Coca-Cola vs.

Pepsi: An outbound
logistics comparative analysis for
India
Jonathan Marquet
Kris OToole
Sanjit Kumar Sahoo
Pareenay Ad Waala Mehrotra
Kagiso Mamabolo
3Continent Master of Global Management
Professor
Course: Global Supply Chain Management

Content
1

Introduction..........................................................................................................

Indias main challenges........................................................................................

Coca-Cola.............................................................................................................
3.1

Introduction....................................................................................................

3.2

Global Distribution Strategy...........................................................................

3.3

Coca-Cola in India...........................................................................................

3.3.1

General information.................................................................................

3.3.2

Distribution channels...............................................................................

3.3.3

Demand forecasting.................................................................................

3.4

Challenges......................................................................................................

3.4.1

Hub-and-spoke system.............................................................................

3.4.2

Information systems.................................................................................

3.4.3

RED..........................................................................................................

Pepsico.................................................................................................................
4.1

Global Distribution Strategy...........................................................................

4.2

PepsiCo in India..............................................................................................

4.2.1

General Information.................................................................................

4.2.2

Distribution Channels.............................................................................

4.3

Challenges....................................................................................................

4.3.1

Rate Cutting...........................................................................................

4.3.2

Too near Wholesalers.............................................................................

4.3.3

Communication of schemes...................................................................

4.3.4

Duplicate Brands....................................................................................

4.3.5

Refrigerator problems............................................................................

4.3.6

Maaza Scheme.......................................................................................

4.3.7

Reverse Supply Chain Management.......................................................

Conclusion..........................................................................................................

Bibliography........................................................................................................

1 Introduction
Vigorous competition within the beverage industry has been well documented.
With such a highly contested market containing a few dominant firms,
organizations are constantly in pursuit of ways to achieve optimal efficiencies. As
this is the case, a high performing supply chain management (SCM) system has
become critical to a firms success. This report will provide a thorough
comparative analysis of the SCM strategies employed by the two leading
organizations competing in the beverage industry: Coca-Cola and Pepsi. The
analysis will be focused on the Indian market and specifically in the field of
outbound logistics.

2 Indias main challenges

The Council of Logistics Management defines SCM as:
The systematic, strategic coordination of the traditional business functions and
tactics across these business functions within a particular organisation and
across business within a supply chain for the purpose of improving the long term
performance of the individual organisation and supply chain as a whole .
Main problems faced by companies in India are:
High cost of Logistics - Logistic cost is 13% of Indias GDP in comparison
to 11% in Europe and 9% in US. Of the total cost transport represents 39%
while warehouse, package and inventory accounts for 24% of total cost
(365 businessdays.com). Higher logistics costs are mainly due to poor
infrastructure in the country.
Physical Infrastructure a bottleneck Insufficient infrastructure
bottlenecks and distribution channels restrict the scope to reach consumer
of product nationwide. Though the country has developed the largest road
network in the world, yet the regional concentration of manufacturing in
Indian but geographically diversified distribution activities as well as
infrastructure bottlenecks, e infrastructural facility is not compared to
developed countries. A lot of infrastructure development ye needs to be
done in terms of better road connectivity. The lack of GPS technology and
to some extent the lack of IT in the warehouses have been a bottleneck
also the delay in infrastructure in comparison to other developing countries
like China, Brazil is acting as a hindrance in GSCM.
The low acceptance of integrated third party logistics (3PL) Apart
from the infrastructural challenges, business in India doesnt have the
access to the best supply chain services for a variety of reasons. The low
acceptance of integrated 3rd party logistics firm in India is one part of the
problem. The cost difference between the 3 rd party logistics firm and
existing transport firm is wide. Shippers have a hard time justifying the
cost of 3PL even though they would be receiving high technology support
1

and also good quality services from such a provider. Further the above
mentioned infrastructure development acts as a hindrance for 3PL in
operating efficiently.
Cost of Quality Services According to industry analysts, logistics cost
in India are among the worlds highest. Also the delivery time for cities
outside metros is also uncertain.
Technology Usage and inadequate investment in IT - Technology
usage is very low in India it restricts the scope of increasing productivity
and efficiency (365business.com). Though India is a leading exporter of IT
yet most of the companies in India still are inhibited in terms of usage of
these technologies. For companies that use IT services have a clear bias in
usage of standalone IT system. There is still a long way for Indian
companies in terms of usage of technologies that are in sync with the
recent developments in the world. The sooner the companies start
accepting the changes in the IT industry and are comfortable in usage of
these technologies. The SCM would become much more smoother and
streamlined.

