SCM Assignment on FMCG Sector- PEPSICO by Roll No 9,33,52

7/29/2019 SCM Assignment on FMCG Sector- PEPSICO by Roll No 9,33,52

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Topics Covered-

Logistics & Capabilities

1. Describe Facilities such as manufacturing, warehousing, retailing.2. Describe Distribution, if applicable. In case of retailer storage with customer pick-up

explain replenishment and customer home delivery, if any.3. Describe the information infrastructure, if specially set by the organization.4. If Global network, then explain its global reach

Planning Processes

1. Demand Forecasting methods or processes used, periods, scope (entire supply chain ororganization or only function or operation)

2. Aggregate Planning if exist, describe methods used, scope of plan and its utilization3. Sales and Operations Planning How supply is managed and how demand is managed4. Inventory Planning Cycle and Safety inventories5. Sourcing Plans if outsourced then assessment and selection, quality control and

performance monitoring plans

Execution

1. Pricing Multi-segment and/or dynamic pricing2. Plans followed or not. How checking and controlling occurs? How performance is

evaluated?3. Information technology in executing plans and getting, analysing data, what macro

processes are catered?4. How collaborations, coordination and cooperation are achieved in Supply Chain?


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History

PepsiCo is a world leader in convenient snacks, foods and beverages, with revenues of more

than $39 billion and over 185,000 employees. The company consists of PepsiCo Americas Foods

(PAF), PepsiCo Americas Beverages (PAB) and PepsiCo International (PI). PAF includes Frito-Lay

North America, Quaker Foods North America and all Latin America food and snack businesses,

including Sabritas and Gamesa businesses in Mexico. PAB includes PepsiCo Beverages North

America and all Latin American beverage businesses. PI includes all PepsiCo businesses in the

United Kingdom, Europe, Asia, Middle East and Africa. PepsiCo brands are available in nearly

200 countries and generate sales at the retail level of more than $98 billion. Some of PepsiCo's

brand names are more than 100-years-old, but the corporation is relatively young. PepsiCo was

founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in

1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001.

PepsiCo offers product choices to meet a broad variety of needs and preference -- from fun-for-

you items to product choices that contribute to healthier lifestyles. PepsiCos mission is: To be

the world's premier consumer Products Company focused on convenient foods and

beverages. We seek to produce healthy financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate. And in everything we do, we strive for honesty, fairness and

integrity. (www.pepsico.com)

Understanding the Supply Chain of PepsiThe objective of every supply chain should be to maximize the overall value generated. The

value of a supply chain generates is the difference between what the final product is worth to

the customer and the costs the supply chain incurs in filling the customers request. (Chopra,

Meindl 2006)

Supply Chain Strategy or Design:

During this phase a company decides how to structure the supply chain over the next severalyears. The company makes long term decisions in regards to location and capacities of

production and warehousing facilities, the products to be manufactured or stored at various

locations, the modes of transportation to be made, information systems and so on. The supply

chain design is very expensive to alter on short notice and supports the companys strategic

objectives. In order to ensure a good supply chain strategy, Haidri Beverages plans two years in

advance. It has several contracts with manufacturers, and receives raw material on a


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convenient basis. The company also decides where production plants are to be placed. Haidri

has production plants at Peshawar and Hyderabad. The production process is 65% automated.

The company has to provide and manage transport for the delivery of products as well as the

arrangement of third party services for the procurement of products. The shipping department

handles orders and the transport department decides the vehicles for safe delivery.Material planning and sourcing is carried out as well. Sources of supply of raw material both

local and foreign are identified and terms and conditions are negotiated. Capacity planning is

also done at this stage. Sales forecasting and production planning depends upon the capacity of

the organization with respect to:

1. Production (180,000 converted 250 ML crates per day).2. Storage: Raw and packing (80,000 Sq Ft)3. Storage: Finished goods (120,000 Sq Ft)

Haidri has a procurement budget of Rs 2.9 billion. Approved suppliers cannot go beyond this

budget. The supplier is audited by the most cost efficient quality control department.

Distributors are also decided by the company, keeping in mind past performances. The

company has increased its distribution capacity from one to six filling lines during the last few

years lending it a competitive edge over Coca Cola.

Supply Chain Planning

As the above configurations have been set, planning must be done within the above stated

constraints. The goal of planning is to maximize the supply chain surplus. Planning establishes

parameters within which a supply chain will function over a period of time. Companies start

the planning phase with a forecast for the coming year of demand. Pepsi carries out sales

forecasting for local demand as well as for export purposes to countries such as Afghanistan.

The annual sales target is conveyed to the supply chain department of Haidri Beverages.

Planning is carried out on a monthly, weekly and daily basis at Haidri.


