Logistics and Supply Chain Management at PepsiCo

This report analyzes the relationship between supply chain management and logistics management at PepsiCo. It also highlights the significance of effective logistics management in achieving customer satisfaction and suggests best practices for cost reduction.

RUNNING HEAD: Logistics and Supply chain management 0
Pepsi
Logistics and Supply chain management

Logistics and Supply chain management 1
Contents
Introduction...........................................................................................................................................2
PepsiCo.................................................................................................................................................2
Analysis of the relationship between supply chain management and logistics management.............2
Significance of effective logistics management function in achieving customer satisfaction............3
ERP.......................................................................................................................................................4
Suggest and analyse different best practices..........................................................................................5
Conclusion.............................................................................................................................................7
References.............................................................................................................................................9

Logistics and Supply chain management 2
Introduction
PepsiCo was established in 1965 with the merger of Pepsi-Cola and Frito-Lay. It is an
international food and beverage company. The products of the PepsiCo are available in more
than 200 countries. The company’s headquarter is in New York. The company believes in
strong corporate governance for financial reliability, investor confidence and greater
performance. The company is driven by food and beverage portfolio and includes brands like
Frito-Lay, Tropicana, Gatorade, Quaker and Pepsi-Cola. PepsiCo received the supply chain
innovation award for it’s innovative distribution strategy. In this report, the relationship
between supply chain management and logistics management of Pepsi has been described. As
an entrepreneur, the significance of effective logistics management function is analysed in
achieving customer satisfaction. ERP is used to improve customer satisfaction and keep focus
on e-commerce. The different best practices have been suggested to Pepsi to achieve
objective of cost reduction.
PepsiCo
Analysis of the relationship between supply chain management and logistics
management
The supply chain management is the process of scheduling, execution and controlling
operations of supply chain to please requirement of customers. The logistics management is a
part of supply chain management and these activities occur within the boundary of company.
The supply chain management thinks outside the business (Stadtler, 2015). The relationship
between SCM and logistics can be defined by analysing activities covered by each concept.
The logistics is responsible for the activities of SCM. The SCM encompasses more process
and functions than the logistics management. SCM defines supply chain structure which
creates framework and in turn creates the inside framework in which all logistic operations
take place. The logistics includes the traditional concepts such as locating, supply,
preservation and portfolio management. The SCM includes old-style logistics and comprises
more activities like marketing, product development, finance and customer service.
The suppliers are linked to upstream and distributors are linked downstream to serve it’s
customers. The supply chain management of PepsiCo aims to provide maximum customer
service at lowest cost possible. It is cross functional tactic to accomplish movement of raw

Logistics and Supply chain management 3
materials into organization. The company has been successful due to it’s effective supply
chain management. The innovative distribution of strategy of company ‘Direct to store
delivery model’ has made delivery of right product at right time. The core supply chain
management includes product designing, planning, forecasting, locating, subcontracting and
manufacturing. PepsiCo was given award for it’s innovative strategy known as Direct to
store delivery model. It moderates system wide inventory, eliminates warehouse space and
develops the potential for growth (Prajogo, Oke & Olhager, 2016).
Logistics is all about getting right product at right time along with appropriate quantity, cost
and time. The logistics management handles the efficient management of day to day activities
in manufacturing final goods and services. The involved activities in logistics management
are from departure of products to the final point of arrival such as transportation, packing,
scheduling, preparing, distributing, delivering and warehousing (Wang, Gunasekaran, Ngai &
Papadopoulos, 2016). The ultimate goal of logistic management of PepsiCo is to optimize
profitability through strategic planning and implementation to meet demand of customers.
The company has used several program and techniques related to logistics like, Just In Time
(JIT), Efficient Customer Response (ECR) and Electronic Data Interchange (EDI). It allows
company to reduce inventory and better coordinate material flow in the productive chains.
Significance of effective logistics management function in achieving customer
satisfaction
The objective of logistics is to improve performance of organisation and improve products
and services to satisfy customers. The term logistics is often misinterpreted as transportation.
The logistics is beyond transportation. It confirms delivery of products in the entire supply
chain. It includes packing, preparation, transportation, storage and information flow (Tatoglu,
et. al. 2016).
The material handling and storage are often regarded as non-value added activity. Labelling
can be the important function as it reduces wastage. There are two types of approaches, push
and pull.
The logistic management of functions of PepsiCo takes place by three distribution operations:
Direct store delivery (DSD): DSD is the oldest method used by PepsiCo. The company
delivers products to retail stores directly. The employees take orders and supply the former

