SCM in Pepsico PDF

A Report
On
Supply Chain Management of PEPSICO
Submitted By: Aayushi Singhvi, Kaushal Patel,

Kishan Saspara, Manan Shah and Shahtaj
Khan
Submitted To: Dr. C. Venkata Ramana
Module: Logistics and Supply Chain

Management
Date: 14th March 2018

CERTIFICATE
TO WHOM SO EVER IT MAY CONCERN
This is to certify that Ms. Aayushi Singhvi, Mr. Kaushal Patel, Mr. Kishan
Saspara, Mr. Manan Shah and Ms. Shahtaj Khan students of AURO
UNIVERSITY, SURAT have done this project report on “Supply Chain
Management of PEPSICO” as a part of their academic module in Logistics
and Supply Chain Management in Block-7 , Semester-4 of MBA Programme
under the guidance of Dr. C. Venkata Ramana.
The project embodies bonafide work carried out by them under my guidance
and supervision during the Module of Logistics and Supply Chain Management.
Dr. C. Venkata Ramana

Module Leader
Logistics and Supply Chain Management
AURO UNIVERSITY SURAT
Logistics and Supply Chain Management 2|Page

ACKNOWLEDGEMENTS
We take this opportunity to express our profound gratitude and deep regards to our guide (Dr.
C. Venkata Ramana) for his exemplary guidance, monitoring and constant encouragement
throughout the project
We are obliged to our batch mates for the valuable information provided by them in their
respective fields. We are grateful for their cooperation during the period of the assignment.
--Aayushi Singhvi
--Kaushal Patel
--Kishan Saspara
--Manan Shah
--Shahtaj Khan

Table of Contents
1. Executive Summary ................................................................................................................ 5

2. Introduction ........................................................................................................................... 6
2.1 Industry Profile................................................................................................................. 6
2.2 Company Profile ............................................................................................................... 8
3. Main Issues Faced By The Pepsico In The Supply Chain And Logistics:- .............................. 11
4. Analysis of the main Issues: ................................................................................................. 12
5. FINDINGS .............................................................................................................................. 14
5.1 Demand Management: .................................................................................................. 14
5.2 Customer Service: .......................................................................................................... 15
5.3 Customer Service Dimension: ........................................................................................ 16
5.4 Logistics Planning and Strategy of PepsiCo ................................................................... 17
5.5 Logistics System Design of PepsiCo India...................................................................... 22
5.6 Integrated Logistics Activities: ....................................................................................... 24
5.7 Measuring Logistics Costs: ............................................................................................. 27
5.8 SCM Performance: ......................................................................................................... 28
5.9 Strategic Integrated logistics Management: .................................................................. 29
5.10 Benchmarking Supply Chain: ....................................................................................... 30
5.11 Designing the Supply Chain Network: ......................................................................... 31
5.12 Supply Chain Planning:................................................................................................. 32
5.13 Implementation of Supply Chain Management: ......................................................... 32
5.14 Role of IT in SCM: ......................................................................................................... 33
5.15 Supply Chain Strategies: .............................................................................................. 34
5.16 Organization and Control in a Supply Chain: ............................................................... 37
5.17 Purchasing and Supply Chain Decisions:...................................................................... 39
5.18 Latest Advancements in LSCM: .................................................................................... 40
5.19 Distribution Channels of Pepsi ..................................................................................... 45
5.20 Inventory management ............................................................................................... 47
5.21 Transportation Network .............................................................................................. 49
6. Conclusion ........................................................................................................................ 54
7. Recommendations: .......................................................................................................... 55

1. Executive Summary
In 2010, PepsiCo Beverage Company (PBC), an operating unit of PepsiCo Inc. (PepsiCo), the
second largest food and beverage company in the world , received the supply chain innovation
award from the Council of Supply Chain Management Professionals (CSCMP) . PBC was
formed on February 26, 2010, when PepsiCo acquired two large bottlers, PepsiCo bottling
Group (PBG) and PepsiCo America Inc. (PAS), for US$7.7 billion and named the combine
PepsiCo Beverage Company. Experts opined that the formation of PBC reflected an effort on
PepsiCo’s part to streamline its operations and facilitate faster and more integrated product
delivery to create a more integrated supply chain, strengthen its distribution channel, and
enhance revenue growth.
Supply Chain Brain launched this award in 2005 to highlight and recognize the top players in
the industry when it comes to innovative programs, projects, and collaboration.
PepsiCo Bottling Group, Inc. was the largest bottler of PepsiCo beverage. It accounted for more
than one half of the PepsiCo beverage sold in the US and Canada and about 40% worldwide.
PepsiCo Americas, Inc. was the second largest bottler of PepsiCo products. It had 19 bottling
plants in the US and had a presence in 11 countries in Central/Eastern Europe and 55 countries
in Caribbean. It held 41.1% stake in the PepsiCo Inc.
SKU is the acronym for stock keeping unit. Here, SKUs represent larger collations of Pepsi’s
individual packets, cartons, or other servings — for example a pallet containing a number of
multipacks.

2. Introduction
2.1 Industry Profile
Fast moving consumer goods (FMCG), are products that are sold rapidly at comparatively low
cost. Though the complete profit made on FMCG products is fairly small, they normally sell
in large quantities, so the increasing profit on such products can be large. Examples of FMCG
generally includes a extensive range of frequently purchased consumer products such as
snacks, toiletries, soap, toothpaste and powders, cosmetics, detergents etc, It also includes
drugs, consumer electronics, packaged food products and beverages, while these are often
categorized separately.
Soft Drinks Industry
The soft-drink industry includes companies that make non-alcoholic beverages and carbonated
mineral waters or concentrates and syrups for the manufacture of carbonated beverages.
Sparkling mineral waters have been popular for thousands of years: the ancient Greeks said
that such waters had medicinal properties and bathed in them commonly; the Romans
established resorts around mineral springs throughout Europe. In the 1600’s the village of
Sauna in Belgium became renowned for its waters, which by the early 1700’s were sold, in
bottles, as far away as London, UK.
Progress of the first man-made carbonated or sparkling water is credited to Joseph Priestley,
the British scientist who discovered oxygen. In 1776 he invented a method of "pushing" carbon
dioxide into water by liquefying it under pressure, thus making fairly continuing bubbles. The
technique led to growth of the soft-drink industry. By the beginning of the 18th century,
carbonated water was being manufactured commercially in England, France and America;
shortly thereafter, (normally fruit concentrates) were added to brighten the taste. In the 1840’s,
small carbonated bottling processes were established in Canada, producing carbonated drinks
in reusable bottles which were supplied as medicinal tonics. Most soft drinks are still
carbonated to give drinks a "tangy bite" and to stimulate the tongue. Furthermore, because
aroma is an important part of flavor, the taste’s carried as vapours in the bubbles that enhance
the taste.

The procedure of "pushing" carbon dioxide is still used, however now the water is first purified
in a method known as "polishing." Cooled carbon dioxide is then injected at pressures of 275-
550 pounds per square inch. Some of the initial drinks made in Canada were called, Cream
Soda, Ginger Beer, Sarsaparilla, None-Such Soda Water, Birch Beer and Sour Lemon. The
first carbonated beverage or "pop" bottles were closed with corks held tightly in place with a
wire binding. Because they had to be kept neck down so that the cork would not dry and let the
carbonation to leak away, they were man-made. Other packaging innovations later in mid-70’s
include canned carbonated drinks, nonreuseble glass bottles and containers prepared from rigid
plastics. However, an effort is being made, repeatedly through provincial legislation, to
increase the use of reuseable glass containers.
The most famous competition within the industry has been between Coka-Cola and Pepsi,
which conducted two rounds of "cola wars" in the twentieth century. In the 1940’s and 1950’s,
Pepsi faced the industry leader by offering a twelve-ounce bottle for the same four-cent price
as Coke's standard seven ounces. In the 1960’s and 1970’s, "Pepsi challenge" taste-tests led
Coke to alter its formula in 1986, a campaign that failed because it underrated the affection
Coke drinkers had to the tradition and representation of the brand.
In 2001, the non-alcoholic beverage industry included approximately six hundred U.S. bottlers
with more than 183,000 workforces, and it reached retail sales of more than $60 billion.
Americans that year consumed an typical of 55 gallons of soft drinks per person, up from 48
in 1990’s and 34 in 1980’s. The eight leading companies 96.4 percent of industry sales, headed
by Coca-Cola with more than 42 percent of the soft drink market and Pepsi with 33 percent.
Six individual brands accounted for almost two-thirds of all revenue: Coca-Cola original (itself
with nearly 20 percent of the market), Pepsi-Cola, Diet Coke, Mountain Dew (a Pepsi product),
Sprite (a Coca-Cola product), Dr. Pepper, and Diet Pepsi. Local sales growth slowed in the late
1990s because of increased rivalry from coffee drinks, sports drinks, iced teas, bottled waters
and juices,. The industry continues, however, to tap profitable international markets; Coke and
Pepsi each have \operations in more than 120 countries.

