INDIVIDUAL ASSIGNMENT

TECHNOLOGY PARK MALAYSIA

BM034-3-2-OPM

OPERATIONS MANAGEMENT

HAND OUT DATE: 08 February 2017

HAND IN DATE: 23 March 2018

WEIGHTAGE: 60%

INSTRUCTIONS TO CANDIDATE:

1. Students are advised to underpin their answers with the use of references
(cited using the Harvard Name System of Referencing)
2. Late submission will be awarded zero (0) unless Extenuating
Circumstances (EC) are upheld.
3. Cases of plagiarism will be penalized.
4. The assignment should be bound in an appropriate style (comb bound or
stapled).
5. The assignment should be submitted in both hardcopy and softcopy, the
softcopy of the written assignment and source code (where appropriate)
should be in a CD in an attached envelope to the hardcopy.
6. You must obtain 50% overall to pass this module.
Acknowledgement

I would like to express my deep gratitude to our course Instructor Mr. Gyan Bahadur Tamang for
his patient guidance and encouragement which helped me in completing this Report. My sincere
thanks also go to our coordinator Mr. Subash Neupane for his practical suggestions and helpful
advices.

Further, without the cooperation and support of my friends and colleagues this report would not
have been completed. This report helped me explore the interaction between operations decisions
and other functions which help shape the management and communicate information effectively
and efficiently.

Finally, I thank my parents for their encouragement and great support in my study.

Sincerely,

Shreeya Rana (NP000123)

1. Introduction of PepsiCo
Beverage industry is one of the fast growing industries in India. It can be divided into two
sections i.e. carbonated and non-carbonated. The carbonated drinks that can be further classified
into cola, lemon orange, mango and apple segments. As far as the soft drink market is concerned,
it is facing the cut throat competition because of the availability of a large number of indirect as
well as direct competitors. Single company offers the soft drink to the market in different taste
and flavors. In this industry entire range of flavors are produced by other competitors also. More
often it becomes impossible to differentiate between the same flavors of two different brands,
when served in plane container, range also. All these factors together make the situation
complicated In 1902, the Pepsi Cola Company was established by Caleb Bradham, a New Bern,
N.C. druggist in the back room of pharmacy, and applied to U.S. patient office for Trade Mark.
The business began to grow and on June 16, 1993, Pepsi-Cola trademark was officially
registered with U.S. office.

2. Operation strategy
“Operation strategy concerns the pattern of strategic decisions and actions that set the role
objectives and activities of the operation.”

‘Performance with Purpose’ and this principle are closely integrated with the strategic direction
chosen for the company. The most noticeable aspects of Pepsi operation strategy are based on the
following six principles:

Achieving growth through mergers and achievements: M&A can offer the advantages of
gaining access to competencies and infrastructure, reducing direct costs and overheads and
achieving organic growth. Recently, PepsiCo has completed as a set of important acquisitions
such as acquisition of juice and diary businesses Lebedyansky and Wimm-Bill-Dann in Russia,
Lucky snacks and Mabel cookies in Brazil, and Dilexis cookies in Argentina.

Forming of strategic alliance of global scale: Strategic partnerships have been formed with
Tingyi in China in order to claim a share with growing beverage market in China. Moreover,
formation of a joint-venture with Tata in India to enhance drinking water manufacturing
capabilities, and initiation of strategic partnership with Almarai in Saudi Arabia can be
mentioned to illustrate PepsiCo’s adoption of strategic alliances as an integral part of the
corporate strategy. Specifically, by forming a strategic alliance with Starbucks – a global coffee
house chain, PepsiCo has been able to claim its share from increasing energy drink market
segment.

Focusing on emerging markets: A violent pursuit of this strategy has had positive impact on
the bottom line. The year of 2015 witnessed a double-digit growth in the sales of snacks in China
and Pakistan and PepsiCo is also strengthening its position in the Middle East. The company has
been able to more than double its e-commerce business in China in 2015. Moreover, PepsiCo
CEO Indra Nooyi has publicly expressed commitments to further increase the level of presence
of the company in emerging markets.

