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Pepsi reverse logistics
- 1. PEPSICO – REVERSE LOGISTICS IIMK | SCM | Section A | Group 2
- 2. Reverse Logistics Refilling Expiration due to completion of shelf life Forecasting error Leakages Use in Bottling Industry Convergent structure From many sources to few demand points High degree of uncertainty in supply- both in terms of quantity and quality of used products returned by the consumers High quality products may justify higher transportation costs (and thus a more centralized network structure), whereas extensive transportation of low value products is uneconomicalIIMK | SCM | Section A | Group 2
- 3. Forecasting Relatively Certain One to Many Uniform Uniform Uniform Visible Consistent Transparent FORWARD LOGITICS More difficult Many to one Non-uniform Damaged Variable Less directly visible Inconsistent Less visible REVERSE LOGISTICS Distribution Cost Bottle Quality Distribution Pts Packaging Process visibility Inventory Mgt Pricing Supplier Distributor LogisticsBottling Plant Retailer Depot Sales Collecti on •Selection •Sorting acc. To quality state & Recovery Route Combined Inspection Quality of glass Grading •Reprocessi ng/Recycli ng •Direct Recovery Recovery Refilling Customer returns Bottle Sorting,Testing Basic Processing Recycle Forward Logistics Reverse Transport Can the bottle be reused? Yes No Bottle can not be repaired Primary Trucks Secondary Trucks IIMK | SCM | Section A | Group 2
- 4. PEPSICO INDIA • PepsiCo established its business operations in India in 1989 • 41 plants of PEPSI Co across India • Lot Sizes depend on demand, season • Direct ordering through Distributor Rep. • Frequency of order: 2-3/week • Transit time: 3 days, Lead Time: 4 days • Inventory: 3 days stock • Use of I.T. : Stock Keeping, Account Keeping, Problem Handling • Expense of Transportation: – Distributor to Bottling plant: Bottling Plant – Retailer to Distributor: Distributor (4000 outlets/distributor) IIMK | SCM | Section A | Group 2
- 5. Bottling plants Bottling plants Presently 38 Bottling plants in India with majority being franchisee owned Company Owned (CoBo) Franchisee Owned (FoBo) Cuttack BhopalRaipur Dharwad Jamshedpur Nagpur Locations Varun Beverages (RKJ) is the main bottling franchisee of PEPSICO IIMK | SCM | Section A | Group 2
- 6. Bottling Volumes at Varun Beverages Month Sales/Case RGB/Case Damages RGB April 2568367 1797857 161805.9 May 2701648 1891154 170203.8 June 2233363 1563354 140701.8 July 2185333 1529733 137676 Aug 2041245 1428872 128598.5 Sept 1801099 1260769 113469.2 Oct 1729055 1210338 108930.5 Nov 1657011 1159908 104391.7 Dec 1710564 1197395 107763.3 Jan 2245370 1571759 141458.3 Feb 2365443 1655810 149022.9 March 2461502 1723051 155074.6 0 500000 1000000 1500000 2000000 2500000 3000000 Sales/Case RGB/Case Damages RGB •High Uncertainty - Fluctuations in RGB are not in proportion to the sales volumes •Huge gap between selling cases and retrieval of RGB – Only 65% of the bottles are retrieved back •The breakages during logistics are substantial – 9% •Damages – Incurring Repair Costs and transportation Costs *Source : Varun Beverages 2010-2011 Data) IIMK | SCM | Section A | Group 2
- 7. Manufacturer Bottling Plant Distributor Wholesaler Retailer Distributor Distributor Bottle Suppliers Raw Material Supplier Wholesaler Retailer Retailer Retailer Retailer Distribution Network Shelf Life : 45-50 days IIMK | SCM | Section A | Group 2
- 8. Manufacturer Bottling Plant Distributor Wholesaler Distributor Distributor Bottle Suppliers Raw Material Supplier Wholesaler Retailer Retailer Retailer Retailer Grading Facility Adherence to safety check list Misbehaviour by truck driver Display of PEPSI LOGO on trucks Physical condition of truck Assets re- utilization Better control over safety stock of bottles Better integration of the captured returns infor mation with forward supply chain information Time taken by driver to reach the distributorship Time taken by driver to reach at plant Damage/loss to the product while delivering Damage/loss to EMPTY BOTTLE during return to plant Delay due to malfunctioning of truck EVALUATION PARAMETERS FOR REVERSE LOGISTICS Reverse Network IIMK | SCM | Section A | Group 2
- 9. Manufacturer Bottling Plant Distributor Wholesaler Distributor Distributor Bottle Suppliers Raw Material Supplier Wholesaler Retailer Retailer Retailer Retailer Grading Facility Recommended RL Decoupling Forward & Reverse channels IIMK | SCM | Section A | Group 2 Grading Facility Specialised 3PL Use of Specialised 3PL that operates directly between Retailer & Bottling plant, with its own Grading facilities & warehouses Warehouses are used for sorting the bottles(Coke/Pepsi/RC Cola..) & employ Cross Docking 3PL Warehouse 3PL Warehouse
- 10. IIMK | SCM | Section A | Group 2 Assumptions Diesel Price 50 per litre One Truck Consumes 7 litres Existing Breakage 9% Breakage Under Decoupled network 5% Truck capacity 144 Crates (300ml Bottles) Exisitng RL utilization 65% Under Decoupled Network 80% Existing RL Decoupled RL Cost per Day per Truck 350 350 Crates carried as per existing RL 93.6 115.20 Breakage 8.424 5.76 Cost per Crate 4.105 3.198 Savings per Crate in Supply Chain 0.907 Existing Volumes 200000 Savings per Crate in Supply Chain 181400 COST BENEFIT ANALYSIS FOR GLOBAL OPTIMISATION Based on our Assumptions the total savings in the supply chain are around Rs 180000/- Assumption : Under the proposed Decoupled Network truck load utilization would increase due to pooling of resources Distance under the new route remains the same
- 11. Rationale for Decoupling Forward & Reverse channels • Different Actors in forward and Reverse Logistics • Reverse Logistics : Specialised expertise • Difference in Nature of supply chains • Increased flexibility for the downstream supply partner(Retailer) • Leveraging economies of scale by 3PL • Difference in handling of collections vis-à-vis deliveries • Flexibility in increasing the rate of retrieval of empty bottles • Integration with specialized Marketing Research partners for processing real time customer feedback Efficient Supply chain Responsiv e Supply Chain Risk Hedging Supply Chain Agile Supply Chain Supplyuncertainty LowHigh Demand Uncertainty Low High IIMK | SCM | Section A | Group 2 Use of I.T. • Current SCM enterprise software doesn’t include reverse logistics • Cant monitor the status of their returns • Measure not incorporated: return rates, recovery rates, and returns inventory turnover
- 12. IIMK | SCM | Section A | Group 2
Editor's Notes
- Plant Capacity:-1 Lot or 1 Batch is prepared bottled in 2 days.1Lot =24000 crates,1 crate=24 bottles
- The ‘reverse risk hedging supply’ chain (high supply uncertainty, low demand uncertainty). Auto industry parts and basic electronic goods also follow this strategy due to the unpredictable supply from consumers in the reverse channel. The products also go back to the manufacturers and not to a secondary channel. This strategy of reverse risk hedging should utilize sharing of resources to bring back these products i.e. Outsourcing to a 3PL as an industry.