Supply Chain Management is the process of planning, implementing, and controlling the operations
ofsupply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply
chainmanagement spans all movement and storage of raw materials, work-in-process inventory, and
finishedgoods from point-of-origin to point-of-consumption. It is a cross functional approach to
managing themovement of raw materials into an organization and the movement of finished goods
out of theorganization toward the end consumer.
Supply Chain management is also the combination of art and science of improving the way
companyfinds the raw components it needs to make a product or service and deliver it to customers.
It seeks toenhance competitive performance by closely integrating the internal functions within a
company andeffectively linking them with external operations of suppliers and channel members.
Moreover, this hasbeen a prominent concern for both large and small companies as they strive for
better quality andhigher customer satisfaction.
In a supply chain, a company links to its supplier upstream and to its distributors downstream in
orderto serve its customer. The goal of supply chain management is to provide maximum customer
service atthe lowest possible costs.
Companies now are competing supply chain-to-supply chain rather than enterprise-toenterpriserequiring for more intimately connected relationships. Customer markets and supply chains
are nolonger limited by physical proximity, and businesses are sourcing from and managing a greater
numberof far-flung partners and channels.
Success of a company now depends on effective global supply chain management, its ability to
deliverthe right product to the right market at the right time. The complexity involved in managing
supplychains that span continents and dominate markets demands strategies and systems that are
Managing Supply Chain for Global Competitiveness takes a strategic look at all of the core functions
ofglobal supply chain management which includes product design, planning and forecasting,
sourcing,outsourcing, manufacturing, logistics, distribution, and fulfilment. An example to illustrate
thistheory on the supply chain management is the PepsiCo, Inc.
Pepsi Co History
PepsiCo, a Fortune 500, American Multinational Corporation is under the food consumer
productindustry and is the world leader in convenient foods and beverages. The Pepsi brand and
otherPepsiColaproducts account for nearly one-third of the total soft drink sales in the United States.
In orderforthe company to make sure that their products reach the customers, the company needs a
efficientsupply chain solutions.
It was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired
in1998 and PepsiCo merged with The Quaker Oats Company, including the Gatorade in 2001.
PepsiCooffers product choices to meet a broad variety of needs and preference -- from fun-for-you
items toproduct choices that contribute to healthier lifestyles. PepsiCo owns some of the world's most
popularbrands, including Pepsi-Cola, Mountain Dew, Diet Pepsi, Lay's, Doritos, Tropicana, Gatorade,
andQuaker. Coca-Cola Company in market value for the first time in 112 years since both companies
beganto compete. Other brands include Caffeine-Free Pepsi, Diet Pepsi/Pepsi Light, Caffeine-Free
Diet Pepsi,Caffeine-Free Pepsi Light, Wild Cherry Pepsi, Pepsi Lime, Pepsi Max, Pepsi Twist and
Pepsi ONE,7 Up,Aquafina (Flavour Splash, Alive, and Twist/Burst),Propel Fitness Water, SoBe,
Quaker Milk Chillers.
The Frito-Lay brands are : Cheetos,Fritos,Go Snacks, James' Grandma's Cookies, Hamka's, Lay's,
MissVickie's, Munchies, Sandora, Santitas, The Smith's Snackfood Company, Sun Chips, Kurkure,
Tostitosand some of the Quaker Oats brands include Aunt Jemima, Capone Crunch, Chewy Granola
bars,Coqueiro, Crisp'ums, Cruesli, FrescAvena, King Vitaman, Life, Oatso Simple, Quake, Quisp,
PepsiCo's overall mission is to increase the value of shareholder's investment. They do this
through sales growth, cost controls and wise investment of resources.
They believe their commercial success depends upon offering quality and value to their
consumers and customers; providing products that are safe, wholesome, economically
efficient and environmentally sound; and providing a fair return to their investors while
adhering to the highest standards of integrity.
