Supply Chain Management Assignment: PepsiCo Analysis

This report provides a detailed analysis of PepsiCo's supply chain management (SCM). It begins with an overview of the company, its products, and its global presence. The core of the report examines PepsiCo's various supply chain strategies, including coordinated forecasting, distribution, information transparency, supply chain visibility, customer relationship management, collaborative planning, product lifecycle management, integrated business planning, strategic sourcing, and quality management. The report then outlines the supply chain flow, from suppliers to manufacturers, distributors, retailers, and finally, the customer. It further explores the push and pull strategies employed by PepsiCo, including marketing and distribution channels like social media and vending machines. Finally, the report discusses the key supply chain drivers, such as facilities, inventory, transportation, and information, and how they contribute to PepsiCo's overall efficiency and responsiveness. This analysis provides a comprehensive understanding of PepsiCo's SCM practices.

NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT
AND RESEARCH, PUNE
SUBJECT: -
SUPPLY CHAIN MANAGEMENT
ASSIGNMENT: - 01
SCM OF PEPSICO
SUBMITTED TO: -
Dr. SUDHIR AMBEKAR
SUBMITTED BY: GROUP 2
PP20127 KEVIN PUNNEN
PP20128 MILIND JAGTAP
PP20130 SWAROOP SHELKE
PP20134 JAYKUMAR PATEL
PP20146 NAMIT JAIN
PEM’16 BATCH
SECTION 2
ELECTIVE GROUP - 6

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About the company:
PepsiCo, Inc. (often referred to as the Pepsi Company) is an American multinational food,
snack, and beverage conglomerate headquartered in Purchase, New York. PepsiCo's operations
represent the entire food and beverage industry. It is in charge of product manufacture,
distribution, and marketing. In 1965, the Pepsi-Cola Company and Frito-Lay, Inc. merged to
establish PepsiCo. PepsiCo has subsequently grown from its namesake beverage, Pepsi Cola,
to a vast array of food and beverage businesses. Pioneer Foods was purchased for $1.7 billion
in 2020, followed by the Quaker Oats Company in 2001, which added the Gatorade brand to
the Pepsi portfolio, and Tropicana Products in 1998.
The company has 23 brands with sales of over $1 billion as of January 2021. PepsiCo has
businesses all over the world and sells its goods in over 200 countries, generating annual net
revenues of more than $70 billion. PepsiCo is the world's second-largest food and Beverage
Company, behind Nestlé, in terms of net revenue, profit, and market capitalization. PepsiCo's
flagship product, Pepsi Cola, has been at odds with Coca-Cola for generations, a rivalry known
as the Soda Wars. Despite the fact that Coca-Cola outsells Pepsi Cola in the United States,
PepsiCo is the largest food and beverage company in North America by net revenue. PepsiCo's
CEO, Ramon Laguarta, has been in charge since 2018.
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PepsiCo Products:
PepsiCo's product mix (based on worldwide net revenue) in 2015 consisted of 53% foods and
47% beverages. The company's current product lines span the globe and include several hundred
brands that collectively produced over $108 billion in yearly retail sales in 2009.
Annual sales of over $1 billion are the primary marker of a food and beverage sector main brand.
Pepsi, Diet Pepsi, Mountain Dew, Lay's, Gatorade, Tropicana, 7 Up, Doritos, Brisk, Quaker
Foods, Cheetos, Mirinda, Ruffles, Aquafina, Naked, Kevita, Propel, Sobe, H2oh, Sabra,
Starbucks (ready to Drink Beverages), Pepsi Max, Tostitos, Sierra Mist and Fritos.
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PepsiCo Supply Chain Strategies
Various supply chain strategies followed by PepsiCo are as follows:
1. Coordinated Forecasting.
PepsiCo’s supply chain management system begins with coordinated forecasting.
PepsiCo uses market intelligence to forecast the total amount of product needed in all
channels and markets where it is sold. The forecasts are done monthly and consider the
current inventory levels, current demand, and expected changes in each channel.