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Supply Chain Operation:

Company makes decision regarding individual customer orders. The goal of supply chain

operations is to handle incoming customer orders in the best possible manner. During this

phase, firms allocate inventory or production to individual orders, set a date that an order is to

be filled, generate pick lists at a warehouse, allocate to shipping, set delivery and so on. There is

less uncertainty about demand. At Haidri, the production, sales and supply chain departments

get together to decide the inventory usually on a weekly basis.

Process views of a supply chain:

The processes in a supply chain are divided into a series of cycles each performed at the

interface between two successive stages of a supply chain.

Cycle View of Supply Chain: There are five stages in a supply chain (Supplier Manufacturer

Distributor Retailer Customer) and four supply chain process cycles (customer order,

replenishment, manufacturing, procurement cycle).

Figure 1

Push/Pull View of Supply Chain:

With push process execution is initiated in anticipation to a customer order. Pepsi has a

seasonal demand. Just in time concept is applicable in non-seasonal period and not applicable

in seasonal period. All processes that are part of the procurement cycle, manufacturing cycle,

replenishment cycle, and customer order cycle are push processes.

Pepsi Sales order and processing: The Shipping Manager receives sales order from Sales Team,

distributors through telephone, fax & email one day before dispatch. The sales are made to

base distributors on advance payment against orders then shipping manager plans according to

the demand of distributors on daily basis.

CustomerRetailerDistributorManufacturerSupplier


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Competitive and Supply Chain Strategies

There are three major sustainable advantages that give PepsiCo a competitive edge as they

operate in the global marketplace:

1. Big, muscular brands,2. Proven ability to innovate and create differentiated products and3. Powerful go-to-market systems.

PepsiCo's overall mission is to increase the value of shareholder's 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. A customer while purchasing a bottle of Pepsi will consider

product quality, price and availability of the product. Thus, Pepsi in India particularly focuses its

competitive strategy as toproducing sufficient variety, reasonable prices, and the availability ofthe product.


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Marketing and Sales Strategies:

PepsiCo has developed the national marketing, promotion and advertising programs that

support its many brands and brand image; oversees the quality of the products; develops new

products and packaging, and coordinates selling efforts (PepsiCo 2000 Annual Report).

Supply Chain Strategy

Step 1: The Customer and Supply Chain Uncertainty

a) Identifying customer needs:

Haidri needs to understand the customer needs for each targeted segment and the uncertainty

the supply chain faces in satisfying these needs. As Haidri deals with beverages, which are a fast

moving consumer good, it knows the requirements of consumers. Pepsi is considered as a drink

which is refreshing during summer, and taken regularly during winter, with demand hiking

around festivals such as Eid and occasions such as weddings. Haidri caters to both cities and

rural areas. It understands the needs of both. As demand for beverages is seasonal, the

quantity of product needed for each lot is taken care of with past demand in mind. Consumers

generally require a small response time, high service level, reasonable price and some variety

(for example health conscious people favor diet versions of sodas).

b)Demand uncertainty andimplied demand uncertainty:

Demand for Pepsi varies by product. For example there is a greater demand for Pepsi as

compared to Mirinda Apple, which is new. Hence, Pepsi has a low demand uncertainty as

compared to Mirinda Apple. The product Pepsi is approaching its maturity stage in the PLC

whereas Mirinda Apple is in the introductory stage.

Pepsis implied demand uncertainty varies with the product type as well as the customer needs.

Due to decreased lead time (the customer may purchase its competitors product if Pepsi is not

available at that time), need for greater variety and higher level of service, implied demand

uncertainty increases. This is true for cities where unmet demand by Pepsi is met by Coca Cola,

Amrat Cola and other such competitors.

Supply uncertainty is also affected by new products. New products have higher supply

uncertainty.

c) Uncertainty for the capability of the supply chain:


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After determining the demand uncertainty it is important to take a look at the uncertainty

resulting form the supply chain. Pepsi is not a new product and its market is going towards

maturation. The company does not have many difficulties in delivering a product and has a

fixed delivery schedule (on daily basis). Pepsi hence has a predictable supply and somewhat

uncertain demand depending on market conditions.

Step 2: Understanding the Supply Chain Capabilities

The efficiency and responsiveness varies according to the consumer needs, implied demand

uncertainty, product type and market segments. In remote areas the company focuses on being

somewhat efficient as other modes of transportation could turn the product to be highly

expensive. According to the company it does not deal with distributors who do not have 20 to

25 vehicles, therefore as the company has focus on cost reduction, uses slow and inexpensive

Highly HighlySomewhat

Efficient

Somewhat

Responsive

In towns PEPSIin cities

Predictable

supply and

Predictable

supply &

uncertain

demandor

uncertain supply

Highly

uncertain

supply &

PEPSI


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modes of transportation, the demand is certain, and uses economies of scale in production, the

product Pepsi is more inclined towards being somewhat efficient. In cities, the company

focuses its attention on being highly responsive as Pepsi has to meet short lead time, meet a

high service level, handle a large variety of products and respond to wide ranges of quantity

demanded especially at the retail stage.

