Supply Chain Management

Pepsi Co

................................ 9 Pepsi Bottling .................................................................. 5 PepsiCo’s Supply Chain Management .............................................................................................................. 14 Pepsi Tropicana Supply Chain ..................................................................................................................... 7 I2 Supply Chain Visibility ................................................................................................................................................................................................................. 13 From supplier to retailer....................................................................... 13 Competitive advantages ....................................................................... 13 Strength ............................................................................................. 17 2 ................................................................................................................................................................... 6 I2 Transportation ......................................................................................................................................................................................................................................... 10 The results ...................................................................... 16 Limitations of Pepsi Supply Chain over Coke......................................................................................................................................................................................................................... 4 Competitive and Supply Chain Strategies......................................................................................................................................................................................................... 9 The challenge .............................................................. 11 Palletization Roadmap ............................................................................................................................................................................................................................................................................................................ 6 Difficulties without Just-in-Time................................................................................................. 15 Solution ..................................................................................................................................... 7 E-solution by Hewlett Packard (HP) ..................................................................... 12 PepsiCo’s Frito Lay Supply chain ............... 15 Background ................................ 11 Packaging as a tool for Supply chain management ...................................................................................................................................................................................................................... 6 Improvement with using Just-In-Time (JIT) ........................................................ 3 Pepsi Co History .............................................................. 15 Problems .............................................................................. 13 Retailers ................................................................... 4 PepsiCo’s Mission ....................... 6 Implementation .....Table of Contents Introduction...................................................................................... 10 The solution .........................................................................

manufacturing. Managing Supply Chain for Global Competitiveness takes a strategic look at all of the core functions of global supply chain management which includes product design. and controlling the operations of supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials. Moreover. work-in-process inventory. It is a cross functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end consumer. outsourcing. its ability to deliver the right product to the right market at the right time. Customer markets and supply chains are no longer limited by physical proximity. Supply Chain management is also the combination of art and science of improving the way company finds the raw components it needs to make a product or service and deliver it to customers. planning and forecasting.Introduction Supply Chain Management is the process of planning. and finished goods from point-of-origin to point-of-consumption. a company links to its supplier upstream and to its distributors downstream in order to serve its customer. It seeks to enhance competitive performance by closely integrating the internal functions within a company and effectively linking them with external operations of suppliers and channel members. Success of a company now depends on effective global supply chain management. this has been a prominent concern for both large and small companies as they strive for better quality and higher customer satisfaction. An example to illustrate this theory on the supply chain management is the PepsiCo. The goal of supply chain management is to provide maximum customer service at the lowest possible costs. sourcing. Inc. and businesses are sourcing from and managing a greater number of far-flung partners and channels. In a supply chain. The complexity involved in managing supply chains that span continents and dominate markets demands strategies and systems that are adaptable. and fulfilment. implementing. Companies now are competing supply chain-to-supply chain rather than enterprise-to-enterprise requiring for more intimately connected relationships. 3 . distribution. logistics.

