ERP Project on Pepsi Pakistan Production

2012
FINAL TERM PROJECT

ENTERPRISE RESOURCE PLANIG
ERP & SAP
ZEESHAN ARSHAD SUPERIOR UNIVERSITY LAHORE 7/25/2012
FINAL TERM PROJECT 2012
ACKNOWLEDGEMENT
We would like to express our deepest gratitude to Almighty ALLAH for kindness, forgiveness and help that lead to the completion of this project. We acknowledge that this project was only possible due to the comprehensive knowledge imparted to us by SIR IMRAN TASEER and THE TEAM OF PEPSICO in most friendly, participated and innovative manner. Continued guidance and motivation encouraged us to complete this project in positive and professional manner. We would like to thank SIR IMRAN TASEERfor his kind support. Without his valuable help, advice and inspiration, this project would have not been completed.
Special thanks to SIR IMRAN TASEER & the PEPSICO TEAM.
ENTERPRISE RESOURCE PLANING
DEDICATION
First of all we will thanks to ALLAH Almighty who has given us wisdom to do this Assignment. We may never forget our Parents and Teachers who supported us throughout our life span. Without them it would have been really impossible for us to complete our project. We dedicate our assignment to them.

EXECTIVE SUMMRY

TABLE OF CONTENTS
ACKNOWLEDGEMENT _______________________________________________________ 2 DEDICATION _______________________________________________________________ 3 HISTORY __________________________________________________________________ 6 PEPSI PAKISTAN _____________________________________ Error! Bookmark not defined.
History of Pepsi ________________________________________________________________ 6
PRODUCTION PROCESS ______________________________________________________ 7 PRODUCTION PLANNING _____________________________________________________ 8

Production Process Of Pepsi ______________________________________________________ 8 Raw material for Soft Drink Pepsi __________________________________________________ 9 Quality Control for Raw Material Purchasing ________________________________________ 11
FORECASTING _____________________________________________________________ 12
Forcasting Method Of Pepsi ______________________________________________________ 13 Challenges during Forecasting ____________________________________________________ 13
PRODUCT COSTING METHOD ________________________________________________ 14

Product Costing Method Of Pepsi _________________________________________________ 15
INVENTORY _______________________________________________________________ 16
Inventory Management Of Pepsi __________________________________________________ 17
QUALITY CONTROL _________________________________________________________ 18

Quality Control Departement of Pepsi _____________________________________________ 19
SUPPLY CHAIN ____________________________________________________________ 20 MANAGEMENT ____________________________________________________________ 20

Supply Chain Management of Pepsi _______________________________________________ 21
COORDINATION WITH MARKETING & FINANCE __________________________________ 24

Marketing Department _________________________________________________________ 25 Marketing and production _______________________________________________________ 25 PRICING STRATEGIES ___________________________________________________________ 26
APPENDICES ______________________________________________________________ 43 REFERENCES ______________________________________________________________ 44
HISTORY Pepsi PAKISTAN

Introduction of Pepsi
Pepsi is a carbonated soft drink that is produced and manufactured by PepsiCo. Invented in 1883 and introduced as "Brad's Drink", it was later renamed as Pepsi-Cola on June 16, 1903. Pepsi is a world renowned brand. It is a very well organized multinational company, which operates almost all over the world. In Pakistan It also has proved itself to be the No.1 soft drink. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant of Pepsi was constructed in Multan, and from there after Pepsi is going higher and higher. Pepsi is the choice soft drink of every one. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumers survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan. Pepsi's greatest competitor is Coca Cola. Coca Cola has an international recognized brand. Cokes basic strength is its brand name. But Pepsi with its aggressive marketing planning and quick diversification in creating and promoting new ideas and product packaging, is successfully maintaining is number one position in Pakistan. When Pepsi was introduced in Pakistan, it faced strong competition with 7up, lemon and lime drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime, "Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced Pepsi's profits and market share. Pepsi is operating in Pakistan, through its 12 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi which is mainly a company of soft drinks after establishing a brand in Pakistan Pepsi came into new product categories like Pepsi-Cola, Mountain Dew, Lay's, Gatorade, Tropicana, 7Up, Doritos, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles, Aquafina, Pepsi Max, Tostitos, Sierra Mist, Fritos, and