3 Coca-Cola
3.1 Introduction
Coca-Cola is an American brand that is the global market leader for sparkling
beverages. The invention of the Coca-Cola beverage is well-known across the
globe. In 1886, pharmacist John Pemberton was actually trying to develop a new
medicine when he invented Coke. Even now, the exact recipe of Coke is one the
worlds best kept secrets. As the drink became increasingly popular, the first
Coca-Cola factory opened in 1894 in Vicksburg, Missippi. Presently, Coke is active
in more than 200 countries and serves more than 1.7 billion beverages a day,
including Sprite, Fanta and Coca-Cola. Coca-Cola has become very popular, in
part, due to its successful marketing strategy which it adapts from country to
country.

3.2 Global Distribution Strategy

Coca-Cola uses a franchising system to distribute its drinks around the world.
Coca-Cola manufactures the syrup, concentrates and beverages, owns the brand
name and decides on the marketing strategy, while bottling companies around
the world buy the syrup and concentrates and then produce the different drinks.
Therefore Coca-Cola is using two types of systems: Company Owned Bottling
Operations (COBO) and Franchise Owned Bottling Organisation (FOBO). The
former is a 100% subsidiary bottling plant of the Coca-Cola Enterprise, while the
latter is a franchise company who has the rights to produce the final product and
distribute it within a designated area. (Dubey, 2014)
Coca-Colas supply chain and distribution system has been vital for the survival of
the company in a sluggish market. Because of increasing concerns over health,
the market for Carbonated Soft Drinks (CSD) has been negatively affected. In
2

several schools in the US for example, CSD have been banned since 2006. When
ex-CEO Nevell Isdel came back as CEO in 2004, his main tasks was to save the
ship from sinking. Therefore he decided to improve and change Coca-Colas
network of bottlers. He decided to consolidate all the companys owned bottlers
and increased the interest in their bottlers partners through the purchase of
stakes. He believed by combining the production and distribution system, CocaCola would be able to respond more quickly to changes in the market (Gupta,
2008). To make sure the quality of its products does not vary, Coca-Cola set up a
strong communication network with its suppliers. Through the Supplier Guiding
Principles, Coca-Cola clearly communicates its values and expectations with its
suppliers.

3.3 Coca-Cola in India

3.3.1

General information

Until 1977, Coca-Cola, was the market leader in India regarding CSD. But when
the new government required Coca-Cola to hand in their secret formula, CocaCola didnt agree and they were forced to leave India. This was the sign for CocaColas main competitor PepsiCo to enter the Indian market in 1988 by creating a
joint-venture with Punjab Agro Industrial Corporation and Voltas India Limited
which lasted until 1993. In 1994, one year after PepsiCo ended the joint-venture,
Coca-Cola re-entered the Indian market after the new Indians Liberalization
Policy. By that time, Coca-Cola noticed a big change in the market. An Indian
player, Parle brothers, successfully marketed Thums Up, Maaza and Limca. To
beat their competitor, PepsiCo, Coca-Cola acquired Parle brothers in 1993. After a
sluggish start, where Coca-Cola unsuccessfully wanted to sell the American way
of living, Coca-Cola became more and more important through its deeper
understanding of the Indian Market. In 2005, Coca-cola and PepsiCo had a total
market share of 95%. Coca-Colas share was equal to 52.4%. (Gupta, 2008)

Figure 3-1: Manufacturing locations Coca-Cola India

Copied from Hindustan Coca-Cola. (Hindustan Coca-Cola, 2015)

Presently, Coca-Colas Indian operation consist of 50 bottling operations of which
25 are owned by the company itself and 25 through franchises. Next to the
owned companies, Coca-Cola India has a network of 21 independent contract
packers which manufacturers several drinks for Coca-Cola. Coca-Cola India has
developed a distribution system which can overcome Indias main challenges.
700,000 retail outlets, 8000 distributors and small 10 tonne open bay three
wheelers successfully deliver Coca-Colas product to its end consumer. CocaColas business model in India is shown on Figure 3.2. (Gupta, 2008)
Figure 3-2: Business Model Coca-Cola India