2.2 Company Profile
Business Summary
PepsiCo is one of the largest companies there is that is involved in the diet, beverage, and snack
industries. PepsiCo, Inc. is engaged in the snack food, soft drink, juice, and fast food franchise
businesses. The Company, through its companies, markets, sells and distributes various items
in the United States and worldwide, manufactures concentrates of Pepsi, Mountain Dew and
other brands for sale to franchised bottlers in the United States and transnational markets and
produces, markets, sells and distributes juices under numerous Tropicana trademarks in the
United States and globally.
PepsiCo’s local snack food business is conducted by Frito-Lay North America, and its global
snack food business is led through Frito-Lay International. The Company's soft drink business
runs as the Pepsi-Cola Company and is covered of two business units, Pepsi-Cola North
America (PCNA) and Pepsi-Cola International (PCI). In December 2000, the Company
proclaimed an agreement under which a subsidiary of PepsiCo will merge with The Quaker
Oats Company, and Quaker will become a wholly owned subsidiary of PepsiCo. Quaker is a
large international marketer of foods and beverages. It makes and markets Gatorade thirst
quencher, along with hot cereals, cornmeal, pancake syrups, grain-based snacks, hominy grits,
and value-added rice products.
PepsiCo in India
PepsiCo entered India in 1988 with joint venture with the Punjab government PSU Punjab
Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture promoted
and sold Lehar Pepsi until 1991, when the use of foreign brands was permissible; PepsiCo
bought out its partners and terminated the joint venture in 1994. Others claim that firstly Pepsi
was banned from import in India, in 1970, for having declined to release the list of its
ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market soon afterwards.
These disagreements are a reminder of "India's sometimes bitter relationship with giant
multinational companies." Indeed, some claim that PepsiCo and The Coca-Cola Company
have "been major aims in part because they are well-known foreign companies that draw
adequate attention."

In 2003, the Centre for Science and Environment (CSE), a non-governmental organization
in New Delhi, said carbonated waters produced by soft drinks manufacturers in India,
comprising multinational giants PepsiCo and The Coca-Cola Company, confined toxins,
containing lindane, DDT, malathion and chlorpyrifos — pesticides that can lead to cancer, a
collapse of the immune system and cause birth shortcomings. Tested products included Coke,
Pepsi, 7 Up, Mirinda, Fanta, Thumps Up, Limca, and Sprite. CSE found that the Indian-
manufactured Pepsi's soft drink products had 36 times the equal of pesticide residues legalized
under European Union guidelines & Coca Cola's 30 times. The Coca- Cola Company and
PepsiCo together accounts 95% market share of soft-drink sales in India.
In 2006, the CSE again found that carbonated drinks, including both Pepsi and Coca-Cola, had
high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company retain that
their drinks are harmless for consumption and have printed newspaper advertisements that say
pesticide levels in their products are less than those in further foods such as tea, fruit and dairy
goods. In the Indian state of Kerala, sale and production of Pepsi-Cola, along with other soft
drinks, was banned by the state government in 2006.
Mission
The mission is to be the world's premier consumer Products Company focused on convenient
foods and beverages. they seek to produce financial rewards to investors as they provide
opportunities for growth and enrichment to their employees, business partners and the
communities in which they operate. And in everything They do, strive for honesty, fairness
and integrity.
Vision:
"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate
– environment, social, economic – creating a better tomorrow than today."
The vision is put into action through programs and a focus on environmental stewardship,
activities to benefit society, and a commitment to build shareholder value by making PepsiCo
a truly sustainable company.

PepsiCo Values & Philosophy:
Values & Philosophy are a reflection of the socially and environmentally responsible company
they aspire to be. They are the foundation for every business decision which they make.
The PepsiCo Family
Meet the three major divisions of the PepsiCo family:
• PepsiCo Americas Beverages.
• PepsiCo Americas Foods.
• PepsiCo International.
Logistics and Supply Chain Management 10 | P a g e

3. Main Issues Faced By The Pepsico In The Supply Chain And
Logistics:-
Issue 1: Gaps in demand and supply
The main challenge does Pepsi face is the gap between its supply and demand. This happens
due to the lack of presence in the market because their heavy reliance on the distribution which
is outsourced by them. The gap exists in the supply chain when demand is not beaten by the
company through their distribution channel. This gap may exist due to irregular quantity
supplied to retailers. Gaps in this chain may exist due to lack of expertise in their distribution
system.
Issue 2: Channel conflict
Conflict in the channel of distribution is also major challenge faced by the PepsiCo
international. This happens due to the higher interdependency between the various parties and
channels. In this mostly power given to local people which can provide a good service to
customers. It may happen due to cross cultural differences between the local people and
PepsiCo international.
Issue 3: Environmental Impact
The infrastructure also come into challenges of PepsiCo in effective distribution and increase
transit time. The various kinds of roads having poor quality and traffic on that is very leniently
managed which creates more complexity and difficulties in managing that routes. Partly the
fault is also of the distributor’s carelessness.
Issue 4: Theft
This is the common problem in most of the countries. This happens in those countries mostly
where the law is not that much power full which may control by law. mainly at the port the
concentrate is being shipped there is the main risk of theft comes. To decrease this theft PCI
has to deploy the security staff to keep eye on concentrate that is reaches its final destination
safely or not. This adds the cost in the supply chain of the company. After this also company
is not sure that it is going to reached safely or not they have to take risk. Locals also have the
risk of this but as they are localizing so they are very well aware about this and they know how
to deal with such problems.

4. Analysis of the main Issues:
In this company have to make sure that their supply chain should capable of facing the problems
faced by their supply and logistics. It is being proved that the supply chain adds value up to 80
% of the cost so managers have to make it effective and efficient to earn profits. The main
reason is to heavy dependability on the local companies in their supply chain. For the solution
of such challenges we have following solutions:
Solution 1: Reducing demand and supply gap
An effective distribution channel is that which is being design and structured as per the
customer segment which may help to reach easily. The Pepsi cola international need to
construct their logistic chain as they can easily reach to the demand of rural consumer.in this
they should segment their market as urban and rural so it may help them to create effective
supply chain segment wise. To copy urban consumer rural consumers also preferring to
consume brand so they can create good supply chain because rural people can support them as
all are aware that Pepsi is brand in itself so they can be part of their supply chain.
Solution 2: Reducing channel conflict
To reduce the conflict in the distribution channel, they should go with the relationship
marketing and in this they should take power and control from their local people and give this
to the company supply chain managers. Relationship marketing plays an effective role in
supply chain management. Commitment and trust should be effective tool of local channel as
well as PepsiCo international which can create positive and healthy relationship between
various channels of distribution.
Solution 3: Reducing environmental impact
They have to build short transit system in their supply chain. Alternative transport system they
should use. By taking help of local government authorities they try to create sound system in
particular area. PepsiCo international should take the help of local institution and NGO’s to
build necessary infrastructure for sound and effective distribution channels in rural India. This
is little difficult but it will help in long run to the company.

Solution 4: Reducing theft
Without personal efforts of PepsiCo international’s to find criminal, make their efforts to
resolve their problem or else it is not possible to solve this problem. They may produce
concentrate in the local country too. This can be also become the solution for this problem.