A customer while purchasing a bottle of Pepsi will consider product quality, price and
availability of the product. Thus, Pepsi focuses its competitive strategy as to producing
sufficient variety, reasonable prices, and the availability of the product.
Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. During her
time,healthier snacks have been marketed and the company is striving for a net-zero impact on
theenvironment. This focus on healthier foods and lifestyles is part of Nooyi's "Performance
withPurpose" philosophy. In 2007, Nooyi spent $1.3 billion on healthier-alternative brands like
NakedJuice, a California maker of soy drinks and organic juice.
Today, beverage distribution and bottling is undertaken primarily by associated companies such as
ThePepsi Bottling Group and Pepsi Americas. PepsiCo is a SIC 2080 (beverage) company.
PepsiCo has also recently acquired a so% stake in U.S.-based Sabra Dipping Company.
PepsiCo also has formed partnerships with several brands it does not own, in order to distribute
theseor market them with its own brands.
Competitive and Supply Chain Strategies
In its business, diversity and inclusion provide a competitive advantage that drives business
Its brands appeal to an extraordinarily diverse array of customers and they are sold by an
equally diverse group of retailers.
It understands the needs of our consumers and customers
Uses diversity in our supplier base and in everything we do.
Commitment to purchase from a supplier base representative of our employees, consumers,
retail customers and communities.
Developing partnerships with minority-owned and women-owned suppliers helps us build the
world-class supplier base we need.
Creates mutually beneficial relationships that expand PepsiCo's sphere of activity. It helps
build community infrastructure by providing employment, training, role models, buying from
other minority and women-owned business and supporting community organizations
Thus the major sustainable advantages that give PepsiCo a competitive edge as they operate in
Big, muscular brands,
Proven ability to innovate and create differentiated products and
Powerful go-to-market systems.
PepsiCo's Supply Chain Management
Difficulties without Just-in-Time
When an operation of the company was not just-in-time based, the demand or production
planner strived to optimize production-oriented goals and objectives such as equipment
utilization, labour efficiency, throughput and uptime.
Optimizing these goals often leads to run large batch sizes that are dependent on the
availability of raw materials. This optimizes the equipment and labour utilization but the
production planners and managers had not been looking at the expense of the bigger picture.
The sourcing or purchasing managers strived towards reducing company's spending overall.
This manager consolidated suppliers offering products or materials at the lowest per unit
costs through buying in volume.
They even got the shipping and freight costs included in the purchase price, which led to the
increase in the price of the commodity.
Purchasing managers focused on getting the best price, not putting into consideration the
supplier performance and reliability.
The logistics/transportation manager was tacked with getting raw materials in and the finished
goods out of the production process and seek to optimize the transportation and distributing
network. This manager focused on the lowest cost and reliability of the logistics or
transportation solutions. But lowest cost could only be attained if the purchasing team
negotiates a delivered cost package deal with the supplier and the supplier is responsible of
the reliability and performance of the carriers or transporters.
Improvement with using Just-In-Time (JIT)
When it comes to delivering high cost and perishable products to manufacturing sites, just-in
time (JIT) remains one of the most cost-effective supply chain solutions. In JIT process, on
time delivery is an absolute necessity.
Just-in-Time (JIT) is a philosophy that defines the manner in which a manufacturing system
should be managed. It enhances customer satisfaction in terms of availability of options,
assurance of quality, prompt delivery times, and value of money.
The Pepsi brand and other Pepsi-Cola products accounted for nearly one-third of the total soft
drink sales in the United States. In order to ensure that PepsiCo's concentrates reaches
bottlers as needed during the production had to reach them JIT, they partnered with 3PL
provider Penske Logistics to manage its transportation. Penske also provides warehouse
management for two Pepsi distribution centres in North America.
I2 Transportation is a part of end to end solution for planning, execution, and management of
the entire transportation cycle.
It is designed to enable an organization to utilize and manage an entire transportation
network, as well as reduce cost while improving transport performance.