Step 3: Achieving the Strategic Fit

Making one stage more responsive allows the other stage to focus on being more efficient. The

Pepsi supply chain assign different roles to its different stages, the company has to decide

either to transfer the responsiveness to the manufacture stage or to the retailer stage. While

discussing the Pepsis supply capability it is seen that Pepsi tends to be more responsive in the

cities and a bit less in towns. Therefore, transferring the responsiveness to the retailer and

distributor, allowing them to face the higher implied demand uncertainty. This in return allows

the manufacturer and supplier to be more efficient. At the same time, multiple beverage types

contribute to a broader product portfolio causing Haidri to adjust its strategies accordingly;

tailoring the supply chain to best meet the needs of each beverage demand.

Expanding Strategic Scope of Pepsi:

In Pepsi the agile inter-company scope of strategic fit is essential because the competitive

playing field has shifted from company-versus-company to supply chain-versus-supply chain.

Strategic scope must cover all boxes, at least at the supply chain end. The agile inter-company

scope of strategic fit requires the company to evaluate every action in the context of the entire

supply chain. As competition increases, Pepsi is expanding their strategic scope as they are

increasing their product line by adding Pepsi Max, Mountain Dew and Mirinda Apple to

their beverage line.

Drivers of Supply Chain Performance

Connecting the drivers with PLC Supply chain strategy:

Within the twin cities of Hyderabad and Pune, Pepsi mainly follows a combined cost effective

responsive supply chain strategy. The intensive supply of the product is being ensured

throughout the twin cities market with the help of several distributors. Pepsi has been able to

reach out to all market segments without any delays because of its business maturity and

comparative business strength. It has the highest beverages sales volumes as compared to any

other beverage in Pune and Hyderabad. Although there is an overwhelming stability in the


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product market yet there are some remote areas where there are conditions for a possible

stock out due to their remoteness. For addressing this risk Pepsi has financed different whole

sellers in those areas to respond immediately. Pepsi in Hyderabad and Pune and in most parts

of India can be rightly placed into the category of an ever growing mature business.

Responsiveness: In case of Fast Moving Consumer Goods (FMCGs) that target a huge segmentof market,responsiveness is a deciding factor for the organizational success. In a typical Indiai

market, quick response enables supply chains to meet the customer demands for ever-shorter

lead times, and to synchronize the supply to meet the peaks and troughs of demand. Pepsis

supply chain has been able to reinforce a greater response to the uncertain and unpredictable

market behavior only because it has multisided processing facilities and corresponds to a

systematic production network with both dedicated and multi-product facilities. The major

focus is to determine the processes that are to be integrated in the supply chain network with

their corresponding suppliers, distribution centers and the associated transport links between

them. The major considerations in the design are the supply chain responsiveness andprofitability.

Framework for Structuring Drivers:

The framework is based on a motive to create strategic fit between the competitive and supply

chain strategy. Pepsi Competitive strategy stands to provide a large variety of products very

quickly; simultaneously the supply chain strategy stands to materialize the availability of that

variety of products. Pepsi mainly follows a responsive supply chain strategy. Alignment of

Pepsis business strategy to a corresponding supply chain strategy is achieved through proper


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deployment of supply chain drivers. Pepsi has to deal with different set of market segments

simultaneously. Most of the time the approach needs to be responsive enough to grow

substantially to be able to compete with uncertain demand, while in many areas demand is

certain and very much predictable, so there it incorporates an efficient supply chain strategy.

The Inventory Driver:

Haidri has established a comprehensive plan to ensure the sufficient inventory levels to keep up

with the market demand effectively. For this purpose the main inventory storage has been

established within the main plant area Kahuta road, Pune. It has the storage capacity of

120,000 Sq Ft and the area is being utilized both horizontally and vertically. The shipping

department is in charge for storage and subsequent displacement of the product orders. The

inventory capacity is being utilized and maintained in coordination with the production

department and is based on the term production estimates. Apart from the main storage

house, Haidri has established more than 10 storage facilities nearer to the market in Pune and

Hyderabad. Increasing inventory makes the supply more responsive to the customers. At Haidri

Beverages, managers bear a high inventory cost to ensure maximum levels of inventory and to

reduce the production and transportation costs.

