QUALITY ON THE FLOORS OF PEPSI

Established in the Carolinas in 1898, Pepsi-Cola has a long and rich history. The drink is the invention of Caleb Bradham, a pharmacist and drugstore owner in New Bern, North Carolina. This young pharmacist began experimenting with combinations of spices, juices, and syrups trying to create a refreshing new drink to serve his customers. He succeeded beyond all expectations because he invented the beverage known around the world as Pepsi-Cola. The business began to grow, and on June 16, 1903, "Pepsi-Cola" was officially registered with the U.S. Patent Office. Pepsi-Cola's first bottling line resulted from some less-than-sophisticated engineering in the back room of Caleb's pharmacy. Building a strong licensing system was one of Caleb's greatest achievements. Local Pepsi-Cola bottlers, entrepreneurial in spirit and dedicated to the product's success, provided a sturdy foundation. They were the cornerstone of the Pepsi-Cola enterprise. By 1907, the new company was selling more than 100,000 gallons of syrup per year.

Pepsi Cola international is well reputed multinational company which is doing its business in almost every country of the world. The company is registered in New York stock exchange U.S.A. to make a better control over the business the company has given the manufacturing rights to different companies. Now these companies are producing the products on the behalf of the company by using their trademark. To maintain their goodwill in the market the company has a strict policy while granting the manufacturing rights Pepsi-Cola have standardized products all over the world (e.g, same in size, shape and quality). The franchises have to follow all the standards as given by the company. Even they have the mobile team, which check the companies after 2 or 3 months. Each company is producing products according to the standards given by the Pepsi Cola international.

Pepsi cola is also very popular in Pakistan that’s why it has major market share, being the market leader. Pepsi Cola International, a remarkable name in the cola industry is doing its business in Pakistan through licensing. In Pakistan Pepsi Cola has 9 franchises. Shamim & company is one of these, established in 1967 as a private limited company. It started its business in 1968. Allah Nawaz Khan Tareen (Ret. DIG) got license of 7-up franchise and was producing only one product, 7-up. But in 1973 it became Pepsi Cola franchise.

In Pakistan, at present Shamim & company is the largest production unit out of the 9. Shamim & company covers the area of Southern Punjab which consists of Multan, Bahawalpur, Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Mianwali and Layyah. The company is properly serving all these areas with quality products. There are 4- processing plants, and 6 filling lines which are imported from Philippines, Italy, Japan and these plants are used according to seasonal demand.

Avg. output rate =15000, cases per day per plant. Here 1- day =24 hours and 1-case = 24 bottles.

Maximum or peak capacity =20,000, cases per day per plant. Effective capacity = 15,000 cases per day per plant.

At start, there was only 1-manual plant having capacity of 2000-cases per day. But now due to Increase in market size (population) and Increase in demand there are 4-plants in Shamim & Company in just 33-years.

Quality is not a recent phenomenon; it has been there in every aspect of man’s life. Just the perspectives through which it is perceived have been varying. From the various views in the past, it is now viewed through the eyes of the customer and aims at satisfying the customer every time and even going beyond customer expectations. Quality management has moved from an initial stage of inspecting, sorting and correcting standards to an era of developing quality manuals and controlling process performance; quality management systems have been developed for third party certification; quality management has become a strategic organizational concern that is based on continuous improvement as the driving force, i.e. TQM (Garvin 1988). Integrity, methodology and humanity have become as the essential features of quality management (Nassa L’Abbe 1991).

The beauty of this view is that it covers every aspect of the operations of a business. And Pepsi has adopted this view in its true sense. It has named each of its departments in terms of quality e.g. quality purchase department, quality sales department, quality production department etc. While studying the quality systems in an organization, there is a set of key variables or precepts that can help us and which are essential for achieving business excellence. For Sitkin et al (1994, p.41), these precepts can be conceptually distinguished into three clusters. Focusing on customer satisfaction, stressing continuous improvement and treating the organization as a total system. Similarly Deming, Juran and Crosby also identified and advocated key principles for achieving excellence. All these can be found being implemented in Pepsi, and this case study analyses the above mentioned aspects in Pepsi viewing all its strengths and weaknesses.

