Pepsico's Distribution & Pepsico's Distribution & Logistics Operations Logistics Operations

By (Group - 8) Sec C Arun K.P - 12129 Gaurav Jhunjhunwala- 12138 Md.Shahbaaz Roomy Akhtar- 12149 Roshan v shetty- 12158 Vinay Prakash- 12178 Sarthak Rohatgi- 12182

Introduction

• PepsiCo is the US based world’s leading beverage and snacks food companies.

• Headquartered in New York.• Largest share in US beverage markets with 28% with

revenue of $25.11bn and growth of 6.8% .

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Contd…PepsiCo served diverse market with its six group

companies such as

1) Frito-lay North America

2) Frito-lay International

3) Pepsi-Cola North America

4) Pepsi Beverage International

5) Gatorade/ Tropicana North America 

6) Quaker Foods North America

Contd…Contd…

• Success mainly due to logistics and distribution management operations.

• Technical Capabilities to support logistics.

• Power of one program by Roger Enrico.

• Integrating and streamlining operations of various companies.

Background• In 1898, Caleb Bradham invented Pepsi-Cola.• Started marketing in 1903 and developed system of

bottling franchise for the drinks.• Went bankrupt in 1923.• Charles, head of Loft candy company bought in

1931 and merged it with Loft candy to create Pepsi-Cola bottling company in 1941.

• Merged with Frito lays international in 1965 to create PepsiCo Inc.

Contd…Contd…• Diversification into restaurant business.

• 1980s Pepsi Co acquired its franchisees to build its bottling business.

• 1990s Overseas expansion of bottling operations.

• 1998 Formation of Pepsi Bottling Company (PBG).

VENDING & FOODSERVICE SYSTEMS (V& FS)

BROKER WAREHOUSE

DISTRIBUTION (BWD)

DIRECT STOREDELIVERY

(DSD)

MAJOR DISTRIBUTI

ON SYSTEMS

DISTRIBUTION OPERATIONS

Direct Store Delivery Direct Store Delivery (DSD)(DSD)

• DSD was the oldest method employed by the PepsiCo

• Employees take Direct orders and delivers the previous orders

• Orders are taken manually .

• Timely delivery and shelf arrangement

• Ensured maximum visibility for passers by.

Contd…Contd…• To launch new products in pretty quick time

• Market response can be determined more easily

• No labour costs -unloading the trucks , placing the products on shelves.

Broker Warehouse Broker Warehouse

Distribution(BWD)Distribution(BWD)• Less delicate & perishable products• “IMPULSIVE BUYING” products were not included• Employed third party distributors • Employees at the stores handled the products and placed

them on the selves.• For the products which are less delicate and

perishable.eg cold drinks and juice. ADVANTAGES:-• No additional employees• Economical

Vending & Food service Vending & Food service

System(V&FS)System(V&FS)• PepsiCo’s sales personnel distributes products

through third party V&FS and bottling companies

• Through this system, products were made available in school, colleges, canteen, stadiums, offices, restaurants etc

• Huge potential of distribution channel developed the largest vending and food service sales forces in the US, comprising 600 people

Contd…Contd…• Revenues of over $1 billion /year

• Five retail channels –supermarkets/retail stores, fountain/restaurant, convenience stores, vending and others

• There were other distribution channels for beverages including institutional buyers such as airlines.

BenefitsBenefits• By 1990s Frito-Lay served more than 400000 retail

customers each week through more than 10000 truck routed and 1600 distribution centers.

• Store door delivery system granted the freshness of its product ,reduced retailer inventory and minimized whole sale expense.

• During this period they concentrated on DTS(Down the street), which resulted in 65% sales of salted snacks versus 45% in supermarket.

Logistics OperationsLogistics Operations

• PepsiCo’s logistics two main phases were:

1.Giving syrup to the bottlers

2.Distribution of bottles/cans to retail outlets

• Product quality and uniformity standards should be maintained.

• Timely delivery

Beverage Manufacturing Unit to Beverage Manufacturing Unit to

BottlersBottlers

• Pepsi-Cola North America (PCNA) produced and sold beverages& concentrate to bottling units in the US and Canada.

• Syrup was either sold directly to the bottlers or was combined with carbonated water for bottling

• PCNA’S objective

1.Timely delivery(99.1% accuracy).

2.Reduce transportation cost

Contd…Contd…• PCNA -3rd party logistics company “Penske

logistics”

• Penske offered transport solution and warehouse management services

• Used- i2 transportation optimization system (TOS) software

• Monitor movement of products and makes necessary changes in routes and schedule to tackle unexpected situations.

• Thus PCNA achieves more than 99.1% accuracy

Contd…Contd…• PCNA has centralized transportation to single

location

• It also employs Six sigma quality process.

•  TOS –oOrder optimization,o Load configuration, o Lowest shipping cost, oQuick routes

Bottlers To Retail OutletsBottlers To Retail Outlets

• Pepsi Americas (PAS) was one of the largest bottlers of  PepsiCo.

• PAS had 100 distribution centres and each centre had 50 trucks

• PAS objectiveso Timely dispatcho  Full capacity utilization o Quicker inventory replenishment.

PDTPDT• Delivered according to the stocks in truck

• Labor and fuel cost

• Old system- SKU 55’s(1990) to 300(2002)

• Replaced handheld computers with PDT8000

• PDT 8000- according to customer requirement

• Connected via WLAN or Modem

Problems Problems • Frito lays and beverages are delivered separately.

• Cost of Labor, Fuel and Time incurred.

• Distribution channels concentrated more on super markets and restaurant.

• Pepsi Co group companies and its bottlers operates independently instead of an integrated approach.

• No ERP system, so separate distribution systems of each brand , this increase cost.

RecommendationsRecommendations• Chilled DSD system for products that require

continuous refrigeration and Hybrid System should be extended.

• Combination of Pepsi Cos selling operations with its distributions and logistics function.

• Streamline operations and integrate systems

• Integrate the distribution channel of products with same destination .

• Allocation of resources in the emerging markets like India and China.