I2 transportation is designed to employ sophisticated optimization and data techniques to
define and evaluate alternative transportation strategies. It is also designed to provide
comprehensive data management, analytics, and reporting of key transportation cost and
PepsiCo set two objectives for transportation management. One was to achieve an on-time delivery
rateat 99.1% and another was to reduce transportation costs. It empowered with optimized processes
andtechnology that enable the team to perform at the highest possible level. With the application of
newtechnology that provides greater supply chain visibility, better organized data, and access to
higher levelof real time or near real time information, even the best team can improve their
In 2000, Penske converted Pepsi's transportation management technology from propriety software
toi2 transportation optimization solution. I2 transportation platform was enhanced with the addition
ofinterface between the two companies.
In addition, Penske's partnership with Business objects provided comprehensive supply chain
datafrom its data warehouse, analysis and management applications. Penske's with use of i2
transportationcould track performance at every stage in the process which increased flexibility and
provided greatercontrol over the transportation operation. This increase in visibility made it easier to
keep track ofshipments, revise routes and schedules to accommodate unforeseen changes and
implement alternativeplans to counter delays. By Penske's putting a solution in place to track and
measure everyshipment, Pepsi has been able to provide an on-time delivery performance of
Pepsi's transportation is consolidated to a central location to reduce costs. Penske also provided
anationwide carrier rate re-negotiation and service assessment which improved cost structure
andachieve on-time delivery goal. With this centralization, allows negotiation in a large scale to secure
thebest rates and services.
Furthermore, Pepsi's orders are received electronically and optimized to ensure lowest
transportationcost. Advanced technology is deployed to select the lowest cost carrier, find the best
routes andconsolidate shipments. Optimal load configuration ensures maximization of each truckload
In summary, PepsiCo used the JIT process to its supply chain management. To make this
possible,Pepsi partners with Penske that has provide them with i2 transportation optimization
solutions whichhas satisfies their consumer with the on-time delivery and with the benefit to the
company for it hasalso reduce transportation cost.
I2 Supply Chain Visibility
With shorter lifecycles and lead times-to customers demanding faster results and more
responsiveservice. Globalization and outsourcing have added to the complexity, resulting in more
diversifiedsupply chains. The number of supply chain partners, as well as the amount of geographic
dispersion,has increased dramatically as a result.
To ensure that their order-to-delivery performance is not impacted, companies need to have
greatercoordination and visibility into the material flow across the supply chain.
Increase Global Visibility
With Companies have access to global visibility into all of their critical supply chain activities and
partnerships.It allows organizations to respond more quickly and effectively to a wide range
ofunplanned and potentially disruptive supply and demand events. Supply-related events can
includeproduction bottlenecks, fulfilment delays such as port strikes and customs delays, and
suppliershortages. Demand-side events might include customer orders that are greater than forecasts
orchanges to orders that have already been placed.
I2 Supply Chain Visibility is designed to manage these events, assess their impact, and orchestrate
arapid and practical resolution while providing a unified view of the supply chain. The solution can
alsoincorporate packaged business process packs for replenishment, fulfilment, and manufacturing,
andthese packages can be configured to meet customer-specific requirements.
i2 Supply Chain Visibility also enables companies to close the loop between traditional planning
andexecution processes. It enables better understanding of orders, inventory, and logistics data.
management,warehouse management, logistics, and inventory applications for the flow of both
domestic andinternational goods. A series of predefined, extensible events and exceptions support
each workflowand a visual "studio" allows workflows and events to be extended, configured, and
customized to meetspecific enterprise requirements. I2 Supply Chain Visibility delivers a robust
technology that is scalableand extensible,and that operates smoothly in a distributed computing
Inbound and outbound tracking of order, inventory, and logistics flows
Domestic and international flows that track multi-leg and multi-modal shipments
Visibility into exceptions and events across orders, inventory, and shipments
Role-based views for buyers, suppliers, analysts, and 3PL vendors
High degree of permissibility and privacy controls
Track-and-trace inventory across multiple locations
Configurable event detection mechanism and customizable event management
Event chaining such as linking of related events, audit trails, context-based problem
prioritization and extensive notification options including e-mail, e-mail digest, pagers,
and cell phones
Calendars, internationalization (i18n), and multi-time zone support enabled
Integration to underlying applications for intelligent resolution and to prevent event
Root-cause, event trend, and performance analysis capabilities
Rich event library with over 100+ out-of-box events supported
Fast, web-based supplier enablement and transaction support
End-to-end supply chain visibility and event management tools
Customer-specific solutions for replenishment, fulfillment, and manufacturing
The ability to forecast and respond to supply/ demand events
The option to move from calendar-based to event-driven planning and re-planning.