The Transportation Driver:

Transportation driver has a large impact on the responsiveness of the business. Faster

transportation of the products allows Haidri to maintain sufficient levels of stock on the

shelves. Haidris transportation network is the collection of routes, modes and locations along

which the product can be shipped. With the help of several distributors the product is being

supplied to the market. There are multiple supply and demand points within the twin citieswhich cater to the market demand. Haidri decides and selects different modes of

transportation having different characteristics with respect to the speed and size of shipment.

The transportation network has been designed with a view to ensure responsiveness and boost

the availability of the product. For Haidri using fast mode of transport increases responsiveness

as well as the transportation cost but lowers the inventory holding cost.

The Information Driver

Connects all the supply chain stages effectively allowing them to coordinate and maximize total

supply chain profitability. It is also crucial to the daily operations of each stage in the supply

chain. The unit manager utilizes the production scheduling system that is based on information

on demand to create a schedule that allows Haidri Beverages to produce the right amount of

product. The warehouse in charge uses this information to create visibility of the warehouses

inventory items. Information sharing helps this firm improve its responsiveness within the

market. It helps to accurately forecast demand and realize frequency of updates,

measurements of the effects of seasonal factors influencing the production, measurements of


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variances from the plan and the ratio of demand variability to order variability. Timely and

accurate information enables the distribution managers to fix potential stock out or oversupply

problems.

The Facility Driver

In order to ensure the responsive strategy implementation, the role of facilities is of prime

importance in the supply chain of Haidri Beverages. Pepsi has established a flexible and a

product-focused production facility in order to respond effectively to the variability in demand.

The storage facilities are designed in order to provide maximum possible capacity for the

inventory. The large amount of excess capacity allows the facility to be very flexible and to

respond to wide surges in demands placed on it. In alignment with the responsive supply chain

strategy the facilities have been geographically located close to the market.

Distribution Channels

Direct distribution:o Delivery of post mix cylinders & handling of key accounts: The key accounts are

different wholesalers, restaurants and hotels like Pizza Hut, KFC, Metro which

serve as a place for key sale. These are known as national key accounts and are

very important in terms of competition.

o Export Parties Indirect distribution:

o Through Base market distributorso Through Outstation distributors

Before delivering the product some certain guiding principles are followed for the assessment

of distributors capability by Haidri:

Applicant must have 20 to 25 vehicles (depending on the area). Applicant must have 20,000 cases of empty bottles. Applicant must deposit Rs.1, 000,000 as a security.


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Haidri uses light and heavy vehicles for safe delivery of goods to the distributors for timely

delivery. It follows the just in time concept which is applicable in Non-seasonal period and not

applicable in the seasonal period.

Review and Revise Distribution:

This is usually done through taking over key revenue areas. If the distributor does not achieve

its sales target, the distribution is taken back and an addition of new distributor is done.

Therefore Pepsis supply is low supply uncertainty. Some of its supply source capabilities are:

Less breakdowns High quality Flexible supply capacity Mature production process

Factors Influencing Distribution Network Design

At the highest level, performance of a distribution network should be evaluated along two

dimensions:

1. Customer needs that are met2. Cost of meeting customer needs

The customer needs that are met influence the companys revenues, which along with cost

decide the profitability of the delivery network. While customer service consists of many

components we will consider those measures that are influenced by the structure of the

distribution network for Pepsi.

Response Time for Pepsi is minimal as the direct customers for Pepsi are the retailers and then

the consumers. So with over 30 delivery trucks in Hyderabad, Pepsi is readily available to every

retailer within 30 minutes. Pune has 6 warehouses from where the supply to the market is done

through Shehzore or small cars.

Product Variety in Pepsi is large. They have made their place in the market with their unique

product line ranging from chips to water. As we are dealing with Haidri, the product varietyincludes beverages ranging from the water Aquafina to Mountain Dew, Pepsi, Pepsi Max, 7 Up,

Mirinda, Mirinda Apple & Fountain Fresh.

Customers Desire Pepsi and Mountain Dew the most; Mountain Dew has the highest

consumption in Gujranwalla. Recently, the sales for 250 ml bottles has decreased but they are

trying to increase it as it gives the company higher profits.


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Availability of Pepsi is very high and the product is always available in stock whenever an order

arrives. Whenever the distributors feel that after one loading there could be a stock out they

place an order to Haidri Beverages in advance just to keep the floor with enough stock in hand.

The Distributors have 3 days stock as back up with them in order of any malfunctioning of the

plant or other such external factors.Customer Experience for Pepsi has always been positive as they receive the product with ease

and on time. The retailers are the direct customers as they place an order to the distributors.

There has never been a shortage or a delay for Pepsi in Metro or Pizza Hut which are the key

accounts for the company.

