Introduction to PepsiCo and its Headquarter
Discuss about the Logistics and Supply Chain Management for Pepsi.
PepsiCo was established in 1965 with the merger of Pepsi-Cola and Frito-Lay. It is an international food and beverage company. The products of the PepsiCo are available in more than 200 countries. The company’s headquarter is in New York. The company believes in strong corporate governance for financial reliability, investor confidence and greater performance. The company is driven by food and beverage portfolio and includes brands like Frito-Lay, Tropicana, Gatorade, Quaker and Pepsi-Cola. PepsiCo received the supply chain innovation award for it’s innovative distribution strategy. In this report, the relationship between supply chain management and logistics management of Pepsi has been described. As an entrepreneur, the significance of effective logistics management function is analysed in achieving customer satisfaction. ERP is used to improve customer satisfaction and keep focus on e-commerce. The different best practices have been suggested to Pepsi to achieve objective of cost reduction.
The supply chain management is the process of scheduling, execution and controlling operations of supply chain to please requirement of customers. The logistics management is a part of supply chain management and these activities occur within the boundary of company. The supply chain management thinks outside the business (Stadtler, 2015). The relationship between SCM and logistics can be defined by analysing activities covered by each concept. The logistics is responsible for the activities of SCM. The SCM encompasses more process and functions than the logistics management. SCM defines supply chain structure which creates framework and in turn creates the inside framework in which all logistic operations take place. The logistics includes the traditional concepts such as locating, supply, preservation and portfolio management. The SCM includes old-style logistics and comprises more activities like marketing, product development, finance and customer service.
The suppliers are linked to upstream and distributors are linked downstream to serve it’s customers. The supply chain management of PepsiCo aims to provide maximum customer service at lowest cost possible. It is cross functional tactic to accomplish movement of raw materials into organization. The company has been successful due to it’s effective supply chain management. The innovative distribution of strategy of company ‘Direct to store delivery model’ has made delivery of right product at right time. The core supply chain management includes product designing, planning, forecasting, locating, subcontracting and manufacturing. PepsiCo was given award for it’s innovative strategy known as Direct to store delivery model. It moderates system wide inventory, eliminates warehouse space and develops the potential for growth (Prajogo, Oke & Olhager, 2016).
Logistics is all about getting right product at right time along with appropriate quantity, cost and time. The logistics management handles the efficient management of day to day activities in manufacturing final goods and services. The involved activities in logistics management are from departure of products to the final point of arrival such as transportation, packing, scheduling, preparing, distributing, delivering and warehousing (Wang, Gunasekaran, Ngai & Papadopoulos, 2016). The ultimate goal of logistic management of PepsiCo is to optimize profitability through strategic planning and implementation to meet demand of customers. The company has used several program and techniques related to logistics like, Just In Time (JIT), Efficient Customer Response (ECR) and Electronic Data Interchange (EDI). It allows company to reduce inventory and better coordinate material flow in the productive chains.
Relationship between Supply Chain Management and Logistics Management
The objective of logistics is to improve performance of organisation and improve products and services to satisfy customers. The term logistics is often misinterpreted as transportation. The logistics is beyond transportation. It confirms delivery of products in the entire supply chain. It includes packing, preparation, transportation, storage and information flow (Tatoglu, et. al. 2016).
The material handling and storage are often regarded as non-value added activity. Labelling can be the important function as it reduces wastage. There are two types of approaches, push and pull.
The logistic management of functions of PepsiCo takes place by three distribution operations:
Direct store delivery (DSD): DSD is the oldest method used by PepsiCo. The company delivers products to retail stores directly. The employees take orders and supply the former orders. The orders are taken in the manually form. It enables company to produce with maximum visibility. It is effective in launching new products in a quick time. It is suitable for the products which are often restocked. It is sensitive to promotions and marketing (Touboulic & Walker, 2015).
Vending and foodservice systems: The sales personnel of company distribute products such as snacks, foods and beverage through third party. The products are made available in school, colleges, office and restaurants through this process. PepsiCo has also launched interactive vend technology. It will enable customers to better connect with company at the time of purchase (Yu, Wang, Zhong & Huang, 2017). It will enable customers to gift a friend by selecting beverage and entering detail of recipients such as name, contact number and message.