Pepsi Max. PepsiCo owns some of the world's most popular brands. In order for the company to make sure that their products reach the customers. James' Grandma's Cookies.Pepsi Co History PepsiCo. During her time. economically efficient and environmentally sound.from fun-for-you items to product choices that contribute to healthier lifestyles. Lay's. and Spudz PepsiCo’s Mission   PepsiCo's overall mission is to increase the value of shareholder's investment. price and availability of the product. Pepsi Twist and Pepsi ONE. Pepsi Lime.  Pepsi Ceo Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. Munchies. Lay's. Hamka's. cost controls and wise investment of resources. Capone Crunch. American Multinational Corporation is under the food consumer product industry and is the world leader in convenient foods and beverages. a California maker of soy drinks and organic juice. SoBe. Doritos. Life. PepsiCo is a SIC 2080 (beverage) company. Santitas. Sun Chips. Kurkure. Pepsi focuses its competitive strategy as to producing sufficient variety.S. Gatorade.Propel Fitness Water. Chewy Granola bars. Quaker Milk Chillers. PepsiCo offers product choices to meet a broad variety of needs and preference -. Quisp. Other brands include Caffeine-Free Pepsi. Oatso Simple. Coqueiro. The Pepsi brand and other PepsiCola products account for nearly one-third of the total soft drink sales in the United States. and Twist/Burst).3 billion on healthier-alternative brands like Naked Juice. Today. PepsiCo has also recently acquired a 50% stake in U. Caffeine-Free Diet Pepsi. Rice-ARoni. King Vitaman. It was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay.Aquafina (Flavour Splash. Coca-Cola Company in market value for the first time in 112 years since both companies began to compete. Tostitos and some of the Quaker Oats brands include Aunt Jemima. the company needs a efficient supply chain solutions. including Pepsi-Cola. Crisp'ums. 4 . Sandora. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company. In 2007. Tropicana. reasonable prices. The Frito-Lay brands are : Cheetos. FrescAvena. They believe their commercial success depends upon offering quality and value to their consumers and customers. Thus. Miss Vickie's.Fritos. Wild Cherry Pepsi. Cruesli. Nooyi spent $1.Go Snacks. and providing a fair return to their investors while adhering to the highest standards of integrity. a Fortune 500. healthier snacks have been marketed and the company is striving for a net-zero impact on the environment. Quake. Diet Pepsi/Pepsi Light.-based Sabra Dipping Company. They do this through sales growth.7 Up . wholesome. A customer while purchasing a bottle of Pepsi will consider product quality. This focus on healthier foods and lifestyles is part of Nooyi's "Performance with Purpose" philosophy. Mountain Dew. and Quaker. Diet Pepsi. The Smith's Snackfood Company. Alive. Caffeine-Free Pepsi Light. and the availability of the product. including the Gatorade in 2001. providing products that are safe. beverage distribution and bottling is undertaken primarily by associated companies such as The Pepsi Bottling Group and Pepsi Americas.

Its brands appeal to an extraordinarily diverse array of customers and they are sold by an equally diverse group of retailers. 5 . Proven ability to innovate and create differentiated products and 3. It understands the needs of our consumers and customers Uses diversity in our supplier base and in everything we do. buying from other minority and women-owned business and supporting community organizations Figure 1 Thus the major sustainable advantages that give PepsiCo a competitive edge as they operate in the global marketplace: 1.PepsiCo also has formed partnerships with several brands it does not own. retail customers and communities. in order to distribute these or market them with its own brands. muscular brands. training. Developing partnerships with minority-owned and women-owned suppliers helps us build the world-class supplier base we need. diversity and inclusion provide a competitive advantage that drives business results. Powerful go-to-market systems. 2. Competitive and Supply Chain Strategies        In its business. Big. Creates mutually beneficial relationships that expand PepsiCo's sphere of activity. consumers. role models. It helps build community infrastructure by providing employment. Commitment to purchase from a supplier base representative of our employees.

prompt delivery times. the demand or production planner strived to optimize production-oriented goals and objectives such as equipment utilization. They even got the shipping and freight costs included in the purchase price. The sourcing or purchasing managers strived towards reducing company’s spending overall. But lowest cost could only be attained if the purchasing team negotiates a delivered cost package deal with the supplier and the supplier is responsible of the reliability and performance of the carriers or transporters. just-intime (JIT) remains one of the most cost-effective supply chain solutions. and management of the entire transportation cycle. Just-in-Time (JIT) is a philosophy that defines the manner in which a manufacturing system should be managed. labour efficiency. Optimizing these goals often leads to run large batch sizes that are dependent on the availability of raw materials. which led to the increase in the price of the commodity.  It is designed to enable an organization to utilize and manage an entire transportation network.PepsiCo’s Supply Chain Management Difficulties without Just-in-Time  When an operation of the company was not just-in-time based. as well as reduce cost while improving transport performance. assurance of quality.      Improvement with using Just-In-Time (JIT)  When it comes to delivering high cost and perishable products to manufacturing sites. and value of money. 6 . not putting into consideration the supplier performance and reliability. It enhances customer satisfaction in terms of availability of options.   I2 Transportation  I2 Transportation is a part of end to end solution for planning. execution. In JIT process. The logistics/transportation manager was tacked with getting raw materials in and the finished goods out of the production process and seek to optimize the transportation and distributing network. on time delivery is an absolute necessity. This manager focused on the lowest cost and reliability of the logistics or transportation solutions. This manager consolidated suppliers offering products or materials at the lowest per unit costs through buying in volume. This optimizes the equipment and labour utilization but the production planners and managers had not been looking at the expense of the bigger picture. throughput and uptime. they partnered with 3PL provider Penske Logistics to manage its transportation. Purchasing managers focused on getting the best price. Penske also provides warehouse management for two Pepsi distribution centers in North America. The Pepsi brand and other Pepsi-Cola products accounted for nearly one-third of the total soft drink sales in the United States. In order to ensure that PepsiCo’s concentrates reaches bottlers as needed during the production had to reach them JIT.