Pepsi has incorporated quality in its vision, stating that their responsibility is to continuously improve all the aspects of the world in which they operate- the environment, social, economic- creating a better tomorrow than today. This means that quality practices are quite fundamental to the operations of Pepsi. The first step that they take towards bringing quality into their ranks is the development of strategies. Strategy is conceptualized as:

1) What is the firm trying to achieve in the long-term (mission)?2) What internal and external issues impact on the firm’s ability to achieve its mission (strategic

issues)?3) Which markets should a firm compete in (markets)?4) What products/services are needed to offer customers in the chosen markets (customer needs)?5) What internal resources (assets, skills, competencies, relationship, finance, and facilities) are

necessary in order to compete (resources)?6) How can a firm perform better than the competition (competitive advantage)? (Jeremy

Galbreath, 2008)

Starting with the mission, Pepsi Co.'s overall mission is to increase the value of shareholders’ 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. In handling the various internal and external issues faced during the process of its activities are handled with one principle in the forefront i.e. maintaining quality of its operations and the goodwill of the organization. Then comes the competition in markets, and the only basis Pepsi has been competing its competitors over such a long period is the quality of its products. This is the only thing that has bound its consumers to its products; nothing else can serve this purpose over a long period.

Identification of the customer needs is the basic step in ensuring quality and Pepsi performs this function quite diligently through market surveys (mostly interactive), enabling them to be constantly in touch with their customers. This helps in knowing the customer preferences in terms of taste. They introduced Pepsi Lemon to offer a new flavor to its consumers but soon realized through customer responses that it was not going to be successful, so they abandoned it. Resources are the next, and without quality resources the quality products and services cannot be provided. We will look at the quality of various resources as this study progresses. It’s worthwhile to mention here that Pepsi ensures quality in all of its resources (assets, skills,

competencies, relationship, finance, and facilities) through various measures and is always seeking to maintain high quality resources for its processes. All these aspects are given due consideration while developing strategies and the implementation plans for these strategies. These six dimensions of strategy when implemented cover the whole working of an organization. We will now explore in detail the various aspects of these dimensions as the study progresses.

All the success that Pepsi has achieved has been the result of its personal ventures and it has seldom entered into any alliance with any outside party. (There have been some alliances few and far between, that too in its promotion campaigns and its efforts aimed at pursuing corporate social responsibility.) With its suppliers too, it has no fixed alliance for a long period of time. It has to get several items from outside suppliers e.g. plastic and glass bottles, the bottle caps and CO2 to name a few. The suppliers for these and other items have been varying over the years and the sole criterion that they use is the quality of the materials supplied. Some of these items come even from Baluchistan. Tin cans are currently supplied by Mobeen & Brothers Karachi and beverage bottles by the Ghani group. New bottles are acquired from glass factories like Toyo Nasic, DGL (Balochistan). Water is obtained from local resources as the company has its own plant of water acquisition & treatment. ‘A’ Grade sugar is bought from Ittefaq Sugar Mills, Layyah Sugar Mills and also imported from Dubai. Concentrate and flavor come from Pepsi Co. International. Company has its local plant for CO2, which does not fulfill requirement of company. So it is purchaed from other gas companies like Pak Gases, and Multan Gases. So they get their supplies through the most reliable suppliers in terms of quality. Quality of these items is not only tested on the suppliers’ end, but also at the Pepsi plants (as we will see further in this study).

To promote the sales, however, the company has agreements with various restaurants, universities and other educational institutions whereby they obtain the exclusive rights to sell

their brands at these places. Further, they provide freezers and refrigerators to the shopkeepers to enhance their loyalty at the final level of the distribution channel.

Quality products and services cannot be produced without quality human resource. At Pepsi, the quality of human resource is maintained through training programs organized periodically for managerial and production level workers. Managers and trainers are also invited from outside the country to give trainings regarding latest best practices in production and management. The new workers are properly trained through various programs especially in the quality control department. However, there is no trend of educational programs for employees in Shamim & Co.

Employee empowerment is the key to motivation and productivity. An employee who feels he or she is valued and can contribute is ready to help and grow in the job. Shamim and Co. though licensed to a multinational, has inclination towards the centralized decision making. Strategies and policies always flow from the top to bottom. It is the duty of the top management to establish the policies and plans, with input from the employees.

