Presented to:

Sir Awais

Subject:

Supply Chain

Discipline:

Master of Business Statistics and Management (MBSM-A)

Punjab University

Prepared By:

Muhammad Sultan Bhatti (1319-10)

Badar Zaman (1353-10)

Asim Hameed (1436-10)

Hooria (1356-10)

HISTORY AND BRANDS:

PepsiCo Americas Beverages:

Pepsi was founded in 1898 by Caleb Bradham; a New Bern, North Carolina, druggist, who first formulated Pepsi-Cola. Today, PepsiCo Americas Beverages (PAB) has well known brands such as Mountain Dew, Diet Pepsi, Gatorade, Tropicana Pure Premium, Aquafina water, Sierra Mist, Mug, Tropicana juice drinks, Propel, SoBe, Slice, Dole, Tropicana Twister and Tropicana Season's Best.

PepsiCo in Europe:

PepsiCo Europe is the leading food and beverage company in Europe employing 43,000 in the region. The company has invested over $3 billion in the region over the last 3 years. Some of the most popular products in the region include: Walkers Crisps, Quaker Oats, Paw Ridge, Pepsi, Diet Pepsi, Pepsi MAX, Pepsi RAW, 7UP, Copella, Doritos, Gatorade, Red Sky, V Water, Planet Lunch, Lays, Cheetos, Smiths, Duyvis, Snack-a-Jacks, Quaker Cruesli, Looza, Twistos, Solinki.

PepsiCo in Asia middle east Africa:

PepsiCo Asia, Middle East & Africa (“AMEA”) makes, markets and sells a number of leading snack food brands including Lay’s, Kurkure, Chipsy, Doritos, Smith’s, Cheetos, Red Rock Deli and Ruffles, Quaker-brand cereals and snacks. AMEA also makes, markets and sells beverage concentrates, fountain syrups and finished goods, under various beverage brands including Pepsi, Mirinda, 7UP and Mountain Dew.

FACTS AND VARIATIONS IN LOGOS

ORGANIZATIONAL STRUCTURE

Pepsi Company’s organization is divided into four areas covering Asia, Africa, Europe and America. These four subdivisions are further narrowed among the countries in these continents. The inter- organization structure of the company has different divisions. The manufacturing plant makes the bottles, the distributors deliver to the suppliers, and the suppliers sell it to the retailers and finally to the consumers.

These supply–chains in different countries are controlled by one main headquarter situated in New York , USA.

OUR MISSION AND VISSION

At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business.

PepsiCo Mission:

Pepsi Co.’s mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

PepsiCo Vision:

"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."

Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.

CULTURE

“We have a fundamental belief that people hold the key to PepsiCo's success. We are known as an academy company, a place where people grow and business leaders develop”

STRATEGIES

Expand the Global Leadership Position of Our Snacks Business Ensure Sustainable, Profitable Growth in Global Beverages Unleash the Power of "Power of One." Rapidly Expand Our "Good-for-You" Portfolio Continue to Deliver on Our Environmental Sustainability Goals and

commitment Cherish Our Associates and Develop the Leadership to Sustain Our Growth

Supply Chain of PepsiCo. And Supply Chain Strategy

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, keepingin mind past performances.

Supply Chain Planning

Companies start the planning phase with a forecast for the coming year of demand. Pepsi carries out sales forecasting for local demand. The annual sales target is conveyed to the supply chain department, planning is carried out on a monthly, weekly and daily basis.

Supply Chain Operation

Company makes decision regarding individual customer orders. The goal of supply chain operations is to handle incoming customer orders in the best possible manner. During this phase, firms allocate inventory or production to individual orders.

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.

Competitive Advantage to PepsiCo.

As they operate in the global market place:

1.Big, muscular brands,

2.Proven ability to innovate and create differentiated products

3.Powerful go-to-market systems.

PepsiCo's overall mission is to increase the value of shareholder's investment. They do this through sales growth, cost controls and wise investment of resources. They believe their commercial success depends upon offering quality and value to their consumers and providing them the products that are safe, wholesome, economically efficient and environmentally sound; which are providing a fair return to their investors while adhering to the highest standards of integrity. A customer while purchasing a bottle of Pepsi will consider product quality, price and availability of the product. Thus, Pepsi particularly focuses its competitive strategy as to producing sufficient variety at reasonable prices and the availability of the product.

