IENG-322 logistics and supply chain
Report on Pepsico supply chain strategy
By:
Team Members ID:
Kamel Muhammad 18101066
Sara Alaa E-Din Arafat 18100459
Zeina Magdi Sabry 18100753
Mariam Amr Fathelbab 18100241
Mariam Ali Mohamed 18102088
Submitted to:
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Dr. Sally Kassem
HISTORY------------------------------------------------------------------------------------------------------------ 3
UNDERSTANDING THE SUPPLY CHAIN OF PEPSI--------------------------------------------------------------------4
COMPETITIVE STRATEGY (IDENTIFYING CUSTOMER NEEDS):---------------------------------------------------------5
Achieving the Strategic Fit--------------------------------------------------------------------------------------5
Pepsico absorptive capacity------------------------------------------------------------------------------------ 6
Application for the Outsourcing------------------------------------------------------------------------------7
Drivers of Supply Chain---------------------------------------------------------------------------------------- 9
Inventory Driver-------------------------------------------------------------------------------------------------- 9
Facility Driver--------------------------------------------------------------------------------------------------- 10
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History
PepsiCo could be a global leader in handy snacks, foods and beverages, with sales of
more than$39 billion and over 185,000 employees. The company includes PepsiCo
Americas Foods (PAF), PepsiCo Americas Beverages (PAB) and PepsiCo
International (PI). PAF consists of Frito-Lay North America, Quaker Foods North
America and all Latin America food and snack businesses, consisting of Sabritas and
Gamesa organizations in Mexico. PAB consists of PepsiCoBeverages North America
and every one Spanish American beverage organizations. PI consists of all
PepsiCobusinesses inside the UK, Europe, Asia, geographical region and Africa.
PepsiCo manufacturers are present in almost 2 hundred countries and generate income
on the retail degree of greater than $98billion. Some of PepsiCo's brand names are
greater than 100-years-old, however the business enterprise is young. PepsiCo
changed into based in 1965 via the merger of Pepsi-Cola and Frito-Lay. Tropicana
became acquired in 1998 and PepsiCo merged with The Quaker Oats Company,
consisting of Gatorade, in 2001.PepsiCo gives product selections to satisfy wide
variety needs and preference -- from fun-for-you gadgets to product selections that
make contributions to more healthy lifestyles. PepsiCo’s mission is: “To be the
world's premier consumer “Products Company” focused on convenient foods and
beverages. We seek to produce healthy financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business partners and
the communities in which we operate. And in everything we do, we strive
for honesty, fairness and integrity.”(www.pepsico.com)
The AMESA area includes the Africa, Middle East and South Asia regions, and
includes many leading global and local snack brands along with Lay’s, Cheetos, and
Doritos, together with local favourites including Chipsy (Egypt), Simba (South
Africa) and Kurkure (India and Pakistan), in addition to diverse beverage
manufacturers such as 7UP, Pepsi, Aquafina, Mtn Dew, Mirinda, and Sting. The
AMESA area covers a huge span of growing and rising markets, along with main
countries such as Egypt, Saudi Arabia, India, Pakistan and South Africa.
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Understanding the Supply Chain of Pepsi
The goal of each supply chain ought to be to maximise the overall value generated.
The value a supply chain generates is the difference between what the final product is
worth to the customer and the costs the supply chain spends in filling the customer’s
request.
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:
With push process execution starts with anticipation to a customer order. Pepsi has a
seasonal demand. Just in time concept can be applied in the non-seasonal duration and
is not as applicable during seasonal durations. All strategies which can be a part of the
procurement cycle, manufacturing cycle, replenishment cycle, and customer order
cycle are push methods. Pepsi Sales order and processing: The Shipping Manager gets
sales order from Sales Team, distributors via telephone, fax & e mail one day earlier
than dispatch. The sales are made to base distributors on advance fee in opposition to
orders then delivery manager plans in line with the demand of distributors day by day.
PepsiCo's overall mission is to increase the value of shareholder's investment. They
do this via sales growth, cost controls and investment of resources. They
believe their industrial achievement relies upon providing high quality and value to
their customers; offering safe, wholesome, economically green and environmentally
sound products while offering a fair return to their investors whilst sticking to the best
requirements of integrity. A customer whilst purchasing a bottle of Pepsi
will consider product quality, price and availability of the product. Thus, Pepsi
especially focuses its competitive strategy as to providing enough variety, affordable
prices, and making sure of the availability of the product.