5. FINDINGS
5.1 Demand Management:

Importance
Demand forecasts system the source of all supply chain planning . Forecasts of future demand
are vital for making exact supply chain decisions and confirming the company’s success.
Examples of such decisions - include how much to inventory, how much of the product to
make, how much to replenish & how much to order.
Ease of Forecasting
Beverages are a push product. Forecasting is not easygoing in the beverage industry as there
are possible serious variants in demand due to seasonal changes in summer and winter, which
cannot be easily forecast before controlled. Therefore, certain forecasting can be difficult at
times & there is a margin for error. Having multiple product lines & daily planning processes
decrease risk of error by extreme responsiveness.
Forecasting Methods
Three forecasting methods is used. The following methods are used for the purpose of sales
and demand forecasting:-
1. Time-Series Method
Historical demand data can be effectively used to forecast future demand.
2. Qualitative Method
Using historical data & market intelligence as a guide, PepsiCo management follows their own
judgment to control the demand forecast.. A yearly demand plan is forecasted in this way which
is further divided into monthly, weekly and daily plans correspondingly.
3. Causal Method
Causal forecasting acts that the demand forecast is highly correlated with stable factors in the
environment such as- the state of the economy, product pricing and interest rates that can

cause a change in the demand. For example is how by presenting a product variation, such as
Pepsi Twist, can impact on demand for the original product that is “Pepsi”.
5.2 Customer Service:
PepsiCo, Inc. is one of the world's top consumer product companies with many of the world's
most important and valuable trademarks. Its Pepsi-Cola Company division is the second largest
soft drink business in the world, with a 21 percent share of the carbonated soft drink market
worldwide and 29 percent in the United States. Three of its brands--Pepsi-Cola, Mountain Dew,
and Diet Pepsi&mdashe among the top ten soft drinks in the U.S. market. The Frito-Lay
Company division is by far the world leader in salty snacks, holding a 40 percent market share
and an even more staggering 56 percent share of the U.S. market. In the United States, Frito-
Lay is nine times the size of its nearest competitor and sells nine of the top ten snack chip
brands in the supermarket channel, including Lay's, Doritos, Tostitos, Ruffles, Fritos, and
Chee-tos. Frito-Lay generates more than 60 percent of PepsiCo's net sales and more than two-
thirds of the parent company's operating profits. The company's third division, Tropicana
Products, Inc., is the world leader in juice sales and holds a dominant 41 percent of the U.S.
chilled orange juice market. On a worldwide basis, PepsiCo's product portfolio includes 16
brands that generate more than $500 million in sales each year, ten of which generate more
than $1 billion annually. Overall, PepsiCo garners about 35 percent of its retail sales outside
the United States, with Pepsi-Cola brands marketed in about 160 countries, Frito-Lay in more
than 40, and Tropicana in approximately 50. As 2001 began, PepsiCo was on the verge of
adding to its food and drink empire the brands of the Quaker Oats Company, which include
Gatorade sports drink, Quaker oatmeal, and Cap'n Crunch, Life, and other ready-to-eat cereals.

5.3 Customer Service Dimension:
Overall, Pepsi CRM application after trying a variety of new software systems seems to have
improved a lot. They first PeopleSoft, Oracle was used as the other applications, where
currently, PepsiCo, mySAP business applications using. they are very beneficial to the
company, the current CRM application, see. Apart from these small changes, they currently
believe that CRM applications are very promising for PepsiCo.
For PepsiCo, CRM is the most essential tool to give 100% satisfaction to their customers. It
helps them to integrate all the information like 360 degree view of customer base on time
delivery, product inventory close time etc. they have their service representative, helpdesk to
interact with customers.
Improvements in information technology
• Executive Support System (ESS) :-sales / market share & the ability to monitor.
• Decision support systems (DSS) :- reduces the cost of raw materials & supplies.
• Packing Application Specialist (PACS) :- production & logistics processes automates.
• Transaction Processing System (TPS) :- 30 to 50,000 hour workweek saves.

5.4 Logistics Planning and Strategy of PepsiCo
Supply chain management (SCM) is the management of a network of organized businesses

involved in the ultimate provision of product and service packages required by end customers.
Supply Chain Management spans all movement and storage of raw materials, work-in-process
inventory, and finished goods from point of origin to point of consumption. It also includes
coordination and collaboration with channel partners, which can be suppliers, intermediaries,
third-party service providers, and customers.
Supply Chain Strategy or Design
In order to ensure a good supply chain strategy, Pepsi co. plans two years in advance. It has
several agreements with manufacturers, and receives raw material on a convenient basis. The
company also decides where production plants are to be placed. The production process is 65%
automated. The company has to provide and manage transport for the delivery of products as
well as the plan of third party logistics for the gaining of products. The shipping department
handles orders and the transport department chooses the vehicles for safe delivery.
Material planning and sourcing is carried out as well. Bases of supply of raw material both
local and foreign are identified and terms and conditions are negotiated. Capacity planning is
also done at this stage. Sales forecasting and production planning depends upon the capacity
of the organization with respect to:
1. Production
2. Storage: Raw and packing
3. Storage: Finished goods
The supplier is audited by the most cost efficient quality control department. Distributors are
also decided by the company, keeping in mind past performances.
Process Views of a Supply Chain
Pepsi has a seasonal demand. Just in time concept is applicable in non-seasonal period and not
applicable in seasonal period. All processes that are part of the procurement cycle,
manufacturing cycle, replenishment cycle, and customer order cycle are push processes.
Cycle View of Supply Chain: There are five stages in a supply chain (Supplier Manufacturer
Distributor Retailer Customer) and four supply chain process cycles (customer order,
replenishment, manufacturing, procurement cycle).

Push/Pull View of Supply Chain:
Pepsi Sales order and processing: The Shipping Manager receives sales order from Sales
Team, distributors through telephone, fax & email one day before dispatch. The sales are made
to base distributors on advance payment against orders then shipping manager plans according
to the demand of distributors on daily basis.
There are three main divisions where the supply chain of PepsiCo lies within: procurement,
manufacturing and distribution. PepsiCo India directly handles over 50% of operations
associated with bottling beverages. The. PepsiCo India doesn’t have any association with other
firms to handle large-scale production. There are two divisions called “shipping and handling”
and “planning”. They run SAP software to manage their operational system. These two
divisions work for defining and developing strategic planning for coming years.

Manufcturing
Prourement Distribution
PEPSICO

Procurement
PepsiCo has assured list of suppliers from which it buys raw materials and determines pricing
for procurement. They position imported raw materials through its global network. The major
raw materials are sugar, mango pulp and bottle resins. PepsiCo has defined policy with respect
to suppliers that key raw material should only be supplied by a supplier to its competitors.
Other raw materials like sugar and bottling are provided by some of the suppliers and they also
supply it to PepsiCo’s competitors. Raw materials are straight sent to PepsiCo and if it is done
nearby than suppliers keep raw materials with them and PepsiCo reimburse for keeping raw
materials. PepsiCo has suppliers who are more operative than their third party in terms of
logistics and they directly send raw materials to PepsiCo and charge superior price.
Manufacturing:
Third party of PepsiCo in India carries out only 40-45% of the bottling and distribution. The
PepsiCo and third party run the manufacturing plants. Most of the third party bottlers are
families. There is large number of small-scale bottlers. All the bottlers are required to operate
same suppliers as PepsiCo. Third party bottlers can negotiate prices with suppliers. PepsiCo
buys the resins for the bottles and then these are wafted into the bottles. PepsiCo India also
uses glass recyclable bottles for packaging purpose. Once the manufacturing has packaging
ready, the liquid products are packaged and made available for the customers or distribution
network.

5.5 Logistics System Design of PepsiCo India
Initially the focus of the Company remains on reaching all the markets and then the Company
shifts its focus on increasing the frequency of sales in the respective markets so that the sales
and profitability of the Company can be increased. Company (PepsiCo): PepsiCo India
provides the salt to all the bottling plants in the Country that carry out the bottling operations.
COBO: These are Company owned bottling operations operating directly under the Company.
Out of 32 bottling plants, PepsiCo owns 15.
FOBO: These are Franchise owned bottling operations. R K Jaipuria group does all the
franchisee-bottling operations for PepsiCo India; currently R K J Group has 17 bottling plants
for Pepsi in India.
Warehouses: These are Company or franchise owned warehouses spread over various
locations that cover the respective territories and come under the purview of their respective
Area or Territory Offices. Stocks are sent from the bottling plants to these warehouses, from
where they are sent to the C & F centers and Distributor Points.