Increased employee productivity
Reduced process, personnel, and expediting costs
Improved customer, supplier, and partner communications.
Real-time decision support
E-solution by Hewlett Packard (HP)
PepsiCo signed a deal with Hewlett Packard in 2006 to help improve its supply chain management
andincrease overall efficiency. The seven year deal involved the overhaul of current IT solutions
withPepsiCo and focused on updating server environments as well as ensuring a new infrastructure
whichbenefitted operations and increased overall cost-saving.
In particular, HP introduced a number of new solutions which helped to encourage stronger
customerrelationship management and supply chain management. PepsiCo had also opted for BT as
its networkprovider to ensure thee-solution is fully implemented.
The supply chain management solution reduced costs as well as enhanced current service
provisiononline and via its communications networking system. By standardizing and optimizing its
serverenvironment, PepsiCo International is better flex to meet its changing business needs and in
turnprovide better service to customers anywhere in the world.
Pepsi Bottling Group is the world's largest manufacturer, seller and distributor of Pepsi -Cola
beverages.With annual sales of nearly $11 billion, the company's fastest growing segment is noncarbonatedbeverages, including the number one brand of bottled water in the U.S., Aquafina, as well
as Tropicanajuice drinks and Lipton Ice Tea. As part of a 24/7 production operation, the company's
Detroit plantships about 27 million cases per year.
Production at the plant begins as empty bottles are unloaded from trucks via conveyor and
transportedto a depalletizer. From there, they are, rinsed, dried and sent to a filling machine (filler
speeds at theplant vary based on bottle size, ranging from 350 to 1,000 bottles per minute). The bottles
leave thefillers and make their way to a packaging machine, and then to a palletizer. Each pallet is
wrapped fordistribution and moved to the warehouse for shipping.
The plant uses a variety of sensors to monitor bottles as they travel through the sequence of steps
and tomanage the flow to the individual stations. Line sensors match the speed of the conveyor.
Thecompany's inventory of sensors swelled over the years to include more than 120 different
varieties.Many of these included multiple styles of the same product stocked under different brands. A
similarproblem was developing with its drives inventory, which had grown to over 50 different part
The wide variety of sensors made it progressively more complex and time-consuming to replace a
faultydevice. Despite its fast, high-performance machinery, the increasingly lengthy and more
frequentdowntime was beginning to impact the company's ability to meet its productivity goals. In
addition,operating costs were on the rise due to the excess spares inventory. Because of the
extensive numberofsensors they had in inventory, including multiple styles and brands, simply finding
the rightreplacement resulted in an hour of downtime.
A more strategic approach to maintenance was necessary, as even the smallest of delays could cost
theplant thousands of dollars in lost production and overtime. Knowing that effective parts
managementand fast, reliable equipment repair lies at the heart of efficient manufacturing, the
company exploredways to get its inventory and maintenance processes under tighter control. That's
when it decided toturn to Rockwell Automation for help.
The Pepsi Bottling Group's Detriot plant reduced its number of sensors from 180 to 46, a
decreaseof66 percent, by standardizing it sensors inventory to Allen-Bradley products. This
reduceddowntimeand inventory costs.
