Analysis of PepsiCo's Logistics, Order Cycle, and Inventory

This report analyzes PepsiCo's logistics operations, examining the interfaces between logistics and core functional areas such as production, marketing, finance, and accounting. It explores the length of production runs, seasonal demand, and product life cycle, as well as the marketing mix (product, price, place, and promotion) and their impact on logistics. The report then delves into PepsiCo's order processing system, providing a detailed overview of its automated processes. Furthermore, it assesses the effectiveness of the current order cycle and inventory management, including inventory turnover ratios and related strategies. Based on the analysis, the report recommends improvements in inventory management and overall operational efficiency, including collaborative system environments, contextual intelligence, and data sharing to optimize the supply chain. The report concludes with a summary of findings and recommendations for PepsiCo to enhance its logistics and supply chain performance.

Running Head: PEPSI CO. 0
Supply Chain

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Contents
Introduction...........................................................................................................................................3
Logistics interfaces with production......................................................................................................3
Length of production runs.................................................................................................................3
Pepsi seasonal demand......................................................................................................................3
Product life cycle...................................................................................................................................4
Logistics interface with marketing........................................................................................................4
Marketing mix of Pepsi.........................................................................................................................4
Product..............................................................................................................................................4
Price...................................................................................................................................................4
Place..................................................................................................................................................5
Promotions........................................................................................................................................5
Logistics interfaces with finance and Accounting.................................................................................5
Order processing system of Pepsi Co....................................................................................................5
Recommendations.................................................................................................................................6
Inventory management of PepsiCo........................................................................................................7
Recommendations for improvement in inventory management.............................................................7
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9

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Introduction
PepsiCo is the leading company that has various brands under it. It is an American
beverage company that has headquarter in New York. From the report, it is found that in the
January 2012, the retail sales of PepsiCo was $1Billion. In several countries, it is the largest
beverage company in various parts of the world. Pepsi is targeting the beverage and food
market that caters to the needs of the people. It has also entered in the various new markets.
Due to its huge customer base, it has become the leading player in the market. An American
food and Beverage company serves in around 200 countries. Pepsi Co. has its headquarter in
New York. Caleb D. Bradham in New Bern first founded it. In 2013, it has adopted the vision
of being the global leader in the convenient beverages and food by serving with purpose.
Logistics interfaces with production
Length of production runs
The length of productions runs in PepsiCo done from Monday to Friday with the
occasional Saturday. It guaranteed the one day off. However, Pepsi runs 7 days a week. The
workers in Warehouse also work 27 days with no days off. However, in the wintertime, its
production goes slow so workers work few hours in a week. Pepsi does not have any union
and discourage the person for joining one who asks for effective and better work hours. In
this way, it tends to ensure the production process without hampering its market (Estes,
2018). It is true that if product will stop for even one day, it tends to hamper the productivity
of the organisation.
Pepsi seasonal demand
It is true that Pepsi demand is increasing to a greater phase in every country. Besides
this, it has opened the big concentrate plant in Singapore. It is the first giant plant of
Singapore. It will also produce the hundreds of beverages under this plant. The new facility
that it has opened in Singapore has taken the 18 months that proved to be boon for its
logistics efficiency and cost savings. It is also found that PepsiCo will have the possibility of
higher production cost due to the new plant (Kit, 2017).

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Product life cycle
From the diagram, it is seen that the PepsiCo demand is increasing due to the
inclusion of health ingredients in its drinks. Due to the increasing sales of Pepsi in Singapore,
the product is gaining huge popularity. It has also expanded its product line that leads to the
growth in the company at various regions (Hugos, 2018).
Logistics interface with marketing
Marketing mix of Pepsi
Product
The main product of the Pepsi Co is the Pepsi Cold drink. Pepsi is one of the leading
products in this field. All the products in the marketing mix of Pepsi are highly carbonated
beverage along with the snacks, fruit juice. Pepsi has also other soft drink apart from the
Pepsi such as 7up and Mountain Dew. It also has various targeted customers. It has also
ventured some of the new product such as Tropicana juices and Lipton tea (Chen & Kitsis,
2017).
Price
All the products of Pepsi are priced as per the demand of the customers. Therefore,
products are priced according to the customer pocket and arte of competition. It also has
Pepsi

