Presented to:Sir AwaisSubject:Supply ChainDiscipline:Master of Business Statistics and Management (MBSM-A)Punjab UniversityPrepared By:Muhammad Sultan Bhatti (1319-10)BadarZaman (1353-10)AsimHameed (1436-10)Hooria (1356-10)
HISTORY AND BRANDS:PepsiCo Americas Beverages:Pepsi was founded in 1898 by Caleb Bradham;a New Bern, North Carolina, druggist, who firstformulated Pepsi-Cola. Today, PepsiCoAmericas Beverages (PAB) has well knownbrands such as Mountain Dew, Diet Pepsi,Gatorade, Tropicana Pure Premium, Aquafinawater, Sierra Mist, Mug, Tropicana juicedrinks, Propel, SoBe, Slice, Dole, TropicanaTwister and Tropicana Seasons Best.PepsiCo in Europe:PepsiCo Europe is the leading food and beveragecompany in Europe employing 43,000 in theregion. The company has invested over $3 billionin the region over the last 3 years. Some of themost popular products in the regioninclude:Walkers Crisps, Quaker Oats, PawRidge, Pepsi, Diet Pepsi, Pepsi MAX, PepsiRAW, 7UP, Copella, Doritos, Gatorade, Red Sky,V Water, Planet Lunch, Lays, Cheetos, Smiths,Duyvis, Snack-a-Jacks, Quaker Cruesli, Looza,Twistos, Solinki.PepsiCo in Asia middle eastAfrica:PepsiCo Asia, Middle East & Africa (“AMEA”) makes,markets and sells a number of leading snack food brandsincluding Lay’s, Kurkure, Chipsy, Doritos, Smith’s, Cheetos,Red Rock Deli and Ruffles, Quaker-brand cereals and snacks.AMEA also makes, markets and sells beverage concentrates,fountain syrups and finished goods, under various beveragebrands including Pepsi, Mirinda, 7UP and Mountain Dew.
ORGANIZATIONAL STRUCTUREPepsi Company’s organization is divided into four areas covering Asia, Africa, Europe andAmerica. These four subdivisions are further narrowed among the countries in thesecontinents. The inter- organization structure of the company has different divisions. Themanufacturing plant makes the bottles, the distributors deliver to the suppliers, and thesuppliers sell it to the retailers and finally to the consumers.These supply–chains in different countries are controlled by one main headquarter situated inNew York , USA.OUR MISSION AND VISSIONAt PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do,but the right thing to do for our business.PepsiCo Mission:Pepsi Co.’s mission is to be the worlds premier consumer Products Company focused onconvenient foods and beverages. We seek to produce financial rewards to investors as weprovide opportunities for growth and enrichment to our employees, our business partners andthe communities in which we operate. And in everything we do, we strive for honesty,fairness and integrity.PepsiCo Vision:"PepsiCos responsibility is to continually improve all aspects of the world in which weoperate - environment, social, economic - creating a better tomorrow than today."Our 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 PepsiCoa truly sustainable company.
CULTURE“We have a fundamental belief that people hold the key to PepsiCos success. We areknown as an academy company, a place where people grow and business leadersdevelop”STRATEGIES Expand the Global Leadership Position of Our Snacks Business Ensure Sustainable, Profitable Growth in Global Beverages Unleash the Power of "Power of One." Rapidly Expand Our "Good-for-You" Portfolio Continue to Deliver on Our Environmental Sustainability Goals and commitment Cherish Our Associates and Develop the Leadership to Sustain Our Growth
Supply Chain of PepsiCo. And Supply Chain StrategyIn order to ensure a good supply chain strategy, Pepsi co. plans twoyears in advance. Ithas several contracts with manufacturers andreceives raw material on a convenientbasis. The company alsodecides where production plants are to be placed. Theproductionprocess is 65% automated. The company has to provide and managetransportfor the delivery of products as well as the arrangement of third party services for theprocurement of products. The shipping department handles orders and the transportdepartment decides thevehicles for safe delivery.Material planning and sourcing iscarried out as well. Sources of supplyof raw material both local and foreign areidentified and terms andconditions are negotiated. Capacity planning is also done at thisstage.Sales forecasting and production planning depends upon the capacity of theorganization. Distributors are also decided by the company, keepingin mind pastperformances.Supply Chain PlanningCompanies start the planning phase with a forecast forthe coming year of demand. Pepsicarries out sales forecasting for localdemand. The annual sales target is conveyed to thesupply chaindepartment, planning is carried out on a monthly, weekly and dailybasis.Supply Chain OperationCompany makes decision regarding individual customer orders. Thegoal of supplychain operations is to handle incoming customer ordersin the best possible manner.During this phase, firms allocate inventoryor production to individual orders.Process Views of a Supply ChainPepsi has a seasonal demand. Just in time concept is applicable in non-seasonal periodand not applicable in seasonal period. All processesthat are part of the procurementcycle, manufacturing cycle,replenishment cycle, and customer order cycle are pushprocesses.Pepsi Sales order and processing: The Shipping Manager receives salesorderfrom Sales Team, distributors through telephone, fax & email oneday before dispatch.The sales are made to base distributors onadvance payment against orders then shippingmanager plansaccording to the demand of distributors on daily basis.