2. Coordinated Distribution.
After forecasting is completed, PepsiCo begins the distribution phase of the supply chain
management process. In this stage, products are delivered from 20 distribution centres to
retailers and wholesalers worldwide. Each distribution centre is responsible for a specific
zone within North America or a specific zone within Europe, depending on which
location they service. PepsiCo works with retail customers to develop joint distribution
programs that coordinate the delivery of products from different third-party suppliers at
specific times of the day to meet customer needs.
3. Information Transparency.
PepsiCo’s supply chain management system uses a centralized information technology
platform called Enterprise Information Portfolio that provides real-time access to relevant
data. The supply chain incorporates electronic data interchange (EDI), point of sale
(POS) systems, and automated clearing house (ACH) technologies to communicate with
each other. Based on the forecasting process, Pepsi-Cola knows what products will be in
demand in each region. It can then send that information via EDI to retail customers to
set price and product advertising strategies on a regional basis.
4. Supply Chain Visibility.
Once products arrive at stores and customers begin buying them, PepsiCo’s supply chain
management system maintains visibility into the location and condition of those items at
all times. This is done through point-of-sale technologies that tell vendors which products
were sold and how quickly they moved off the shelves. When a store sells a product, it
uses a POS system to send the information electronically to PepsiCo. The data tells
Pepsi-Cola how much of each item was sold, where that item is located within the store,
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and what price the item was sold. This data then moves on through the supply chain
management process until everyone can see how quickly things are selling and what the
customer demand really is. This helps PepsiCo better manage inventory levels and
product lifecycles to know when to refresh its items with new designs or flavors.
5. Customer Relationship Management.
Supply chain management is all about customer service. PepsiCo’s system helps maintain
strong relationships with customers, both large and small. The company uses feedback
surveys of thousands of customers each year to learn what they like, don’t like, and want
to see more of. This information is gathered through personal contact with the retailers
and through focus groups and online surveys.
6. Collaborative Planning, Forecasting, and Replenishment.
PepsiCo has established an integrated planning and forecasting process closely linked
with its IT system so that the entire supply chain management system works in concert.
All members of PepsiCo’s supply chain management team, from regional distributors to
store owners, use the same data, so they all have the same information on hand at any
given time. This collaboration helps PepsiCo to save money and plan more effectively.
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7. Product Lifecycle Management.
Product lifecycle management is a vital part of the supply chain management process. It
involves a constant effort to evaluate and manage products to move efficiently through
total distribution, from production to retail sales. Suppose products have a long lifecycle
before being sold out. In that case, PepsiCo can change the product mix or replenish it
more often, so there are always newer products available. This helps drive demand for
overall product categories and also cycle in new products when appropriate. This is done
with the help of POS data, which allows for tracking of products through all aspects of
the supply chain management system.
8. Integrated Business Planning.
Effective supply chain management involves a close working relationship between
business units. PepsiCo has established a process that ensures this happens. The company
spends time each year reviewing current performance and projecting forward to see what
different business opportunities there are for the coming year. This information is used to
create strategic plans that detail how resources will be used and to set performance
objectives and metrics for the coming year. These plans are then reviewed by
management and modified as needed.
9. Strategic Sourcing.
PepsiCo uses strategic sourcing to make the best use of its resources and keep costs
down. This involves analyzing how each supply partner contributes to overall supply
chain management before choosing which partners will be managed via collaborative
processes. When evaluating potential business partners, PepsiCo looks at several factors,
including price, service levels, responsiveness, performance history, innovation
capabilities, and environmental performance.
10. Quality Management and Continuous Improvement
Quality assurance is an essential part of supply chain management at PepsiCo. It works
with suppliers to develop quality focuses and requirements, which can help improve their
overall efficiency and create consistency across the supply chain. This consistency allows
PepsiCo to maintain product integrity and high-quality service levels for its customers.
11. Performance Measurement Analysis.
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PepsiCo uses a variety of tools to monitor its supply chain management performance,
including:
Internal metrics that show what is happening throughout the PepsiCo system; include
sales measurements, throughput, and inventory turnover. External metrics are reported to
customers and used for benchmarking purposes. These include service level agreements
(SLAs) and on-time delivery performance. Financial metrics that show how supply chain
management impacts the company’s financial performance; include ROI, ROA, and net
income.