Order Visibility in Pepsi is not really an electronic phenomenon where you can track your order

through computer. It is more of person-to-person contact and one can easily track down their

orders through the designated staff in each sector of Hyderabad and Pune or for that sake all

over India.

Returnability of Pepsi has always been very strong in a sense that unsatisfactory items can be

returned and changed on the spot. This is true for both the consumers and the retailers. Pepsi

has laid down a system through which they can effectively manage this requirement. The

retailers are told to take down the comments and the address or phone numbers from the

person who is returning the bottle. It seems at fist that a customer always wants the highest

level of performance along all these dimensions, in practice however this is not always the case.

Design Options for Distribution Network:

Distributor Storage with Carrier Delivery:

In Pepsi inventory is not held by the manufacturers at the factories but is held by distributors/

retailers in intermediate warehouses and package carriers are used to transport the products

from the intermediate location to the final customer. This requires distributor storage to keep

high levels of inventory because distributor/retailer aggregates demand uncertainty to a lower

level than the manufacturer. Transportation costs for Pepsi are somewhat lower because an

economic mode of transportation (e.g. truckload) can be employed for inbound shipments to

the warehouse, which is closer to the customer. Facility cost is high because of a loss of

aggregation and often end up with higher processing costs. The information structure needed is

not that complex. The distribution warehouse serves as a buffer between manufacturer and

customer. Real time visibility between customers and warehouse is needed whereas as visibility

between customer and manufacturer is not required. Response time is also reduced. Customer


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convenience is high and order visibility with manufacturer storage becomes easier. Distributor

storage is well suited for medium to fast moving goods and it can also handle higher level of

variety than retail stores.

Value of Distribution System:

There are basically two components of distribution:

Storage Distribution

The storage facilities of Hyderabad Beverages are designed in order to boost the timely

availability of the product. For this purpose the distributors are fully equipped with facilities

that are needed to ensure intensive supply of the product. The storage facilities are designed to

contain the maximum possible inventory items that are needed at any given time.

Hyderabad Beverages has established several storage units nearer to the market in order to

boost availability. Transportation conducts inventory movement from point to point in supply

chain of Haideri Beverages. It incorporates a combination of modes and routes at different

stages. Transportation choices have a large impact on the responsiveness strategy of the

business. Hyderabad has several contracts with several distributors with multiple transport

facility that ensure the maximum possible transport of inventory within a short period of time.

The distribution does not work between specific supply chain components but it performs a

basic function of integration amongst all supply chain components. In case of FMCG like Pepsi,

the value of systematic distribution process can not be undermined. The Pepsi distribution

system linked the entire supply chain for all product categories. The distribution centers and its

information network play a key role in that regard. The major object is to carefully track sales of

items and offer short replenishment cycle times. The distributors offer stored deliveries too

many retail outlets in the twin cities. Different products are being delivered conveniently on


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pre-orders. The distribution system is flexible enough to alter delivery schedule depending on

customer demand. The Territory Distributor Managers maintain a contact with the retailers in

order to book and place the orders. Whenever a store places an order it is immediately

transmitted to the supplier through the distribution manager.

Now Hyderabad receives orders from all distribution centers and the shipment departmentdelivers the orders. At the distribution centre, products from the manufacturer are delivered

into different trucks and each truck makes deliveries to multiple retail stores. The number of

stores depends upon the sales volume. The system works on trust and does not require the

delivery person to be present when store personnel scan the delivery. This reduces the delivery

time at each store.

To support this distribution network they have a transport department which consists of more

than 30 ten wheeler trucks in Hyderabad alone. Each truck has a capacity of 1572 Pepsi cans.

Pune distribution is made possible through Shehzore and Suzuki because of the narrow and

congested roads. The distribution department is in direct contact with the manufacturers and

keeps updating inventory levels. They keep in stock spare three days stock to combat external

uncertainty. The distribution department is responsible for all the variety of the products in

their portfolio. PepsiCos overall distribution network spreads throughout India connecting the

remotest of places and providing great customer service. Globalization has increased the

competition that Pepsi is constantly coming up with new projects, campaigns and distribution.

Pepsi with more than 180% of profits this year and with the annual review of their rates (last

revised on 14th November 2007) is looking more and more competitive and as the logo says:

Ye Dil Maangay Aur!

Product Life Cycle

(PLC) can be divided into several stages characterized by the revenue generated by the product.


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Warehouse Operations In pepsi:

PepsiCo is having two warehouses at Sangareddy plant, Hyderabad. One stores

GRBs (Glass Returnable Bottles) & Aquafina outside the old plant & other storing PETs ( ),

Aquafina outside new plant.