Source: Copied from Krishna. (Krishna, 2010)

3.3.2

Distribution channels

Hindustan Coca-Cola Beverages Pvt. Ltd. (HCCBPL) formulated four routes

according to the type of customer (Titus, 2012):

Key Accounts: These are key customers who have a large share in the
total share of Coca-Colas sales. These customers mostly consist of fine
clubs, restaurants, hotels, and buy Coca-Colas products in large
quantities. Because of the higher bargaining power, the customers benefit
from 15 days to one month credit.

Future Consumption: These are outlets, such as super markets, Food

courts & Departmental stores, of Coca-Cola who hold inventory for future
consumption to make sure the product is available whenever the consumer
needs it.

Immediate Consumption: This category consist of educational

institutions, small bars, canteens, unorganized retailers. Because of the
small volumes, little inventory is held. Therefore Coca-Cola has to replenish
these types of customers on a daily basis.
General: This category is often use in rural areas where the density of
population is much lower.

The four main groups of customers are replenished through a direct route or an
indirect route. The type of route is determined by the type of the bottler. For
COBOs, a direct route is used, while indirect routes are used for FOBOs. The direct
route is shown on Figure 3.3. When Coca-Cola uses a direct route, it means the
bottling unit or partner manages sales, delivery, and merchandising. Therefore, a
FIFO-inventory system is used. By using a First-in First out system, Coca-Cola
makes sure expiration of products are limited and an easy & accurate cost
calculation will be used as goods will be priced according to their purchasing
price.
Figure 3-3: Coca-Cola's Direct Route India

Source: Copied from Krishna. (Krishna, 2010)

When an indirect route is using, an organization which isnt part of Coca-Cola will
be responsible for the sale and distribution of the product. To guarantee the
quality of the service, the distributor has to full certain requirements which are
listed in Figure 3.4.
Figure 3-4: Coca-Cola's Indirect Route India

Source: Copied from Krishna. (Krishna, 2010)

The average order size of the distributor or the retailer will depend on the
seasonal demand, which is predicted through a variety of factors (see below).
However, Coca-Cola uses a different order system for distributors and retailers.
Retailers have to order by contacting the Distributor Representative while
Distributor can order by calling the local manufacturing plant. Ordering can take
place on a daily basis and the lead time is in normal circumstances around two
days. The retailer will bear the costs to transport the goods from the distributor to
its retail location while Coca-Cola will be responsible for the distribution expenses
when transporting the goods to the distributor. To reduce the supply time, CocaCola works 24h/7. The daily distribution is represented by Figure 1-5. (LBSIM,
2012)

Figure 3-5: : Daily distribution Coca-Cola India

Source: Copied from LBSIM. (LBSIM, 2012)

3.3.3

Demand forecasting

As Coca-Cola is still growing in India, it is difficult to make accurate forecasts.

Therefore, Coca-Cola India uses a mix of a bottom-up (salespersons) and topdown (management) approach. These forecast are firstly done on a region-level
scale. This will result in more accurate and more precise data. Afterwards, these
forecasts are broken down in cities and towns by the sales manager who is in
charge for the specific towns or cities. A variety of factor are used when
forecasting the demand (LBSIM, 2012):

Historical data

Economic parameters

Seasonal variations

Festivals, events, ceremonies, sport events,

Weekly reviews in order to adapt the monthly forecast

3.4 Challenges
Figure 1-2 shows the business model for Coca-Cola India. This image confirms
that the use of COBO and FOBO are important mechanism for Coca-Cola. In India,
Coca-Cola company is divided in four regional head offices: Haryana, Mumbai,
Hyderabad and Kolkata. Throughout India, there are more than 50 manufacturing
7

plants, which are shown by Figure 1-1 By doing so, Coca-Cola tackles Indias
problem of geographical spread and the differences in taste one will face within
India. (Krishna, 2010)