This type of management clearly indicates that there is low employee empowerment. Employees at Shamim and Co. are not always appreciated to take part in the decision making. This might lead to low job satisfaction. Employees are only expected to participate when any query is put forward towards them from the top management. Even though there might be low employee empowerment still employees suggestions are not completely undermined.

Shamim & Co. uses both formal and non-formal ways to gather information form employees. Employees are also provided with the training to analyze the processes in a critical ways and then make suggestions about those problems in a more effective manner. Training helps both the organization and the employees, because trained employees make decisions more efficiently, which help company to grow and employees’ decision making power also improves.

Employees at the company are appreciated to take part in the brainstorming sessions. These sessions are used frequently at Shamim & Co. for solving the quality problems which are encountered by the company. During brainstorming different techniques such as cause and effect diagram are used to solve the problems in more productive way. Nominal group techniques are also used at Shamim & Co. to appreciate team work. Usage of these techniques gives strong indication that team work is given some importance in the company.

Suggestion box is another technique for getting input from employees which has been in place for very long time in the company. Employees can make suggestions at any time to management that they think is necessary to be made. This increases the employee involvement, but employees seem to be hesitant to use suggestion boxes at the company. One reason behind this is that it is a very slow procedure, and also employees do not receive any response from company which would suggest that their suggestions have been entertained. Walking and talking approach is

used to the extent of keeping things under control, but suggestions are not appreciated by the managers while they manage during walking.

Shamim & Co. has a code of conduct. This code of conduct has been developed in the light of the Pepsi Internationals code of conduct. Shamim & Co. code of conduct also does not ignore the values of the Pakistani people. Company’s management has shaped the code of conduct, and management expects that employees would strongly follow the code of conduct and expects the employees to exhibit their best behavior at workplace as well as in the public, which would enhance the company’s image.

New employees in their orientation are informed about the company’s code of conduct. Employees are also provided with proper training, regarding adopting the code of conduct. Employees are also guided about ethical dilemmas they might face during their job, they are also provided with proper guidelines for behaving in the organization.

It is due to Shamim & Co. quality culture that the new employees find it easy to learn the ethics in a very short time. When employees are working in the organization they have constant guidance of their senior employees and the top management which helps employees to learn the company culture in a smooth way. Employees, whether the top managers or the lower employees, are treated with respect. This quality culture helps organization to survive in the hostile environment of the beverages industry.

Feedback is a very common practice in Shamim & Co. This feedback is required for all employees of the company. Promotions are based on feedback. This is very strong point of the company. Feedback is taken from all employees about their seniors, juniors and colleagues. This is a major reason why employees behave ethically in the organization. But most of the employees at the Shamim & Co. have reservations regarding the evaluation and feedback process of the company.

Leadership is very critical for organizations to attain sustained growth in a dynamic environment. Shamim & Co. does not have a very conducive culture for the development of employees into potential leaders. Employees are never really empowered to make their own decisions or to take part in any work without the official authority of the top management. This does not serve a great deal in the employee character building.

Employees are also not given any specific training regarding enhancing their leadership abilities. Although there are different training programs which helps build employees communication skills but leadership is rather neglected. This becomes clearer through their employee turnover ratio. Most of the employees leave the company due to lack of promotions. Shamim & Co. also tries to hire top managers from outside rather than promoting their own employees.

There is job dissatisfaction and very low motivation on the staff due to:

Low salary. Daily allowance has been eliminated. Overtime is rewarded in terms of holidays not in monetary terms. According to

technicians, they normally do not get a chance of making allowed vacations due to workload so the extra holidays are of no use for them.

Higher positions are filled from outside. Sales targets are set without the consent of staff. Post Mix staff has no knowledge of ISO standards. The new machines are not available for installation.

Shamim & Co. also sets high ethical standards when it comes to external stakeholders. Company was one of the first to help the victims of 2005 earth quake and they also took active part in providing temporary shelters to 2010 flood victims. Company also helped to build flood victims’ houses.

Pepsi always promotes the sports in any country they operate. Same is the case in Pakistan. Pepsi is the official sponsor of the PCB. Pepsi also invests in the local level sports. They are very much aware of the fact that sports are important for the growth of the society.

Pepsi also tries to be ethical in their advertisings. Pepsi never develops a promotional campaign that would hurt the feelings of the any group of the society. That is why they draft their promotional campaigns very carefully.