Old warehouse-

Block storage is implemented in old warehouse. For product retrieval, FIFO is followed. Total floor area utilized for finished goods storage is = 19000 sq.ft. GRBs are stored 3 pallets high, whereas Aquafina is stored 2 pallet height. Total pallets storage capacity for GRBs = 2110 Pallets, Aquafina = 450 Pallets As is monthly dispatches per day

o During season - 62000 caseso During non-peak months - 40000 cases

Actual man hours required & made availableo During season 240 men/ dayo During non-peak months 100 men/day

Current availability and capacity of MHE 60 pallets / hr Vehicles loaded per day

o During season - 120o During non-peak months 80

What is the average storage time of a particular SKU in the warehouse?


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o During season - 4 dayso During non-peak months 10 - 12 days

Four lines are run in old plant1. CSD GRB line 1 - At production rate of 16 pallets per Hr (200ml)2.

CSD GRB line 2 - At production rate of 16 pallets per Hr (200ml)

3. Hot fill GRB line - At production rate of 7 pallets per Hr (200ml)4. Aquafina line At production rate of 8 pallets per Hr (1000ml)

New warehouse-

Racking system is used for storage of finished goods as well as raw material/packagingmaterial.

For product retrieval, FIFO is followed. Total floor area used for racking system to store FG = 30000 sq.ft. Total pallets storage capacity for FG is = 5250 Pallets Total storage capacity for FG till 3 pallet ht is = 4650 Pallets Total storage capacity for FG for 4th pallet ht is = 600 Pallets Total pallet storage capacity for RM/PM = 1100 Pallets Duty paid goods which are received through stock transfer are stored on 3000 sq.ft.

area, with pallet storage capacity = 650 pallets. Storage is done only up to 2 pallet

height.

Current availability and capacity of MHE 25-30 pallets/hr Three lines are run in new plant

1. PET line At production rate of 20 pallets per Hr (600ml PET bottles)2. Hot fill line - At production rate of 17 pallets per Hr (500ml Slice PET bottles)3. New Aquafina line - At production rate of 15 pallets per Hr (1000ml bottles)

Quick Warehouse Assessment checklist

House keeping

1. Floor: Well maintained

2. Structure: Paintwork, dust, : - Very Good

3. Storage Product:


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State of packaging mostly well packed, 0.1-0.2% of the times you will find thepackaging is not proper or seals are broken. Even Slice 500 ml pallets are

wrapped in plastic films to avoid damage & spillage

Damage very less

Age fast moving SKUs are dispatched sometimes online. During season, stockdoesnt stay in the plant for more than 3-4 days. During off season, it can be upto

1 month

Spillage Very less Orderliness Very Good

Activities

1. Loading/Unloading dock congestion: It appear Busy & professional

2. Delays in & out of warehouse for orders/trucks Yes

3. Fork Lift trucks movement rates: A bit slow due to presence of racking system

4. Order Picking:

Overall Order Picking Rates 25 mins for GRB50 60 Mins for PET

Observe the pickers: Pickers try to pick & load the pallets carefully so thatno spilling of case occurs from the pallet. Overall - Very good

Equipment

1. Inventory kept 7 forklifts - Old Plant

8 forklifts New Plant

2. Age & physical condition of the equipment 8 FLTs from new plant are

purchased 2 months back Battery operated, 7 FLTs from old plant are

purchased 3 years back Gas operated

3.Maintenance facilities for equipment - Regular

4. Damage to equipment - especially to racking because that indicates aisle width

issues or training issues of labor Damages observed in Racks

Layout or Space Utilization


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1. Management visibility Shipping office is exactly in front of the stacking area. So,visibility is good from management point of view

2. Pallet position utilization Excellent pallet position utilization as racking isemployed in the new WH which stores product 3-4 pallet ht & in old WH, only GRBs(3 ht) & aquafina (2 ht) are stored without racking.

3. Utilization of height Very good apart from DPG (cans, tetra packs)4. Width of Gangways Appropriate. Not very narrow, not very wide5. In case of block stacking- floor markings yes there are floor markings6. Stock Rotation (E.g. Check expiry dates) clear distinction is made while stacking

of FG in racks according to the shift in which it is produced and the type of

production (GRB, hot fill etc.). For dispatch, FIFO is implemented.

7. Stock Location In old plant, material is stored in the area of WH which is exactlyin front of the production lines. FG from every line are located in front of the line

producing it. New plant has a separate WH in which, racking is present

Safety

FLT practices hazard operators drive safely Stacking/stripping of pallets care is taken by forklift driver. Pedestrian ways - Safe Fire precautions & Inflammable material - Present First aid present at the security booth

Sign Postings implemented strictly

Security

Spot checks on security staff Very poor records maintained Entry & Exit doors : - Very good Lighting of the warehouse : - Very Good


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Demand Forecasting for Frito- Lay Products

In Below section we will see how to forecast for fritolay products.