Walker's. Pepsi has different slogans in different time now a day in Pakistan there is a slogan "Badal Do Zamana".
PRODUCTION PROCESS
PRODUCTION PLANNING
Production Process Of XYZ
The production process is concerned with transforming a range of inputs into outputs. Any production process involves a series of links in a production chain. At each stage value is added in the course of production. Adding value involves making a product more desirable to a consumer. The production process of Pepsi is shown in the following diagram.
Raw Material
Blow Mold Machine
Labeler Machine
Mixing Of Raw Material
Raw (base) material reception & handling
Filler Machine
Granular sugar reception & storage
Automation and process integration
Sugar dissolving
Packaging
CIP (CleaningIn-Place)
Sugar syrup clarification & storage
Carbonation
Powder dissolving & purification
Final Product
Continuous final beverage Final syrup preparation
Pasteurization
Water treatment
Continuous inline blending
Beverage water desecration

This is the production process of Pepsi cola. In this production process there are four main processes Blow mold, Filler, Labeling and packing machine. All these process are automatically attached with each others. There are total three plants of production two plants for plastic bottles and one is for glass bottles. If any problem occurs in machine the production is stop. So to avoid bottle neck machine are continuously monitored and data about machine performance has been recorded.
Raw material for Soft Drink Pepsi

Raw (base) material reception and handling Granular sugar reception and storage Sugar dissolving Sugar syrup clarification and storage Powder dissolving and purification (for ingredients like starch and artificial sweeteners, acidifiers, thickeners, salts, preservatives, and anti-oxidants) Pasteurization Water treatment (membrane filtration, candle filters, activated carbon filtration) Beverage water deaeration Final syrup preparation Continuous in-line blending Continuous final beverage preparation Carbonation CIP (Cleaning-In-Place) Automation and process integration
Raw Material of Plastic Bottle

Parison Tube (Plastic Tube)
Processing of Plastic Bottle

First production department purchase the raw material bottle making material from supplier. Then parison tube is placed in a machine and heated and placed into another mold which shape like bottle with screw top. A steel rod is slid into the parison. Highly pressurized air then shoots through the steel rod and fills the parison, pressing it against the inside walls of

the mold. The pressure of the air stretches the plastic both side. And shape the bottle in the standard size.
Raw Material of Glass Bottle

There is no raw material for the glass, they just recycle the bottle, but in case of manufacturing the new bottles the supplier took the order and fills the order.
Process in Mixing Machine

The ingredients of drink are moved into tanks where they are carefully mixed. Carbonated water constitutes up to 94% of a soft drink. Carbon dioxide adds that special sparkle and bites to the beverage and also acts as a mild preservative. Carbon dioxide is a uniquely suitable gas for soft drinks because it is inert, non-toxic, and relatively inexpensive and easy to liquefy. The second main ingredient is sugar, which makes up 7-12% of a soft drink. Used in either dry or liquid form, sugar adds sweetness and body to the beverage, enhancing the "mouthfeel," an important component for consumer enjoyment of a soft drink. Sugar also balances flavors and acids. The overall flavor of a soft drink depends on an intricate balance of sweetness, tartness, and acidity (pH). Acids add sharpness to the background taste and enhance the thirst-quenching experience by stimulating saliva flow. The most common acid in soft drinks is citric acid, which has a lemony flavor. Acids also reduce pH levels, mildly preserving the beverage. The syrup may be sterilized while in the tanks, using pasteurization which involves quickly heating and cooling the mixture. The water and syrup are carefully combined by machines which regulate the flow rates and ratios of the liquids. The vessels are pressurized with carbon dioxide to prevent aeration of the mixture. Carbonation is generally added to the finished product. The temperature of the liquid must be carefully controlled.
Finished Product
The finished product is transferred into bottles at extremely high flow rates and crown caps are put on it. Labels are then paste on the bottles to provide information about the brand, ingredients, shelf life, and safe use of the product. Finally bottles are packed into cartons and product is ready for sale.
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Quality Control for Raw Material Purchasing
For the raw material purchases, there is Production Manager, Quality Control Manager, approving a list of suppliers and Procurement Manager based on their product quality. The procedure is that product samples are tested in the laboratory and then after complete satisfaction of quality, supplier is approved and sends his quotation. Production department sends monthly demand and quotations for the quantity net of current stock and wastage is invited. Material requirement by Production dept. Opening/closing stock adjustment by Stores. Material to be purchased by Procurement dept.
Some time purchase quantity decisions are made on the space available in the store. After the material is purchased and Gate checking, it is again send to quality laboratory by FIFO rule. Raw materials are approved by following: No. 1. 2. 3. Material Pepsi Concentrate Caps & Closures Plastic Bottles Manufacturer/ Supplier(s) PepsiCo Inc. Ireland & PepsiCo Factory in Hattar Estate. Gatron Pakistan Limited Galtron Pakistan Limited Balochistan Glass Mills 4. Glass Bottles Tariq Glass Limited 5. Carbonated Water Pakistan Bottlers (Pvt) Ltd. Approved from Approval at the factory Approved form PepsiCo China. Approved from PepsiCo China. Approved by PepsiCo China. Approved from PepsiCo U.A.E, Dubai.
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FORECASTING
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Forcasting Method Of Pepsi
Forecasting is the establishment of future expectations by the analysis of past data, or the formation of opinions. A sales forecast is a projection of the expected customer demand for products or services. Incase of PepsiCo forecasting is done by the Marketing and sales department whereas Operation department only helps them. As PepsiCo is using naive forecasting that is the forcast for any period equal to the previous periods actual value. Their naive forecasting is done on dauly basis. That means sales of the coming day is equal to the sales of the previous day. Nive Forecast: Stable time series data F(t) = A(t-1) Daily base forecasting help them in avoiding over production, short range of forecasting is more accurate. It helps to respond quikly to change in customers demand. That also provides a competitive edge.
Challenges during Forecasting