An important role in maintaining the quality and implementation of quality standards is of the Quality Control Department. It is responsible for the following functions:

Water treatment (for bottle filling & washing) Syrup making (pasteurization room) Calibration

Of Laboratory equipment

Of Production equipment

Incoming raw material testing In process testing Finished goods testing Market complaints handling

Market rejectionsCustomer rejectionsTrade sampling

Quality testing of CO2 plant and Boiler

Water is the main ingredient of the beverage product so water testing is an important step of quality testing. Raw water is treated so as to make it free of all impurities and useable in the mixing process. There are several water tests. One is the Water Testing 2P-M Indicator Method. The purpose of "2P-M" or "A " alkalinity test is to verify that water treatment plant is operating correctly and final treated water for processing conforms to the quality standards. High alkalinity leads to undesirable effects. Then there is Total Dissolved Salts Testing In Water. The purpose of this test is to provide rapid, indirect evaluation of the total dissolved salts in a water sample. The level of total dissolved salts is a useful measure to gauge the overall consistency of the mineral contents in the water, which ultimately affect the quality of the beverage. The frequency of the test is after every four hours.

There’s another test named Water Test Chlorine Residual. Chlorine "residual" is the amount of chlorine that remains after the natural chlorine demand of the water has been satisfied. Twofold purpose of this test is to test, on one side, where chlorine is necessary, to demonstrate that the level of chlorine present is adequate for water oxidation & disinfections purposes and on the other side, where chlorine is prohibited, to confirm that it is absent. The frequency of test for water treatment is after an hour and for washer final rinser is once in a shift. Then there is a test for the Taste, Odor and Appearance of the Treated Water. The purpose of this test is to provide a rapid, gross evaluation of major defects in treated water for syrup & beverage making. In this test, the taste, odor and appearance of treated water samples are assessed hourly.

Finally, there is a Water Hardness Test. Water hardness is the gradual decrease in the tendency of water to form foam due to presence of impurities like chlorides, sulphates etc. The hardness in the water affects the beverage quality as well as produces scale in washers, boilers etc. The rest of the tests are conducted during the production process.

At first, there is a Bottles Washing Plant. Here, the syrup (from syrup tanks) and water (from water treatment) are mixed at a specific ratio called flow mix. The mixture then moves to carbo cooler where carbonation of product i.e. absorption of CO2 in the syrup at low temperature takes place. It then moves to filler where product is filled in empty bottles and crown caps are put on it. The final product moves towards packing machine through conveyer. Most of the time bottles are packed into cases manually. At Shamim & Co., they have installed a new plastic packaging machine.

After the bottle washing plant comes the CO2 (Carbon Dioxide) plant. CO2 assures the product a measure of added sanitary protection and greater shelf life. CO2 gas in addition to product carbonation, contributes to the production process itself by displacing air from water and product during processing and supplying counter pressure needs for some filler bowls. CO2 enhances both the taste of the beverage and its appearance. Carbon Dioxide imparts a pungent, slightly

acidic taste to the finished product as well as creating greater eye appeal. Each individual product should be carbonated to a level most suited for that flavor.

There are some other specific tests for IN PROCESS TESTING which go on throughout the production process at different steps. BRIX BY HYDROMETER TEST is conducted to measure by weight, the percent solids of sugar in simple syrup, finished syrup, control drinks and final beverage. Brix is defined as by weight percent solids of sugar. BRIX INVERSION TEST is conducted to break the sugar molecule into simple molecule of glucose and fructose, Inversion is performed to confirm on-line brix target. The test is taken after an hour of starting tank on production line. FILL HEIGHT TEST is conducted to verify that containers are consistently filled to the correct level as established depending upon package size. Fill height is the distance from the top of bottle to the meniscus of the liquid. It is tested both through a laser beam and by a manual worker.

pH TESTING is quite important for beverages. pH scale indicates the amount of acidity or alkalinity. pH is measured for Raw water, treated water, control drink, finished beverage, T.A. testing and incoming raw material. The purpose of the test is to define the line Brix. This also helps in predicting the sensory attributes of the beverage. TITRATABLE ACIDITY TEST is for measuring the acidity level in the test sample.