Distributors: These are small, associated to C & F centers. Everything at the Distributor point
owned and managed by the distributor, even the salespersons are on the Distributors payroll.
Wholesalers: These are smaller than C & F centers and Distributor points and get the stock
directly from the Company or Franchisee. They get their stock directly from the Company and
thus get distinct rates and additional discounts from the Company.
Slums: They are generally minor than the Wholesalers are. However, they get special discounts
from the C & F centers and Distributor points. All the different players in the distribution
channel namely C & F centers, Distributor points, Wholesalers and Slums have different
designated markets and are not supposed to operate in the market designated to any other
player.
Retailer: Retailers are the most vital chain in the distribution channel of Pepsi as they are the
only point of contact with the customers. Retailers get their stock from all the other channel
members in the distribution channel.

5.6 Integrated Logistics Activities:
Value chain analysis is an analytical tool used to identify the ways in which businesses create
value for customers. The essence of value chain analysis is illustrated in Figure below:
Primary Activities
Inbound logistics
PepsiCo portfolio comprises 22 brands including Pepsi-Cola, Tropicana, Gatorade, Mountain
Dew and Diet Pepsi and each brand belonging to PepsiCo generated at least one billion USD
in retail sales in 2015. Inbound logistics practices of each brand within PepsiCo portfolio reflect
the nature and quantity of raw materials used, the proximity between the location of suppliers
and manufacturing plant and other set of factors.
The economies of scale can be specified as the main source of value for PepsiCo derived from
inbound logistics primary activity. PepsiCo also benefits from locating its production sites
within close geographical proximity to the main sources of raw materials in order to save on
transportation costs.
Technology is another driver of innovation that provides advantage to PepsiCo’s supply chain.
One of the innovations that PepsiCo is exploring is 3D printing. For example, RUFFLES®
Deep Ridged used 3-D printing technology to create optimal potato chip prototypes.

Operations
PepsiCo operations are divided into the following the following six operational segments:
1. Frito-Lay North America (FLNA). This segment engages in manufacturing,
marketing, distributing and selling branded snack foods.
2. Quaker Foods North America (QFNA). This segment is assigned with producing,
marketing, distributing and selling cereals, rice, pasta and other branded products.
3. Latin America segment produces markets, distributes and sells a several snack food
brands for Latin American market. These brands include Doritos, Cheetos, Marias
Gamesa, Ruffles, Emperador, Saladitas,Sabritas, Lay’s, Rosquinhas Mabel and
Tostitos.
4. Asia, Middle East & North America (AMENA). AMENA segment makes, markets,
distributes and sells a number of leading snack food brands including Lay’s, Kurkure,
Chipsy, Doritos, Cheetos and Crunchy through consolidated businesses, as well as
through non-controlled affiliates.
5. Europe & Sub-Saharian Africa (ESSA). This segment engages in manufacturing,
marketing, distributing and selling a number of snack food brands either independently
or in conjunction with third parties.
6. North America Beverages (NAB). Operations in NAB segment revolve around
producing, marketing, distributing and selling concentrates, fountain syrups and
finished goods under various beverage brands including Pepsi, Gatorade, Mountain
Dew, Diet Pepsi, Aquafina, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist
and Mug.
As it is illustrated in Figure 2 below, North America Beverages and Frito-Lay North America
segments are the biggest sources of PepsiCo revenues and they account for 55 per cent of the
total revenues.

PepsiCo conducts its productions operations with use of sophisticated operational systems and
advanced technologies. A particular focus on sustainability issues as an integral part of its CSR
strategy is an important feature of PepsiCo operations and a solid source of value addition.
Moreover, PepsiCo adjusts its products to local tastes and preferences and this is reflected on
operations. For example, PepsiCo has tailored its products to suit the Chinese palette and
introduced various local flavors to the Lay’s brand. The current flavors available in the market
are fresh cucumber, baked lobster, peking duck, hot and sour fish soup, fried prawn and little
tomato.
Outbound logistics
PepsiCo distribution costs amounted to USD9.4 billion in 2015, USD9.7 billion in 2014 and
USD9.4 billion in 2013. PepsiCo creates value in outbound logistics via using multiple product
distribution formats. Specifically, PepsiCo outbound logistics integrate the following three
formats of product distribution:
1. Direct-Store-Delivery. This distribution format is especially popular with product
categories that are re-stocked very often. Direct-Store-Delivery provides PepsiCo the
advantages of merchandizing with maximum visibility and appeal within stores.
2. Deliveries to customer warehouses. Mainly less fragile and perishable products are
distributed in this format and this is the most cost-effective distribution format.
3. Using distributor networks. Third-party distributors are needed in order to facilitate
the distribution to locations far from PepsiCo manufacturing plants and warehouses.

5.7 Measuring Logistics Costs:
The demand in the season is very high and it remains common in every season most of the
time. In Pepsi seasonal demand differ from summer to winter at a decreasing rate. In off peak
Pepsi reduces their price on liter bottle and come up with the new discounted price or we can
say saving schemes to attract new customer. They charges high price in peak season and low
when demand is less. Basically this is the pull and push strategy of PepsiCo.
Pricing and Revenue Management for Multiple Customer Segments
These are different segments which Pepsi has allocated and targets multiple customers from
these segments such as children, teenagers and adults. The product range is available in tin,
glass bottles, plastic liter bottles and fountain fresh.
❖ Using in Practice
Managers do gather accurate and complete data relating to products, offered prices,
competition and most important customer behavior. For Pepsi it’s equally important to quantify
the expected benefits from revenue management. Historical data and a good model of customer
preferences are being used to estimate the benefits. Pepsi differentiates between the customers
who truly need the supply chain asset during peak period and those who will benefit from
moving their order to the off-peak period. This approach increases profits for the firm while
also satisfying the customers creating a double impact. Revenue management tactics have
brought in huge profits to the company.

5.8 SCM Performance:
PepsiCo offers the world's largest portfolio of billion-dollar food and beverage brands,
including 22 different product lines that each generates more than $1 billion in annual retail
sales. With net revenues of approximately $65 billion, PepsiCo's employees are united by our
unique commitment to sustainable growth; we believe that investing in a healthier future for
our planet and its people also means a more successful future for PepsiCo. PepsiCo calls this
commitment Performance with Purpose: PepsiCo's promise to deliver sustained value by
providing a wide range of foods and beverages, from treats to healthy eats; finding innovative
ways to minimize their impact on the environment and lower our costs through energy and
water conservation as well as reduce use of packaging material; providing a safe and inclusive
workplace for our employees globally; and respecting, supporting and investing in the local
communities in which they operate.

5.9 Strategic Integrated logistics Management:
Planning (Demand and Supply): The Demand Planner contributes to the success of PepsiCo
NAB by executing the demand planning process within a defined network. The Demand
Planner supports all facets of the forecasting process in order to achieve high forecast accuracy
and to ensure customer service is maintained. This person also supports sales and marketing
teams to ensure innovation launch execution. The Supply Planner contributes to the success of
PepsiCo NAB by assisting with the management of supply chain processes and projects ;
including innovation launch execution, supplier development, and production performance
results analysis and reporting.
Warehouse Operations: Associates will work either on a field-based or headquarters-based

team. The key objectives of these teams are to manage inventory, improve warehouse
productivity, and execute shipments to ensure key service metrics are met. These teams interact
with various other areas of the supply chain, including demand & supply planning,
transportation , customer integration, sales strategy, and finance.
Transportation: Associates will partner with transport team members to ensure timely
delivery of raw materials and finished goods to our plants, distribution centers, and customer.
This initiative encompasses many business areas including safety, DOT regulations, electronic
driver logs, cost control, on time shipments, payroll, and driver routing. Associates will have
the opportunity to get hand on experience owning day to day transport activities.
Customer Integration: Associates serve as a direct point of contact for PepsiCo's customers.
Associates actively partner with Warehouse Operations, Transportation, Supply Chain
Planning and Sales to ensure our customers receive flawless order fulfillment and delivery.
Customer Integration roles deliver a wide range of exposures to critical skills including:
effective communications, influence management, data analysis critical thinking and process
optimization skills.
Strategy: Associates will work with SC Strategy team and support various network
optimization initiatives using JDA Strategist and various excel, SAP and access reports. This
role will support development of near-term and longer-term network implications of strategic
initiatives for PepsiCo NAB. Additionally, this role will support activities involved in
development and execution of least landed cost sourcing solution for our network

5.10 Benchmarking Supply Chain:
PepsiCo has announced details of its global sustainability plans and the supply chain
benchmarking:
• PepsiCo will continue to work on the efficiency of its manufacturing and distribution
operations while also broadly extending its environmental stewardship efforts across its
global value chain.
• It will sustainably source both direct and major non-direct agricultural raw materials by
2020 and 2025, respectively.
• Building on its earlier goal, PepsiCo also intends to invest in the necessary measures to
sustainably source 100 percent of the palm oil and cane sugar it purchases by 2020.
• Building on its support for the United Nations Guiding Principles on Business and Human
rights, PepsiCo is significantly broadening its focus on respecting human rights across the
company's supply chain.
• It will extend the principles of its Supplier Code of Conduct to all franchisees and joint
venture partners. These principles already apply to PepsiCo's direct suppliers.

