a corporation listed in the New York Stock Exchange USA. It is the
owner of globe products like Pepsi Cola, Team, Marinda etc. Being owner of the
products they give the rights of manufactures of its products to different countries. All
over the world, the products are standard. If you buy a Pepsi from a remote area like
Talamba and from Washington D.C., you will find absolutely same taste and color.
Because Pepsi Co. has strict quality standards. And the franchisees have to follow these
standards. Otherwise they have to face penalties from the real owners of the product. The
company is the exclusive

PepsiCo Franchisee for Bangladesh. Transcom beverage limited owns and operates
modern plants in Dhaka and Chittagong for bottling the renowned soft drink
brands:Pepsi, Pepsi Diet, 7Up, 7Up Light, Mirinda, Slice, Mountain Dew and Aquafina
drinking water. Their objective is to deliver sustained growth in Bangladesh and move
towards dominant Beverage Company, delighting & nourishing every Bangladeshi, by
best meeting their everyday beverages needs & stakeholders by delivering performance
with purpose, through talented people.

.
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Case Study(Pepsi)

Warehouse and storage:

There are two kinds of warehouse in this organization. They are:

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1. Raw material warehouse.

2. Finished product warehouse.

There is only one storage in this organization. That is Technical store.

Raw materials warehouse,

Finished product warehouse

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Technical store

Procedure:

This section will cover step by step procedure of how goods and products are stored in
the warehouse.

Raw Materials:

Raw materials include not only raw materials of beverages, but also raw materials for
producing bottles for the beverages. So raw materials include - sugar, beverage formulae,
preform (for bottles)

Raw materials are imported from countries like Ireland, India , Pakistan, China etc via
water ways. Containers reach Chittagong sea port. From there raw materials are
distributed to Chittagong and Dhaka plant.

There is separate warehouse for raw materials, as mentioned earlier. Materials are stored
there.

Raw Materials Storage

Types of racking:
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1. Fixed pallet racking : This is constructed of a strong frame usually made of steel
with shelving of the same material.

2. Drive-in and drive-through racking: These are pallet-based racking systems

that allow access for forklift trucks.

3. High-rack and narrow-aisle racking: Designed to maximize space, the racking

utilizes the full height of the warehouse with aisles placed as close as possible to
each other to allow access by either manually driven or computer-controlled
forklifts.
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Chittagong Factory Dhaka Factory

Importing raw materials.

Fixed pallet racking

Drive-in & drive through racking High rack & narrow aisle racking
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Finished Product Warehouse

The main products of Transcom beverage are: Pepsi, 7Up, Mirinda, Slice, Mountain
Dew, Pepsi Diet,7UpLight and Aquafina water.

From the factory, after production, products are taken and kept in the warehouse. There
are separate sections for separate products .

For Aquafina drinking water, the products need to settle down for 24 hours before they
are ready for use or distribution. The products that are not ready for use or distribution
yet, are given a red tag mark.(Figure 14(b))

From the ware house, products are carried via truck and thus distributed throughout the
country.
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Fork-lift Truck Customer

Transferring finished products.

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Warehouse for beverages.

Technical Store

The items that are kept in technical store are: Local and foreign spare parts of
machineries, oil, Mobil , grease etc. The foreign items are imported from different
countries mainly via air-ways and sometimes via water-ways.
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Acquiring technical materials.

Findings and Analysis

An inventory count is the physical verification of the numbers and condition of articles that are
in stock which is a tool within inventory management. There are various type of inventory
counting system.
Some companies choose to count their stock at certain times of the year, whereas other
companies choose to carry out rolling stock takes (cyclic counting).
Pepsico has multiple product line and inventory control requires the company to focus upon
more important inventory items and to utilize more sophisticated and effective approaches to
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inventory management. Inventory classification is usually a first step toward efficient inventory
management.
Though there are no specific system or classifications for raw material and the finished products
warehouse, they follow FIFO system.

The first in, first out (FIFO) method of inventory valuation is a cost flow assumption that the first
goods purchased are also the first goods sold. In most companies including pepsico this
assumption closely matches the actual flow of goods, and so is considered the most theoretically
correct inventory valuation method. The FIFO flow concept is a logical one for a business to
follow, since selling off the oldest goods first reduces the risk of obsolescence.

Under the FIFO method, the earliest goods purchased are the first ones removed from the
inventory account. This results in the remaining items in inventory being accounted for at the
most recently incurred costs, so that the inventory asset recorded on the balance sheet contains
costs quite close to the most recent costs that could be obtained in the marketplace.
Conversely, this method also results in older historical costs being matched against current
revenues and recorded in the cost of goods sold, means that the gross margin does not
necessarily reflect a proper matching of revenues and costs. For example, in an inflationary
environment, current-cost revenue dollars will be matched against older and lower-cost inventory
items, which yields the highest possible gross margin.