Frito Lay India Brands:

Frito Lay India Product portfolio:


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Category & Variants:

Frito Lay India brands comes under two categories.

1) Salty category2) Break fast category

Salty category:

Salty category is divided into two categories.

1) Traditional Lehar comes under this category2) Western salty Further divided into three categories

a) Bridge Kurkure, Kurkure Desi beatsb) Extruded Cheetos, Cheetos whooshc) Potato chips Lays, Uncle chips


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Frito Lay India Brands

Frito Lay Brand Pack details:

Frito - LayIndia

Break fastcategory

Quaker

Saltycategory

Traditional

Lehar

Westernsalty

Bridge

Kurkure KurkureDesi beats

Extruded

Cheetos Cheetoswhoosh

Potatochips

Lays Unclechips


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Demand Planning at Frito Lay India:

Current Demand planning process at Frito Lay:

Forecasting is done based on Primaries at SKU depot level.

Lays

Small

Medium

LargeExtraLarge

Kurkure

ExtraSmall

SmallMedium

Large

ExtraLarge

Cheetos

Small

Medium

Large

Uncle Chips

Small

Medium

Large

Lehar

Extra small

Medium

Large

Quaker

Medium

Large

ExtraLarge

1

Forecast Sheets sent to Regions at the begining of third week of everymonth

2

Region will send the filled in forecast sheets to HO by the end of thirdweek

3

All India Consolidated demand sheet is prepared for M0, M1 and M2

4

Based on the consolidated demand sheet S&OP slides are prepared bythe end of fourth week

5 S&OP meeting will be done during first week of every month

6

Based on inputs of S&OP meeting demand sheets are modified and M0

demand is freezed

7

Forecast Sheets are prepared during second week of every month andthe cycle is repeated


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Forecast Sheets are prepared at SKU depot level SM wise and are sent to Regions. In these

sheets SM have to fill M0 Latest estimate, M1 and M2 expected Primary and secondary sales at

depot wise SKU level. These values are compared against AOP,

Yago, M-1, I2M1 and I2M2 values. The sheets at depot level are consolidated to SM Level and

SM Wise sheets are consolidated to Region Level.

Regions will send the filled in sheets to HO and all these region consolidated sheets are linked

to All India consolidated sheet and depot wise SKU level forecast values are captured in the

consolidated sheet. This sheet gives SKU Depot matrix, where each cell gives the forecast value

of particular combination. In the similar way for M0, M1 and M2 SKU Depot forecast matrix is

prepared. SM Wise comparison is done at Brand Pack level in a separate sheet which is used to

compare M0 forecast demand against M-1, AOP and Yago. This sheet also gives SM Wise

forecasted turnover of M0.

Using this consolidated sheet S&OP slides are prepared. Here brand wise forecasted demand is

compared with M-1 and Yago for both Primaries and Secondaries. Demand Planner will discuss

with all RLMs, Marketing and Sales people in the S&OP meeting about the forecasted demand

and the demand is finalized. Modifications are done to consolidated M0 sheet as per the inputs

received from S&OP meeting and final M0 demand sheet is prepared. Production Planning will

be done based on this M0 demand and the cycle repeats.

Sources of data:

1) Primary sales data will be obtained from SAP and DW (data warehouse) at SKU level.2) Secondary sales data is obtained from WOL at Brand Pack level which will be received

from all regions on weekly basis.

3) Tertiary sale data is obtained from Pack report, which is received from Neilson on everymonth.

Demand Planning Reports:

1) Daily Sales Report which will compare Primary and Secondary sales till last date withLast month, Last Year and Plan data.

2) WOL Report Regions send this report on weekly basis which will give secondary salesvolume at Brand level.

3) Brand Pack Report Regions send this report on weekly basis which will give secondarysales data at depot wise Brand Pack Level.

4) Forecast Accuracy is calculated at SKU Depot Level from Aligned Availability Report.


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Proposed Demand planning process at Frito Lay:

Demand forecasting should be done based on secondary sales data. Secondary sales is the

sales from distributors to retailers. Secondary sales advantage is aimed at improving the supply

chain related business analytics and will also aid the senior management to make strategic sales

and marketing decisions for achieving better sales and performance results for the company.

Other benefits of secondary sales based forecasting is:

Improved control and visibility of secondary sales and stock information Ability to manage distributor performance using facts and figures Ability to monitor distributors and sales teams efficiency Improved data collection and human resource utilization Improved ability to track new promotions and product information effectively Shortened month-end processing time

Secondary based forecasting should be done at ASM SKU level channel wise.

Templates were designed for each region. The following templates were designed:

1. Template 1:

Depot level sheets were designed which were further roll up to SM and Region level.