The first task undertaken by Rockwell Automation was to conduct an Installed Base Evaluation –
aplant-wide inventory assessment to determine the exact number of sensors and drives the
plantcurrently had in stock. Next it needed to figure out what products were actually needed and
could be eliminated. To streamline its operation, Rockwell Automation recommended that
Pepsistandardize its entire sensors inventory on Allen-Bradley products. The local
distributor,McNaughtonMcKayElectric Company (Mc&Mc), helped design a migration plan to help
ease the cost of thisinventory conversion.
Although all the drives employed at the plant were Allen-Bradley brand, many were older
modelsrepresenting a multitude of drive families. To simplify its drives inventory and upgrade its
technology atthe same time, Pepsi converted all of its drives to the Allen-Bradley Power Flex family of
AC drives. Adetailed cross-reference chart developed by Rockwell Automation now provides
technicians with aquick and easy way to identify failed and replacement parts, as well as installation
To ensure reliable availability to spare parts, Pepsi set-up a Rockwell Automation Services
Agreementthat included parts management. With the agreement, Pepsi pays a fixed monthly cost for
their spareparts, which are owned and managed by Rockwell Automation but stocked on-site. The
agreementallows Pepsi to reduce its upfront expenses, have immediate access to spares, reduce
carrying costs,andupdate its control technology cost-effectively. The agreement also includes an inservice warranty, sothe parts don't go out of warranty until they are actually used for the warranty
To help the company better utilize its internal resources and reduce costly troubleshooting delays,
theRockwell Automation Services Agreement included Tech Connect Support. This remote support
serviceprovides the plant with 24/7 access to Rockwell Automation technical specialists. When a
problemoccurs, Pepsi technicians can call for immediate troubleshooting assistance to resolve it as
quickly aspossible. To help facilitate problem resolution, Rockwell Automation technical specialists
can alsoperform remote system diagnostics through an Allen-Bradley modem installed at the Pepsi
facility. Thishelped Pepsi minimize risk and reducing long term costs.
Leveraging Rockwell Automation Services & Support has proved to be a smart decision for
PepsiBottling Group. The improved inventory and parts management capabilities helped reduce
downtimeand inventory costs, and standardizing on Allen-Bradley products eased training
requirements andminimized the technology learning curve. These benefits have ultimately enhanced
productivity by 8percent and reduced the overtime required to fill orders. In addition, the plant was
able to reduce thenumber of sensors it uses from 180 to 46, a decrease of 66 percent. Likewise, it was
able to reduce thenumber of drive styles from several hundred to 14.
Packaging as a tool for Supply chain management
GS - 1 standards (bar codes)
RFID tags for real-time stock replenishments
Commercial Security offerings
Online supply chain visibility across the chain
Pack safety for the consumer
Pepsi-Cola Saved $44 million by switching from corrugated to reusable plastic shipping containers
forone litre and 20-ounce bottles, conserving 196million pounds of corrugated material.
Palletization - cost vs. value creator
Key supply chain cost optimizer through an integratedsupply chain approach
Drive standards -pallets/ trucks
Pallet pooling services
PepsiCo's Frito Lay Supply chain
Frito-Lay is the snack food division of PepsiCo and the largest supplier of potato and corn chips in
theworld, currently holding 40% of the market share globally, and selling its products in 120 countries.
Frito-Lay is succeeding against a multitude of competitors in a fierce, yet slow-growth industry,
sellingapproximately 4-5 billion packages of snacks per year.
In order to achieve this, the company has learned how to masterfully create, innovate and manage
allaspects of its supply chain using high -tech IT systems that allow it greater control over its
productionprocesses and distribution network.
Supplier Base: Frito-Lay's supplier network for potato chip production has fewer than 100individual
Several years ago, Frito-Lay approached its potato suppliers to seek those farmers
willing to concentrate on cultivating a limited number of potato varieties, with a focus
on producing the most appealing taste and quality potato chip for the consumer.
Frito-Lay then offered these farmers long-term contracts, which made it easier for the
farmers to get financing and for Frito-Lay to achieve more efficient, profitable
economies of scale in other areas of the value chain.