5.11 Designing the Supply Chain Network:
At the maximum level, performance of a distribution network should be valued along two
dimensions:
Customer Cost of
needs meeting
that are customer
met needs
The customer needs that are met : influence the company’s revenues, which cost decide the
profitability of the delivery network. While customer service involves of many mechanisms
then they will consider those procedures that are influenced by - the structure of the distribution
network for Pepsi.
Response Time for Pepsi is least as the direct customers for Pepsi are the retailers & then the
final consumers. Pepsi try to find center of gravity in every country ,so that it can deliver its
retailer in less time.
Product Variety in Pepsi is huge. They have made their place in market with their unique
product line ranging from chips to water, which includes beverages extending from the water
Aquafina to Mountain Dew, 7 up ,Pepsi, Miranda, Pepsi Max, Mirinda apple & Fountain Fresh,
Pepsi light , Pepsi diet.
Availability : Pepsi availability is very high and the product is always in stock whenever an
order arrives. The Distributors have three days stock as back up with them in order of any
failing of the plant or other external factors.
Customer Experience for Pepsi has always been progressive as they receive the product with
ease and on time. The retailers are the direct regular customers as they place an order to the
distributors. Return ability: Pepsi has always been very robust in a sense that unsatisfactory
items can be returned & changed on the spot. This is factual for both the retailers and the
customers. Pepsi has set down a system through which they can efficiently manage this
requisite.

5.12 Supply Chain Planning:
The goal of planning is to maximize the supply chain surplus. Planning establishes restrictions
within which a supply chain will function over a period of time. Companies start the planning
phase with a prediction for the coming year of demand. Pepsi carries out sales forecasting for
local demand. The annual sales target is conveyed to the supply chain department, scheduling
is carried out on a monthly, weekly and daily basis.
5.13 Implementation of Supply Chain Management:
Company makes decision regarding specific customer orders. The goal of supply chain
operations is to handle incoming customer orders in the best possible manner. During this
phase, firms allocate inventory or production to individual orders, set a date that an order is to
be filled, makes pick lists at a warehouse, assign to shipping, and set delivery and so on. There
is less uncertainty about demand. The manufacture, sales and supply chain departments get
together to decide the inventory usually on a weekly basis.

5.14 Role of IT in SCM:
According to their 24 hours “order to delivery” concept, they have developed a computer
application and created wide network that helps them to achieve its goals. PepsiCo Information
Management System Microcomputers to update inventory information systems were
connected to the central computer system daily PepsiCo. Manages more than $ 25,000 (Rs
12,50,000) a year are estimated to escape from the system.
Management information system:
Effective marketing planning product planning, pricing, promotion and distribution is required
in the case. Such planning is only possible if the company the right to adequate and relevant
information. This is possible through MIS. PepsiCo utilize MIS system to capture the present
market trends, demand forecasting and also oversee taste and preferences of the customers.
MIS facilitates marketing plan and control. It helps PepsiCo to obtain timely information of
pricing, promotion and distribution. MIS gives quick supply chain information. Therefore, it
helps PepsiCo in taking right decisions at right time. They use some computer applications to
enhance their supply chain as well as relationships with its suppliers and customers:
1. Current enterprise resource planning:
Enterprise resource planning is business process management software that allows an

organization to use a system of integrated applications to manage the business and automate
back functions. ERP software integrates all facets of an operation, including product planning,
development, manufacturing processes, sales and marketing.
2. Current supply chain management:
PepsiCo has many bottling plants situated across the globe. The company makes sure that all
their suppliers are integrated in their individual logistics activities. My Sap business suits
application helps suppliers to communicate with each other and forecast demand according to
that. PepsiCo is also trying to increase their supplier base. Therefore, they are indulging into
encouraging minority and women. By doing this, they are successful in increasing their supplier
base as well as market share.

5.15 Supply Chain Strategies:
There are three major sustainable advantages that give PepsiCo a competitive edge as they
operate in the global marketplace:
1. Big Muscular Brands built through well market positioning and hefty investment in
advertising and promotions;
2. Proven ability to innovate and produce differentiated products through superior
operating base;
3. Powerful go to market system built with the help of superior relationship base and an
faultless sales and distribution network. Making it all work are the extremely talented
and dedicated people who are an vital part of PepsiCo India.
PepsiCo's overall mission is to surge the value of shareholder's investment. They do this
through sales growth, cost controls and sensible investment of resources. They believe their
commercial success depends upon contribution quality and value to their consumers and
customers; providing products that are safe, economically efficient and environmentally
complete; and providing a fair arrival to their investors while observing to the highest standards
of integrity. A customer while purchasing a bottle of Pepsi will reflect product quality, price
and availability of the product. Thus, Pepsi particularly emphases its competitive strategy as to
producing sufficient variety, reasonable prices, and the availability of the product.
Supply Chain Strategy

Step 1: The Customer and Supply Chain Uncertainty
a) Identifying Customer Needs
Pepsi needs to understand the customer needs for each targeted segment and the uncertainty
the supply chain faces in satisfying these needs. Pepsi deals with beverages, which are a fast
moving consumer good, it knows the requirements of consumers. Pepsi is considered as a drink
which is refreshing during summer, and taken regularly during winter, with demand hiking
around festivals like New Year, Halloween occasions such as weddings. Pepsi caters to both
cities and rural areas. It understands the needs of both. As demand for beverages is seasonal,
the quantity of product needed for each lot is taken care of with past demand in mind.
Consumers generally require a small response time, high service level, reasonable price and
some variety (for example health conscious people favor diet versions of sodas).
b) Demand Uncertainty and Implied Demand Uncertainty
Demand for Pepsi varies by product. For example there is a greater demand for “Pepsi” as
compared to “Mirinda Apple,” which is new. Hence, Pepsi has a low demand uncertainty as
compared to “Mirinda Apple.” The product “Pepsi” is approaching its maturity stage in the
PLC whereas “Mirinda Apple” is in the introductory stage.
Pepsi’s implied demand uncertainty varies with the product type as well as the customer needs.
Due to decreased lead time (the customer may purchase its competitor’s product if Pepsi is not
available at that time), need for greater variety and higher level of service, implied demand
uncertainty increases. This is true for cities where unmet demand by Pepsi is met by Coca Cola
and other such competitors. Supply uncertainty is also affected by new products. New products
have higher supply uncertainty.
Step 2: Understanding the Supply Chain Capabilities
Highly Efficient Somewhat Efficient Somewhat Responsive Highly Responsive
In towns PEPSI in cities

The responsiveness & efficiency disagrees according to the consumer needs and wants, which
implies demand uncertainty, product market segment and type. In isolated areas the company
emphases on being efficient as other modes of transportation, which lead the product to be
highly expensive. The company it does not deal with distributors who do not have 20 - 25
vehicles, therefore as the company has focus on cost reduction, uses inexpensive modes of
transportation and slow modes of transportation, when the demand is certain, & uses
economies of scale in production then the Pepsi is more inclined towards being efficient. In
urban areas, the company pay attentions on being highly reactive as Pepsi has to meet a high
service level, short lead time, handle a large variety of products & respond to broad ranges of
quantity required particularly at the retail stage.
Step 3: Achieving the Strategic Fit
The Pepsi supply chain give different roles to its different stages, the firm has to decide either
to transmission the responsiveness to the manufacture stage or to the retailer stage. While
analyzing the Pepsi’s supply capability it is seen that Pepsi tends to be more reactive in the
cities and less in towns. Therefore, transferring the openness to the distributor & retailer, which
allowing them to face the higher implicit demand uncertainty. In return company allows the
supplier and manufacturer to be more efficient. At the same time, several beverages types give
to a broader product portfolio triggering Pepsi to adjust its strategies appropriately; modifying
the supply chain to meet the needs of each demand.