Focusing on organizational culture: Organizational culture can be defined as “the collection of

words, actions, thoughts, and “stuff” that clarifies and reinforces what a company truly values
and the nature of organizational culture directly impacts its performance in short-term and long-
term perspectives. PepsiCo CEO Indra Nooyi is widely believed to be an unconventional
corporate leader for a good reason. It has been noted that “she’s been known to walk the halls at
Pepsi barefoot, sometimes even singing along the way and this fact communicates her
willingness to embrace her differences with positive implications on employee morale and
organizational culture.

Developing and promoting the idea of One PepsiCo: Specifically, Indra Nooyi has been
striving to increase the level of association of individual brands with PepsiCo company values
and philosophy through promoting the idea of One PepsiCo. This is meant to be facilitated
through sharing supply-chain management and infrastructure, operational costs for many brands
within PepsiCo portfolio have been decreased.

Innovation in marketing initiatives: A wide range of innovative marketing initiatives

developed by PepsiCo marketing team include “Do Us a Flavor” campaign that involved
consumers in 17 countries submitting flavor ideas, development of Lipton Brisk Star Wars game
application for mobile phones, and using celebrity endorsement in an innovative manner by
attracting a popular singer amongst Pepsi brand target customer segment Beyonce Knowles.
Importantly, cross-cultural differences in various markets are taken into account when
developing and delivering PepsiCo marketing messages. For example, the marketing tagline of
“Live for Now” associated with Pepsi brand has been modified as “Yalla Now” and “Oh Yes
Abhi” for Middle East and Indian markets respectively taking into account cross-cultural
differences associated with these markets.

3. Product and service design

“Product and service design involves or affect nearly every functional area of an organization.”

Pepsi has its success result of larger products, high standards of performance, distinctive
competitive strategies and the high integrity of its services by all employees. Pepsi has hundreds
of brands and its brands are available worldwide through a variety of go-to-market systems,
including direct store delivery, broker-warehouse, and food service. There are five best known
brands are: Frito-Lay Brands, Pepsi-Cola Brands, Gatorade Brands, Tropicana Brands, and
Quaker Brands. The Pepsi creates more new product lines to serve different tastes for the
different kinds of customers in the market. That is also the successful strategy to keep the
company running well in both domestic and international market. Almost each year the Pepsi has
the new products to introduce to the market.

4. Process Design
“The arrangement and working of something before it is created is defined as process design”.

The process designs of Pepsi are as follows:

Ingredient Delivery: Flavors concentrates are conveyed from special Pepsi-Cola manufacturing
plants in heavy-duty, air-tight containers. Liquid sweeteners are transported in special tanker
trucks. All ingredients and food products are stored in clean, sanitary areas, and items requiring
refrigeration are kept in temperature-controlled areas. The bottles and cans that will eventually
be filled with Pepsi are manufactured elsewhere, and shipped to Pepsi plants wrapped and sealed
for protection. Labels, cartons, caps, the carbon dioxide used to carbonate soft drinks and other
supplies are also produced for Pepsi by other companies. On the arrival, everything is subject to
careful inspection to make certain all of the ingredients and materials meet high Pepsi standards.

Washing and Rinsing: After the ingredients have been delivered, all of them are washed
thoroughly and cleaned.
Mixing and Blending: Pepsi-Cola flavor concentrate is carefully combined with sweeteners and
other ingredients in large stainless steel mixing tanks.

Coding: Once on the belt, cans are part of an enclosed, controlled environment that keeps them
sanitary and helps ensure quality throughout the filling process. They travel rapidly through a
printer that applies a production code to each can. Then they're automatically turned upside
down, and rinsed thoroughly with filtered water before proceeding directly to the filler.

Filling: In the last step of the manufacturing process, as the now-rinsed cans reach the filler,
they're reinvested, immediately filled and the lid is applied at an average speed of 1,200 cans per
minute. The filler is where the syrups from the mixing tanks are combined with the purified
water from the filtration process. The liquid is then carbonated. This carbonation process gives
soft drinks the special sparkle fizzy bubbles that add to their quality of refreshment.

Labeling: All Pepsi cans and bottles are imprinted with a freshness date, which is a date code
that tells you your soft drink is fresh. A final quality check ensures that the package is properly
filled, sealed and labeled.