There are many problem and challenges which manager face during forcasting: Variation in sale. Variation in demand. Country circumstances. Natural disaster Bottle neck
Target:
Target of the production is depend upon the effeciency of machine because all the machines are automatic. Shifts and over time of employees are also conducted to meet the production target.
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PRODUCT COSTING METHOD
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Product Costing Method Of Pepsi
Every product have different requirement of material and cost. In Pepsi they consider different expenses while calculating the product cost. In the one bottle of Pepsi they include the following expenses:
Raw Material. Man Power. Utilities expenses. Transportation. Other Expenses Interest expense. Miscellaneous expenses Gas. Water. Electricity.
The base price of the Pepsi cola is decided by PI (Pepsi International). In the base price all the expenses and profit of company is included. When bottle is sold in Pakistan the Tax imposed by the government is also included in the price of bottle. Plus Advertisement expense like Refrigerators and discounts given to the retailers after approval from Pakistan International added to the products cost.
Price of Bottle = Base Price by Pepsi International + Government Tax + Advertisement Challenges which are faced during costing are the pricing of products depends on the competition in the market, and the current situation of the country.
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INVENTORY
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Inventory Management Of Pepsi
An inventory is a stock or store of goods. Inventory is a vital part of business. Not only they are necessary for operations but also they contribute to customer satisfaction. The major source of revenues for retailer and wholesale business is the sale of inventory. A manufacturing firm carries different kind of inventories like raw material, work in process (WIP), finish goods. Inventory serves a number of functions. It helps to meet customer demand, smooth the production process. Inventory management is a very critical area for any beverage organization. It serves the role of coordinator or middleman between production and sales. Ensuring appropriate quantity and on time availability of material is most important. Any defect in storage, supply to plants, stock and distribution directly affects sales. This is a complete chain and any bottle neck or disturbances will slowdown the whole operations.
Pepsi Ware Houses

Names of Inventories Raw Material Storage Work-In-Process Inventory Finish Goods Inventory Ware Houses 2 1 1
Pepsi cola has four warehouses in which two of them for raw material storage, one for work-in-process inventory and one for finish goods inventory. Management of production and procurement takes the decision of when, from where and in what quantity to buy. After approval, the purchased raw material is identified with quality control passed stickers and placed in godown. Raw Material is placed in controlled temperature 25 degree. While work in process inventory and Finish Goods Inventory is placed at normal temperature. Finished goods storage is secured against sunlight, rainfall, moisture and other intimidation. Goods are issued on FIFO method (first in, first out) [This method assumes that the first unit making its way into inventory is the first sold.] basis via validity of production dates. It ensures that product is not expired, bad taste and visually unattractive. Shift wise record of daily transactions is maintained.
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QUALITY CONTROL
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Quality Control Departement of Pepsi
Quality control is a process by which entities review the quality of all factors involved in production. In Pepsi cola quality control department is responsible for testing raw material, testing in process inventory, finish good testing, market complaints handling, market rejections, customer rejections. For the raw material purchases, there is Production Manager, Quality Control Manager, approving a list of suppliers and Procurement Manager based on their product quality. The procedure is that product samples are tested in the laboratory and then after complete satisfaction of quality, supplier is approved and sends his quotation. After the purchases of raw material quality control inspector check the material randomly in case of boxes they check few boxes. If quality control department pass the sample the raw material is moved for other processes. Quality of raw material is check at every delivery. Quality control department also check the quality during the processing of bottle to insure better outcome. Finish goods are also inspected according to standard. Pepsi cola is not working under the rules of international Organization for Standardization (ISO). The standard of Pepsi is settled by Pepsi International (PI). The production department produces Pepsi according to the standard of Pepsi International and inspection is also according to standard. After sale the team of quality control also takes action on the complaints of customers. To ensure the best quality and customer satisfaction teams of Pepsi International survey the market and check the standard by picking the product from the market. Pepsi international also collects product samples from market, tests them in their labs against standards, sends monthly test results summary to their franchisers.
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SUPPLY CHAIN MANAGEMENT
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Supply Chain Management of Pepsi
Supply Chain Management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. Supply Chain Management is one of the most important strategic aspects of any business enterprise. Decisions must be made about how to coordinate the production of goods and services, how and where to store inventory, whom to buy materials from, and how to distribute them in the most cost-effective, timely manner. Supply chain of Pepsi cola are as follows:
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Supply Chain Management
Supplier
Raw Material
Blow Mold Machine
Quality Check Consumer
Shaping Of Bottle
Quality Control Department Retailer
Plant Manager
Labeler Machine
Transportation
Quality Check
Printing on the Bottle
Packing
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Filler Machine