3.4.1

Hub-and-spoke system

To be successful in rural areas, Coca-Cola moved away from a centralized

approach towards an hub-and-spoke system. Through this system, bottles are no
longer sent directly from the factories to the retailers, but they are first sent to an
hub, where they are transported to smaller inventories called spoke-centres
when orders are coming in. By doing so, Coca-Cola was able to cut cost. Before
the hub)and)spoke system was used, bottles faced long-haul journeys in large
vehicles. This lead to diseconomies of scale as demand is different from region to
region in India. By changing the approach, Coca-Cola was able to offer a more
tailored service. Cost were saved as well as the type of vehicles changed. For
transporting the bottles from the factories to the hubs, large vehicle are used,
medium vehicles are used for the transportation between. (Wharton University of
Pennsylvania, 2010)

3.4.2

Information systems

With a country as geographically vast as India and a technological infrastructure

so primitive, especially in rural areas, information flows from retailers to
manufacturers are notoriously slow-moving. In order to remedy these challenges,
Coca-Cola initiated Project COLA (Countrywide Outbound Logistics Automation).
COLA is developed around the ERP system and is designed to cover all functions
including manufacturing, sales, distribution, finance and logistics. (Goswami,
2008)
According to an article featured in Network World, The first step in creating an
accurate picture was setting up a Distribution Automation System (DAS) -- a
transaction system that kept all sales movement accessible. A DAS system has
been used in several FMCG companies in India. At Coca-Cola, it was tailored to
meet specific requirements that included 'centralized masters' and a day-end
transaction summary for MIS analysis. The objectives of the software were to
provide complete transparency and control to distribution operations, while
adding value to certain marketing operations. The article goes on to elaborate
that, The backbone of the system is a number of small but critical applications
These apps collect information from the bottom of the distribution pyramid.
Among these is a handheld device that is installed in trucks. (Goswami, 2008)
The Cooler Tracking System (CTS) is another integral application in this solution a sticker on the refrigerators, monitored by sales executives. CTS keeps track of:
- number of coolers in inventory
- coolers installed
- coolers under maintenance
The final application of this system is the ROADnet Route Optimizer. Goswami
writes that, The application runs on a mobile device with GPRS carried by
business development staffers. Their job is to make rounds on fixed routes and
8

check the availability and arrangement of Coca-Cola products. Since they keep
track of what needs replenishments, they can also bunch together outlets that
need restocking. This helps with dynamic route optimization and ensures that
delivery trucks do not make too many unnecessary runs from the plant
(Goswami, 2008). This allows Coke to monitor real time sales, up-sell and crosssell its depots, and increase the quality and effectiveness of its performance
tracking. (Goswami, 2008)

3.4.3

RED

RED (Right Execution Daily) is a supply chain management strategy Coca-Cola

implemented in 2006. It serves primarily as an outline and performance indicator
for distributors. Its use is integrated among all of Coca-Colas distributors and
bottlers. For instance, Hindustan Coca-Cola Beverages Pvt. Ltd. (HCCBPL)
indicates that RED (Hindustan Coca-Cola, 2015):
Provides a ready reckoner in the form of Picture of Success to the Feet on
Street to ensure consistency and high standards of execution in around
450,000 RED outlets across the country.
Helps drive creation of a soft drink culture ensuring easy availability to the
consumers across rural and urban clusters. Extensive support is provided by
HCCBPL to help build the business of a customer as he moves up the
Pyramid from Basic Product Availability to Chilled Availability evolving into
Activated Chilled Availability. HCCBPL creates strong customer value by
evolving customers from provider of basic product to delivering an
experience to the consumer.
Hellenic Bottling Company articulates the specifics as well as the importance of
the RED system as well by indicating that (HBC, 2015):
The level of our execution success in the market is monitored and improved
through a pioneering 360 degree process called Right Execution Daily (RED) and
developed in the Coca-Cola System which consists of creating the plan of success
for each channel, defining the standards for execution excellence, tracking actual
performance through market surveys, providing guidance on strategic
decision, and coaching our sales force while rewarding successful performance.

