pesico distribution and logistics operations

7/28/2019 pesico distribution and logistics operations

1/23

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


2/23

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% .

`


3/23

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


4/23

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.


5/23

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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9/23

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.


10/23

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


13/23

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.


20/23

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.


22/23

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.


23/23

pesico distribution and logistics operations

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