Measuring and analyzing performance is the only way to accurately picture how effective
supply chain management is. PepsiCo uses multiple metrics to get the most precise
performance evaluation. This allows management to make changes where necessary to
meet customer needs while controlling as much as possible and keep operations cost-
efficient and sustainable.
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PepsiCo Supply Chain Flow
The product flow of PepsiCo consists of Supplier, Manufacturer, Distributer, Retailer and
Customer.
1. Supplier: The raw material used in the production of Pepsi includes carbonated water,
sugar, critic acid, emulsions etc. These are the supplied to PepsiCo by 1st tier and 2nd tier
suppliers accordingly. Some ingredients are also arranged by the company from the other
companies.
2. Manufacturer: The next step is concerned with the delivering of the ingredients to the
manufacturer and the starting of the manufacturing process some bottling plants are
owned by PepsiCo themselves while some are provided authority by PepsiCo for the
manufacturing finished beverages. The raw material such as glass, silica, aluminum is
utilized for the purpose of manufacturing of bottles in which the drinks are bottled after
production.
3. Warehouse and Distribution: The drinks are then delivered to the warehouse. For the
purpose of the distribution of its products to market, PepsiCo follows three channel
process direct store delivery, third party distributer networks and customer warehouse.
4. Retailer: The distributers further distribute the stock available with them to the
wholesalers and suppliers operating indifferent regions.
5. Customer: The drinks then reach the consumer residing in the different parts of the
country through the supply from these retailers.
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Supplier
Manufactu
rer
Distributer
Retailer
Customer

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Push/Pull view of PepsiCo
Push and pull strategy allow the movement of goods from producers to manufactures.
(Harrison 2003). Pull strategy refers to a technique where incentives are given to the
consumers in order to pull products through the channel. Push strategy refers to a technique
where incentives are offered to the distributors or producers in order to push the products
through the channel.
Push strategy: This company has done a fair job with push marketing strategy, where they
have created a website on Facebook and twitter accounts, while no pop-up screens or
marketing promotions comes up while you are accessing your home page. Such tie ups with
social media helps the company to hold the clients and increase the sales.
Pull strategy: Pepsis target audience ranges from 18 to 35yrs (Darrien, 2013) so therefore the
company uses young and vibrant colours to attract the audience. As far as pull strategy goes, they
have advertised about their products in almost every site, promotional hoardings or posters can
be found in almost every public places. In addition to this, Pepsi gives bulk discounts
furthermore attracting the consumers. According to integrating marketing communication
agencies, a pull strategy motivates the customers to actively seek out a specific product.
(Boundless, 2013).
Vending machine is another aspect of distribution channel. It is mainly considered as an SST
(self-service technology) channel. Where the buyers have to just insert the appropriate amount
and ends up having a can in no time. The sales growth depends upon where the machines is kept
(Greenwald, 2007). Henceforth, we find these machines near schools, colleges, sports stadium
and son on.
Finally, from a bird’s eye view, based on the example mentioned above, we can infuse that a
company can achieve remarkable growth if the company follows an appropriate distribution
channel. A continuous improvement in distribution channels can yield high profits and
inevitably results in a better supply chain.
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Supply Chain Drivers:
For a firm to be a successful, its supply chain management should be efficient and responsive.
There should be balance between responsiveness and efficiency in supply chain which best
meets company’s need. To improve the supply chain, it is required to understand supply chain
drivers which directly affects the supply chain.
a) Facilities:
Facilities are the places in the supply chain network where inventory is stored, parts are
fabricated and assembled into finished goods. The decision regarding the location of the
facilities (plant), their capacity, and the flexibility of the facilities have a major impact on
the performance of the supply chain.
PepsiCo has 37 bottling plants in India, including 17 company-owned plants and 20
owned by franchisee partners. This allows responsive supply chain to reach demand.
b) Inventory:
All raw materials, work in progress and finished products within a supply chain are
concerned in inventory. Any change in inventory policies can greatly affect the efficiency
and responsiveness of the supply chain. Decision such as how much to store and where to
store.