5.16 Organization and Control in a Supply Chain:
For Pepsi, outsourcing results in the supply chain function being accomplished by a third party.
It is one of the most important issues facing the firm. Raw material for manufacturing and
packaging is being outsourced through contracts. Incoming and outbound transportation of
goods from the manufacturing place to the delivery center and then to the final customer is also
being outsourced to a third party. The considerations are:
• Looking for sources of supply and negotiate with suppliers
• Finding of raw material from local and foreign suppliers
• Determining terms and conditions with supplier
• Managing activities and documentation with suppliers
• Comparisons of cost and quality assurance.
It makes the decision from where to outsource by inviting bids for proposals in the local
newspapers. The proposal works as a general offer to all the concerned parties whether they
are related to the delivery of raw material or distribution vehicles. Sourcing process of the
company comprises the selection of supplier, product design collaboration, design of supplier
contracts, gaining of material and services and assessment of supplier performance in case of
raw material procurement.

Supplier Scoring and Assessment
When comparing suppliers, Pepsi does not only concentrate on the mentioned price but also
other factors that may affect the total cost of the supplier. The factors other than mentioned
price are as follows:
• Replacement Lead Time
• Supply Flexibility
• Supply Quality
• Pricing Terms
• Exchange Rates
• Duties And
• supplier viability.
For Pepsi, the supplier scoring and assessment is based on the supplier performance, in terms
of replacement lead time and on time performance, differentiate themselves amongst their
competitors. Soon after the tender notice for the procurement of raw materials is marketed,
they are requested to send sample of the products. For example, for the production of Pepsi,
concentrate and sugar are demanded of high quality which is the specialty of the company.
These samples are verified in the total quality laboratories. The sales department selects the
particular supplier if the samples match with the standard set. Being an ISO-9001 certified
company, Pepsi cannot sell low quality products, hence it has strict criteria set for the purchase
of raw materials from suppliers.

5.17 Purchasing and Supply Chain Decisions:
Raw material Procurement
In the manufacturing of Pepsi products the raw material consist packaging materials, cans of
big size and small sizes, sugar and particular concentrate etc.. There are two sources of raw
materials one is local suppliers and other is foreign suppliers. The material required to
manufacture is primarily come from the country only in which they are manufacturing.
PepsiCo international already have the list of different suppliers of sugar so they select the
supplier from where manufacturer have to buy. And the concentrate which is the main raw
material of PepsiCo is direct come from PepsiCo international. Here management advertises
their tenders into the newspaper to invite suppliers of such raw materials so by this they can
get the cost benefit.
Selection Criteria of Distributors
Distribution selection is the main step in supply chain which is very critical step, because
mainly all retailers are handled by the distributors so while taking the decision they have to
check their efficiency and accuracy of the work, how well they are. Because efficient and well
placed distributors are very important to keep to ensure the availability of product. Which every
company keeps as a main target.

5.18 Latest Advancements in LSCM:
Companies need to be willing to make necessary and difficult changes. Success requires
reducing cost base through control on expenses and redesigned work processes. Logistics cost
which is incurred as a percentage of GDP is 11.6%. In order to improve their productivity, they
need to work on new products and trends. Some of the new innovations are as
Vendor Management Inventory (VMI)
VMI is a distribution channel operating system whereby the inventory at the distributor/retailer
is monitored and managed by the manufacturer vendor. It is a family of
business model in which buyer of a product provides certain information to the supplier of that
product and the supplier takes full responsibility for maintaining an agreed inventory of the
material, usually at the buyer’s consumption location. It includes several activities including
determining appropriate order quantities, managing proper product mixes. VMI is also QRIS
(Quick response inventory system) The vendor’s computer acquires data electronically, no
manual data entry is required at the recipient’s end which help in reducing the lead time and in
eliminating the vendors recording errors.
Collaborative Planning Forecasting and Replenishment (CPFR)
CPFR can be defined as a collaboration where two or more parties in the supply chain jointly
plan a number of promotional activities and work on synchronized forecasts, on the basis of
which production and replenishment processes are determined. The term CPFR was first
introduced in 1995, in connection with a pilot project between Wal-Mart. Warner-Lambert,
Benchmarking partners, SAP and Manugistics. The objective of CPFR is to better align supply
and demand through trading partner data interchange exception-based management and
structured collaboration in order to eliminate issues and constraints in fulfilling consumer
expectations. CPFR is a business practice that reduces inventory costs while improving product
availability across the supply chain. The CPFR process begins with an agreement between the
trading partners to share information with each other and to collaborate on planning with the
ultimate goal of delivering products based on true market demand.

Cross Docking
Cross docking is a practice in Logistics of unloading materials from an incoming semi-trailer,

truck or rail, car and loading this material directly into outbound trucks, trailers, or rail cars,
With little or no storage between them. It is a function of warehouses or distribution centers,
which was introduced by Wal Mart. Cross docking is a system in which the vendor’s ship
merchandise to a distribution centres in pre packed quantities required by each store. The
merchandise is delivered to one side of the distribution centre; the floor ready merchandise is
then transferred to the other side of distribution centre for delivery to a store. Cross docking is
a process by which products are aptly room the inbound dock to the outbound dock, avoiding
the need to store and prepare order replenishment. It either picked or moved directly from the
inbound dock to the outbound dock, avoiding the need to store and prepare order
replenishment. It not only reduces material handling but also reduces the need to store the
products in the warehouse.
Radio Frequency Identification (RFID)
It is a technology that uses communication via electromagnetic waves to exchange data

between a terminal and an object such as product, animal, or person for the purpose of
identification and tracking. it is a device that contains a chip and an antenna , which can be
physically inserted or stuck to a product. The basic information about the product can be stored
in this chip. The tagging of this chip enables companies to identify and track their goods at
various levels in a distribution chain. The reason this technology is being increasingly used is
due to its extraordinary ability to track almost anything and know where it is at any step of the
distribution process. The end result, companies become more efficient increase sales and
reduce costs.
Advanced Planning and Scheduling
It is also referred to as APS and Advanced Manufacturing. It refers to a manufacturing

management process by which raw materials and production capacity are optimally allocated
to meet the demand. APS is especially well suited to environments where simpler planning
methods cannot adequately address complex trade-offs between competing priorities.
Traditional planning system utilize a stepwise procedure to allocate material and production
capacity. This approach is simple but cumbersome, and does not readily adapt to changes in
demand, resource capacity or material availability. APS has commonly been applied where one
or more of the following conditions are present
Make to order manufacturing
Capital intensive production processes, where plant capacity is constrained
Products that require a large number of components or manufacturing tasks
Advanced planning and scheduling software enables manufacturing scheduling and advanced
scheduling optimization within these environments.
Electronic Data Interchange- (EDI)
It is the structured transmission of data between organizations by electronic means. It is used

to transfer electronic documents or business data from one computer system to another
computer system. It also be called as electronic document interchange. It is the exchange of
business information through standard interfaces by using computers. It interoperated as
transmission of business data between organizations in a computerized format that does not
require the rekeying information.
PepsiCo use innovation in its supply chain to benefit the entire organization:
At PepsiCo, there are following global priorities that all impact the supply chain:
1.Brand Building,
2.Innovation,
3.Execution,
4.Productivity, And
5.Driving Cash Returns.