4 Pepsico
4.1 Global Distribution Strategy
The companys products reach the market through the following three channels:
direct store delivery (DSD), customer warehouse, and third-party distributor
networks. PepsiCo chooses the relevant distribution channel based on customer
needs, product characteristics, and local trade practices. Several Distribution
channels can be found for PepsiCo:
Direct Store Delivery: Under the DSD system, PepsiCo delivers products
directly to retail stores. Of the three channels, DSD enables PepsiCo to
merchandise with maximum visibility. Its more suitable for products that
are restocked often and are sensitive to promotions and marketing.
Customer warehouse: The customer warehouse system is a less
expensive distribution channel. Its ideal for products that are less fragile
and perishable, have lower turnover, and are not purchased impulsively.
Third-party distributor networks: PepsiCo distributes food and
beverage products to restaurants, businesses, schools, and stadiums
through third-party food service and vending distributors and operators.
As PepsiCo uses a Pull-method globally, a good forecasting method is needed.
Therefore, a combination of three forecasting methods is used. The following
methods are used in combination for the purpose of sales and demand
forecasting: Time-Series Method: Historical demand data can be effectively used to
forecast future demand.
Qualitative Method: Using historical data and market intelligence as a
guide, PepsiCo management practices their own judgment to determine
the demand forecast. A yearly demand plan is forecasted in this way which
is then further divided into monthly, weekly and daily plans accordingly.
Causal Method: Causal forecasting assumes that the demand forecast is
highly correlated with certain factors in the environment such as the state
of the economy, interest rates, and product pricing that can cause a
change in the demand. An example is how by introducing a product
variant, such as Pepsi Twist, can influence demand for the original product
that is Pepsi.

4.2 PepsiCo in India

4.2.1

General Information

PepsiCo entered India in 1988 by creating a joint venture with the Punjab
government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India
10

Limited. This joint venture marketed and sold Lehar Pepsi until 1991, when the
use of foreign brands was allowed. Pepsi bought out its partners and ended the
joint venture in 1994 and has now grown to become the countrys largest selling
food and Beverage Company. Being one of the largest multinational investors in
the country, PepsiCo has established a business which aims to serve the long
term dynamic needs of consumers in India.
PepsiCo Indias expansive portfolio includes iconic refreshment beverages such
as Pepsi itself, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options
such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking
water, isotonic sports drinks, Gatorade, Tropicana 100% fruit juices, and many
other beverages.
To support its operations, PepsiCo has 36 bottling plants in India, of which 13 are
company owned and 23 are franchisee owned. PepsiCos business is based on its
sustainability vision of making tomorrow better than today and its commitment to
living by this vision every day is visible in its contribution to the country,
consumers and farmers.
In order to ensure a good supply chain strategy, Pepsi co. plans two years in
advance. It has several contracts 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
arrangement of third party services for the procurement of products. The
shipping department handles orders and the transport department decides the
vehicles for safe delivery. Material planning and sourcing is carried out as well.
Sources of supply of raw material both local and foreign are identified and terms
and conditions are negotiated. Capacity planning is also done at this stage. Sales
forecasting and production planning depends upon the capacity of the
organization. Distributors are also decided by the company, keeping in mind past
performances.

11

Figure 4-6: Distribution Channel PepsiCo India

Fig 1: Supply Chain of PepsiCo. India

Company follows hub and spoke model of distribution. A hub and spoke network
is a centralized, integrated logistics system designed to keep costs down.
For the urban cities, direct distributors are appointed by the company, which are
supplied directly by the company depots against bank transfer of money. These
distributors appoint salesman for which they are provided subsidy from the
company, whose job is to market the products of the company. The schedule of
the salesman is repeated for every week.
For rural India, the distributor receives the supplies from urban distributor against
bank transfer of money. The major benefits of hub and spoke model can be
underlined as:

Reduced Capital for Inventory and Lowering Facilities Costs

o

Reducing the number of warehouses significantly reduces rent and

other building expenses such as utility and maintenance expenses.
In addition, lower operational and administrative overhead is
achieved as taxes, insurance, telephone and other facility overhead
is eliminated.

Reducing the number of warehouses and centralizing inventory

dramatically decrease the amount of inventory carried. Only the hub
needs to carry a lengthy supply and nodes can switch to a more
economic Just-in-Time inventory method.

Moving equipment becomes easier as logistics becomes simpler to

manipulate.

Economies of scale result in cost savings

12

Mass shipping and receiving of larger quantities will lower inbound

and outbound shipping costs

Centralized purchasing lowers per unit, shipping and administrative

time as operating supplies can be purchased in larger quantities

Inventory control is better by not having to reconcile as many

locations.