Broker warehouse distribution: The company employs third party for the distribution of products from company’s warehouse to the retailer’s warehouses and retail outlets. This system is more effective than the DSD system (Hazen, Boone, Ezell & Jones-Farmer, 2014). It is more economical and the category includes food, beverages and juices.
ERP (Enterprise Resource Planning) includes broad set of activities to help an organisation to manage it’s business. It is a software application to organize and standardize business process to plan effectively. The software integrates all aspects to manage business and automate functions related to technology, service and human resources. ERP can communicate and share information or database with rest of the company (Tarhini, Ammar & Tarhini, 2015). The software collects information and make available to other parts for increasing productivity.
PepsiCo started using ERP for better integration. It helps in directing the business functions. These are the software packages used to maintain system of enterprise. The main ERP software providers are SAP, Oracle, PeopleSoft, JD Edwards etc. The company has changed it’s supply chain into the adaptive supply chain network. It is the ability to respond changing internal and external conditions. PepsiCo has coordinated business process through ERP. It deals with customers to increase sales and customer satisfaction. The features help in improving customer satisfaction and reducing costs:
Right to use real time data: The real time access data to management enables making better decisions. It increased productivity and reduces inventory costs. As a result, customer satisfaction is improved which results in increased profits (McMurray, 2015).
Core Supply Chain Management of PepsiCo
Insight of production vs. sales: The ERP system provides insight of profit in production vs. sales. The system explains the difference between cost and price of goods manufactured and sold. It brings out the variation which reduces the profit gained by each location. The results help in reducing costs and improved customer satisfaction.
Systematized sales and production costs: The ERP system monitors consumption of sales and costs from distant level. It helps in managing production by planning and scheduling. It boosts the operational efficiency and draws plans according to resources, capacity and demand.
Quality control: The quality control process is necessary to update after manufacturing and purchasing raw material. It helps management to view the type of quality desired by customers. Producing good quality products lead to less wastage of resources (Seethamraju, 2015).
SAP has displaced some of the competitors of PepsiCo. The implementation of ERP has helped company to synchronize business practices and compact with customers to enhance revenue and customer satisfaction.
The ERP system gathers data from PepsiCo’s customers, warehouse, point of sale and production data. The adoption of system is a significant step in the transformation of company. It has driven efficiencies and effectiveness of portfolio of brands of company. PepsiCo enters equipment requests in the ERP system to view data by cross functional departments. The company has attained expertise to lower costs of technology. The company is continue to establish itself by innovating it’s operations. The system influences technology to achieve growth and innovation (Al-Mashari & Al-Mosheleh, 2015).
There are various practices which can help PepsiCo to reduce logistic costs are:
Focus on labour costs:
PepsiCo can analyse labour costs of the warehouse operations. The labour management software system can help company to manage warehouse work. The employees can join incentive programs for warehousing. More focus should be given on the automotive repetitive and structured tasks. Warehouse mobility can be used to reduce overall costs (Jacobs, Chase & Lummus, 2014). It will increase individual activity. Broker warehouse distribution should be used due to it’s economic cost.
An appropriate planning of operations conducted daily such as scheduling, shipping routes and shipment time is vital. The last minute choices and decisions should be avoided as it results in delays and missed deadlines. It reflects bad image of company (Kim, Pettit, Harris & Beresford, 2018). The smart planning should be taken into account to manage schedule and delivery times.
The preventative measures should be adopted by PepsiCo to save money on equipment. It is a way to achieve logistics cost reduction. In the middle of a task, equipment failure can be costly in man hours and customer service. So, proper measures should be taken to reduce costs and enhance measures.
The cargo should be ensured properly to avoid unpleasant surprises. The insurance is required to cover the value of products. The logistics and cost saving strategies have no mean if the cargo is not insured properly (Carbonara & Pellegrino, 2017).