better organized data. With the application of new technology that provides greater supply chain visibility. revise routes and schedules to accommodate unforeseen changes and implement alternative plans to counter delays. It is also designed to provide comprehensive data management. Furthermore. Advanced technology is deployed to select the lowest cost carrier. analysis and management applications. Pepsi has been able to provide an on-time delivery performance of well over 99 percent. Globalization and outsourcing have added to the complexity. In 2000. Penske’s partnership with Business objects provided comprehensive supply chain data from its data warehouse. Penske’s with use of i2 transportation could track performance at every stage in the process which increased flexibility and provided greater control over the transportation operation. and access to higher level of real time or near real time information. has increased dramatically as a result. PepsiCo used the JIT process to its supply chain management. One was to achieve an on-time delivery rate at 99. 7 . By Penske’s putting a solution in place to track and measure every shipment. To make this possible. Penske converted Pepsi’s transportation management technology from propriety software to i2 transportation optimization solution. find the best routes and consolidate shipments. and reporting of key transportation cost and service trade-offs. I2 Supply Chain Visibility With shorter lifecycles and lead times—to customers demanding faster results and more responsive service. Optimal load configuration ensures maximization of each truckload (2003). Pepsi’s orders are received electronically and optimized to ensure lowest transportation cost. resulting in more diversified supply chains. Penske also provided a nationwide carrier rate re-negotiation and service assessment which improved cost structure and achieve on-time delivery goal. Implementation PepsiCo set two objectives for transportation management.1% and another was to reduce transportation costs. Pepsi’s transportation is consolidated to a central location to reduce costs. as well as the amount of geographic dispersion.It empowered with optimized processes and technology that enable the team to perform at the highest possible level. Pepsi partners with Penske that has provide them with i2 transportation optimization solutions which has satisfies their consumer with the on-time delivery and with the benefit to the company for it has also reduce transportation cost. I2 transportation is designed to employ sophisticated optimization and data techniques to define and evaluate alternative transportation strategies. The number of supply chain partners. even the best team can improve their performance. In addition. i2 transportation platform was enhanced with the addition of interface between the two companies. With this centralization. analytics. This increase in visibility made it easier to keep track of shipments. allows negotiation in a large scale to secure the best rates and services. In summary.