With respect to innovation in the supply chain specifically, there are three key drivers:
1) Digitizing the value chain
2) Environmental sustainability;
3) Technology advantage;
Environmental sustainability is an integral part of PepsiCo’s Performance having Purpose

vision which guides everything they do and throughout every part of their supply chain. One
of the ways we operationalize Performance with Purpose globally is by finding innovative ways
to reduce both their impact on the environment and our operating costs, which is good for the
planet and business.
For example, Frito-Lay, which is the largest all electric truck delivery in North America US
has more than 280 electric trucks. Moreover in case of water conservation, they recognize water
which is fundamental human right. PepsiCo and the PepsiCo Foundation, through various
partnerships, are on track to help six million people gain access to safe water by the end of this
year. They are improving their operational water use efficiency by more than 20% per unit of
production since 2006. In case of waste, they recycled or reused nearly 93% of total waste
generated at company-owned manufacturing facilities in 2013. Allover 22 manufacturing
plants have achieved zero waste sent to landfill and 48 have achieved near-zero waste sent to
landfill. Which is appreciable. We’re also seeing tremendous promise with alternative to
energy solutions such as landfill gas, solar, and even rice and oat hull biomass boilers. They
are hoping to replicate these cutting edge innovations and best practices across the globe in the
coming years.
Technology is another driver of innovation which provides an advantage to PepsiCo’s supply

chain. One of the innovations that PepsiCo is exploring is 3D printing. For example,
RUFFLES® Deep Ridged used 3-D printing technology to create optimal potato chip
prototypes. they also use the latest in automation technology to enhance plant efficiency and to
better meet customer’s needs more effectively. This is especially helpful with some of their
older plants. They are also following trends in vehicle technology. One area of interest to them
is a concept for trucks called platooning where the front driver is in control and two trucks
follow behind at a safe distance, like a bike team ‘drafting’ off one another. they see potential
with platooning to realize fuel savings. In addition, the emergence of e-commerce as a new

distribution channel is another driver that is changing the way they interact with and serve their
consumers and customer. They are building new e-commerce capabilities, looking at how to
retool the form and function of products and packaging as well as their supply chain models.
Digitizing the value chain at PepsiCo is about end-to-end assimilation of their supply chain
from a systems and digital perspective, from strategy to execution. There are several different
steps they are taking in this area to explore the possibilities. For example, the Internet of Things
(IoT) is considerable at PepsiCo. This is a relatively new term which describes a hyper-
connected world where smart technology touches and impacts everything. They are introducing
this concept into some of their systems. Maneuverability and cloud-based applications are big
focus areas for PepsiCo as well. The computing power that is now accessible on tablets and
smartphones allow people to do just about anything. They think that industry as a whole has
fully realized or embraced the true conceivable of mobile. Their imagination is to help advance
mobile technology at PepsiCo so access and use is pervasive, from the boardroom to the
frontline, and applying the technology in innovative ways that will revolutionize our supply
chain and how they do business.

5.19 Distribution Channels of Pepsi
➢ Direct distribution
✓ Post handling and delivery of fusion cylinders into key accounts; The key
accounts are different restaurants, wholesalers & hotels as like KFC
,Pizza Hut, which act as a place for key sale. These are recognized as
national key accounts & are very significant in terms of competition.
✓ Export Parties
➢ Indirect distribution
✓ Through Outstation distributors
✓ Through Base market distributors
Pepsi uses heavy and light vehicles for safe standard delivery of goods directly to the
distributors for timely delivery. It called as “ Direct store delivery” ,which use the just in time
concept it is only applicable in Non-seasonal period- not applicable in the seasonal period.
Review and Revise Distribution
This is typically done through captivating over key revenue areas. If the distributor fail to
achieve its sales target then the distribution is taken back and an adding of new distributor is
done. So Pepsi’s supply is low supply uncertainty. Its supply source capabilities which are as
follow:
Less breakdowns High Quality Flexible Supply Mature production

Capacity process

Reverse Flow
The empty bottles are picked by the secondary trucks from the retailers & brought back to the
Distributor. The primary trucks transmit the empty bottles further to the bottling plant where
the bottles are reused & cleaned.

5.20 Inventory management
Distributor Storage with Carrier Delivery
In Pepsi inventory is not managed by the manufacturers at the factories but is managed by
distributors / retailers in transitional warehouses & package carriers are used to moving the
products from the intermediary location to the final customer. This needs for distributor storage
to keep high levels of inventory because distributor / retailer total demand uncertainty which
directly to lower level than the manufacturer. Transportation costs for Pepsi are lower because
an economic mode of transportation like truckload can be used for inbound shipments to the
warehouse, it is closer to the customer. Facility cost is high because of a loss of aggregation &
often end up with higher managing and processing costs. The information structure necessary
is not that multifaceted. The distribution warehouse serves as a buffer between customers and
manufacturer .Real-time visibility between warehouse and customer is needed whereas
distinguishability between customer and manufacturer is not needed. Response time is also
concentrated.
Order visibility with manufacturer storage becomes easier and Customer convenience is high.
Distributor storage is well matched for medium - fast moving goods and also handle higher
level of range than retail stores.
Value of Distribution System
There are two components of distribution which are as follow:
• Storage
• Distribution

The storage facilities of Pepsi are planned in order to enhance the timely availability of the
product. For this reason the distributors are totally equipped with facilities which are needed to
ensure exhaustive supply of the product. The storage facilities are intended to contain the
maximum possible inventory items which are needed at any given time.
The distribution does not available between particular supply chain mechanisms but it a basic
function of combination amongst all supply chain mechanisms. In case of FMCG - Pepsi, the
value of efficient distribution process cannot be demoralized. The Pepsi distribution system
related the entire supply chain for all product classifications. The distribution information
network and its center play a key role in that concern. The major object is to carefully track
sales of elements and offer short replenishment cycle times. Whenever, a store places an order
it is direct transferred to the supplier via the distribution manager.

5.21 Transportation Network
Pepsi supply chain strategy is closely related to the proper use of transportation. In a typical
market, quick response supports supply chains to meet the customer demands for shorter lead
times, and to coordinate the supply to meet the troughs & peak of demand. The main emphasis
is to determine the activities that are to be combined in the supply chain network with their
equivalent suppliers, distribution centers & the allied transport links between them.
Modes of Transportation Network
Land: Truck offers benefit of door to door shipment, a shorter delivery time & no transfer
between pick up and delivery. Pepsi uses the TL (truck load) approach. This approach provides
covers the way for economies of scale and is able to meet service necessities while minimizing
both empty travel time & trucks idle time. Truck loads are more appropriate for Pepsi because
of the use of warehouses & larger shipments which makes it cheap. Raw materials from the
suppliers are taken by using trucks, finished products are transferred to distributors, then
retailers using trucks. Pepsi have its own taskforce of small and large trucks & vehicles for
carrying goods, raw material. while the other distributors also use their private vehicles.
Water: This mode forms only a very small part of the total transport network. It is used for
shipping of empty cans .
Air: It is again a very small part of the entire transport network.
Design Options for a Transportation Network
Shipment via central DC with inventory storage using milk-runs: This is the main mode used
for transporting goods to consumers who are far away. Products are transmitted to the
distribution center in a particular region & are stored there. Tinier trucks then convey these
products to the local retailers as per the demand in smaller vehicles using milk runs. This
method is cost effective the reason behind this it saves on extreme transport cost that would
have been involved in transferring to each retailer directly to the supplier & also inhibits stock
outs because inventory is maintained closer to the retail outlets.

Retailer
(Shipping via Central DC)
Retailer
Retailer
Retailer
D.C Retailer
Retailer
Direct Shipping: This method is used for shipping products to key account holders such as
pizza hut and KFC.
Direct Shipping with Milk-Runs: This method is used for shipping post mix cylinders to
retailers within the for source fresh Pepsi. The shipment is made in milk runs.
Just –In –Time
Difficulties without Just-in-Time
• Without Just-In-Time, the production manager tries to maximize production-oriented goals

such as labour efficiency, equipment utilization and uptime which results in large batch
sizes which are dependent on availability of raw-materials. This optimizes the labour and
equipment utilization regardless of the expense.
• The purchasing manager tries to lower the overall cost of the company. So, they concentrate
on getting the best price without concerning about reliability of the suppliers.
• The transportation manager gets raw materials in and the finished goods out of the
operation. They try to optimize distributing network. They also try to lower cost and
reliability of logistics but it is possible only when the purchasing team could negotiate with
the supplier.

Improvement with using Just-In-Time (JIT)
• For delivering perishable products, just-in-time is one of the most effective solutions. In
just-in-time, delivery on time is a necessity.
• Just-in-time defines the way in which a manufacturing system should be managed. It

satisfies customers by assuring quality, availability of products, quick delivery and value
of money.
• The Pepsi brand and Pepsi-Cola products captured approximately one-third of the total
sales of soft drinks in the US.
• PepsiCo collaborated with 3PL provider Penske Logistics for managing its transportation.
Warehouse management is also provided by Penske for two Pepsi distribution centers in
North America.