The inefficient use of resources can affect revenue of company. The optimized use of resources can improve the efficiency of business. It can be made possible by rearrangement of delivery schedules to keep the vehicles active for delivery.
Logistics Management at PepsiCo
A better warehouse management system can minimise costs by mechanising cycle counting. It increases the efficiency of factory warehouse. It reduces the cost of picking and put away. The efficient use of technology continues to weed out inefficiencies. A transportation management system utilises the most effective lanes and routes. PepsiCo can consider automation to reduce logistic costs (Gattorna, 2017). The warehouse execution system and warehouse control system can be used to regulate and automate manual process. PepsiCo can also apply strategic changes to decrease costs and increase customer satisfaction.
PepsiCo can reduce usage of water per unit. It saves cost of company. The water conservation efforts made can save the company by large extend. It can have the huge impact on community and planet. It can further lower operating costs.
The transparency of supply chain management can actually improve planning and expense. It can be made possible through better management of safety stock. The company can maintain certain level of stock to reduce risk of product deficits. A proper supply chain management can give an insight to managers to prevent disruptions in the logistic process (Pagell & Shevchenko, 2014).
The low cost of logistics keeps customers happy. The company can reduce logistic costs by going beyond the expectation of customers. There should be direct connection between buyer’s satisfaction and overall cost drop to measure changes in logistic costs.
Conclusion
From the above report it can be determined that there is close relationship between supply chain management and logistics management of PepsiCo. The scope of supply chain management is wide and covers logistics management. The logistics management is a part of supply chain management. The ERP system has helped PepsiCo to improve customer satisfaction by reducing costs along with focus on e-commerce. The analysis is also done to support ERP in company. At the end, various best practices have been explained to support PepsiCo. These practices can help company to achieve objective of reducing costs.
References
Al-Mashari, M. and Al-Mosheleh, H., 2015, April. Enterprise Resource Planning of Business Process Systems. In UKAIS(p. 2).
Carbonara, N. and Pellegrino, R., 2017. How do supply chain risk management flexibility-driven strategies perform in mitigating supply disruption risks?. International Journal of Integrated Supply Management, 11(4), pp.354-379.
Gattorna, J., 2017. Introduction. In Strategic supply chain alignment (pp. 15-21). Routledge.
Hazen, B.T., Boone, C.A., Ezell, J.D. and Jones-Farmer, L.A., 2014. Data quality for data science, predictive analytics, and big data in supply chain management: An introduction to the problem and suggestions for research and applications. International Journal of Production Economics, 154, pp.72-80.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Kim, J., Pettit, S., Harris, I. and Beresford, A., 2018. Towards A Better Understanding of Humanitarian Supply Chain Integration. In The Palgrave Handbook of Humanitarian Logistics and Supply Chain Management (pp. 249-277). Palgrave Macmillan, London.
McMurray, D., 2015. The rise of the digital supply chain. MHD Supply Chain Solutions, 45(3), p.20.
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Seethamraju, R., 2015. Adoption of software as a service (SaaS) enterprise resource planning (ERP) systems in small and medium sized enterprises (SMEs). Information systems frontiers, 17(3), pp.475-492.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Tarhini, A., Ammar, H. and Tarhini, T., 2015. Analysis of the critical success factors for enterprise resource planning implementation from stakeholders’ perspective: A systematic review. International Business Research, 8(4), p.25.
Tatoglu, E., Bayraktar, E., Golgeci, I., Koh, S.L., Demirbag, M. and Zaim, S., 2016. How do supply chain management and information systems practices influence operational performance? Evidence from emerging country SMEs. International Journal of Logistics Research and Applications, 19(3), pp.181-199.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.
Wang, G., Gunasekaran, A., Ngai, E.W. and Papadopoulos, T., 2016. Big data analytics in logistics and supply chain management: Certain investigations for research and applications. International Journal of Production Economics, 176, pp.98-110.
Yu, Y., Wang, X., Zhong, R.Y. and Huang, G.Q., 2017. E-commerce logistics in supply chain management: Implementations and future perspective in furniture industry. Industrial Management & Data Systems, 117(10), pp.2263-2286.
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