Identifying Customer’s needs

Pepsi needs to understand the customer needs for each targeted segment and the uncertainty the supply chain faces in satisfying these needs. Pepsi deals with beverages, which are a fast moving consumer good, it knows the requirements of consumers. Pepsi is considered as a drink which is refreshing during summer, and taken regularly during winter, with demand hiking around festivals like New Year, Halloween occasions such as weddings. Pepsi caters to both cities and rural areas. It understands the needs of both. As demand for beverages is seasonal, the quantity of product needed for each lot is taken care of with past demand in mind.

Consumers require a:

Small response time High service level Reasonable price Variety products, Availability of goods Return ability Less Response time Home delivery Collateral offers Original color and taste Healthy Disposable

Halal ingredients More crunch low Moisture Halal Ingredients More Quality of fries Less Oil More Flavors Easily availability Should not Stale Less Lead time Good Quality Quality material Hygienic Air tight packaging

Demand Uncertainty and Implied Demand Uncertainty

Demand for Pepsi varies by product. For example there is a greater demand for “Pepsi” as compared to “Mirinda Apple,” which is new. Hence, Pepsi has a low demand uncertainty as compared to “Mirinda Apple.” The product “Pepsi” is approaching its maturity stage in the PLC whereas “Mirinda Apple” is in the introductory stage.Pepsi’s implied demand uncertainty varies with the product type as well as the customer needs. Due to decreased lead time (the customer may purchase its competitor’s product if Pepsi is not available at that time), need for greater variety and higher level of service, implied demand uncertainty increases.

Supply Chain Capabilities

The efficiency and responsiveness varies according to the consumer needs, implied demand uncertainty, product type and market segments. In remote areas the company focuses on being some what efficient as other modes of transportation could turn the product to be highly expensive. According to the company it does not deal with distributors who do not have 20 to 25 vehicles, therefore as the company has focus on cost reduction, uses slow and inexpensive modes of transportation, the demand is certain, and uses economies of scale in production, the product Pepsi is more inclined towards being some what efficient. In cities, the company focuses its attention on being highly responsive as Pepsi has to meet short lead time, meet a high service level, handle a large variety of products and respond to wide ranges of quantity demanded especially at the retail stage.

Distribution Channels

Direct distribution:

Ultimate consumers

Indirect distribution:

Through Base market distributors

Through Outstation distributors Pepsi uses light and heavy vehicles for safe delivery of goods to the distributors for timely delivery. It follows the just in time concept which is applicable in Non-seasonal period and not applicable in the seasonal period.

Review and Revise Distribution

This is usually done through taking over key revenue areas. If the distributor does not achieve its sales target, the distribution is taken back and an addition of new distributor is done. Therefore Pepsi’s supply is low supply uncertainty. Some of its supply source capabilities are:

Less breakdowns High quality Flexible supply capacity Mature production process

Factors Influencing Distribution Network Design

At the highest level, performance of a distribution network should be valuated along two dimensions:

1.Customer needs that are met

2.Cost of meeting customer needs

Response Time

For Pepsi is minimal as the direct customers for Pepsi are the retailers and then the consumers. Pepsi try to locate center of gravity in every country , so that it can reach its retailer in less time.

Product Variety

In Pepsi Product variety is large. They have made their place in the market with their unique product line ranging from chips to water, the product variety includes beverages ranging from the water Aquafina to Mountain Dew, Pepsi, Pepsi Max, 7 Up, Mirinda, Mirinda Apple &Fountain Fresh, Pepsi diet , Pepsi light.

Availability

Of Pepsi is very high and the product is always available in stock whenever an order arrives. The Distributors have 3 days stock as back up with them in order of any malfunctioning of the plant or other such external factors.

Return ability

Of Pepsi has always been very strong in a sense that unsatisfactory items can be returned and changed on the spot. This is true for both the consumers and the retailers. Pepsi has laid down a system through which they can effectively manage this requirement.

Achieving the Strategic Fit:

Making one stage more responsive allows the other stage to focus on being more efficient. The Pepsi supply chain assign different roles to its different stages, the company has to decide either to transfer the responsiveness to the manufacture stage or to the retailer stage. While discussing the Pepsi’s supply capability it is seen that Pepsi tends to be more responsive in the cities and a bit less in towns. Therefore, transferring the responsiveness to the retailer and distributor, allowing them to face the higher implied demand uncertainty. This in return allows the manufacturer and supplier to be more efficient. At the same time, multiple beverage types contribute to a broader product portfolio causing Pepsi to adjust its strategies accordingly; tailoring the supply chain to best meet the needs of each beverage demand.

Forcasting Method:

A combination of three forecasting methods is used. The following methods are used in combination for the purpose of sales and demand forecasting:-

1.Time-Series Method

Historical demand data can be effectively used to forecast future demand.

2.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.

3.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.

Product Life Cycle of