internationalization (i18n). and supplier shortages. extensible events and exceptions support each workflow and a visual ―studio‖ allows workflows and events to be extended. Increase Global Visibility With Companies have access to global visibility into all of their critical supply chain activities and partnerships. web-based supplier enablement and transaction support 8 . inventory. and multi-time zone support enabled Integration to underlying applications for intelligent resolution and to prevent event recurrence Root-cause. The solution can also incorporate packaged business process packs for replenishment. i2 Supply Chain Visibility delivers a robust technology that is scalable and extensible. fulfillment delays such as port strikes and customs delays. and 3PL vendors High degree of permissibility and privacy controls Track-and-trace inventory across multiple locations Configurable event detection mechanism and customizable event management workflows Event chaining such as linking of related events. warehouse management. suppliers. analysts. It allows organizations to respond more quickly and effectively to a wide range of unplanned and potentially disruptive supply and demand events. Supply-related events can include production bottlenecks. assess their impact. and logistics data. and orchestrate a rapid and practical resolution while providing a unified view of the supply chain. context-based problem prioritization and extensive notification options including e-mail. fulfilment. event trend. and that operates smoothly in a distributed computing environment. companies need to have greater coordination and visibility into the material flow across the supply chain.To ensure that their order-to-delivery performance is not impacted. A series of predefined. It enables better understanding of orders. inventory. and shipments Role-based views for buyers. e-mail digest. and these packages can be configured to meet customer-specific requirements. and customized to meet specific enterprise requirements. configured. logistics. i2 Supply Chain Visibility also enables companies to close the loop between traditional planning and execution processes. audit trails. inventory. and performance analysis capabilities Rich event library with over 100+ out-of-box events supported Fast. Powerful Functionality This solution incorporates pre-built workflows that integrate data across order management. pagers. and logistics flows Domestic and international flows that track multi-leg and multi-modal shipments Visibility into exceptions and events across orders. Demand-side events might include customer orders that are greater than forecasts or changes to orders that have already been placed. and cell phones Calendars. and inventory applications for the flow of both domestic and international goods. Extensive Capabilities              Inbound and outbound tracking of order. and manufacturing. I2 Supply Chain Visibility is designed to manage these events.

HP introduced a number of new solutions which helped to encourage stronger customer relationship management and supply chain management. PepsiCo had also opted for BT as its network provider to ensure the e-solution is fully implemented. Increased employee productivity Reduced process. In particular. The supply chain management solution reduced costs as well as enhanced current service provision online and via its communications networking system. as well as Tropicana juice drinks and Lipton Ice Tea. The bottles leave the fillers and make their way to a packaging machine. By standardizing and optimizing its server environment. including the number one brand of bottled water in the U. Real-time decision support E-solution by Hewlett Packard (HP) PepsiCo signed a deal with Hewlett Packard in 2006 to help improve its supply chain management and increase overall efficiency. 9 . rinsed.Benefits         Exception-based management End-to-end supply chain visibility and event management tools Customer-specific solutions for replenishment. they are. seller and distributor of Pepsi-Cola beverages. and then to a palletizer. and manufacturing The ability to forecast and respond to supply/demand events The option to move from calendar-based to event-driven planning and re-planning. Each pallet is wrapped for distribution and moved to the warehouse for shipping. As part of a 24/7 production operation.000 bottles per minute). Production at the plant begins as empty bottles are unloaded from trucks via conveyor and transported to a depalletizer. the company’s fastest growing segment is non-carbonated beverages. the company’s Detroit plant ships about 27 million cases per year. PepsiCo International is better flex to meet its changing business needs and in turn provide better service to customers anywhere in the world. Aquafina. ranging from 350 to 1.. fulfillment. personnel. supplier. dried and sent to a filling machine (filler speeds at the plant vary based on bottle size. From there.S. and partner communications. and expediting costs Improved customer. With annual sales of nearly $11 billion. The seven year deal involved the overhaul of current IT solutions with PepsiCo and focused on updating server environments as well as ensuring a new infrastructure which benefitted operations and increased overall cost-saving. Pepsi Bottling Pepsi Bottling Group is the world’s largest manufacturer.

Many of these included multiple styles of the same product stocked under different brands. reliable equipment repair lies at the heart of efficient manufacturing. The company’s inventory of sensors swelled over the years to include more than 120 different varieties. The wide variety of sensors made it progressively more complex and time-consuming to replace a faulty device. The solution The first task undertaken by Rockwell Automation was to conduct an Installed Base Evaluation – a plant-wide inventory assessment to determine the exact number of sensors and drives the plant currently had in stock. Knowing that effective parts management and fast. which had grown to over 50 different part numbers. including multiple styles and brands. A similar problem was developing with its drives inventory. A more strategic approach to maintenance was necessary. high-performance machinery. operating costs were on the rise due to the excess spares inventory. Line sensors match the speed of the conveyor. by standardizing it sensors inventory to Allen-Bradley products. In addition. Despite its fast. That’s when it decided to turn to Rockwell Automation for help.The challenge The plant uses a variety of sensors to monitor bottles as they travel through the sequence of steps and to manage the flow to the individual stations. the increasingly lengthy and more frequent downtime was beginning to impact the company’s ability to meet its productivity goals. a decrease of 66 percent. Next it needed to figure out what products were actually needed and which ones 10 . the company explored ways to get its inventory and maintenance processes under tighter control. The Pepsi Bottling Group’s Detriot plant reduced its number of sensors from 180 to 46. This reduced downtime and inventory costs. as even the smallest of delays could cost the plant thousands of dollars in lost production and overtime. simply finding the right replacement resulted in an hour of downtime. Because of the extensive number of sensors they had in inventory.