It is noteworthy to mention that steps like these that insure a stable supply of raw
material are important to a company who purchases 2.3 billion pounds of potatoes
and 775 million pounds of corn annually.
From supplier to retailer
Frito-Lay traditionally relied upon its in-house fleet of trucks to transport products from
its plants to its 1,900 warehouses or 200 distribution centers.
However, as the company expanded, operations managers realized that it was not
economical to produce every product at every plant, and thus began specializing at
On the other hand, logistics became increasingly difficult and distances grew longer,
and thus, Frito-Lay learned to exploit the benefits of truck carrier services, employing
Menlo Logistics to handle route planning. Menlo was able to reduce the carrier base
by so% and negotiate nationwide discounts with other carriers.
The last stop involved is the 400,000 stores across the nation that carries Frito-Lay's
snack food products. The company utilizes their own technological systems to show
stores how reallocating shelf space, for example, can produce larger profits.
Retailers are also provided with Frito-Lay's "Profit-Vision Program", which allows
retailers to analyse their sales and compare it to national performance statistics.
At the same time, Frito-Lay benefits from the program because it convinces retailers
to allocate more shelf-space to their products.
Strengths of IT Corporation
Tracks the logistical movement of products throughout the supply chain, from
acquiring the raw materials to final delivery, by utilizing its 848 tractors, 2,251 trailers,
and a fleet of thousands of local computer-equipped delivery trucks.
Empowers its regional managers with access to vast amounts of information on their
databases that can be used to effectively guide them in their distribution decisions.
It is able to correctly assess demands across all of its products due to the availability
of point-of sale data and an impeccable IT system, giving planners the ability to
discern consumer trends and appropriately prepare production plans.
Its managers can be proficient in determining levels of inbound supplies, raw
materials, the allocation of the company's production capacity, and logistical details
for truck routing.
The company's ability to target local demand patterns with effective promotion and
delivery systems results in continuously optimizing profit margins and reducing
inventory and unneeded costs.
The company tries to captivate its customers by developing extensive databases that
record who their customers are and exactly what they want.
They focus on being the most reliable, quality-driven suppliers who provide services
through the retail channel by means of collecting as much information along the way
and utilizing it to address their weaknesses and capitalize on their strengths.
Despite only delivering potato and corn chips, relies on its ability to add unparalleled
value in its distribution channel. Its customers know that when they do business with
Frito-Lays, they aren't simply buying a product to shelve in their stores, but
incorporating an advanced information system with hopes of increasing sales and
Supply chain in India
Horticulture produce in India is largely marketed through traditional channels. A typical
marketingchain for horticultural produce consists of several players as shown in Figure
PepsiCo is one of the pioneers of contract farming in India since 2001 Their experience in
contractfarming has covered many crops - potato, basmati rice, tomato, chili, peanut, oranges and
more recentlysea weed. PepsiCo's operations started in India started in the region of Punjab
incollaboration with state government. PepsiCo India's project with the Punjab Agro Industries
Corporation and Punjab Agriculture University remains one of the most ambitious contracts
farmingprojects in the country.
Pepsi Tropicana Supply Chain
Of the four principal Distribution Centres (DC) in the U.S. the Jersey City, N.J. DC is responsible for
thesupply of Tropicana juices in all states in the Northeast U.S., and all Canadian provinces. Jersey
Cityhouses a unit load capacity Automated Storage and Retrieval System (ASRS) that is fully
integratedintoan Automated Warehouse System (AWS). The centre handles chilled premium orange
juices, andblended juices from concentrate as well as shelf stable juice products from either Florida or
localco-packers.Products vary according to package size, and juice type and style, giving rise
toapproximately200 Stock Keeping Units (SKU), each facing random demand from customers. Juices
arrive alreadypalletized and variously pre-packaged, and are unloaded according to demand,
andmoved into theASRS area.
