Case Two: PepsiCo Implements New Procurement System to Minimize Costs

Summary
As a world leader in manufacturing convenience food and beverage, PepsiCo is on an
ongoing mission to reduce costs in from their millions of purchases from multiple vendors. To
manage their procurement processes across its divisions, PepsiCo has implemented a system,
Purchase to Pay, which tracks a variety of processes from product purchases to procurement
management to vendor selection and payment. Upon implementing the system, PepsiCo
decided to see whether Purchase to Pay could assist in negotiating the best deals with
suppliers. From their investigation PepsiCo found a considerate amount of waste in the
procurement process and cases of being overcharged. To improve their system to control their
spending, the IS staff set out to develop a system to improve tracking and analyzation of
purchases. 
Upon searching for existing procurement solutions, PepsiCo settled on a system from
BusinessObjects Corporation. This system stored procurement data in a database and provided
business intelligence information through a Web-based user interface over corporate intranet. 
By using the Business Objects solution to improve the Purchase to Pay system, PepsiCo
has minimized its expenses by streamlining the Purchase to Pay process and now makes one
monthly payment that provides vendors an itemized statement detailing each bill, invoice
number and the grand total. The company anticipates that the system will save them more than
$10 million within a year and more than $43 million over the next three years. By implementing
a flexible and scalable system, PepsiCo has simplified and improved its procurement processes
as they meet new challenges. 

What stage of the systems development life cycle led PepsiCo to discover the need for
improvement in its previous Purchase to Pay system?
PepsiCo discovered the need for improvement in its previous Purchase to Pay system in the
systems maintenance and review stage of the systems development life cycle.

How was the previous Purchase to Pay system not aligned with the goals of PepsiCo’s
organization?
PepsiCo’s main goal was to reduce costs using the Purchase to Pay system but upon
investigation, they discovered that there was a considerable amount of waste in its procurement
process and that there were not so good deals with cases of overcharge. Therefore the
Purchase to Pay system was not aligned with with the goals of the company

What are the benefits of implementing a system that allows you to custom design reports
and experiment with ad hoc queries?
Implementing systems that allows you to custom design reports and experiment with ad hoc
queries provides benefits of giving higher abilities to analyze and identify cost saving
opportunities and customize reports that are given to suppliers in a more detailed way. With this
companies will be able to spot opportunities and problems easier and gain more favorable
alternatives in times of troubles.

Relate the characteristics of valuable data (provided in Chapter 1 Table 1.2) to the
information provided by, and the method of delivery used by, PepsiCo’s new system.
The characteristics of valuable data found in PepsiCo’s new system are that it is accessible,
economical, flexible,reliable, relevant and secure. PepsiCo’s new system is aligned with the
company’s goals, is easily accessible, gives accurate business intelligence information through
the corporate intranet(secure) and can use the information in different ways such as identifying
cost saving opportunities and creating detailed itemized statement of each bill given to the
vendors. These benefits can also be extended across the entire corporation and can be verified
if wanted.