as well as installation instructions. When a problem occurs. McNaughtonMcKay Electric Company (Mc&Mc). To simplify its drives inventory and upgrade its technology at the same time. the plant was able to reduce the number of sensors it uses from 180 to 46. a decrease of 66 percent. the Rockwell Automation Services Agreement included TechConnect Support. The improved inventory and parts management capabilities helped reduce downtime and inventory costs. Likewise. To help facilitate problem resolution. Packaging as a tool for Supply chain management       GS – 1 standards (bar codes) RFID tags for real-time stock replenishments Commercial Security offerings Counterfeit & pilferage Online supply chain visibility across the chain Pack safety for the consumer 11 . Pepsi pays a fixed monthly cost for their spare parts. and update its control technology cost-effectively. which are owned and managed by Rockwell Automation but stocked on-site. Although all the drives employed at the plant were Allen-Bradley brand.could be eliminated. Pepsi technicians can call for immediate troubleshooting assistance to resolve it as quickly as possible. reduce carrying costs. Pepsi converted all of its drives to the Allen-Bradley PowerFlex family of AC drives. To streamline its operation. This helped Pepsi minimize risk and reducing long term costs. This remote support service provides the plant with 24/7 access to Rockwell Automation technical specialists. and standardizing on Allen-Bradley products eased training requirements and minimized the technology learning curve. Pepsi set-up a Rockwell Automation Services Agreement that included parts management. many were older models representing a multitude of drive families. To help the company better utilize its internal resources and reduce costly troubleshooting delays. it was able to reduce the number of drive styles from several hundred to 14. have immediate access to spares. In addition. The agreement also includes an in-service warranty. The agreement allows Pepsi to reduce its upfront expenses. To ensure reliable availability to spare parts. The results Leveraging Rockwell Automation Services & Support has proved to be a smart decision for Pepsi Bottling Group. The local distributor. These benefits have ultimately enhanced productivity by 8 percent and reduced the overtime required to fill orders. Rockwell Automation recommended that Pepsi standardize its entire sensors inventory on Allen-Bradley products. A detailed cross-reference chart developed by Rockwell Automation now provides technicians with a quick and easy way to identify failed and replacement parts. Rockwell Automation technical specialists can also perform remote system diagnostics through an Allen-Bradley modem installed at the Pepsi facility. helped design a migration plan to help ease the cost of this inventory conversion. With the agreement. so the parts don’t go out of warranty until they are actually used for the warranty period.

Pepsi-Cola Saved $44 million by switching from corrugated to reusable plastic shipping containers for one litre and 20-ounce bottles. Palletization – cost vs. value creator Key supply chain cost optimizer through an Integrated supply chain approach • Drive standards – pallets/trucks • Pallet pooling services Palletization Roadmap 12 . conserving 196million pounds of corrugated material.

