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PEPSICO Supply Chain

PepsiCo entered India in 1989 and has grown to become one of countrys leading food and beverage companies. One of the largest multinational investors in India, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India PepsiCo India and its partners have invested more than 1 billion dollars. It provides direct and indirect employment to 1,50,000 people including suppliers and distributors.

Bottling operations are of two types > FOBO- Franchise owned


bottling operations > COBO- Company owned bottling operations

In India , out of 43 bottling operations 17 are COBO and the rest are FOBO.

FOBO COBO

With push process execution is initiated in anticipation to a customer order. 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.

In 2002 the company decided to expand manufacturing capabilities to enable growth. It needed to transform its warehouse effectiveness and a so-called go-to-market strategy to optimize service and costs. At the same time it was faced with a rapidly shifting product line and customer expectations. So Pepsi looked in to options for transforming warehouse effectiveness. It wanted to optimize the delivery systems There was requirements for- Daily sales orders that needed to be picked and loaded within an 8- to 12-hour window, order profiles and SKU proliferation continued to challenge productivity efforts, building pallets was highly complex, and employee turnover was too high for a number of reasons, not least of which was because morale was low. Most of the warehouses were operating at or above the capacity, So Pepsico was not willing to increase this.

Eliminating the warehousing step High-turnover High-volume perishable goods(soft drinks) Suppliers take their products directly to the store Suppliers free up warehouse space for retailers Suppliers get a better handle on their product sales and inventories Requires one-fourth of the footprint of traditional deliveries for the same cost per pallet investment and the result is lower inventories, lower warehouse labor costs and greater delivery productivity Pepsi won the 2010 Supply Chain Innovation Award from SupplyChainBrain for these innovations

Direct labour costs in the warehouse are down 40 percent Network inventory has been cut by a third

Manual picking productivity is up 18 percent Transport trailer loading productivity has increased by up to 58 percent

Delivery productivity is up by 15 percent with more than a 25-percent internal rate of return.

Adopted by PepsiAmericas Inc., a bottler of Pepsi products A form of DSD Brand owner places an order before the delivery date Orders remotely uploaded to central order and routing system at headquarters via wireless connectivity Delivery trucks can be stocked more efficiently and accurately for the days routes Drivers now have the capability to track inventory, record deliveries and wirelessly print invoices to portable printers.

Increase in volume at the store which translates to more sale Higher revenue, greater contribution margin, accelerated working capital due to reduced turns . Improves the cash flows to the company. Better returns on trade deals, and improvements in shopper loyalty Improved trade effectiveness and promotional activities for the retailer. This is Profitable for Retailer also as supplier assumes the costs for delivery, inventory management and merchandising

PROBLEM : Increasing carbon emissions associated with its Tropicana orange juice Biggest portion of the carbon footprint was found not in manufacturing, or distribution, but actually back in the agriculture stage Process of making FERTILIZER Thus, carbon reductions was at stake.

Tropicana Orange Juice Carbon Lifestyle


DISTRIBUT ION 22%

FERTILIZE R 36% PACKAGIN

USE 3%

G
15% MANUFAC TURING 24%

Pepsi used biomass from closer to home. Orange rinds left over in manufacturing, Wood waste and agricultural by-products are other sources Spent tens of millions of dollars removing some carbon from a manufacturing process at returns that can be 10% or less Took 15% of total carbon out in the fertilizer step without costing anything. Two main enablers for achieving Green Supply Chain: Just in time delivery (Minimize packaging ) Reverse logistics for packaging materials (Reuse and Recycle)

Optimized logistics and distribution, making sourcing and procurement more environmentally friendly Created supplier guidelines for environmental performance Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20-ounce bottles Conserved 196million pounds of corrugated material Will be testing a new type of bottle that is totally made of plant-based, renewable resources and will be fully recyclable.

PLACE-Pennsauken SERVICE AREA - Philadelphia and southern New Jersey region. Sales representatives couldn't YEAR - 1994 get their orders from the field
back to the loading docks quickly enough.

Orders would start backing up on Monday

Workers in the distribution centers would spend their afternoons sitting on their signals

LOSS

= Time-and-a-

half plus commission

Backlog of weekday orders stacked up Delivering 30,000 to 40,000 cases on Saturday

Pepsi Pennsauken outfitted its sales reps with handheld computers that instantly send data back to the distribution centers over a wireless network Wireless was perfectly suited to the demands of the soft-drink industry.
each of the company's 15 route-sales drivers were given wireless equipped handheld computers

Reps now carry the devices

check inventory at each of the client retail outlets

Soft-drink orders are punched directly into device

Inventory is matched accordingly

order is then immediately sent over wireless network

Sales and delivery capacity have increased at lower costs than before. Representatives no longer had to waste precious selling time listening to busy signals

Workers in the distribution centers received orders as soon as they were taken

Pepsi had a 15% improvement in labor efficiency in the first months the program was in operation

Indian Agriculture, due to its reliability on monsoon, had fluctuations in supply of potatoes, tomatoes, paddy, etc. PepsiCo highly dependent on agriculture for its products. This could affect PepsiCos products like Lays, Uncle Chips, Quaker to name a few. Repercussions could be huge due to unavailability of raw materials leading to halt in production and manufacturing activities.

PepsiCo decided to invest in the agriculture sector by Brining to the farmers, new high-yielding varieties of potato and other edibles. Contract farming where farmers were assured buy-back mechanism at a prefixed rate with farmers. Tie-up with State Bank of India, to help farmers get credit at a lower rate of interest. Weather insurance for farmers through our tieup with ICICI Lombard.

Partnership with more than 11,000 farmers working across Punjab, Uttar Pradesh, Karnataka, Bihar, West Bengal, Gujarat and Maharashtra for the supply of world-class chip-grade potatoes. A retention ratio of over 90%, which reveals the depth and success of the partnership. In 2010, contract farmers in West Bengal registered a phenomenal 100% growth in crop output, creating in a huge increase in farm income. The remarkable growth has resulted in farmers receiving a profit between Rs. 20,000 40,000 per acre, as compared to Rs. 1000020,000 per acre in 2009. High-yielding potato seeds have allowed farmers to produce world-class potatoes and obtain higher returns. Relatively Assured supply of Potatoes due to the creation of cost-effective, localized agri-supply chain.

It is the method of delivering the products to distributor Some of the products are delivered from the manufacturing plants and warehouses to customer warehouses and retail stores. These less costly systems generally work best for products that are less fragile and perishable, have lower turnover, and are less likely to be impulse purchases

Manufacturer

Depot/Warehouse

Distributor

Retailer

Customer

PepsiCo adapted all the above mentioned systems to the local conditions of the various countries in which it operated. PepsiCo's highly advanced distribution system was well supported by state-of-the-art logistics systems. PepsiCo upgraded its technical capabilities consistently in order to strengthen its logistics management activities. PepsiCo's bottlers employed wireless technologies to strengthen their distribution system and effectively serve the customers in the markets in which they operated. However, with its vast worldwide operational network and good market presence globally, PepsiCo still lacks in integrating and streamlining the operations of its various group companies/divisions.