Pepsi Co's

8/8/2019 Pepsi Co's

http://slidepdf.com/reader/full/pepsi-cos 1/22

PepsiCo¶s Distribution andPepsiCo¶s Distribution andLogistics OperationsLogistics Operations

ByBy-- Aaditya Rahatikar Aaditya Rahatikar Abhijeet Kendole Abhijeet Kendole

Abhijit Kadam Abhijit Kadam Abhilash Payikkad Abhilash Payikkad

Aditi Pradhan Aditi Pradhan Aditya Tiple Aditya Tiple

8/8/2019 Pepsi Co's


Introduction & Background NoteIntroduction & Background Note

Headquartered in New York, U.S.A.Headquartered in New York, U.S.A.

One of the world¶s leading beverage andOne of the world¶s leading beverage andsnack food company.snack food company.

The Pepsi Cola Company began in 1898 by aThe Pepsi Cola Company began in 1898 by aNC Pharmacist and Industrialist CalebNC Pharmacist and Industrialist CalebBradham.Bradham.

Started marketing PepsiStarted marketing Pepsi--Cola in 1903.Cola in 1903. It only became known as PepsiCo when itIt only became known as PepsiCo when it

merged with Frito Lay in 1965.merged with Frito Lay in 1965.

8/8/2019 Pepsi Co's


In the 1970, invention of PET bottlles raised theIn the 1970, invention of PET bottlles raised theproductivity manifolds.productivity manifolds.

Diversified into restaurant business through theDiversified into restaurant business through theacquisition of Pizza Hut(1977), Taco Bell(1978),acquisition of Pizza Hut(1977), Taco Bell(1978),and Kentucky Fried Chicken (1986).and Kentucky Fried Chicken (1986).

During the early and midDuring the early and mid--1990,PepsiCo tried to1990,PepsiCo tried toexpand its overseas bottling operations.expand its overseas bottling operations.

In 1998, Pepsi Bottling Group (PBG) was formedIn 1998, Pepsi Bottling Group (PBG) was formedto improve margin on its beverages operations.to improve margin on its beverages operations.

In 1999, PepsiCo sold about 65% of its stake inIn 1999, PepsiCo sold about 65% of its stake inPBG through on IPO.PBG through on IPO.

Indra Nooyi is the current C.E.OIndra Nooyi is the current C.E.O

8/8/2019 Pepsi Co's


PepsiCo Group of CompaniesPepsiCo Group of Companies

It has 6 group companiesIt has 6 group companies

1.1. FritoFrito--Lay North America (FLNA)Lay North America (FLNA)

2.2. FritoFrito--Lay International (FLI)Lay International (FLI)

3.3. PepsiPepsi--Cola North America (PCNA)Cola North America (PCNA)

4.4. Gatorade/Tropicana North America (GTNA)Gatorade/Tropicana North America (GTNA)

5.5. PepsiCo Beverages International (PBI)PepsiCo Beverages International (PBI)

6.6. Quaker Food North America (QFNA)Quaker Food North America (QFNA)

8/8/2019 Pepsi Co's


Market Share in the U.S.Market Share in the U.S.

BeveragesI

ndustryBeveragesI

ndustry

28%

27%12%

5%

28%

PepsiCo

Coca Cola

CadburyScheweppes

Nestle

Others

Source: PepsiCo Annual Report 2002

www.pepsico.com

8/8/2019 Pepsi Co's


PepsiCo¶s FinancialsPepsiCo¶s Financials

Year endedYear endedDecember December 3131

20002000 20012001 20022002

RevenuesRevenues 22.33722.337 23.51223.512 25.11225.112

OperatingOperating

ProfitsProfits

3.8183.818 4.0214.021 4.7304.730

Net IncomeNet Income 2.5432.543 2.6622.662 3.3133.313

In $ billion

Sour : o Annual R ort 2002

8/8/2019 Pepsi Co's


Two of the most significant aspects of Two of the most significant aspects of PepsiCo¶s operations werePepsiCo¶s operations were

1.1. PepsiCo¶s Distribution OperationsPepsiCo¶s Distribution Operations

2.2. PepsiCo¶s Logistics OperationsPepsiCo¶s Logistics Operations

8/8/2019 Pepsi Co's


PepsiCo¶s Distribution OperationsPepsiCo¶s Distribution Operations

Since its inception, pepsiCo attached a lotSince its inception, pepsiCo attached a lotof importance to its distribution operations.of importance to its distribution operations.

PepsiCo¶s distribution system was aimedPepsiCo¶s distribution system was aimedat making available all products within aat making available all products within areachable distance by customer.reachable distance by customer.