Inspection: Quality control audits performed by specially trained technicians are a critical part
of the manufacturing sequence for each batch, and are typical of the attention to detail that's
necessary if the highest possible quality standards are to be maintained. Cleanliness is also vital,
so all internal and external surfaces of the production system, including syrup lines,
proportioning, cooling and carbonating equipment, are meticulously sanitized.

Packaging: As products leave the manufacturing line, they're combined into a variety of
packages six- or 12-packs, 24- or 30-can cases or cases of individual two-liter bottles.

Warehousing and Delivery: The finished packages are stacked on shipping pallets and moved
to temporary holding areas or to a central warehouse for shipping. The storage is purely
temporary, since freshness is an important part of delivering the best possible product to our
consumers. Some of our products will be quickly transported by large trucks to outlying districts
and towns. Most, however, are loaded into Pepsi-Cola delivery trucks you see calling on food
stores in your own neighborhood. Other trucks deliver Pepsi-Cola syrup to restaurants and
fountains. To make sure there's always enough Pepsi for everyone who wants one, our trucks are
on the road every single day.
5. Quality management
“Quality management is the ability of a product or service to consistently meet or exceed
customer expectations”.

PepsiCo is dedicated to producing the safest, highest quality and best tasting beverages and foods
in every part of the world. Developing and maintaining strong food safety programs is how they
assure safety for every package, every day, in every market. PepsiCo has detailed internal
programs and procedures for food safety. PepsiCo has an excellent track record in delivering safe
products. Assuring PepsiCo brand design is properly vetted and products are produced, stored
and sold with rigorous testing of incoming materials and proper controls and metrics to deliver
safe products. We have created robust programs and systems to manage the changing external
environment and we continue to verify that our programs are delivering against the standards.
We have established a Global Food Safety strategic plan to meet key food safety objectives.

6. Supply chain
“Supply management is the management of the relationship and flows between the string of
operations and process that produce value in the form of products and services to the ultimate
consumer.” (slack, 2018)

PepsiCo's supply chain management had been based on the idea of collaboration and integration.
The company took several initiatives to have a more collaborated and integrated supply chain,
which would become a source of competitive advantage.

Obtaining of Raw Materials

The raw materials used in manufacturing PepsiCo's beverage and food products were: apple,
pineapple juice and other fruit juice concentrates, corn, aspartame, corn sweeteners, flour,
flavoring, grapefruits, oats, oranges, rice potatoes, sucralose, sugar, vegetable and other oils, and
wheat. Raw materials also included packaging material plastic resins such as polyethylene
terephthalate and polypropylene resin used for plastic beverage bottles, film packaging for snack
foods, aluminum for cans, and also fuels and natural gases.

Manufacturing Operations

PepsiCo employed many technologies at its production facility when it realized that production
flow was not smooth due to the frequent breakdown of machine and mismanaged inventory.
Production at PepsiCo plants began with the unloading of empty bottles from the trucks via the
conveyor and their being moved to the DE palletizer.

Distribution Network and Logistic Management

PepsiCo used different distribution strategies to bring its products to market depending upon
product characteristics, local trade practices, and customers’ needs. It delivered fragile and
perishable products which were less likely to be impulse purchases, from its manufacturing plant
and warehouses to customer warehouses and retail stores. PepsiCo used third party foodservices
and vending distributors to distribute its snacks, foods, and beverage to restaurants, schools,
stadiums, businesses, and other locations.

PepsiCo’s Relationship with Retailers

PepsiCo also made its supply chain better by establishing a collaborative relationship with its
retailers. One such example was its relationship with Wegman’s retail. PepsiCo approached
Wegman’s with a proposal for the Frito-Lay line which controlled two fifth of the world market
for salty snacks and PepsiCo products.

Road Ahead

PepsiCo was continuing with its efforts in the direction of having a well-managed supply chain
and of strengthening its relationship with all its supply chain partners. In January 2011, PepsiCo
changed the distribution system of its Gatorade products from warehouse delivery to “Direct to
store” at convenience stores through both company-owned independent bottlers in the US and
Canada.
7. Conclusion