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Final project
Supply chain management
Group members:
Fatima zafar (10990)
Waseh malik (10770)

Faculty:
Sir Abdullah Athar

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Table of content

Introduction………………………………………………………………3

Supply chain process……………………………………………………3

Supply chain management………………………………………………4

Understanding the Supply Chain of Pepsi……………………………..4-5

Organogram of the company……………………………………………6

Challenges faced in supply chain……………………………………….6-8

Steps taken by the company …………………………………………….9-11

Conclusion………………………………………………………………..12

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Introduction

Pepsi is a carbonated soft drink manufactured by PepsiCo. Originally created and developed in
1893 by Caleb Bradham and introduced as Brad's Drink, it was renamed as Pepsi-Cola in 1898,
and then shortened to Pepsi in 1961. Pepsi has been bringing fun and refreshment to
consumers for over 100 years. Pepsi-Cola is the refreshment beverage unit of PepsiCo, Inc., in
the United States and Canada. From its humble beginnings over a century ago, Pepsi-Cola has
grown to become one of the best known, most loved products throughout the world. Today,
the company continues to innovate, creating new products, new flavors and new packages in
varying shapes and sizes to meet the growing demand for convenience and healthier choices.
Pepsi is constantly on the lookout for ways to ensure their consumers get the products they
want, when they want them and where they want them.

First entered Pakistan in 1968, their operations have reflected a strong commitment to
Pakistan’s people, communities and economy. Many of their brands in Pakistan today are
immediately recognizable household names which have reduced amounts of sugar, salt,
saturated and trans-fats. They have leveraged PepsiCo’s global best practices to establish
comprehensive internal procedures that ensure food safety controls covering the entire supply
chain from raw material, through production, and ultimately the retail shelf.

Supply chain process

Supply chain management is the process of delivering a product from raw material to the
consumer. It includes supply planning, product planning, demand planning, sales and
operations planning, and supply management.

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What is supply chain management?

Supply Chain Management is the process of planning, implementing, and controlling the
operations of supply chain with the purpose to satisfy customer requirements as efficiently as
possible. 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 is a cross
functional approach to managing the movement of raw materials into an organization and the
movement of finished goods out of the organization toward the end consumer. Supply Chain
management is also the combination of art and science of improving the way company finds
the raw components it needs to make a product or service and deliver it to customers. It seeks
to enhance competitive performance by closely integrating the internal functions within a
company and effectively linking them with external operations of suppliers and channel
members. Moreover, this has been a prominent concern for both large and small companies as
they strive for better quality and higher customer satisfaction.

In a supply chain, a company links to its supplier upstream and to its distributors downstream in
order to serve its customer. The goal of supply chain management is to provide maximum
customer service at the lowest possible costs.

Understanding the Supply Chain of Pepsi

The objective of every supply chain should be to maximize the overall value generated. The
value of a supply chain generates is the difference between what the final product is worth to
the customer and the costs the supply chain incurs in filling the customer’s request.

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PepsiCo’s supply chain is based on high-quality raw materials and outstanding suppliers.
According to PepsiCo’s main web page they have thousands of independent farmers and small-
business farmers that provide the quality materials they need for their products. Having good
relations with large-scale and small business helps PepsiCo to run their supply chain with
quality outputs.

The company puts a lot of their resources on research and development, constantly trying new
things and improving their operations; an example would be the rural development on 3rd
world countries. Being in a highly competitive market PepsiCo aims to gain as much competitive
advantage they can against their competitors primarily The Coca-Cola Company. PepsiCo has a
very intricate supply chain and distribution that allows them to effectively compete with other
snack and beverage companies. They don’t just sell to retailers and wholesalers which would be
the most common distribution that other companies do, they adapted the “Direct to Store
Delivery Model” for their distribution. This method is highly used in the food industry but
PepsiCo is one of the companies that uses this method more efficiently which helps them to
minimize the number of days a product spends in the supply chain process.PepsiCo and other
consumer-goods companies are logging higher demand from shoppers as the global economy
recovers from the initial shocks of the Covid-19 pandemic and restaurants, stadiums and other
venues reopen. But the recovery has also been hampered by production and transportation
challenges.