Routing
o

4.2.2

For a network of n nodes, only n - 1 routes are necessary to connect

all nodes; that is, the upper bound is n - 1. For example, in a system
with 10 destinations, the spoke-hub system requires only 9 routes to
connect all destinations, while a true point-to-point system would
require 45 routes.

Distribution Channels

PepsiCo India has adopted intensive distribution strategy the companys main
focus is to reach all its markets.

4.2.2.1

Intensive distribution

A Strategy of intensive distribution is characterized by placing the goods or

services in as many outlets as possible. When the consumer requires a great deal
of location convenience, it is important to offer greater intensity of Distribution.
This strategy is generally used for convenience items such as Tobacco, gasoline,
and soap, snack foods & bubblegum.
Manufactures are constantly tempted to move from exclusive or selective
distribution to more intensive distribution to increase their coverage and sales
and one can find Pepsi in nursing homes, confectionery shops, and departmental
stores.

4.2.2.2

Channel members

There are four channel members apart from company factory and consumer.
These are, in order of product forwarding:
Godown: These are the hub. They receive products directly from the
factory and their function is to store products and forward them to
distributors as and when orders are placed. They dont have any margin
but are company owned and are paid directly by the company.
Distributor: Pepsi doesnt have any separate stockiest, only distributors
are present. They receive products from the godowns and supply to
wholesalers and also directly to retailers. They appoint a salesman for
retailing, and for this they get subsidy from company. Their margin
depends on whether they are supplying to wholesaler or directly to retailer
and vary from 2% to 5% according to company, but in reality it is lower as
they sometimes sell at lower prices to increase volumes. This leads to rate
cutting. They also get various schemes from the company, which are
13

generally to be forwarded to retailers and wholesalers. There are 6

distributors of Pepsi in Gurgaon.
Wholesalers: They buy from distributor and supply to either retailers or
nearby village wholesalers. There are more than 100 wholesalers of Pepsi
in Gurgaon and surrounding areas. They try to get products as cheap as
possible and for this they often ask for bulk discounts from distributors.
They also try to get products from distributors of other states. They have
very strong networking and huge storage capacity. There margin is 2% to
3%, depending upon the product and the price which they are able to get
from distributors. Sometimes, they also get scheme from the distributor. At
present, there is a scheme in half liter bottles for wholesalers, i.e. they get
4 bottles extra on buying a whole carton. Wholesalers are generally not
exclusive to Pepsi and also carry other company products. Interestingly,
most of the wholesalers are common with Coca Cola because of the same
nature of business and same target shops. Wholesalers generally dont get
credit from distributors because they try to find the lowest price in the
market and buy, and thus they are generally not loyal to any distributor.
Also, the responsibility of transportation of good lies on the wholesaler and
he is responsible for any damage to goods.
Retailers: Retailers cater to the customers. They buy either from the
wholesaler or distributor, depending on ease of purchase, relations and
credit policy. Wholesalers generally supply them on credit. According to a
wholesaler, he supplies to the retailers on credit and has maintained
different rates depending on the credit days. If the retailer pays him within
30 days, he supplies on normal rates, but if the retailer pays after 30 days
then he charges a premium. Retailers of Pepsi vary from small pan shops
to big departmental stores and restaurants. The margin to retailers is from
14% to as high as 18% depending upon the product and rates they get
from wholesalers. There are also schemes for retailers. Presently, they get
3 bottles extra if they buy a full carton of half liter bottles.

4.2.2.3

Distribution Channels Redefined

Pepsi is proactively addressing these emerging trends by approaching distribution

and channels in a much broader way. They are shifting emphasis from mere reach
or availability expansion to touching consumers with a 3- way convergence- of
product availability, brand communication and higher level of brand experience.
They are thus going beyond delivering products and creating greater
engagement and interaction around the purchasing experience.

14

Figure 4-7: Pepsi's Reinvention

Pepsis reinvention of distribution is built on an understanding of emerging

consumer trends, the retail environment and the growth drivers of our brands.
Pepsis distribution system is a key external resource. Normally it has taken years
to build and cannot be easily changed. It ranks in importance with key internal
resources such as manufacturing, research, engineering and field sales personals.
It represents significant corporate commitment to set policies and practices that
constitute the basic fabric on which is woven an extensive set of long run
relationship.

4.2.2.4

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. 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. The ensure the quality, several processes
have been implemented which are discussed below.