Logistics and Supply chain management 4
orders. The orders are taken in the manually form. It enables company to produce with
maximum visibility. It is effective in launching new products in a quick time. It is suitable for
the products which are often restocked. It is sensitive to promotions and marketing
(Touboulic & Walker, 2015).
Vending and foodservice systems: The sales personnel of company distribute products such
as snacks, foods and beverage through third party. The products are made available in school,
colleges, office and restaurants through this process. PepsiCo has also launched interactive
vend technology. It will enable customers to better connect with company at the time of
purchase (Yu, Wang, Zhong & Huang, 2017). It will enable customers to gift a friend by
selecting beverage and entering detail of recipients such as name, contact number and
message.
Broker warehouse distribution: The company employs third party for the distribution of
products from company’s warehouse to the retailer’s warehouses and retail outlets. This
system is more effective than the DSD system (Hazen, Boone, Ezell & Jones-Farmer, 2014).
It is more economical and the category includes food, beverages and juices.
ERP
ERP (Enterprise Resource Planning) includes broad set of activities to help an organisation to
manage it’s business. It is a software application to organize and standardize business process
to plan effectively. The software integrates all aspects to manage business and automate
functions related to technology, service and human resources. ERP can communicate and
share information or database with rest of the company (Tarhini, Ammar & Tarhini, 2015).
The software collects information and make available to other parts for increasing
productivity.
PepsiCo started using ERP for better integration. It helps in directing the business functions.
These are the software packages used to maintain system of enterprise. The main ERP
software providers are SAP, Oracle, PeopleSoft, JD Edwards etc. The company has changed
it’s supply chain into the adaptive supply chain network. It is the ability to respond changing
internal and external conditions. PepsiCo has coordinated business process through ERP. It
deals with customers to increase sales and customer satisfaction. The features help in
improving customer satisfaction and reducing costs:

Logistics and Supply chain management 5
Right to use real time data: The real time access data to management enables making better
decisions. It increased productivity and reduces inventory costs. As a result, customer
satisfaction is improved which results in increased profits (McMurray, 2015).
Insight of production vs. sales: The ERP system provides insight of profit in production vs.
sales. The system explains the difference between cost and price of goods manufactured and
sold. It brings out the variation which reduces the profit gained by each location. The results
help in reducing costs and improved customer satisfaction.
Systematized sales and production costs: The ERP system monitors consumption of sales and
costs from distant level. It helps in managing production by planning and scheduling. It
boosts the operational efficiency and draws plans according to resources, capacity and
demand.
Quality control: The quality control process is necessary to update after manufacturing and
purchasing raw material. It helps management to view the type of quality desired by
customers. Producing good quality products lead to less wastage of resources (Seethamraju,
2015).
SAP has displaced some of the competitors of PepsiCo. The implementation of ERP has
helped company to synchronize business practices and compact with customers to enhance
revenue and customer satisfaction.
The ERP system gathers data from PepsiCo’s customers, warehouse, point of sale and
production data. The adoption of system is a significant step in the transformation of
company. It has driven efficiencies and effectiveness of portfolio of brands of company.
PepsiCo enters equipment requests in the ERP system to view data by cross functional
departments. The company has attained expertise to lower costs of technology. The company
is continue to establish itself by innovating it’s operations. The system influences technology
to achieve growth and innovation (Al-Mashari & Al-Mosheleh, 2015).
Suggest and analyse different best practices
There are various practices which can help PepsiCo to reduce logistic costs are:
Focus on labour costs:

Logistics and Supply chain management 6
PepsiCo can analyse labour costs of the warehouse operations. The labour management
software system can help company to manage warehouse work. The employees can join
incentive programs for warehousing. More focus should be given on the automotive
repetitive and structured tasks. Warehouse mobility can be used to reduce overall costs
(Jacobs, Chase & Lummus, 2014). It will increase individual activity. Broker warehouse
distribution should be used due to it’s economic cost.
Timely planning:
An appropriate planning of operations conducted daily such as scheduling, shipping routes
and shipment time is vital. The last minute choices and decisions should be avoided as it
results in delays and missed deadlines. It reflects bad image of company (Kim, Pettit, Harris
& Beresford, 2018). The smart planning should be taken into account to manage schedule and
delivery times.
Focus on preventative measures:
The preventative measures should be adopted by PepsiCo to save money on equipment. It is a
way to achieve logistics cost reduction. In the middle of a task, equipment failure can be
costly in man hours and customer service. So, proper measures should be taken to reduce
costs and enhance measures.
Cargo insurance:
The cargo should be ensured properly to avoid unpleasant surprises. The insurance is required
to cover the value of products. The logistics and cost saving strategies have no mean if the
cargo is not insured properly (Carbonara & Pellegrino, 2017).
Optimise resources:
The inefficient use of resources can affect revenue of company. The optimized use of
resources can improve the efficiency of business. It can be made possible by rearrangement
of delivery schedules to keep the vehicles active for delivery.
Focus on the systems and planned technology:
A better warehouse management system can minimise costs by mechanising cycle counting.
It increases the efficiency of factory warehouse. It reduces the cost of picking and put away.
The efficient use of technology continues to weed out inefficiencies. A transportation