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various bottled at different rates. As per the quantity of the drinks, prices are applied and
charged from the customers. It has also included the Tropicana beverage by targeting the
health conscious people.
Place
The products of Pepsi are available in around more than 200 countries all over the
world. The places where products of Pepsi are sold are the areas where it has targeted its
customers. The distribution strategy in the marketing mix of Pepsi includes the extensive
network of grocery stores, retailers, supermarkets and retailers. As compare to this, Tropicana
is available only at few outlets where it has targeted its customers. The primary mode of
distribution for the PepsiCo is with the help of distributors who provides it to the retailer.
Afterwards, the secondary mode of distribution is directly through the company that provides
to the bulk buyers as well as the major retailers who tends to buy directly from the company.
In this, cost has been saved by giving better margin to its bulk buyers (Schönsleben, 2016).
Promotions
Pepsi has targeted the food products to the family and youth. They are promoting their
product through the well-known movie stars or through the famous personalities. The main
channels through which Pepsi products are promoted include outdoor, print, TV, and online
ads. Besides this, it has also sponsored the global events such as world cup of cricket and
football. Besides this, it is also found that Pepsi cannot live without the proper promotions of
its brand. It is because it belongs to the FMCG market. In this way, it has promoted its
product in such a way that directly attracts the health conscious people.
Logistics interfaces with finance and Accounting
It is true that the financial and accounting performance of any company depends on its
profitability and management. (Purohit, 2015). As cash management is crucial for the
survival of the company as there are times when company is perform well in terms of their
service and sales but fails to generate the cash that results in the unfavourable condition in the
company. However, PepsiCo has enough sales in order to cover up the running expenses as
well the fixed cost.

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Order processing system of Pepsi Co
PepsiCo has fully automated the order processing system. It uses the demand solution
of Esker in order to receive the orders of customer in file format. The file format includes
email, fax, and EDI. Afterwards, it automatically goes to the effective CSR team based on the
category of product. next, with the help of intelligent recognition tool, the relevant and
required data is extracted in order to create the sales order. It is done in their ERP system
without the need of any of the manual input. In this way, it tends to extract the updated and
correct data without missing any element. In case of any need of the approval, order to placed
automatically into the workflow. After the approval, order to archived automatically by
assuring the easy access to the authorized user. In the recent time, it manages around 4000
order per month. Among these order, 90% of the order is processed without the intervention
of human. This helps the company in fast processing of the order as well as helps in
improving he services of customers (Esker, 2019).
Using Esker demand
solution in receiving the
order of customer in file
format
Goes to the current
team of CSR
using intelligent
recognition tool,
essential data is
extracted automatically.
Creation of data in
the ERP system
without missing any
of the element
Made available to
the authorised user
Operates around 4000
order each month

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Recommendations
It is true that logistics and supply chain plays an essential role in the organization. For
an organization to get the maximum advantage, it is essential to make the best decision
regarding its logistics. Companies like PepsiCo also face the issues due to lack of corporation
among concerned parties. Lack of the proper information to the middle as well as top level
management also tends to reduce the effectiveness in their decisions. In order to reduce the
order processing system, PepsiCo can also bring the required changes (Christopher, 2016).
The collaborative system environment also offers the vehicle to companies to increase the
demand for flexible system. It can also use the contextual intelligence. It is the ability to
adapt that knowledge that is unique as well as different from the one when it developed.
Using this, it can bring the creative ideas in the organisation. It can also make the use of
cloud-based software or other platform in order to make the best use of the data. It is also
recommended to PepsiCo to improve the operational efficiency with the partnership and data
sharing. The real time sharing of data with the entire partners is also significant. In the end,
data sharing in logistics will assist in improving the operational improving the operational
efficiency.
Inventory management of PepsiCo
It is seen that the fixed asset turnover ratio of the PepsiCo was relatively constant
from 2014 and 2015. In the year 2014, the inventory turnover ratio was 3.87 and in the year
2015, it became 3.86. It means that in the year 2015, the average piece of inventory on the
shelf about 32 days being sold. The increase in inventory of PepsiCo means that it was able to
manage its inventory effectively and efficiently. This can be caused by the increment in sales
revenue that further increases the cost of goods sold more effectively (GuruFocus, 2019).
As compare to the data of 2014 and 2015, in 2017, the inventory turnover of PepsiCo
was 10.16. However, it goes down and became 9.67. In this way, it can be can seen that the
inventory ratio of PepsiCo has been reduced. It can also observed that the company spend
less amount in the write downs, storage as well as obsolete inventory. Therefore, the decline
in productivity is required to improve in PepsiCo for the better results and output.