the company has learned how to masterfully create. Strength Frito-Lay is succeeding against a multitude of competitors in a fierce. for example. can produce larger profits.5 billion packages of snacks per year. with a focus on producing the most appealing taste and quality potato chip for the consumer. It is noteworthy to mention that steps like these that insure a stable supply of raw material are important to a company who purchases 2. Menlo was able to reduce the carrier base by 50% and negotiate nationwide discounts with other carriers. selling approximately 4. Retailers  The last stop involved is the 400.3 billion pounds of potatoes and 775 million pounds of corn annually. and selling its products in 120 countries. 13 . In order to achieve this. Frito-Lay then offered these farmers long-term contracts. profitable economies of scale in other areas of the value chain. On the other hand. as the company expanded. operations managers realized that it was not economical to produce every product at every plant.PepsiCo’s Frito Lay Supply chain Frito-Lay is the snack food division of PepsiCo and the largest supplier of potato and corn chips in the world. Frito-Lay approached its potato suppliers to seek those farmers willing to concentrate on cultivating a limited number of potato varieties. The company utilizes their own technological systems to show stores how reallocating shelf space. which made it easier for the farmers to get financing and for Frito-Lay to achieve more efficient. employing Menlo Logistics to handle route planning.   From supplier to retailer    Frito-Lay traditionally relied upon its in-house fleet of trucks to transport products from its plants to its 1. currently holding 40% of the market share globally. Frito-Lay learned to exploit the benefits of truck carrier services.900 warehouses or 200 distribution centers. However. innovate and manage all aspects of its supply chain using high-tech IT systems that allow it greater control over its production processes and distribution network. logistics became increasingly difficult and distances grew longer. and thus began specializing at particular locations. yet slow-growth industry. and thus. Strategy Used:  Several years ago.000 stores across the nation that carries Frito-Lay’s snack food products. Supply chain in USA: Supplier Base: Frito-Lay’s supplier network for potato chip production has fewer than 100 individual suppliers.

They focus on being the most reliable.  Retailers are also provided with Frito-Lay’s ―Profit-Vision Program‖. from acquiring the raw materials to final delivery. At the same time. giving planners the ability to discern consumer trends and appropriately prepare production plans.  Supply chain in India Horticulture produce in India is largely marketed through traditional channels. quality-driven suppliers who provide services through the retail channel by means of collecting as much information along the way and utilizing it to address their weaknesses and capitalize on their strengths. which allows retailers to analyze their sales and compare it to national performance statistics. basmati rice. PepsiCo’s operations started in India started in the region of Punjab in collaboration with state government. A typical marketing chain for horticultural produce consists of several players as shown in Figure PepsiCo is one of the pioneers of contract farming in India since 2001 Their experience in contract farming has covered many crops – potato. chili. but incorporating an advanced information system with hopes of increasing sales and profits. Empowers its regional managers with access to vast amounts of information on their databases that can be used to effectively guide them in their distribution decisions. they aren’t simply buying a product to shelve in their stores.     Competitive advantages   The company tries to captivate its customers by developing extensive databases that record who their customers are and exactly what they want. It is able to correctly assess demands across all of its products due to the availability of point-ofsale data and an impeccable IT system. relies on its ability to add unparalleled value in its distribution channel. oranges and more recently sea weed.251 trailers. peanut. tomato. The company’s ability to target local demand patterns with effective promotion and delivery systems results in continuously optimizing profit margins and reducing inventory and unneeded costs. the allocation of the company’s production capacity. 2. PepsiCo India's project with the Punjab Agro Industries 14 . Strengths of IT corporation  Tracks the logistical movement of products throughout the supply chain. by utilizing its 848 tractors. raw materials. and logistical details for truck routing. and a fleet of thousands of local computer-equipped delivery trucks. Its customers know that when they do business with Frito-Lays. Frito-Lay benefits from the program because it convinces retailers to allocate more shelf-space to their products. Despite only delivering potato and corn chips. Its managers can be proficient in determining levels of inbound supplies.