Competitive Advantage to PepsiCo.As they operate in the global marketplace:1.Big, muscular brands,2.Proven ability to innovate and create differentiated products3.Powerful go-to-market systems.PepsiCos overall mission is to increase thevalue of shareholdersinvestment. They dothis through sales growth,cost controlsand wiseinvestment of resources. They believetheir commercial successdepends upon offeringquality and valueto their consumersandproviding them the products that aresafe, wholesome, economically efficient andenvironmentally sound; which are providing a fair return to theirinvestors whileadhering to the highest standards of integrity. Acustomer while purchasing a bottle ofPepsi will consider productquality, price and availability of the product. Thus, Pepsiparticularlyfocuses its competitive strategy as to producing sufficient variety atreasonable prices andthe availability of the product.Identifying Customer’sneedsPepsi needs to understand the customer needs for each targetedsegment and theuncertainty the supply chain faces in satisfying theseneeds. Pepsi deals with beverages,which are a fast moving consumergood, it knows the requirements of consumers. Pepsiis considered as adrink which is refreshing during summer, and taken regularlyduringwinter, with demand hiking around festivals like New Year, Halloweenoccasionssuch as weddings. Pepsi caters to both cities and rural areas.It understands the needs ofboth. As demand for beverages isseasonal, the quantity of product needed for each lot istaken care ofwith past demand in mind.Consumers require a: Smallresponse time High service level Reasonable price Variety products, Availability of goods Return ability Less Response time Home delivery Collateral offers Original color and taste
Healthy Disposable Halal ingredients More crunch low Moisture Halal Ingredients More Quality of fries Less Oil More Flavors Easily availability Should not Stale Less Lead time Good Quality Quality material Hygienic Air tight packagingDemand Uncertainty andImplied Demand UncertaintyDemand for Pepsi varies by product. For example there is a greaterdemand for “Pepsi”as compared to “Mirinda Apple,” which is new.Hence, Pepsi has a low demanduncertainty as compared to “MirindaApple.” The product “Pepsi” is approaching itsmaturity stage in thePLC whereas “Mirinda Apple” is in the introductory stage.Pepsi’simplied demand uncertainty varies with the product type aswell as the customer needs.Due to decreased lead time (the customermay purchase its competitor’s product if Pepsiis not available at thattime), need for greater variety and higher level of service,implieddemand uncertainty increases.Supply Chain CapabilitiesThe efficiency and responsiveness varies according to the consumer needs, implieddemand uncertainty, product type and marketsegments. In remote areas the companyfocuses on being somewhatefficient as other modes of transportation could turn theproduct to behighly expensive. According to the company it does not dealwithdistributors who do not have 20 to 25 vehicles, therefore as thecompany has focuson cost reduction, uses slow and inexpensivemodes of transportation, the demand iscertain, and uses economies of scale in production, the product Pepsi is more inclinedtowards beingsomewhat efficient. In cities, the company focuses its attention onbeinghighly responsive as Pepsi has to meet short lead time, meet ahigh service level, handle
a large variety of products and respond towide ranges of quantity demanded especiallyat theretail stage.Distribution ChannelsDirect distribution:Ultimate consumersIndirect distribution:Through Base market distributorsThrough Outstation distributorsPepsi uses light and heavy vehicles for safe delivery ofgoods to thedistributors for timely delivery. It follows the just in time concept whichisapplicable in Non-seasonal period and not applicable in the seasonalperiod.Review and Revise DistributionThis is usually done through taking over key revenue areas. If thedistributor does notachieve its sales target, the distribution is takenback and an addition of new distributoris done. Therefore Pepsi’ssupply is low supply uncertainty. Some of its supply sourcecapabilitiesare: Less breakdowns High quality Flexible supply capacity Mature production processFactors Influencing Distribution Network DesignAt the highest level, performance of a distribution network should bevaluated along twodimensions:1.Customer needs that are met2.Cost of meeting customer needs
Response TimeFor Pepsi is minimal as the direct customers for Pepsiare the retailers and then theconsumers. Pepsi try to locate center of gravity in every country , so that it can reach itsretailer in less time.Product VarietyIn Pepsi Product variety is large. They have made their place in themarket with theirunique product line ranging from chips to water, theproduct variety includes beveragesranging from the water Aquafina toMountain Dew, Pepsi, Pepsi Max, 7 Up, Mirinda,Mirinda Apple &Fountain Fresh, Pepsi diet , Pepsi light.AvailabilityOf Pepsi is very high and the product is always availablein stock whenever an orderarrives. The Distributors have 3 days stock as back up with them in order of anymalfunctioning of the plant orother such external factors.Return abilityOf Pepsi has always been very strong in a sense thatunsatisfactory items can be returnedand changed on the spot. This istrue for both the consumers and the retailers. Pepsi haslaid down asystem through which they can effectively manage this requirement.Achieving the Strategic Fit:Making one stage more responsive allows the other stage to focus onbeing moreefficient. The Pepsi supply chain assign different roles to itsdifferent stages, thecompany has to decide either to transfer theresponsiveness to the manufacture stage orto the retailer stage. Whilediscussing the Pepsi’s supply capability it is seen that Pepsitends to bemore responsive in the cities and a bit less in towns. Therefore, transferringthe responsiveness to the retailer and distributor, allowingthem to face the higherimplied demand uncertainty. This in returnallows the manufacturer and supplier to bemore efficient. At the sametime, multiple beverage types contribute to a broader productportfoliocausing Pepsi to adjust its strategies accordingly; tailoring the supplychain tobest meet the needs of each beverage demand.
A combination of three forecasting methods is used. The followingmethods are used incombination for the purpose of sales and demandforecasting:-1.Time-Series MethodHistorical demand data can be effectively used to forecast futuredemand.2.Qualitative MethodUsing historical data and market intelligence as a guide, PepsiComanagement practicestheir own judgment to determine thedemand forecast. A yearly demand plan isforecasted in this waywhich is then further divided into monthly, weekly and dailyplansaccordingly.3.Causal MethodCausal forecasting assumes that the demand forecast is highlycorrelated with certainfactors in the environment such as thestate of the economy, interest rates, and productpricing that cancause a change in the demand. An example is how byintroducing aproduct variant, such as Pepsi Twist, can influencedemand for the original product thatis Pepsi.