4.2.2.5

Improvement with using Just-In-Time (JIT)

When it comes to delivering high cost and perishable products to

manufacturing sites, just-in time (JIT) remains one of the most costeffective supply chain solutions. In JIT process, on time delivery is an
absolute necessity.

Just-in-Time (JIT) is a philosophy that defines the manner in which a

manufacturing system should be managed. It enhances customer
satisfaction in terms of availability of options, assurance of quality, prompt
delivery times, and value of money.

15

4.2.2.6

I2 Transportation

I2 Transportation is a part of end to end solution for planning, execution, and

management of the entire transportation cycle. It is designed to enable an
organization to utilize and manage an entire transportation network, as well as
reduce cost while improving transport performance. I2 transportation is designed
to employ sophisticated optimization and data techniques to define and evaluate
alternative transportation strategies. It is also designed to provide
comprehensive data management, analytics, and reporting of key transportation
cost and service trade-offs.

4.2.2.7

Implementation

PepsiCo set two objectives for transportation management. One was to achieve
an on-time delivery rate at 99.1% and another was to reduce transportation
costs. It empowered with optimized processes and technology that enable the
team to perform at the highest possible level. With the application of new
technology that provides greater supply chain visibility, better organized data,
and access to higher level of real time or near real time information, even the
best team can improve their performance. The benefits can be listed as follows:

Exception-based management

End-to-end supply chain visibility and event management tools

Customer-specific
manufacturing

The ability to forecast and respond to supply/ demand events

The option to move from calendar-based to event-driven planning

and re-planning. Increased employee productivity

Reduced process, personnel, and expediting costs

Improved customer, supplier, and partner communications.

Real-time decision support

solutions

for

replenishment,

fulfilment,

and

4.3 Challenges

4.3.1

Rate Cutting

Rate cutting from wholesalers is a major problem, faced by distributors. Certain

direct distributors keep profits as low as 1% and then sell to wholesalers so as to
take bulk orders, while wholesalers themselves keep profits as low as 0.5% and
sell to smaller village wholesalers and retailers so as to make bulk orders and this
causes the rate cutting problem, as few retailers do not buy from the distributors
because they can get their orders cheaper from wholesalers.

4.3.2

Too near Wholesalers

One of PepsiCos major problems is the existence of wholesalers that are too near
which leads to rate competition between the two wholesalers.

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4.3.3

Communication of schemes

At times few wholesalers only get to know about the schemes of the month after
many days and they are not able to take the benefits of it.

4.3.4

Duplicate Brands

There are many duplicate brands existing in the market and taking advantage of
the illiterate population in rural areas by selling spurious PepsiCo beverages.
These brads offer very high margins for retailers and distributors.

4.3.5

Refrigerator problems

Some retailers demand a company refrigerator regularly and are not willing to
store PepsiCo products in their own refrigerators and these retailers are generally
big and imperative and theres always a threat that a competitor could provide
them with refrigerators and restrict them from selling Pepsi products.

4.3.6

Maaza Scheme

One of Pepsis major competitors in India is Maaza which is a successful brand of

Coca-Cola. Maaza became and still is a very popular brand in India and retailers
who were told to only house Pepsi products started keeping Maaza and this
adversely affected Pepsi sale and posed great challenges for distributors and
wholesalers.

4.3.7

Reverse Supply Chain Management

Whenever a retailer/wholesaler/distributor starts a business with Pepsi they first

need to buy empty bottles from Pepsi and then the next time they are supplied
with filled bottles in return of empty bottles. This process calls for great efforts of
wholesalers and distributors.

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5 Conclusion
As illustrated by the report, the Indian environment alone presents a number of
obstacles that must be overcome in order to build and maintain a successful SCM
system. With respect to Coca-Cola and Pepsi, it has been shown that the two
competitors utilize many similar SCM methods but maintain some key strategic
differences as well. While both utilize COBO and FOBO strategies as well as huband-spoke systems, they each have unique strategic philosophies, such as Cokes
Project COLA. As has been clearly indicated by the report, Coca-Cola and Pepsi
both face numerous challenges, and while each company utilizes SCM differently,
it is clear that continued investment for the improvement of SCM will be of critical
importance to the competitiveness and long-term success of the companies.

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