PepsiCo made conscious efforts to adoptPepsiCo made conscious efforts to adoptto needs and preferences of globalto needs and preferences of globalcustomers.customers.

8/8/2019 Pepsi Co's


Types of Distribution ModelsTypes of Distribution Models

1.D r t Stor D liver (DSD)1.Dir ect Stor e Deliver (DSD) Oldest method of distribution.Oldest method of distribution. Used for delicate and perishable products suchUsed for delicate and perishable products such

as chipsas chips Arranged to attract maximum customers Arranged to attract maximum customers Company employees take new orders fromCompany employees take new orders from

grocery and convenience stores and deliver thegrocery and convenience stores and deliver theprevious orders to the stores.previous orders to the stores.

Employees were responsible for putting theEmployees were responsible for putting theproducts on stores shelves and also ensuringproducts on stores shelves and also ensuringtimely delivery.timely delivery.

8/8/2019 Pepsi Co's


Benefit of DSD to r etailer Benefit of DSD to r etailer Labour cost required for unloading the trucksLabour cost required for unloading the trucks

and placing the products on shelves wasand placing the products on shelves waseliminated.eliminated.

Frequent replenishment of stocks.Frequent replenishment of stocks.

Retailers were given 30 days credit period toRetailers were given 30 days credit period to

make payment to avoid cost burden.make payment to avoid cost burden.

8/8/2019 Pepsi Co's


2.Br oker War ehouse Distr ibution (BWD2.Br oker War ehouse Distr ibution (BWD))

Used for products which are less perishable andUsed for products which are less perishable anddelicatedelicate

Use third party distributor to distribute productsUse third party distributor to distribute productsto the retail stores from company warehouse.to the retail stores from company warehouse.

The items under category includedThe items under category included

beverages(Pepsi,mountain dewbeverages(Pepsi,mountain dewetc),juices(tropicana),and sports juicesetc),juices(tropicana),and sports juices(Gatorade).(Gatorade).

8/8/2019 Pepsi Co's


3.Ven ing & Food Ser vice (V&FS)3.Vending & Food Ser vice (V&FS) PespiCo¶s V&FS sales personnel distrubuted itsPespiCo¶s V&FS sales personnel distrubuted its

products through third party V&FS and bottlingproducts through third party V&FS and bottling

companies.companies. Through this system ,the products were madeThrough this system ,the products were made

available in school and colleges,stadiums.officeavailable in school and colleges,stadiums.officepremises and restaurants etc.premises and restaurants etc.

PepsiCo¶ developed one of the largest V&FSPepsiCo¶ developed one of the largest V&FSsales force in US which generated revenues of sales force in US which generated revenues of over $1 bn every year.over $1 bn every year.

8/8/2019 Pepsi Co's


PepsiCo¶s Logistics OperationsPepsiCo¶s Logistics Operations

For effective management of DistributionFor effective management of Distributionsystem, PepsiCo has put in place Advancedsystem, PepsiCo has put in place AdvancedLogistics Systems.Logistics Systems.

PepsiCo sold beverage concentrate to bottlers,PepsiCo sold beverage concentrate to bottlers,

who added Co2,sweetner and water to makewho added Co2,sweetner and water to makebeverages and beverage syrup.beverages and beverage syrup.

Bottling companies are owned & operated byBottling companies are owned & operated bylocal companies in countries where PepsiColocal companies in countries where PepsiCo

operatedoperated Bottlers had to confirm to the product quality andBottlers had to confirm to the product quality and

uniformity standards described by PepsiCo.uniformity standards described by PepsiCo.

8/8/2019 Pepsi Co's


Following are PepsiCo¶s leading bottlers:Following are PepsiCo¶s leading bottlers:1.1. epsi Bottling Gr oup ( BG)epsi Bottling Gr oup ( BG)

2.2. epsi Bottling Ventur es ( PBV)Pepsi Bottling Ventur es ( PBV)

3.3. Pepsi Amer icas Inc (PAS)Pepsi Amer icas Inc (PAS)

Operating in Central Europe, Caribbean, andOperating in Central Europe, Caribbean, andCentral Corridor in the U.S.Central Corridor in the U.S.

8/8/2019 Pepsi Co's


PepsiCo¶s Logistics operations has twoPepsiCo¶s Logistics operations has twomain phases:main phases:

1.1. Beverage manufacturing unit to BottlersBeverage manufacturing unit to Bottlers

2. Bottlers to Retail Outlets2. Bottlers to Retail Outlets

8/8/2019 Pepsi Co's


Beverage Manufacturing unit toBeverage Manufacturing unit to

BottlersBottlers Pepsi Cola North America (PCNA) produced and soldPepsi Cola North America (PCNA) produced and soldbeverages and beverage concentrate to bottlingbeverages and beverage concentrate to bottlingcompanies in U.S. and Canada.companies in U.S. and Canada.