The sheets had O/s, Primary and Secondary sales, C/s in kg and value term for EC ,TT

and MT channel. The data had to be entered in cases and further we can obtain in Kgs

and values. One depot sheets can be further scaled down to ASM and CE level. Also

channel wise distributors were differentiated.Depot level sheets ( working sheets) were

prepared were all the depots all India ie for 36 depots and were scaled for 15 SMs.


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2. Tempate 2 :

TMR Timely Availability Check and Data Integrity Check template was made for all regions. It

is used for entering the date on which the TMR is received so that defaulters can be traced.

In this we can get SM wise, state wise and region wise. Data integrity check can also be

done for any SKU. This check must be done for different SKUs every month. This check will

aid in accurate demand Planning.

3. Tempate 3 :

ASM level -Channel wise forecast templates were made for 58 ASMs.The parameters included

were M-1,M0, M1,M2, YAGO , AOP etc.These sheets were also made ASM wise channel wise

can were further scaled up to depot ,SMs and regions.

4. Regional package

Regional package was made for north ,east, south and west which contained respective number

of depot sheets, SM Package and Forecast sheets

Sales data is entered in the webportal every month and can be updated. This can be used for

forecasting.

Strategies for Outsourcing

As part of PEPSICO Responsible & Sustainable Sourcing (RSS) strategy at PepsiCo, they are

committed to working in partnership with its suppliers to follow a specific code of conduct inthe areas of employee labor conditions, health & safety, environmental management and

business integrity, all part of PEPSICO corporate social responsibility (CSR) assurance program.

We have updated PEPSICO policies to simplify communications about PepsiCos values and how

they extend to PEPSICO supply chain partners.

PepsiCo-wide supplier code of conduct explicitly communicates PEPSICO corporate social

responsibility expectations to PEPSICOs suppliers and their chain of suppliers. While the vast

majority of PEPSICO suppliers are already working to these or similar standards, and may well

have supplier standards that reach back into their own supply chains, we continue to workclosely with PEPSICO suppliers to ensure they fully comply with PEPSICO code of conduct

provided below. Integrating the supplier code of conduct into all new contracts is one way we

assure compliance.

Additionally, in 2007 PepsiCo joined Sedex (www.sedex.org.uk) as the means for PEPSICO

supplier community to articulate and verify their activity in the areas of employee labor


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conditions, health & safety, environmental management and business integrity. Sedex is the

standard tool we are using to gain visibility into PEPSICO supply chain regarding these issues in

a consistent and reportable manner. PepsiCo is pleased to be working with Sedex and other

firms committed to making the assessment process easier for suppliers. We encourage PEPSICO

suppliers to work with these partners, as well, to identify improvement opportunities, andfacilitate corrective action plans to drive Performance with Purpose - achieving business and

financial success while leaving a positive imprint on society - throughout PEPSICO supply chain.

Information Technology used in SCM of PepsiCo


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Information Systems:

ROLE OF INFORMATION SYSTEMS IN BUSINESS:

Achieve operational excellence. Develop new products & services. Attain customer intimacy & service. Improve decision making. Promote competitive advantage. Ensure survival.


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ORDER FULFILMENT OF PEPSICO

Software Costs @ Pepsi

Software costs includes :1. Direct cost of materials & services utilized in developing or obtaining computer

software.

2. Compensation & related benefits for employees who are directly associated with thesoftware project.

3. Interest costs incurred while developing internal-use computer software.

ERP in PepsiCo:-

ERP systems integrate business processes & information from entire enterprise . Thesystem helps in coordinating the operation of business functions.

ERP systems are software packages that can be used for the core systems necessary tosupport enterprise systems.

ERP Systems Vendors:-

ERP vendors into 3 groups : Tier I, Tier II and Tier III


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Tier I Tier II Tier IIII

SAP

Oracle

Oracle eBusiness Suite

Oracle JD Edwards

Oracle Peoplesoft

Misrosoft Dynamics

Epicor

Sage

Infor

IFS

QAD

Lawson

CDC Software

ABAS

Activant Solutions Inc.

Bowen and Groves

Compiere

Exact

NetSuite

Visibility

CGS

Hansa World

Consona

Syspro

Market Share:-

ERP Automating Business Processes:


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Comparison of Inefficient & Efficient Systems:-

Inefficient Customer Service

Do you think that one can keep the customer on the phone throughout this process?


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Would you consider this to be good customer service?

Solution to Inefficient Customer Service:

Enterprise system establishes available to promise (ATP) by checking warehouses andscheduled manufacturing

Price and creditworthiness automatically determined from database

Before ERP


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After implementing ERP:

Documents

SCM Assignment on FMCG Sector- PEPSICO by Roll No 9,33,52