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Competitive strategy (Identifying customer needs):
PepsiCo strives to understand the customer needs for every segment and the
uncertainty the supply chain goes through in meeting those needs. As Haidari deals
with liquids, which are a fast-moving consumer good, it is aware of the necessities of
consumers. Pepsi is known to be a beverage which is refreshing during summer,
and taken often during winter, with demand hiking around occasions such as Eid
and weddings. PepsiCo caters to towns and rural areas. It is aware the needs of each.
As demand for beverages is seasonal, the amount of product required for every lot is
processed according to demand. Consumers usually need a small response time, high
service level, affordable price and variety to some extend (for example health aware
customers prefer diet variations of sodas)
Effi ciency vs responsiveness
The efficiency and responsiveness varies according to the consumer needs, required
demand uncertainty, type of product and market segments. In remote regions the
corporation specializes in being on the efficient part as means of transportation
could make the product notably expensive. According to the company it does not
cope with distributors who do not have 20 to 25vehicles, because the company is
conscious towards cost reduction, uses slow and less expensive modes of
transportation, the demand is certain, and economies of scale in production is applied,
the product Pepsi is more inclined towards being somewhat efficient. In cities, the
company focuses its interest on being notably responsive as Pepsi has to fulfil short
lead time, meet a high service level, deal with a big variety of products and meet
wide ranges of amounts demanded particularly on the retail stage.
Achieving the Strategic Fit
Making one stage on responsive side permits the other stage to focus on being on the
efficient side. The Pepsi supply chain assign distinctive roles to its distinctive stages,
the company has to determine either to switch the responsiveness to the manufacture
stage or to the retailer stage. While discussing the Pepsi’s supply capability it's far
visible that Pepsi has a tendency to be on the responsive side in the cities and more
efficient in towns. Therefore, shifting the responsiveness to the retailer and
distributor, allows them to face the greater demands uncertainty. This permits
the manufacturer and supplier to be focus on being more efficient.
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Pepsico absorptive capacity
Absorptive capacity refers to a company's ability to borrow critical knowledge from
the outside world in order to gain a competitive advantage. In view of its information
and communication issues, Pepsi will outsource its information and communication
technology (ICT) functions to a specialised firm in order to benefit from its
knowledge and exploit its capabilities. Partnering with this specialised contractor
demonstrates that the firm believes in the partner's policies and business philosophy,
and that their services will offer value to Pepsi. In addition, the firm will contract for
transportation services with regional logistic companies, freeing up time to focus on
core business while benefiting from the firm's expertise and experience with road
networks.
In order to respond to changing market demands, the company recently expanded its
product line to include grains. The organisation, in particular, use market research and
information to tailor its services to the preferences of its clients. Companies, for
example, seek knowledge from the environment in order to develop a better strategy,
policy, or product through innovation.
Justi fi cati on of Outsourcing Strategy and Its Implementati on
PepsiCo has a large and diverse portfolio, putting it at risk of incurring a variety of
expenditures as a result of its supply chain activities. Outsourcing is an appropriate
technique for the company to use since it allows it to focus on its core businesses
while delegating non-essential business activities to other companies The Company’s
complicated nature necessitates assuring knowledge and efficiency in every sector of
the industry, which can be accomplished by outsourcing to organisations with
expertise in the field.
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By contracting the project to a competent and specialised party, PepsiCo Company
would get access to resources and services. As a result, it will improve the company's
performance by increasing the likelihood of achieving the business goals and
objectives.
The company will be given the opportunity to sell itself.
Application for the Outsourcing
Depending on the factors and complexity of operations, the logistics expenses for
every given organisation can skyrocket. PepsiCo Operations, for example, has a large
network that will expose the corporation to a variety of cost risks.
As a result, outsourcing logistics services will transfer all of the business's risks and
liabilities, including responsibility for losses or theft, time factor, and other
unexpected or unforeseeable costs due to environmental dynamics. The possibility of
losing property owing to weather conditions, poor road infrastructure, and burglary
are all potential risks. If this occurs, the transportation company will be fully liable for
the losses as a result of the contract's passing of liability, which will include important
deliverables for monitoring the outsourced firm's performance and tying payment to
performance. In addition, the contract's KPI provision and agreement will work to
encourage the team, ensuring that the expected outcomes are achieved.
Importantly, the outsourced firm's key performance indicators will include timely
deliveries and the lack of breakages or damages, decreasing the inconvenience to the
company's consumers as a result of bad service delivery. PepsiCo will eventually be
involved in its own business.