Its main objective was to reach the accuracy level of Its main objective was to reach the accuracy level of

99.1% in terms of timely delivery and to reduce99.1% in terms of timely delivery and to reducetransportation cost.transportation cost.

PCNA tied up TPL company Penske who replacedPCNA tied up TPL company Penske who replacedPepsiCo¶s Transportation management technology withPepsiCo¶s Transportation management technology withTransportation Optimization Software (TOS)Transportation Optimization Software (TOS)

TOS closely monitors movement of products fromTOS closely monitors movement of products fromfacilities to bottling plant and helps in making necessaryfacilities to bottling plant and helps in making necessarychanges in the route.changes in the route.

8/8/2019 Pepsi Co's


TOS facilitates Electronic Receipt of TOS facilitates Electronic Receipt of Orders and helped in planning appropriateOrders and helped in planning appropriate

delivery routes and schedules in quickdelivery routes and schedules in quicktime.time.

It also helps company to identify theIt also helps company to identify the

Shippers offering lowest shipping cost andShippers offering lowest shipping cost andspot the best routes.spot the best routes.

8/8/2019 Pepsi Co's


Bottlers to Retail OutletsBottlers to Retail Outlets

Pepsi Americas (PAS) produced,Pepsi Americas (PAS) produced,distributed and promoted major PepsiCo¶sdistributed and promoted major PepsiCo¶sbrand.brand.

PAS ensures the timely delivery,fullPAS ensures the timely delivery,fullcapacity utilization of its trucks and quicker capacity utilization of its trucks and quicker replenishment at the storesreplenishment at the stores

Its main aim is to continously increaseIts main aim is to continously increasesales and productivity levels.sales and productivity levels.

8/8/2019 Pepsi Co's


PAS replaced its various business systems withPAS replaced its various business systems withan integrated ERP package and mobilean integrated ERP package and mobile

computing system using wireless Local Areacomputing system using wireless Local AreaNetwork (WLAN) and wireless Wide AreaNetwork (WLAN) and wireless Wide AreaNetwork (WWAN).Network (WWAN).

PAS replaced Handheld computers with PDTPAS replaced Handheld computers with PDT8000 computers which equipped with integrated8000 computers which equipped with integratedbarcode scanners,numeric keyboard andbarcode scanners,numeric keyboard andportable printers.portable printers.

ASM

¶s feed the orders in PDT and send that ASM

¶s feed the orders in PDT and send thatinformation to sales system at distributioninformation to sales system at distributioncentres.centres.

8/8/2019 Pepsi Co's


The main advantage of WLAN was that the cost of The main advantage of WLAN was that the cost of maintaining the infrastructure for handhelds wasmaintaining the infrastructure for handhelds was

reduced.reduced. The ASM¶s could view data relating to marketThe ASM¶s could view data relating to market

trend,identify consumer buying behaviour and for trend,identify consumer buying behaviour and for comparing sales in various stores.comparing sales in various stores.

Helped to improve the logistics operation resultingHelped to improve the logistics operation resultingin enhanced efficiency and precision.in enhanced efficiency and precision.

8/8/2019 Pepsi Co's


Drawbacks of Existing ModelsDrawbacks of Existing Models

Bottlers functioned more or lessBottlers functioned more or lessindependently.independently.

PepsiCo¶s major units and bottlersPepsiCo¶s major units and bottlersinvested in their own wireless technology.invested in their own wireless technology.

No ERP connecting this units.No ERP connecting this units.

Separate distribution systems serving theSeparate distribution systems serving the

same retail outlets.same retail outlets. Efforts and resources were not pooledEfforts and resources were not pooled

together.together.

8/8/2019 Pepsi Co's


Suggested AlternativesSuggested Alternatives

CPFR (Collaborative Planning & ForecastingCPFR (Collaborative Planning & ForecastingReplenishment)Replenishment)

VMI (Vendor Managed Inventory)VMI (Vendor Managed Inventory)

JITJIT--IIII DRP (Distribution Requirement Planning)DRP (Distribution Requirement Planning)

Cross DockingCross Docking

WMS (Warehouse Management Systems)WMS (Warehouse Management Systems)

4PL4PL GPS & GIS TechnologyGPS & GIS Technology

APS (Advanced Planning & Scheduling) APS (Advanced Planning & Scheduling)

SCORSCOR

Documents

Pepsi Co's