Then, several other tests are conducted under INCOMING RAW MATERIAL TESTING, including Sodium hydroxide (Caustic Soda) %purity test, Processing material calcium chloride test, and Test of Conductivity Ash in granular sugar by conductivity meter whose purpose is to test the incoming sugar for its ash contents in order to define quality. Sugar ash is primary indicator of sugar sensory performance in a beverage. It is comprised of organic and in-organic salts left over from the refining process. The sugar is used in syrup making.

The bottle caps are also tested. Crown Corks/Caps Inspection/ Attribute Analysis is performed whose purpose is to ensure that incoming lot of crown corks/caps fulfills the appearance requirement and is free from defects. Crown caps are used for packing (sealing) of bottles after filling. Crowns and closures should match supplier shipment label and purchase order. The characteristics considered in the analysis are outside printing, inside printing, color, shell or liner flash, cracks, band etc.

The glass bottles are tested through Glass Bottles Inspection/ Attribute Analysis whose purpose is to identify the visual defects affecting the beverage quality in the incoming glass. The defects are categorized as:

Very critical defects: Any defect dangerous for personnel.

Critical defects: The defects that result in hazardous or unsafe conditions for using, maintaining or depending upon the product. These could be Struck glass, Loose glass, False bottoms etc.

Major defects: The defects likely to result in failure or reduce materially the usability of the product for intended purpose. The defects are Cracks, Choked necks, Bent neck, Stones over 1.6mm (1/16 inch) etc.

Minor defects: Minor defects are departure from established standards having little bearing on the effective use. These could be Brush marks, Seeds, dirty molds, Dirty finishing etc.

Taste, Odor & Appearance Test is also conducted for Granular Sugar for its sensory attributes for consignment acceptance or rejection for every delivery. There is a CO2 purity test for CO2 used in Carbo-cooler for absorption and Chlorine (sodium hypo chlorite) test for chlorine used in water treatment.

Post Mix tanks inspection is performed to test undiluted fountain syrup that is delivered to retailers in transfer tanks. The inspection is performed before filling new or market returned tanks. A form is filled with the following format:

Tank#

Product AppearancePre-inspection

O-ring

Safety

WolvesWashing Filling Performed

Then, Post Mix tanks washing is performed in order to eliminate the chances of contamination. The steps are;

Rinse with treated water Clean with detergent Rinse with treated water Sanitize with chlorine Rinse with treated water Sanitize with steam

Calibration is very integral and critical because instruments are eyes into the process and if these are not working properly, the process may produce unexpected or undesired results. The calibration ensures that the equipment is fit for its intended use. It has several categories. PRESSURE GAUGE CALIBRATION is performed to test the non-existence of pressure difference & note if difference exists. HYDROMETER CALIBRATION is for testing the non-existence of difference in Brix reading and noting down if difference existed. THERMOMETER CALIBRATION is performed to ensure that thermometers are properly tested for their exact temperature reading. This calibration is for Dial thermometers for washers and Mercury/ Alcohol thermometers for laboratory testing. Further categories of calibration include pH meter model

H18424 calibration, pH meter model H8314 calibration, Calibration for TDS meter, Conductivity meter calibration, Refract meter calibration, Incubator calibration, Syrup tanks calibration to get actual syrup volumes, Temperature gauge to test their exact temperature, Pressure gauge calibration, and calibration for Hand refract meter.

Another important step towards ensuring quality and encouraging franchises to attain highest quality standards is the PCI QUALITY RATING. PCI collects product samples from market, tests them in their labs against standards, sends monthly test results summary to their franchisers and allots rating (colors) to franchisers after every three months. The PCI Operations Director - Quality Systems for Middle East, North Africa & Pakistan sends rating of 44 factories located in these areas. The color ratings include Red, Orange, Yellow and Green, from highest to lowest.

SUGGESTIONS

Arrangements should be made for creating and appreciating leadership qualities in employees.

In the production hall, every concerned person must use masks, gloves and safety glasses. Earplugs should be provided to the people working in the production hall. Proper sitting room should be provided to CO2 supervisor to keep the spare parts, tools

and documents safely. Proper arrangements should be made for draining. The vehicles must be fit and available on time. It is in their best interest and makes their

job safe, convenient and speedy. People within the company should be promoted to the managerial as well as chief

technician and sales supervisor level.