Primary activity, resulting in improved performance. If the corporation outsources, it
will reap even more rewards. For each region in which it operates, it hires a third-
party logistics firm PepsiCo could approach transportation companies in various
places to exploit their road network mastery of the network and market reputation.
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Notably, the outsourcing process will be carried out with due diligence to ensure that
the most relevant and compatible vendors are hired to provide services to the
company.
Engaging a supplier with a similar culture and business concept to avoid ideological
conflict and choosing ethical suppliers to avoid ruining the company's image are both
important factors. Close monitoring should also be conducted to verify that the project
is on track and that any developing concerns are addressed quickly to prevent
negative consequences for the company's operations.
PepsiCo would also have to keep its confidential information out of the hands of
outside parties.
Outsourcing Informati on and Communicati on Technology
PepsiCo will also outsource the region's information and technology functions to a
market leader. Due to the increased focus on core business activities and the process
benefits of technology, the process will also move the organisation towards its goals
and objectives. The outsourced firm will have to research PepsiCo's current systems
and processes in order to develop a solution that will add value to the company's
operations and increase efficiency. Notably,
The outsourced company will take care not to cause any problems, instead
guaranteeing a smooth transfer to the new digital system.
The company's communication and data exchange needs will be met by the ICT
system. Notably, the existing weekly employees' meeting structure is insufficient for
sharing and updating information among the members. Data and communication are
primarily important when they are provided to stimulate decision-making and align
the process and system before the organisation incurs expenditures. Furthermore, the
new ICT infrastructure must be user-friendly in order to avoid glitches in the current
system As a result, the outsourced firm will need to conduct a user analysis and
design the product for them.
Correspondingly. Furthermore, the contracted organisation must strategically present
and implement the project in order to acquire the customers' attention and
endorsement, hence enhancing its chances of success. Otherwise, the project may
meet sabotage-level pushback.
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Another key feature of the ICT system is the necessity to improve security in order to
protect against potential privacy breaches by cyber criminals. The outsourced firm
will be in a better position to provide system backup and ongoing maintenance,
ensuring that the system operates and manages efficiently. Finally, the firm will
prepare and conduct new system training sessions, aligning users as needed to avoid
affecting individual performance. Another crucial step is for the contractor to formally
launch the new system and train the users or workers on the vital aspects they need to
know.
Drivers of Supply Chain
Framework for Structuring Drivers:
The framework was created with the goal of achieving strategic alignment between
competitive and supply chain strategies. Pepsi's competitive strategy is to give a wide
range of items fast; at the same time, the supply chain strategy is to make that variety
of products a reality. Pepsi primarily employs a flexible supply chain strategy. The
proper deployment of supply chain drivers allows Pepsi's business plan to be aligned
with a matching supply chain strategy. Pepsi must concurrently deal with a variety of
market segments. Most of the time, the method must be responsive enough to grow
significantly in order to compete with uncertain demand, but in several areas, demand
is certain and fairly predictable, thus it must incorporate an efficient supply chain
strategy.
Inventory Driver
Haidri has devised a thorough strategy to ensure sufficient inventory levels to
efficiently meet market demand. The main inventory store has been created within the
main plant area Kahuta road, Rawalpindi, for this reason. It has a storage capacity of
120,000 square feet, and the space is employed both horizontally and vertically. The
shipping department is in charge of product order storage and subsequent
displacement. The inventory capacity is used and maintained in collaboration with the
production department, and it is based on long-term production estimates. Apart from
the main storage facility, Haidri has constructed more than ten storage facilities in
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Rawalpindi and Islamabad that are closer to the market. Increasing inventory allows
the supply to respond more quickly to the needs of the customers.
Managers at Haidri Beverages bear a high inventory cost in order to maintain
maximum inventory levels while lowering production and transportation costs.
Facility Driver
The function of facilities in Haidri Beverages' supply chain is critical for ensuring
responsive strategy implementation. To respond efficiently to the unpredictability in
demand, Pepsi has created a flexible and product-focused production plant. The
inventory storage facilities have been constructed to provide the highest potential
capacity for the inventory. The facility's significant quantity of extra capacity allows it
to be very flexible and adapt to large surges in demand. The facilities were
strategically positioned near the market to match with the responsive supply chain
strategy.
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Reference list:
1. (2021). Retrieved 30 December 2021, from
https://www.studocu.com/row/document/bahria-university/supplu-chain-
management/pepsi-logistics/6758882
2.
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