Download - pesico distribution and logistics operations
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Pepsico's Distribution & LogisticsOperations
By (Group - 8) Sec C
Arun K.P - 12129Gaurav Jhunjhunwala- 12138Md.Shahbaaz Roomy Akhtar- 12149Roshan v shetty- 12158Vinay Prakash- 12178Sarthak Rohatgi- 12182
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Introduction
PepsiCo is the US based worlds 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 groupcompanies such as1) Frito-lay North America2) Frito-lay International3) Pepsi-Cola North America
4) Pepsi Beverage International
5) Gatorade/ Tropicana North America
6) Quaker Foods North America
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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.
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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.
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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).
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VENDING &FOODSERVICE
SYSTEMS (V& FS)
BROKERWAREHOUSE
DISTRIBUTION
(BWD)
DIRECT
STOREDELIVERY
(DSD)
MAJORDISTRIBUTIO
N SYSTEMS
DISTRIBUTION OPERATIONS
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Direct Store Delivery (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.
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Contd
To launch new products in pretty quick time
Market response can be determined more easily
No labour costs -unloading the trucks , placing theproducts on shelves.
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Broker Warehouse Distribution(BWD)
Less delicate & perishable products
IMPULSIVE BUYING products were not included
Employed third party distributors
Employees at the stores handled the products and placedthem on the selves.
For the products which are less delicate andperishable.eg cold drinks and juice.
ADVANTAGES:-
No additional employees
Economical
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Vending & Food service System(V&FS)
PepsiCos 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 theUS, comprising 600 people
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Contd
Revenues of over $1 billion /year
Five retail channelssupermarkets/retail stores,
fountain/restaurant, convenience stores, vending and
others There were other distribution channels for beverages
including institutional buyers such as airlines.
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Benefits
By 1990s Frito-Lay served more than 400000 retailcustomers 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 minimizedwhole sale expense.
During this period they concentrated on DTS(Down
the street), which resulted in 65% sales of salted
snacks versus 45% in supermarket.
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Logistics Operations
PepsiCos 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
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Beverage Manufacturing Unit to Bottlers
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 wascombined with carbonated water for bottling
PCNAS objective
1.Timely delivery(99.1% accuracy).2.Reduce transportation cost
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Contd PCNA -3rdparty 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
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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
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Bottlers To Retail Outlets
Pepsi Americas (PAS) was one of the largest bottlersof PepsiCo.
PAS had 100 distribution centres and each centre
had 50 trucks
PAS objectives
o Timely dispatch
o Full capacity utilization
o Quicker inventory replenishment.
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PDT
Delivered according to the stocks in truck
Labor and fuel cost
Old system- SKU 55s(1990) to 300(2002) Replaced handheld computers with PDT8000
PDT 8000- according to customer requirement
Connected via WLAN or Modem
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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 ofeach brand , this increase cost.
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Recommendations
Chilled DSD system for products that requirecontinuous refrigeration and Hybrid System should
be extended.
Combination of Pepsi Cos selling operations with itsdistributions 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.
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