SUPPLY CHAIN FLOW (MANUFACTURING)

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Organogram of the company

Challenges faced in supply chain management area and its solutions

Pepsi Bottling

Pepsi Bottling Group is the world's largest manufacturer, seller and distributor of Pepsi -Cola
beverages. With annual sales of nearly $11 billion, the company's fastest growing segment is
noncarbonated beverages, including the number one brand of bottled water in the U.S.,
Aquafina, as well as Tropicana juice drinks and Lipton Ice Tea. As part of a 24/7 production
operation, the company's Detroit plant ships about 27 million cases per year. Production at the
plant begins as empty bottles are unloaded from trucks via conveyor and transported to a
depalletizer. From there, they are, rinsed, dried and sent to a filling machine (filler speeds at the
plant vary based on bottle size, ranging from 350 to 1,000 bottles per minute). The bottles leave
the fillers and make their way to a packaging machine, and then to a palletizer. Each pallet is
wrapped for distribution and moved to the warehouse for shipping.

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1. The challenge( bottling)

The plant uses a variety of sensors to monitor bottles as they travel through the sequence of
steps and to manage the flow to the individual stations. Line sensors match the speed of the
conveyor. 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. Because of the extensive number of sensors they had in
inventory, including multiple styles and brands, simply finding the right replacement resulted in
an hour of downtime. A more strategic approach to maintenance was necessary, as even the
smallest of delays could cost the plant thousands of dollars in lost production and overtime.
Knowing that effective parts management and fast, reliable equipment repair lies at the heart
of efficient manufacturing, the company explored ways to get its inventory and maintenance
processes under tighter control. That's when it decided to turn to Rockwell Automation for
help.

The solution

The first task undertaken by Rockwell Automation was to conduct an Installed Base Evaluation
– a plant-wide inventory assessment to determine the exact number of sensors and drives the
plant currently had in stock. Next it needed to figure out what products were actually needed
and which ones could be eliminated. To streamline its operation, Rockwell Automation
recommended that Pepsi standardize its entire sensors inventory on Allen-Bradley products.
The local distributor,McNaughtonMcKayElectric Company (Mc&Mc), helped design a migration
plan to help ease the cost of this inventory conversion. Although all the drives employed at the
plant were Allen-Bradley brand, many were older models representing a multitude of drive
families. To simplify its drives inventory and upgrade its technology at the same time, Pepsi
converted all of its drives to the Allen-Bradley Power Flex family of AC drives. Detailed cross-
reference chart developed by Rockwell Automation now provides technicians with quick and
easy way to identify failed and replacement parts, as well as installation instructions. To ensure
reliable availability to spare parts, Pepsi set-up a Rockwell Automation Services Agreement that
included parts management. With the agreement, Pepsi pays a fixed monthly cost for their
spare parts, which are owned and managed by Rockwell Automation but stocked on-site. The
agreement allows Pepsi to reduce its upfront expenses, have immediate access to spares,
reduce carrying costs, and update its control technology cost-effectively. The agreement also
includes an in service warranty, so the parts don't go out of warranty until they are actually
used for the warranty period. To help the company better utilize its internal resources and
reduce costly troubleshooting delays, the Rockwell Automation Services Agreement included

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Tech Connect Support. This remote support service provides the plant with 24/7 access to
Rockwell Automation technical specialists. When a problem occurs, Pepsi technicians can call
for immediate troubleshooting assistance to resolve it as quickly as possible. To help facilitate
problem resolution, Rockwell Automation technical specialists can also perform remote system
diagnostics through an Allen-Bradley modem installed at the Pepsi facility. This helped Pepsi
minimizes risk and reducing long term costs.

2. Gap in demand and supply

Another challenge faced by Pepsi is the gap in supply and demand. This is mainly a result of
Pepsi’s lack of presence in the market and its heavy reliance on outsourced distribution. Gaps in
demand exist in the supply chain when the company fails to meet the demand via distribution.

In the case of Pepsi Cola International, an entire rural segment of customers is excluded from
distribution, which shows the lack of focus given to customer service in the supply chain. As
much as Pepsi Cola International would like to blame the local distributors for this, the main
responsibility lies on its own head for developing a distribution strategy without proper
consideration of the customer segments that exist in the country and for not hiring managers to
control the supply-chain operations in the country, who would have inculcated efficiency in the
supply chain.