Detail:
This is the supply chain of Pepsi cola. First the management of production and procurement takes the decision of when, from where and in what quantity to buy raw material. After the purchases of raw material and delivered by supplier quality control department check the quality of material randomly in case of boxes they check few boxes. If quality control department pass the sample, the raw material is moved for other processes and if raw material sample is not passed then quality control department inform the plant manager and raw material is moved back to supplier. At every point of process there is a quality control check to insure the best quality of Pepsi cola. Then parison tube is placed in blow mold machine and heated to make a shape like bottle with screw top. The mold must then cool. After the making of bottle the raw material of soft drink is mixed and final syrup is ready and filled in the empty bottles. At filler machine there is a quality check point which check the quality of final product which is going to fill in bottles. The filled bottles are then move toward the labeling machine where labels are then paste on the bottles to provide information about the brand, ingredients, shelf life, and safe use of the product. The quality of product is also checked at the packing at that point the look of bottle is checked. Finally bottles are packed into cartons and then transported toward the distributors. Which customers can purchase and consumed easily. Production department of Pepsi use ERP (Oracle base software) to track the material. The function of this software is that they tag the materials which help him to keep eye on it. With the help of it they trace the location of material and monitor it when they needed.
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COORDINATION WITH MARKETING & FINANCE
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Marketing Department
Contributing to this industrial revolution among other industries were Manufacturing, Agricultural, Automotive, Chemical, Hotel, Banking Business Services, Real estate, Tourism and information Technology to name a few. But on such industry that has been holding onto its share of the market since its inception note in the Pakistan- its birthplace - but all across the globe as well as the Beverage Industry. It has introduced icons that very few are oblivious to.
Marketing and production

A. Role of Marketing before and During Production
Marketing provides timely and accurate information to the design and production department about the nature of needs. They also give the feedback about the product for quality purposes. Information from sales dept. also helps in providing information regarding sales of the units that helps in forecasting, and estimates for market demand for efficient production and control.
B. Role of Marketing after Production Once the products have been designed and produced in the required quantities, they must be efficiently marketed to identify target markets. After purchase, marketing must monitor customer attitudes to the companys products; any adverse comments or complaints must be noted and, if necessary, passed back to the production department for action. C. Making a New Product Where an entirely new product is involved, it is usual for the manufacturing department to produce a quantity to be introduced to the customers on a sample basis. Such sampling frequently reveals flaws, either in the production technique or in the quality of materials used, which can be easily rectified before mass production
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begins. Whilst it is essential to avoid the overproduction of a new line before it is satisfactorily established, it is equally undesirable to accept orders for large quantities of a new product when such quantities will not be available at time. D. Sales & Marketing Department
This department makes different efforts to increase the sales of the Company by sponsoring different social programs and advertising their products.
PRICING STRATEGIES 1. Competitionbased pricing approach

Pepsi has intense competition with the coca cola the largest soft drink company world wide. So its pricing cant exceed too much nor decrease to much as compared to the price of coca cola. If price of the Pepsi exceed too much from the coke customer will shift to the coca cola and on the other hand if the price of Pepsi decreases people might get the impression that quality of the is also low.
2. Promotional Pricing Policy

Pepsi has offered promotional prices very frequently. Especially on some occasion Pepsi reduces its rates. like in Ramazan Pepsi reduces its rate unto 5 rs on 1.5 litter bottle.
3. Market Penetration Pricing Policy

Prices in beverage industry are determined by the consumer. In an economy like that of Pakistan, consumers tend to switch towards a low priced product. Pepsi objective is to target every consumer of the country so Pepsi has to set its prices at such a level which no one can offer to its consumers. That is why Pepsi Cola charges the same prices as are being charged by its competitors. Otherwise, consumers may go for Coca Cola in case of availability of Pepsi at relatively very heigh.
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4. Discounts
Pepsi Cola offers various discounts to those retailers who have the maximum sales of Pepsi products on daily, monthly and on seasonal basis. Same of the main discounts given to the retailers are as follows:
Following are discounts offered by Pepsi.