15 . and all Canadian provinces.S.J.. and moved into the ASRS area.20% of the retailers.. Each train usually contains 8 to 10 railcars that can accommodate cross-dock delivery. This process is called CRP or continuous replenishment program. Pepsi Tropicana Supply Chain Background Of the four principal Distribution Centres (DC) in the U. DC is responsible for the supply of Tropicana juices in all states in the Northeast U. Two types of unloading procedures are currently in practice: cross-docking and warehousing. Each train has approximately 45 refrigerated cars. N. Problems There are three major problem areas related to the current practices in Tropicana. each facing random demand from customers. giving rise to approximately 200 Stock Keeping Units (SKU). and blended juices from concentrate as well as shelf stable juice products from either Florida or local copackers. The Jersey City Distribution Center (DC) of Tropicana is responsible for the supply of Tropicana juices in all states in the Northeast U. NY. and are unloaded according to demand. the Jersey City. Juices arrive already palletized and variously pre-packaged. Cross docking normally is used for customers receiving a single product types or transfers to a smaller distribution center in Whitestone. Ordering policy of the individual retailers. Juices arrive already palletized and pre-packaged in paperboard containers and plastic and glass bottles.S. and all Canadian provinces. Tropicana manages the inventory orders for about 10% . and juice type and style. Premium orange juice from Florida represents approximately 65% of the shipments. and has an approximate shelf life of 65 days.Corporation and Punjab Agriculture University remains one of the most ambitious contracts farming projects in the country. At the moment. 1.S. Products vary according to package size. The center handles chilled premium orange juices. Jersey City houses a unit load capacity Automated Storage and Retrieval System (ASRS) that is fully integrated into an Automated Warehouse System (AWS). The Jersey City DC receives five Tropicana Unit trains from the production facility in Florida weekly.

Foreseeing an inventory buildup problem. The retailers benefit from in time delivery and less stock out cost. At the same time it will increase the fill rate because the additional capacity gained from more reasonable ordering can be used for ordering more juices of the type that cause trucks to wait in the yard. A carefully designed coordinated system will benefit each and every player in the supply chain network. The company never ships partially filled trains from Florida. Tropicana used i2 Supply Chain Strategist to execute hundreds of scenarios and sensitivities. implemented i2 Supply Chain Strategist to model manufacturing logistics operations to include co-packer operations. 16 . Central ordering of juices that are shipped to the distribution center. 2. 3. This is the so-called supplier-retailer coordination problem. From the supply chain perspective. The Jersey City distribution center sometimes builds up inventory of certain classes of juices that are close to their expiration date. 2. a unit of PepsiCo. Individual stores contribute the other 80% . Combining marketing strategies with inventory levels and other factors. 3. One approach would be to create an incentive for the customers to entrust their ordering function to Tropicana. The advantage of the warehouse is that it is able to centralize the demand information of individual stores in its replenishment decisions of juices shipped from Florida to Jersey City. This may require the design of contracts or cost sharing agreements with the customers. which are not under Tropicana’s control.The Tropicana customer service department administers the ordering of those individual customers.90% of the orders. Currently there are five trains of juices scheduled to arrive weekly from Florida. Solution 1. and the company has to get rid of them either at a very low price with sales promotion or donate them to charity. the company can use marketing (and mainly pricing) as a tool to either increase demand (when certain items build up) or reduce demand (when insufficient inventory is available). The model involved over 30 manufacturing and distribution facilities and the seasonal demand of over 20 product types. This is subject to random variation and hence uncertainties of demand on the warehouse. producing data that provided insights into areas where the company could rationalize system capacity at manufacturing facilities and increase efficiencies within existing distribution and logistics systems. Tropicana. this is mutually beneficial for both the customers and the warehouse. A carefully designed and sophisticated coordination of ordering policies will reduce the chances for these problems and result in savings. Marketing strategies such as sales incentives can influence demand.

PepsiCo and its bottlers have established a purchasing cooperative to gain purchasing power in buying raw materials. In a consolidated system negotiations involve fewer players and therefore take less time to gain agreement. 17 . Pepsi bottling system is more fragmented than Coca-Cola's 3. which may be why the Pepsi system has lagged in system efficiency efforts. 4. 2. Coca-Cola has for the most part maintained distribution of its entire beverage line-up through its bottlers. PepsiCo consolidation puts pressure on the independent system bottlers to more readily consider agreements for warehouse distribution. While PepsiCo has been pursuing international beverage acquisitions. PepsiCo has duplicate distribution systems for its beverages. those investments will take time to produce significant operating income 5.Limitations of Pepsi Supply Chain over Coke 1.

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