3. Channel conflict

Channel conflict is another big challenge faced by Pepsi Cola International in the Ukraine. It is
the result of the high level of interdependence in the supply chain between different parties
and channels and the lack of power and control exercised by Pepsi Cola International in the
supply chain. All power has been given to the locals which has inculcated inefficiencies in
providing quality customer service and reaching all customers as desired by Pepsi. The main
source of this conflict is the cultural difference between the local distributors and the Pepsi Cola
International’s country of origin.

The locals have the mindset and approach towards business whereby they allow themselves to
practice any form of legal or illegal practice that may enable them to earn short-term and quick
profits, regardless of their commitments to their suppliers. They have the same approach
towards Pepsi. With Pepsi outsourcing the entire supply-chain operation to locals, the locals
feel free to assume their own business philosophies and execution methods as they hold no
fear of disappointing their supplier. Without power and control from the vertical chain, the
distributors are free to deliver as they please, regardless whether they meet marketing targets.
This is a challenge; it is partly the result of carelessness on the part of Pepsi for outsourcing the
supply chain entirely and showing no sign of taking authority and control of any part of the
marketing channel.

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Steps taken by the company

 Coordinated forecasting

The forecasts are done monthly and take into account the current inventory levels, current
demand, and expected changes in each channel. Pepsi-Cola then works with the food and
beverage factories (carbonated soft drink bottlers) to determine its requirements for raw
materials. This includes packaging and ingredients such as corn syrup, sugar, and bananas. The
results of this process are shared throughout the entire supply chain management system so
that people outside Pepsi-Cola can plan for their own production needs.

 Coordinated Distribution

After forecasting is completed, PepsiCo begins the distribution phase of the supply chain
management process. In this stage, products are delivered from 20 distribution centres to
retailers and wholesalers worldwide. Each distribution centre is responsible for a specific zone
within North America or a specific zone within Europe, depending on which location they
service. PepsiCo works with retail customers to develop joint distribution programs that
coordinate the delivery of products from different third-party suppliers at specific times of the
day to meet customer needs

 Supply chain visibility

Once products arrive at stores and customers begin buying them, PepsiCo’s supply chain
management system maintains visibility into the location and condition of those items at all
times. This is done through point-of-sale technologies that tell vendors which products were
sold and how quickly they moved off the shelves. When a store sells a product, it uses a POS
system to send the information electronically to PepsiCo. The data tells Pepsi-Cola how much of
each item was sold, where that item is located within the store, and what price the item was
sold. This data then moves on through the supply chain management process until everyone
can see how quickly things are selling and what the customer demand really is. This helps
PepsiCo better manage inventory levels and product lifecycles to know when to refresh its
items with new designs or flavors.

 Customer relationship management

Supply chain management is all about customer service. PepsiCo’s system helps maintain
strong relationships with customers, both large and small. The company uses feedback surveys
of thousands of customers each year to learn what they like, don’t like, and want to see more
of. This information is gathered through personal contact with the retailers and through focus
groups and online surveys. PepsiCo uses the information to improve its products and services
while also working with retailers through a unique customer focus group called Retailer
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Advisory Councils. These councils consist of 12 different retail customers who come together
every year to discuss their needs and issues regarding product delivery, pricing policy,
merchandising programs, and more.

 Collaborative planning, forecasting, and replenishment

PepsiCo has established an integrated planning and forecasting process closely linked with its IT
system so that the entire supply chain management system works in concert. All members of
PepsiCo’s supply chain management team, from regional distributors to store owners, use the
same data, so they all have the same information on hand at any given time. This collaboration
helps PepsiCo to save money and plan more effectively. For example, by analyzing the data
from POS systems and EDI technology combined with external market data, PepsiCo can predict
when products will be sold out and how quickly they will need to be replaced. The company can
then work with distributors in advance to ensure that their orders are placed at just the right
time so that products arrive before demand disappears.