Implementation
To achieve an on time delivery rate at

99.1%
Two objectives set by PepsiCo
To reduce cost of transport
➢ To achieve the above-mentioned objectives, PepsiCo applied new technology that gives
better organized data, supply chain visibility and access to real time information.
➢ In 2000, Penske changed transportation management technology of Pepsi from

propriety software to i2 transportation optimization solution. This increased flexibility
and gave better control on the transportation operation. It also made track of shipments
and implementation of alternative plans easier. By doing so, Pepsi has been able to
achieve its on time delivery goal.
➢ Pepsi’s transportation is joined to a central location to reduce costs. Penske established

a nationwide transporter rate re-negotiation and service valuation which improved cost
structure. With this centralization, allows intervention in a large scale to get the best
rates and services.
➢ Furthermore, Pepsi’s orders are acknowledged electronically and boosted to ensure

lowest transportation cost. Advanced technology is installed to select the lowest cost
carrier, consolidate shipments and find the best routes.
➢ PepsiCo used the JIT process for its supply chain management. To make this possible,
Pepsi partners with Penske which has provided them with i2 transportation optimization
solutions which has satisfied their consumers with on-time delivery and the advantage
to the company as it has also reduced transportation cost.

Limitations of Pepsi Supply Chain over Coco-Cola
1. PepsiCo has supplementary distribution systems for its beverages. Coca-Cola has for the
most part preserved distribution of its entire beverage line-up through its bottlers.
2. Pepsi bottling system is more disintegrated than Coca-Cola's
3. In a combined system negotiations involve less players and therefore take less time to gain
agreement. Which may be reason that why the Pepsi system has insulated in system
efficiency efforts. PepsiCo & its bottlers have proven a purchasing supportive to gain
purchasing power in buying raw materials.
4. While PepsiCo has been following international beverage acquisitions, those investments
will consumed time to produce major operating income.
5. PepsiCo alliance puts pressure on the impartial system bottlers to more voluntarily
consider agreements for warehouse distribution.

6. Conclusion
The primary objective of the report was to know distribution channel Strategy of PepsiCo & to
know the significance of Distribution channel strategy in Positioning of the product. The data
collected delivered a effectively for understanding the general organizational set up of PepsiCo
in India. By exploring the data & the literature review, the Sales & Distribution Network of
Pepsi is very solid and almost perfect. PepsiCo India had the first mover benefit when it entered
the market & it capitalized on that benefit to attract the market. Franchisee- based operations
combined with the Companys operations add asset to the whole presence of the Company in
the market. It is very significant to progress good relationship with the retailers by delivering
them better services & schemes. Maintaining the good relationship with the distributors are
essential for the firm because they are the core -part of the distribution channel.
PepsiCo is the world‘s largest beverages firm. It has twenty two brands under its product
portfolio & each generate more than $1 million turnover yearly. PepsiCo believes in out-of-
box‖ strategy & before it has been positive brand. Because their success is their effective supply
chain & logistics. There are three divisions in their supply chain- procurement, manufacturing
& distribution. They have third party explanations for their logistics operations. They have my
Sap business suits uses for their daily operations. With the help of those applications- they can
simply manage their day-to day operations. PepsiCo consider hub & spoke model for in the
supply chain process. PepsiCo has achieved well to timeout its paths. Now PepsiCo is standard
brand.

7. Recommendations:
• Pepsico doesn't have proper enabling technologies such as EDI , ERP , RFID and EDD
in India . They should be having that for the better performance of its supply chain
activities.
• These engagements would identify specific opportunities to improve operational
performance and reduce costs within the manufacturing, assembly, supply chain, and
customer support processes
• Pepsico should define specific process changes and the auto-id technology required to
streamline each process step.
• Pepsico should address the business, manufacturing, logistics, information technology,
and financial implications of RFID including starting points and scale-up plans.
• To improve efficiency, PepsiCo India should work to streamline fleet logistics and
balance day-to-day delivery routes.
• Pepsico should also maintain key supplier/delivery relationships.

8. Bibliography:
Anand. (2012, May 13). Business Today. Show TIme, pp. 1-6.
Armstrong, P. K. (2002). New Delhi: Prentice-Hall ofIndia Private Limited.
Datta, S. (2000, March-April). Globalisation and Representations of Supply Chain in Indian
Social Scientist, 28(3/4), pp. 71-82.
DNA. (2016, Spetember 26). Pepsico leading in Supply Chain in India, pp. 1-8.
Ernst and Young. (2011). Spotlight on India's Beverage Industry. Mumbai: Ernst and young.
Supply and demand. (2017). Retrieved from India One Stop:
http://www.indiaonestop.com/film.htm
FOLMSBEE. (2011). Can the Indian supply chain managemtn startegies go global? The
Hindu, 1-5.
Gaikwad, S. (2017, March 6).Pepsico over Coco Cola in Supply Chain. pp. 1-3.
Guo, J., & Noor, I. (2011). A study on SCM of Pepsico in India. International Journal of
Business and Social Sciences, 2(22).
Harper W. Boyd, J. R. (1999). In Marketing Research - Text and Cases (p. 360). Delhi: All
India Traveller Bookseller.
Harper W. Boyd, J. R. (1999). Marketing Research - Text and Cases. Delhi: All India
Traveller Bookseller.
Ibid. (n.d.).
Jain, N., Soneja, T., & Ahluwalia, J. (2016)Logistics and Suplly Chain. Deloitte.
K., U. (2012, July). E Commerce in India; Early birds, expensive worms. Consumer and
shopping Insights, p. 1.
Karnad, G. (1989, Fall). Pepsico in India. Daedalus, 118(4), pp. 330-352.
Li , N., & Zhang, P. (2001). SUPPLY CHAIN MANAGEMENT STARTEGIES :AN
ASSESSMENT OF RESEARCH. Eighth Americas Conference on Information
Systems.
Malhotra, N. K. (2004). Marketing Researeh-An Applied Orentation. In Fourth Edition (p.
321). Pearson Publication.
Mirza, S. A. (1979-1980, December-January). Outlook for the logistics. Social Scientist,
8(5/6), pp. 121-125.
NFDC. (2017). NFDC. Retrieved from NFDC India: https://www.nfdcindia.com/
O.R. Krishnaswami, M. R. (2007). Methodology of research in social sciences. Himalaya
Publishing House.

Pwc India. (2016).Pepsico to reach new heights in India thorugh its effeective supply chiain.
Mumbai: Pwc India.
Rui, Z. (2017, January 3).Pepsico reveals best dealers for 2016. pp. 1-5.
Schindler, D. R. (n.d.). In Marketing Research - Concepts and Cases (p. 444). New Delhi:
Tata McGraw Hill Education Private Limited.
Sontakki, C. N. (2010). Marketing Research. In C. Sontakki, Marketing Research (p. 333).
Supply Chain.
The Hindu. (2016, September 22). The Hindu. Pepsico’s revenues may cross Rs 9,300 cr by
FY17, pp. 1-2.

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A Report

Supply Chain Management of PEPSICO

Submitted By: Aayushi Singhvi, Kaushal Patel,

Submitted To: Dr. C. Venkata Ramana

Module: Logistics and Supply Chain

Date: 14th March 2018

TO WHOM SO EVER IT MAY CONCERN

UNIVERSITY, SURAT have done this project report on “Supply Chain

Management of PEPSICO” as a part of their academic module in Logistics

and Supply Chain Management in Block-7 , Semester-4 of MBA Programme

under the guidance of Dr. C. Venkata Ramana.

Dr. C. Venkata Ramana

Logistics and Supply Chain Management 2|Page

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1. Executive Summary ................................................................................................................ 5

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2.1 Industry Profile

Soft Drinks Industry

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The PepsiCo Family

Meet the three major divisions of the PepsiCo family:

• PepsiCo Americas Beverages.

• PepsiCo Americas Foods.

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Issue 2: Channel conflict

Issue 3: Environmental Impact

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Solution 1: Reducing demand and supply gap

Solution 2: Reducing channel conflict

Solution 3: Reducing environmental impact

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5.1 Demand Management:

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

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5.2 Customer Service:

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Improvements in information technology

• Packing Application Specialist (PACS) :- production & logistics processes automates.

• Transaction Processing System (TPS) :- 30 to 50,000 hour workweek saves.

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Supply chain management (SCM) is the management of a network of organized businesses

Supply Chain Strategy or Design

2. Storage: Raw and packing

3. Storage: Finished goods

Process Views of a Supply Chain

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Pricing and Revenue Management for Multiple Customer Segments

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Warehouse Operations: Associates will work either on a field-based or headquarters-based