The role of Inventory management in pepsico

The role of the inventory at Pepsi is to ensure that the specific designs made by the company are
tailor fit for the market. Their inventory contributes significantly to the company’s performance
especially since the production process consists of various plants which help in the production of
different components like bottles, caps, and mixing of the final product together with filling the
bottle and capping them which produces the final product that is ready to be sold to the market.
Their inventory management emphasizes automation. Adequacy, scheduling, and cost
minimization are the key objectives in this strategic area of operations management. PepsiCo
does so through computerized monitoring of inventory. Inventory managers can access real-time
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data to help them make decisions. Some fundamental roles that inventory plays are
Predictability : In order to engage in capacity planning and scheduling, pepsico need to control
how much raw-material, parts, and sub assemblies it processes at a given time. Inventory buffers
what pepsico process.
Fluctuations in demand : Inventory is assist in estimation of demand. To understand and satisfy
customer demand on time. Acknowledging how much stock needed at any given time
Unreliability of supply: Inventory kept when there is scarce of resources or very few suppliers
are available.
Price protection : Buying quantities of inventory at appropriate times helps avoid the impact of
cost inflation. When there is chances of price rising in future , better to purchase at presently at
reasonable price and avoid price fluctuation cost.
Lower ordering cost : The company buys raw material in bulk and gets great discounts, which
further reduce the costs and improve on its profits as a result. The company thus produces its
products in bulk and takes advantages of economies of scale.

ABC Classification System

ABC system is an inventory classification system in which a small percentage of (A) items
account for most of the inventory value. A items require close inventory control because of their
high value. B and C items require less control. Pepsico maintains several types of inventories. It
is not desirable to keep the same degree of control on all the items. Pepsico pays maximum
attention to those items whose value is the highest. The company therefore, classify inventories
to identify which will receive the most efforts in controlling.
It is selective in it’s approach to control investment in various types of inventories. This
analytical approach is called the ABC analysis and tends to measure the significance of each
item of inventories in terms of its value.

Conclusion:
Due to the effective inventory management, procurement goal can be achieve quickly. As we
know, inventory is the joint of the whole supply chain. When optimize the inventory
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management, upstream activities will run effectively meanwhile down stream activities will go
ahead without any stoppage

Recommendation:
In this section recommendation is given on the factors that effect inventory management
system.

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Reduce gap between safety stock & ROL

A balance between safety stock and ROL gives good customer service. It is important for
reaching customer service level.

Adapting to Economic Environment

During times of high inflation, adapting to last-in, first-out costing, so that the cost of
goods sold reflects the most recent and highest prices, thereby minimizing taxable
income.

Adapting to Market Environment

In this case, they might find it beneficial to establish fixed-rate lines of credit when
interest rates are low.

Fixing Goals
Flexibility to deal with market ups and downs should be an integral part of their company
goals to bend pricing rules, offer discounts or sit on their inventory when shifts in
consumer buying habits occur.

Increase sense of Responsibility in staff

As an external factor, they have some control over their fate, however. they can reward
employees who maintain inventory controls set in place and remove those who
continually make bad inventory decisions.

Using multi-sourcing
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Understanding suppliers' lead-time requirements can help maintain sufficient inventory.

Finding and utilizing backup suppliers is an internal decision that also can cover
inventory shortages. Joining a bulk-purchasing group places some of their inventory
control in the hands of others, but may prove to be worthwhile.

Provide Training to the Staffs:

Knowledge of what one is required to do and the effect of the action should be known to
the operatives who are on the shop floor. For Example: If an operative is given a put
away task, he should know how and where he should put away the pallet, how to scan the
pallet ID and confirm it back to the system. Besides he should also know the impact of
not completing any of these actions or doing something wrong. The impact his action
will have on the system as well as physical inventory should be clear to the operative.

The operatives should be trained on the entire process and understand why and what he is
doing.

Dedicate positions for managing inventory:

They should have control of which employees are affecting their inventory. This is
especially true in manufacturing operations where the priorities of machine operators and
production supervisors are meeting the production schedule, keeping the machines
running, and ensuring the quality of the product being produced. Inventory accuracy will
never be a primary responsibility of these types of positions. Once they come to this
realization it is easy to see the benefits of putting inventory and material handling
responsibilities in the hands of people whose primary responsibility is inventory.

Process data accurately

The more they know about how their specific inventory system works, the more
successful they will be in optimizing its features.

The only way to determine the source and correct problems is to have a thorough understanding
of how the system is set up and how information is processed and data is stored. The bigger
advantage to acquiring a high level of system knowledge lies in the amount of information they
will be able to extract from the system.
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References
(n.d.). Retrieved from https://www.academia.edu/19777796/pepsi

(n.d.). Retrieved from http://panmore.com/pepsico-operations-management-10-decisions-areas-

productivity

(n.d.). Retrieved from https://uniquewritersbay.com/blog/inventory-management-coca-cola-pepsi/

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