Seasonal Discount Pepsi also offers seasonal discounts schemes by reducing price in Ramadan and on Eid. Pepsi also offers trade in allowance for retailers. 3 B F Discount Some Times, especially in the off-season duration, in order to increase the sale of Mirinda and Teem, 3-BF discount is given (i.e.) 3 bottles free on purchasing every case of Teem and Mirinda.
5. Incentives
Mainly two types of incentives are given by the Pepsi Cola: Incentive to Retailers Pepsi Cola provide various incentives to retailers on the best sales and achieving the predetermined sales targets. These incentives are in the shape of: A. Deep Freezers B. Return Tickets C. Free Transportation Services. D. Incentive to Dealers E. The best dealer of the year is awarded with a brand new Suzuki Pickup. The second best is awarded with Motor Cycle. The third best is awarded with Return Ticket to Middle East.
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6. Special Offers
Pepsi Cola gives special offers to consumers on special occasions like Ramadan and Eid days instead of decreasing the price of the products, some special packs like Pakkora Mix, Chat Massala, or Free Drinks with Liter Bottles are offered.
Product costing is the process of tracking and studying all the various expenses that are accrued in the production and sale of a product, from raw materials purchases to expenses associated with transporting the final product to retail establishments. It is important component in evaluating and planning overall business strategies. Possible costs include in product costing are transportation costs, packaging, raw material, man power, utilities and quality costs.
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Identify the need of ERP system
SAP:
Sap is integrated ERP software that target business software requirement of mid size and large companies. SAP is a product of SPA AG. It allows open communication within and between all companies. SAP AG is German software house. SAP is the market leader software for the business solution. The main benefit of SAP is it requires 7% data entry and 93% is automated. In was found in June 1972 and at thats time the SAP stand for System Analysis and Program Development. Later on in is changed to Systems, Applications and Products in data processing.
2.1: Development
SAP R/3 through version 4.6c consisted of various applications on top of SAP Basis, SAP's set of middleware programs and tools. When SAP R/3 Enterprise was launched in 2002, all applications were built on top of the SAP Web Application Server. Extension sets were used to deliver new features and keep the core as stable as possible. The Web Application Server contained all the capabilities of SAP Basis. A complete architecture change took place with the introduction of my SAP ERP edition 2004. R/3 Enterprise was replaced with the introduction of ERP Central Component (SAP ECC).
2.2: Implementation
Identify the need of ERP system
SAP ERP consists of several modules including: a) b) c) d) e) f) Utilities for marketing and sales Field service Product design and development Production and inventory control Human resources Finance and accounting.
SAP ERP collects and combines data from the separate modules to provide the company or organization with enterprise resource planning.
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2.3: Deployment and maintenance costs
SAP ERP systems effectively implemented can have cost benefits. Integration is the key in this process. "Generally, a company's level of data integration is highest when the company uses one vendor to supply all of its modules." Large companies can also spend $50 million to $100 million on upgrades. Midsized companies (fewer than 1,000 employees) are more likely to spend around $10 million to $20 million.
3:
ERP
Enterprise resource planning (ERP) integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside.
3.1: History:
In 1990 Gartner Group first employed the acronym ERP as an extension of material requirements planning (MRP), later manufacturing resource planning and computer-integrated manufacturing. Without supplanting these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing. Not all ERP packages were developed from a manufacturing core.
3.2: Advantages:
1. 2. 3. 4. Sales forecasting, which allows inventory optimization Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced).
3.3: Disadvantages:
1. Customization is problematic.
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2. Reengineering business processes to fit the ERP system may damage competitiveness and/or divert focus from other critical activities 3. ERP can cost more than less integrated and/or less comprehensive solutions. 4. High switching costs increase vendor negotiating power vis a vis support, maintenance and upgrade expenses. 5. Overcoming resistance to sharing sensitive information between departments can divert management attention. 6. Integration of truly independent businesses can create unnecessary dependencies. 7. Extensive training requirements take resources from daily operations.
4.0: Integrated Data Modeling:

Integrated data modeling means all the department of organization work together not only that the organization is likened to the customer. Means until unless customer never purchase the product the sale is set to be logical. With the help of integrated data modeling the organization can check the status of their product at any time. We can give a unique code to every item through which we can find the product. The code is set in such a way that all the data related to that product is find out. The example of integrated data modeling is code of the item through which organization can route the item.
4.1: Item Code:
Warranty Item
Distributer
01-Jan-2011-0001-01-00-00-04-01-01-1
Customer
Batch num
Reproduction
Dealer
Retailer
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4.2: Values of Integrated System:

Integrated system helps organization in many ways some of them are following. 1. Unique code 2. Easy to detect item 3. Check the route of the item 4. Check the production level 5. Easy to find warranty clam 6. Easy to find reproduction level 7. Store became automated 8. Integrated with supply chain 1: Unique code: In this system the every item have its unique code. 2: Easy to detect item: Due to this unique code item can be detect easily that it can belong to which batch. 3: Route of item: We can easily check the route of the item that where and who get this item. Or it is sale or not. Through this we can find easily our logical sale and physical sale. Logical sale: Logical sale means the item is not purchased by the customer but move out from the organization but still mentioned as logical sale. Normally retailer is the last level of logical sale. Physical sale: Physical sale means when the end users purchase that item than it is mentioned as physical sale. 4: Check the production:
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The organization can easily find out the product or item is actually fall in the production. 5: Easy to find warranty claim: Through this integrated system we can easily find out how many time the item claim the warranty. No one can claim the warranty more than the organization provide. 6: Reproduction: It is easy to find the reproduction of the item or the organization has to transfer it to the scrap. 7: Automation: Through this our store became automated and when the production department want any material store can easily find out we are out of stock or we have to order for purchased before the next production. 8: Integrated with Supply chain Supply chain is automated with this unique code and integrated system. Means we can check the sale of our item and also check where the and who is the best dealer.
5.0: Production:
In SAP-ERP production is divided in four parts 1. Production plan 2. Production 3. TQM 4. Reproduction a. Reproduction plan b. Reproduction
1: Production Plan
A production plan is that portion of your intermediate-range business plan that your manufacturing / operations department is responsible for developing. The plan states in
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general terms the total amount of output that the manufacturing department is responsible to produce for each period in the planning horizon. This production plan needs to be translated into a master production schedule so as to schedule the items for completion promptly, according to promised delivery dates; to avoid the overloading or under loading of the production facility; and so that production capacity is efficiently utilized and low production costs result.
Production plan is not an easy job it will take a lot of time. SAP uses the three in one method for calculating the cost. SAP uses the new method of calculating the cost of the product. SAP calculates the cost of the process means it will never calculate the finish good cost but it calculates the process cost.
1.1: 3 in 1 Process:
Three in one method means man power, material, equipment. Process 1 Man Power Code 100 101 Worker type Worker Sup No of Employ` 10 2 Avrg. Salary 45 53 Time 1 hr 1 hr Amount 450 106 556 How to find Salary: In 1 hr the organization make a batch of 100 items. So find out the average salary of the employer. Average salary= 4000+700+6000 =8000 10 8000= 364 22 364 8 = 45
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Material Code 201 202 Material type Abc Def UNIT RATE 100 500 Unit Kg Kg Qty 0.5 2 Amount 50 1000 1050
Equipment E code 301 302 Type AB AA Rate 10 50 Amount 10 50 60 How to find Equipment cost Machine price =10000 Num of batch made=1000 Than per Batch cost for the machine is=10000 100 Per unit cost= 100 10 Total cost for process 1=556+1050+60= 1666 Rs Process 2 Man Power =10 Rs = 100 Rs
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Same work is done in this as we done in process 1 Material Same work is done in this as we done in process 1 Equipment Same work is done in this as we done in process 1
Why is it important to have a carefully developed production plan? Production planning is one of the planning functions that a firm needs to perform to meet the needs of its customers. It is a medium-range planning activity that follows longrange planning in P/OM such as process planning and strategic capacity planning. Firms need to have an aggregate planning or production planning strategy to ensure that there is sufficient capacity to meet the demand forecast and to determine the best plan to meet this demand. A carefully developed production plan will allow company to meet the following objectives: Minimize costs / maximize profits Maximize customer service Minimize inventory investment Minimize changes in production rates Minimize changes in work-force levels Maximize the utilization of plant and equipment
2: Production:
After making a production plan production is very smooth. We can find the cost of any product at any level. It will also help in future casting and store will be automated. Because every time when the organization want to manufacture any product they can easily find out the exact cost of that product and the material required for the manufacturing. If the material is available in store it issue to the production department or if the material is not available in store than it will generate
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the request to the purchase department. So that if the production plan is good then it will automatically help the sore and purchase so that all departments are integrated.
Production Planning Cycle The Production Planning Cycle refers to Production Planning Control which has 3 phases: Production planning, Planning, Controlling.
The Pre-Planning Phase consists of product development, sales forecasting, factory or plant layout, equipment selection policy, and preplanning of production just prior to large scale production. The Planning Phase consists of planning of the 4 M's (methods, materials, men and machines), routing, estimating, scheduling, and despatching. The Controlling Phase consists of follow up, inspecting, and evaluating. Planning is the process of gathering information that helps the planner overcome present or future hurdles. In production planning following steps are followed: Product Definition: here we define the name and the size of the product. Its the identity of the product through which it is recognized in market. Item Bio-data: here we specify te raw material required to produce a quality product. Product Description: highlights specifications like Size Color Design Length Width Height Weight Packing style Etc. Equipment Bio-data: In todays era we all know that equipment is preferred more than manpower since it makes work easy and fast. So here we specify which equipment to be used for product manufacturing. Manpower: is of two types: Skilled Unskilled And here we specify how much skilled and unskilled manpower is required in product manufacturing. Packing: is a very essential part of the all production planning as it enhances the outlook of the product which helps in attracting the customer.
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ERP Vendors
Vendors are the people who have developed the ERP packages . They are the people who have invested huge amounts of time and effort in research and development, to create the packaged solutions . Choosing the right vendor and the right ERP package is one of the most critical tasks of ERP implementation . Vendor selection is not a popularity contest and bigger does not always mean better . While selecting a vendor the factors like track record, quality of the product, the financial stability, longevity, after sales service, contribution in implementation, training, and maintenance should be considered . The vendor should supply the product and its documentation as soon as the contract is signed . Once the contract has been exchanged the vendor will guide the company through a series of events culminating in the use of the tool . The vendor is responsible for fixing any problems that the implementation team encounters in the software . Another role the vendor has to play is that of the trainerto provide the initial training for the company s key users, people who will play lead roles in the implementation of the system
Vendor training should achieve the goal of showing the key users how the package works, what the major components are, how the data and information flow across the system, what is flexible and what is not, what can be configured and what cannot, what can be customized and what should not, the limitations, the strengths and weaknesses, and so on . The objective of vendor training is to show how the system works , not how it should be implemented . The trainees should use these training sessions to question the vendor on all aspects of the system . The project manager should monitor and control the costs incurred by the vendor . Problems and bugs should be brought to the vendor's attention for resolution, for which there should be a provision within the contract regarding the withholding of payment . The vendor should supply the product and its documentation as soon as the contract is signed . 38