PepsiCo's inventory management is computerized and automatic. Adequacy, scheduling,
and cost minimization are the key objectives of operation. PepsiCo does so through
computerized monitoring of inventory. Inventory managers can access real-time data to
help them make decisions.
c) Transportation
Inventory is moved from point to point in the supply chain using transportation facilities.
It can be form of many combinations of modes and routes, each having its own
performance characteristics. The responsiveness and efficiency of the supply chain is
significantly affected by the choice of transportation modes and routes.
PepsiCo has three distribution channels:
o Direct store delivery
o Customer warehouse
o Third-party distributor networks
d) Information
Information is collection of data and analysis regarding inventory, facilities,
transportation and customers throughout the supply chain. Information is helpful in
making the supply more efficient and responsive.
PepsiCo has huge collection of past data and uses latest information management systems
to get real time data about supply chain and predict, forecast and optimize the
supplychain.
e) Sourcing
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Sourcing is another important area in supply chain management. The source is a specific
location or enterprise from here goods are obtained.
PepsiCo have thousands of independent farmers and small-business farmers that provides
the quality materials they need for their products. Also, they are having good relations
with plastic producing companies for sourcing raw materials.
f) Pricing
Pricing is the process by which a firm decides how much to charge customers for its
goods and services. pricing is used as a lever to match supply and demand. When demand
is low prices are reduced or discount sales are given. Also, optimized supply chain of
PepsiCo helps to offer product at lower price.
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Supply Chain Visibility of PepsiCo
Once products arrive at stores and customers begin buying them, PepsiCo’s supply chain
management system maintains visibility into the location and condition of those items at all
times. This is done through point-of-sale technologies that tell vendors which products were sold
and how quickly they moved off the shelves. When a store sells a product, it uses a POS system
to send the information electronically to PepsiCo. The data tells Pepsi-Cola how much of each
item was sold, where that item is located within the store, and what price the item was sold. This
data then moves on through the supply chain management process until everyone can see how
quickly things are selling and what the customer demand really is. This helps PepsiCo better
manage inventory levels and product lifecycles to know when to refresh its items with new
designs or flavors.
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Logistics and Distribution of PepsiCo
Once the PepsiCo’s products are ready, this firm must use the shortest time possible to ensure
that they are delivered to the market. The global logistics and distribution strategies used by this
firm are unique. PepsiCo has the responsibility of ensuring that its beverage products are
delivered to the retailers in the regions where it operates. This may seem to be an expensive
process, but is one of the reasons why this firm has been very successful in the world market.
Most retailers do not have problems of stocking their products because they are assured that the
products will be delivered to them other than having to incur the transportation cost.
Domestic and International Logistics of PepsiCo
Managing domestic and international logistics may be a challenge, especially for a firm with
wide a market coverage such as PepsiCo. However, this firm has been able to manage its local
and international logistics very effectively. The United States remains the major market for
PepsiCo’s products. It has special tracks that it uses to deliver its products to its domestic
customers. The track below shows a typical truck used to distribute the products of this firm.
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In the international market, this firm uses various types of trucks to ensure that their products
reach the retailers within the right time. The chart below shows the growth of income of PepsiCo
from the international market, which shows that the logistical demand, is on the rise.
PepsiCo has an elaborate transport and logistics unit that has won several awards in the United
States for its efficiency. In the United States and Europe, PepsiCo has enough trucks that it
uses to transport its products. It also has warehouses that are strategically located along the
highways to help in the storage of its perishable products before they are delivered to the
market.
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Conclusion
The management of PepsiCo has made an effort to ensure that its supply chain management for
its beverages is very effective in order to maintain high quality products in the market. This
management has been keen on acquiring quality raw materials, transports them to the firm,
transforms the materials to final products, and delivering the products to the clients in the
market. In its supply chain, the firm has always emphasized on maintaining quality at all the
stages using various quality management tools such as Total Quality Management. It is clear
that PepsiCo is one of the best examples of firms that have used the modern methods of supply
chain management to enhance their operations in the market. Although the market is very
competitive, this firm has been able to remain very competitive because of its ability to access
quality raw materials, use efficient production processes, and deliver quality products to the
customers in time.
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