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Recommendations for improvement in inventory management
Several methods can be undertaken in order to manage the inventory in organisation.
PepsiCo can considered the tools related inventory optimization. It will help in evaluating the
entire network and will help in determining the best policies for inventory (Noe, Hollenbeck,
Gerhart & Wright, 2017). Besides this, it can also employ the business solutions that by using
the real time analytics under one of its platform. PepsiCo by using this data can support the
inventory and other decisions of planning. PepsiCo should also keep the eye on the suppliers
in order to deliver to their commitment. There are times suppliers mismanage the inventory
that leads to the decrement in the inventory of company at end. Therefore, proper eye can be
put on the supplier that will lead to the better results (Napolitano, 2013).The proper eye on
suppliers will also help in eradicating the problems related to supplier. After the proper
identification of unreliable supplier, PepsiCo can deal with them and resolve the issues. Over
the past few years, traceability and product genealogy has come under the top of the
inventory managers.
Conclusion
In the limelight of above discussion, it can be concluded that PepsiCo is the fastest
growing company that has expanded its wings across the world. Moreover, it is also
interpreted that PepsiCo has also opened a new plant in Singapore that will help it in
producing more input. In this way, it can stated that the demand of PepsiCo is increasing in
Singapore. It is also seen as the huge plant of PepsiCo in Singapore. From the order
processing system of the company, it is found that it follows the effective procedure in order
to process the orders. Besides this, it also operates around 4000 orders per month. In addition
to this, it is at the growth stage due to increase in the demand of its product. However, several
changes are also essential for PepsiCo in order to improve its inventory management. at the
end, it can also be stated that it is one of the best company who is able to ensure the best
promotional policy. This is the reason it is able to attract large number of customers toward
its brand.

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References
Chen, I. J., & Kitsis, A. M. (2017). A research framework of sustainable supply chain
management: the role of relational capabilities in driving performance. The
International Journal of Logistics Management, 28(4), 1454-1478.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Esker. (2019). PepsiCo selects Esker to enhance its order processing and better serve its
customers. Retrieved from: https://www.esker.com/company/press-releases/pepsico-
selects-esker-enhance-its-order-processing-and-better-serve-its/
Estes, S. (2018). Allergen Management: Ensuring What Is in the Product Is on the Package.
In Food Allergens (pp. 103-116). Springer, Cham.
GuruFocus. (2019). PepsiCo Inventory turnover. Retrieved from:
https://www.gurufocus.com/term/InventoryTurnover/PEP/Inventory
%252BTurnover/PepsiCo%2BInc
Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
Kit, T.S. (2017). PepsiCo opens S$130m concentrate plant in Singapore. Retrieved from:
https://www.channelnewsasia.com/news/singapore/pepsico-opens-s-130m-
concentrate-plant-in-singapore-8796764
Napolitano, M. (2013). Top 8 guidelines to improve the inventory management. retrieved
from:
https://www.mmh.com/article/top_8_guidelines_to_improve_inventory_management
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
Education.
Purohit, H. (2015). Impact of Customer Relationship Management Processes on Firms Sales
with special reference to PepsiCo. United Kingdom: Routledge.

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Schönsleben, P. (2016). Integral logistics management: operations and supply chain
management within and across companies. CRC Press.
Wang, G., Gunasekaran, A., Ngai, E. W., & Papadopoulos, T. (2016). Big data analytics in
logistics and supply chain management: Certain investigations for research and
applications. International Journal of Production Economics, 176, 98-110.