The vendor is responsible for fixing any problems in the software that the implementation team encounters . The ERP software might have to be customized to suit the company s needs . Customizing means altering the product so that it is suited for the company s purposes . It is the vendor who is responsible for the customization .
Importance of Preparation
Preparing your company for implementation is almost as important as the project itself. It is important to let everyone know that after many months of implementation preparation, implementation may not go smoothly and the pain can last as long as three to four months more even if everything has been done correctly . Some of the most common things that are often overlooked : 1. Availability of the skill set necessary for completing the implementation 2. The ever- changing technological environment 3. Technological obsolescence 4. Length and complexity of the implementation project 5. Time taken to realize the benefits from the ERP system 6. Employee resistance and how to deal with it 7. Training and relocation of employees 8. Transition strategies
How to Successfully Implement ERP Systems ?
Some of the things that an organization can to do to ensure the success of an ERP implementation are : 1. A well - defined project organization structure that details the project planning, execution and monitoring mechanism 2. An attitude that stresses on business transformation instead of process automation 3. An approach that brings about the proper integration of people, process and technology through effective management of change Some other things that will ensure success are : 1. A well thought out, comprehensive process to help plan, guide and 39 ENTERPRISE RESOURCE PLANING

control the entire ERP implementation effort . 2. Evaluating the ERP plan before you commit to software acquisition and installation . 3. Ensuring that the resources required for the implementation are in place 4. Constant monitoring and management 5. Top management participation and support 6. Reviews and corrective actions
Pre-implementation Tasks
The main tasks that should be performed during this session are : 1. Assembling the participants One of the first steps of the project planning session is to assemble the critical stakeholders of the project . This should include all people who have a direct influence over the project . 2. Feasibility study and need analysis review Feasibility study report contains the factors that will affect the ERP implementation . The needs analysis is the justification for the project . Review of these two documents will give an idea on what could be the potential problem areas and where more attention and resources will be needed . 3. Project mission and vision statements creation The vision should be a global statement that is continuous and ongoing . The mission statements will consist of the major milestones of the project . 4. Determination of organizational structure The organizational structure is determined to decide how the implementation is to proceed . 5. Determination of the modules to be implemented 6. Creating the core team Project sponsor, executive committee, project manager, work teams, etc . are created in this step . 7. Establishing the training needs Determine how much education will be required, the type of education and the number of participants . 9. Establishing the data conversion strategy The goal in this step is to establish what needs to be converted/ migrated and how it is going to be done . It is best to have experienced people from the legacy system working together with application consultants 40