Logistics and Supply chain management 7
management system utilises the most effective lanes and routes. PepsiCo can consider
automation to reduce logistic costs (Gattorna, 2017). The warehouse execution system and
warehouse control system can be used to regulate and automate manual process. PepsiCo can
also apply strategic changes to decrease costs and increase customer satisfaction.
Reduction of water:
PepsiCo can reduce usage of water per unit. It saves cost of company. The water conservation
efforts made can save the company by large extend. It can have the huge impact on
community and planet. It can further lower operating costs.
Supply chain visibility:
The transparency of supply chain management can actually improve planning and expense. It
can be made possible through better management of safety stock. The company can maintain
certain level of stock to reduce risk of product deficits. A proper supply chain management
can give an insight to managers to prevent disruptions in the logistic process (Pagell &
Shevchenko, 2014).
Focus on customers:
The low cost of logistics keeps customers happy. The company can reduce logistic costs by
going beyond the expectation of customers. There should be direct connection between
buyer’s satisfaction and overall cost drop to measure changes in logistic costs.
Conclusion
From the above report it can be determined that there is close relationship between supply
chain management and logistics management of PepsiCo. The scope of supply chain
management is wide and covers logistics management. The logistics management is a part of
supply chain management. The ERP system has helped PepsiCo to improve customer
satisfaction by reducing costs along with focus on e-commerce. The analysis is also done to
support ERP in company. At the end, various best practices have been explained to support
PepsiCo. These practices can help company to achieve objective of reducing costs.

Logistics and Supply chain management 8
References
Al-Mashari, M. and Al-Mosheleh, H., 2015, April. Enterprise Resource Planning of Business
Process Systems. In UKAIS(p. 2).
Carbonara, N. and Pellegrino, R., 2017. How do supply chain risk management flexibility-
driven strategies perform in mitigating supply disruption risks?. International Journal of
Integrated Supply Management, 11(4), pp.354-379.
Gattorna, J., 2017. Introduction. In Strategic supply chain alignment (pp. 15-21). Routledge.
Hazen, B.T., Boone, C.A., Ezell, J.D. and Jones-Farmer, L.A., 2014. Data quality for data
science, predictive analytics, and big data in supply chain management: An introduction to
the problem and suggestions for research and applications. International Journal of
Production Economics, 154, pp.72-80.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Kim, J., Pettit, S., Harris, I. and Beresford, A., 2018. Towards A Better Understanding of
Humanitarian Supply Chain Integration. In The Palgrave Handbook of Humanitarian
Logistics and Supply Chain Management (pp. 249-277). Palgrave Macmillan, London.
McMurray, D., 2015. The rise of the digital supply chain. MHD Supply Chain
Solutions, 45(3), p.20.
Pagell, M. and Shevchenko, A., 2014. Why research in sustainable supply chain management
should have no future. Journal of supply chain management, 50(1), pp.44-55.
Prajogo, D., Oke, A. and Olhager, J., 2016. Supply chain processes: Linking supply logistics
integration, supply performance, lean processes and competitive performance. International
Journal of Operations & Production Management, 36(2), pp.220-238.
Seethamraju, R., 2015. Adoption of software as a service (SaaS) enterprise resource planning
(ERP) systems in small and medium sized enterprises (SMEs). Information systems
frontiers, 17(3), pp.475-492.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management
and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.

Logistics and Supply chain management 9
Tarhini, A., Ammar, H. and Tarhini, T., 2015. Analysis of the critical success factors for
enterprise resource planning implementation from stakeholders’ perspective: A systematic
review. International Business Research, 8(4), p.25.
Tatoglu, E., Bayraktar, E., Golgeci, I., Koh, S.L., Demirbag, M. and Zaim, S., 2016. How do
supply chain management and information systems practices influence operational
performance? Evidence from emerging country SMEs. International Journal of Logistics
Research and Applications, 19(3), pp.181-199.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a
structured literature review. International Journal of Physical Distribution & Logistics
Management, 45(1/2), pp.16-42.
Wang, G., Gunasekaran, A., Ngai, E.W. and Papadopoulos, T., 2016. Big data analytics in
logistics and supply chain management: Certain investigations for research and
applications. International Journal of Production Economics, 176, pp.98-110.
Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2017. E-commerce logistics in supply
chain management: Implementations and future perspective in furniture industry. Industrial
Management & Data Systems, 117(10), pp.2263-2286.