The Jersey City Distribution Centre (DC) of Tropicana is responsible for the supply of
Tropicanajuicesin all states in the Northeast U.S., and all Canadian provinces. Premium orange juice
from Floridarepresents approximately 65% of the shipments, and has an approximate shelf life of 65
days. TheJersey City DC receives five Tropicana Unit trains from the production facility in Florida
weekly. Eachtrain has approximately 45 refrigerated cars. Juices arrive already palletized and prepackaged inpaperboard containers and plastic and glass bottles. Two types of unloading procedures
are currently inpractice: cross-docking and warehousing. Cross docking normally is used for
customers receiving asingle product types or transfers to a smaller distribution centre in Whitestone,
NY. Each train usuallycontains 8 to 10 railcars that can accommodate cross-dock delivery.
There are three major problem areas related to the current practices in Tropicana.
Ordering policy of the individual retailers.
At the moment, Tropicana manages the inventory orders for about 10% - 20% of the retailers.
Thisprocess is called CRP or continuous replenishment program. The Tropicana customer service
department administers the ordering of those individual customers. From the supply chain
perspective, this is mutually beneficial for both the customers and the warehouse. The advantage of
the warehouse is that it is able to centralize the demand information of individualstores in its
replenishment decisions of juices shipped from Florida to Jersey City. The retailers benefitfrom in time
delivery and less stock out cost. Individual stores contribute the other 80% - go% of theorders, which
are not under Tropicana's control. This is subject to random variation and henceuncertainties of
demand on the warehouse. One approach would be to create an incentive for thecustomers to entrust
their ordering function to Tropicana. This is the so-called supplier-retailercoordination problem. A
carefully designed coordinatedsystem will benefit each and every player in thesupply chain network.
This may require the design of contracts or cost sharing agreements with thecustomers.
Central ordering of juices that are shipped to the distribution centre.
Currently there are five trains of juices scheduled to arrive weekly from Florida. The company
neverships partially filled trains from Florida. The Jersey City distribution centre sometimes builds
upinventory of certain classes of juices that are close to their expiration date, and the company has to
getrid of them either at a very low price with sales promotion or donate them to charity. A
carefullydesigned and sophisticated coordination of ordering policies will reduce the chances for these
problemsand result in savings. At the same time it will increase the fill rate because the additional
capacitygained from more reasonable ordering can be used for ordering more juices of the type that
causetrucks to wait in the yard.
Combining marketing strategies with inventory levels and other factors.
Marketing strategies such as sales incentives can influence demand. Foreseeing an inventory buildupproblem, the company can use marketing (and mainly pricing) as a tool to either increase
demand(when certain items build up) or reduce demand (when insufficient inventory is available).
1. Tropicana, a unit of PepsiCo, implemented i2 Supply Chain Strategist to model manufacturing
logistics operations to include co-packer operations.
2. The model involved over 30 manufacturing and distribution facilities and the seasonal
demand of over 20 product types.
3. Tropicana used i2 Supply Chain Strategist to execute hundreds of scenarios and sensitivities,
producing data that provided insights into areas where the company could rationalize system
capacity at manufacturing facilities and increase efficiencies within existing distribution and
Limitations of Pepsi Supply Chain over Coke
PepsiCo has duplicate distribution systems for its beverages. Coca-Cola has for the most part
maintained distribution of its entire beverage line-up through its bottlers.
Pepsi bottling system is more fragmented than Coca-Cola's
In a consolidated system negotiations involve fewer players and therefore take less time to
gain agreement, which may be why the Pepsi system has lagged in system efficiency efforts.
PepsiCo and its bottlers have established a purchasing cooperative to gain purchasing power
in buying raw materials.
While PepsiCo has been pursuing international beverage acquisitions, those investments will
take time to produce significant operating income.
PepsiCo consolidation puts pressure on the independent system bottlers to more readily
consider agreements for warehouse distribution.
Resource : http://pepsicoindia.co.in/ , http://en.wikipedia.org/wiki/PepsiCo