to fully understand the complete need . 9. Establishing interfaces The goal of this step is to identify any interfaces that require development . This section is for the required interface programs between systems for which none exist . 10. Determining work estimates The work estimates for all the activities from planning sessions to training and maintenance after installation of the ERP project should be determined in advance . 11. Cost of consultants In this step, the areas where the services of external consultants are needed are identified and the cost of hiring the consultants are calculated . 12. Calculation of implementation time The scope, time and resources are decided and based on that the implementation time is calculated . 13. Identifying constraints All constraints of the project should be identified and documented . 14. Establishing policies and guidelines Project policies and guidelines form consistent methods for dealing with situations and events are established and documented
CONCLUSION AND FINDINGS

The report highlights the importance of Enterprise Resource Planning (ERP) system and how it helps the firm to improve their Operational efficiency. A successful ERP system helps a firm to achieve cost efficiency and thus leading to competitive advantage. The report analyses how pepsi Corporation's strategy to be a low cost supplier and how the implementation helped them to be in that position. It also gives a brief about the problems company faced while implementing the process and steps they adopted to overcome that. Timescales are also provided to understand the year by year updates of the implementation process. The process of successful implementation and postimplementation of the whole ERP project saw a positive change in the overall scenario of Indian Oil Corporation. The benefits of ERP implementation are both tangible benefits and intangible benefits as experienced in IOCL. Some of the tangible benefits which IOCL got were inventory reduction, personnel reduction, productivity improvement, order management improvement, financial cycle improvement, information technology cost reduction, procurement cost reduction, cash management improvement, revenue/profit increase, and transportation/logistics cost 41 ENTERPRISE RESOURCE PLANING

reduction, maintenance reductions, and on-time delivery improvements. The intangible benefits were information visibility, new/improved processes, customer responsiveness, cost reductions, integration, standardization, flexibility, globalization, supply/demand chain, business performance, dismantling inefficient legacy systems.
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APPENDICES
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REFERENCES
Ravi Babar (Production Engineer, Pepsi Lahore Pakistan) Zahid Abbas (Human Resource Executive, Pepsi Lahore, Pakistan) www.google.com.pk http://www.pepsi.com/ http://en.wikipedia.org/wiki/Pepsi http://www.pepsiworld.com.pk/
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ERP Project on Pepsi Pakistan Production

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ERP Project on Pepsi Pakistan Production

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2012

FINAL TERM PROJECT

ERP & SAP

ZEESHAN ARSHAD SUPERIOR UNIVERSITY LAHORE 7/25/2012

FINAL TERM PROJECT 2012

Special thanks to SIR IMRAN TASEER & the PEPSICO TEAM.

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PRODUCTION PROCESS ______________________________________________________ 7 PRODUCTION PLANNING _____________________________________________________ 8

PRODUCT COSTING METHOD ________________________________________________ 14

QUALITY CONTROL _________________________________________________________ 18

SUPPLY CHAIN ____________________________________________________________ 20 MANAGEMENT ____________________________________________________________ 20

COORDINATION WITH MARKETING & FINANCE __________________________________ 24

APPENDICES ______________________________________________________________ 43 REFERENCES ______________________________________________________________ 44

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HISTORY Pepsi PAKISTAN

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Blow Mold Machine

Mixing Of Raw Material

Raw (base) material reception & handling

Granular sugar reception & storage

Automation and process integration

Sugar syrup clarification & storage

Powder dissolving & purification

Continuous final beverage Final syrup preparation

Continuous inline blending

Beverage water desecration

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Raw material for Soft Drink Pepsi

Raw Material of Plastic Bottle

Processing of Plastic Bottle

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Raw Material of Glass Bottle

Process in Mixing Machine

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Challenges during Forecasting

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PRODUCT COSTING METHOD

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Pepsi Ware Houses

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PRODUCTION PROCESS __ 7 PRODUCTION PLANNING _ 8

SUPPLY CHAIN 20 MANAGEMENT 20

APPENDICES 43 REFERENCES 44