 Product lifecycle management

Product lifecycle management is a vital part of the supply chain management process. It
involves a constant effort to evaluate and manage products to move efficiently through total
distribution, from production to retail sales. Suppose products have a long lifecycle before
being sold out. In that case, PepsiCo can change the product mix or replenish it more often, so
there are always newer products available. This helps drive demand for overall product
categories and also cycle in new products when appropriate. This is done with the help of POS
data, which allows for tracking of products through all aspects of the supply chain management
system. It also helps to streamline some operations and inventory controls while raising
efficiency levels in others. If PepsiCo identifies a mature or dying product category, it can
eliminate that product’s distribution channels altogether. This allows for more efficient
distribution of Pepsi-Cola products and the product’s packaging, which can save money.

 Strategic sourcing

PepsiCo uses strategic sourcing to make the best use of its resources and keep costs down. This
involves analyzing how each supply partner contributes to overall supply chain management
before choosing which partners will be managed via collaborative processes. When evaluating
potential business partners, PepsiCo looks at several factors, including price, service levels,
responsiveness, performance history, innovation capabilities, and environmental performance.

Once a business partner is chosen, PepsiCo sets up a master agreement that outlines all
requirements and expectations. The master agreements are then broken down into individual
contracts that outline the specifics of each arrangement to keep costs low while meeting
customer service levels. Supply chain management at PepsiCo works closely with the
procurement team to evaluate the best sourcing options. This allows PepsiCo to find new

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opportunities for cost reduction while working with its supply partners to meet customer
needs.

 Quality management and continuous improvement

Quality assurance is an essential part of supply chain management at PepsiCo. It works with
suppliers to develop quality focuses and requirements, which can help improve their overall
efficiency and create consistency across the supply chain. This consistency allows PepsiCo to
maintain product integrity and high-quality service levels for its customers.

PepsiCo uses a variety of tools to ensure the highest quality product is delivered to customers.
These include:

Supplier certification programs such as its Deming Award for Supply Chain Partner Excellence;
PepsiCo’s supplier code of conduct; and an evaluation program that includes both internal and
external audits, which are all performed by an independent third party

 Performance measurement analysis

PepsiCo uses a variety of tools to monitor its supply chain management performance, including:

Internal metrics that show what is happening throughout the PepsiCo system; include sales
measurements, throughput, and inventory turnover.

External metrics are reported to customers and used for benchmarking purposes; These
include service level agreements (SLAs) and on-time delivery performance.

Financial metrics that show how supply chain management impacts the company’s financial
performance; include ROI, ROA, and net income.

Measuring and analyzing performance is the only way to accurately picture how effective
supply chain management is. PepsiCo uses multiple metrics to get the most precise
performance evaluation. This allows management to make changes where necessary to meet
customer needs while controlling as much as possible and keep operations cost-efficient and
sustainable.

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Conclusion

The management of PepsiCo has made an effort to ensure that its supply chain management
for its beverages is very effective in order to maintain high quality products in the market. This
management has been keen on acquiring quality raw materials, transports them to the firm,
transforms the materials to final products, and delivering the products to the clients in the
market. In its supply chain, the firm has always emphasized on maintaining quality at all the
stages using various quality management tools such as Total Quality Management. It is clear
that PepsiCo is one of the best examples of firms that have used the modern methods of supply
chain management to enhance their operations in the market. Although the market is very
competitive, this firm has been able to remain very competitive because of its ability to access
quality raw materials, use efficient production processes, and deliver quality products to the
customers in time.

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%20the%20result%20of,International%20in%20the%20supply%20chain.

https://pepsico.com.pk/Page/Index/Company

https://www.cnbc.com/2022/10/12/pepsico-pep-reports-q3-earnings.html#:~:text=For
%202022%2C%20the%20company%20now,%25%2C%20up%20from%208%25.

https://theorg.com/org/pepsico

https://profit.pakistantoday.com.pk/2020/04/28/virus-lockdowns-pepsicos-organic-revenue-
profits-to-suffer-in-second-quarter/

https://ibottling.com/pepsi-companys-tips-for-increased-efficiency-in-your-supply-chain/

https://www.wsj.com/articles/pepsico-raises-full-year-expectations-while-navigating-supply-
chain-environment-11633433216

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