Pepsi Supply Chian Assignemnt-00

National College of Business Administration & Economics Course: Supply chain management

Submitted by: Iqra Dilshad Munazza Tahir Kamran Peter Muhammad Usman Butt Submitted to: Sir Sikender Aziz

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Table of Contents Introduction 2 Product Details

7

Parties Involved

12

Internal Cycle of each party

16

Link between each party 16 Customers or Consumers Problems in the chain

27 29

Suggestions 31 References 32

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An Overview Pepsi was first introduced as "Brad's Drink", in New Bern, North Carolina, United States, in 1893 Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins experimenting with many different soft drinks. In 1898, one of Caleb's formulations, known as "Brad's Drink" a combination of carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola". On August 28, 1898, Pepsi-Cola received its first logo. In 1902, he applied for a trademark with the U.S. Patent Office, Washington D.C., and formed the first Pepsi-Cola Company. In 1905 Pepsi-Cola's first bottling franchises were established in Charlotte and Durham, North Carolina. Pepsi-Cola's first bottling franchises were established in Charlotte and Durham, North Carolina. In 1906, Pepsi gets another logo change, the third in eight years. The modified script logo is created with the slogan, & quot;The Original Pure Food Drink". In 1920, Pepsi theme line speaks to the consumer with "Drink Pepsi-Cola, it 2|Page

will satisfy you". In 1923, Pepsi-Cola Company was declared bankrupt and its assets were sold to a North Carolina concern, Craven Holding Corporation, for $30,000. FORMATION OF PEPSI COLA AS CORPORATION Roy C. Megargel, a Wall Street broker, bought the Pepsi trademark, business and good will from Craven Holding Corporation for $35,000, forming the Pepsi-Cola Corporation. In 1928, after five continuous losing years, Megargel reorganized his company as the National Pepsi-Cola Company. PEPSI COLA AS INCORPORATION In 1965, Expansion outside the soft drink industry began. Frito-Lay of Dallas, Texas, and PepsiCola merged, forming PepsiCo, Inc. Pepsi Cola Company operates in beverages industry. 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 company’s trademark. To maintain their goodwill in the market the company has a strict policy of granting 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 given by the company.

SETUP OF PEPSI COLA The head office is situated in New York (USA) with units operating in different regions of the world. These are called Business Units and Pakistan is in MENA Pak (Middle East, North America and Pakistan). The head office of MENA Pak is situated in Dubai (UAE). The local head offices for each country are situated in the respective capitals.

Pepsi cola at present: 3|Page

PepsiCo Inc. is among the most successful consumer product companies in the world with annual revenues of $39 billion and approximately 140,000 employees. Some of PepsiCo's brand names are nearly 100 years old but the corporation remains relatively young. PepsiCo divisions operate in two major domestic and international businesses: beverages and snack foods. Through our divisions PepsiCo has achieved a leadership position in each of these business segments: we are world leaders in beverage bottling and we are the world's largest producers of snack chips. PepsiCo's brand names are some of the best known and most respected in the world and our restaurants are named as favorites by millions of people. PepsiCo has achieved a continuing record of growth. This record is based on high standards of performance, distinctive competitive strategies which are superbly executed, the personal and professional integrity of our people, business practices and products. PepsiCo International (PCI) soft drink operation and includes the business of Seven-Up International. PepsiCo beverages are available in about 195 countries and territories. PCI organization consists of three geographic business units, each with self-sufficient operations and broad local authority. The three units are:

- Pepsi-Cola Europe - Pepsi-Cola Latin America - Pepsi-Cola Asia PCI beverages are produced by a combination of independent franchised bottlers, jointventure bottling operations and company-owned bottling plants. PCI is the soft drink market leader in more than 50 countries and territories including Saudi Arabia, Venezuela, Russia, Pakistan, Hungary and Vietnam. Other key markets include Mexico, Saudi Arabia,

Venezuela and Argentina. PI also focuses on high potential, underdeveloped markets, such as China and India

Vision 4|Page

PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate environment, social, economic – creating a better tomorrow than today Tomorrow > Today We believe Sustainability lives at the intersection of public and corporate

interest. It

encompasses citizenship and corporate social responsibility, which are about doing the right things for society and for the business. It encompasses the health of the Company, which is about fulfilling our mission of creating financial rewards and growth.

Mission PepsiCo’s 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)

PEPSI-Pakistan: The market in Pakistan is surely dominated by Pepsi. It has proven itself to be the No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. In 1971, first plant of Pepsi was constructed in Multan, and from there after Pepsi is going higher and higher. Pepsi is 5|Page

the choice soft drink of every one. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan. When Pepsi was introduced in Pakistan, it faced fierce competition with 7up, lemon and lime drinks, which was established during 1968, in Multan. Pepsi introduced its lemon and lime, "Teem" to compete with 7up. It successfully, after some years, took over 7up, and this enhanced Pepsi's profits and market share. In Pakistan, Pepsi with 7up enjoys 70% of the market share whereas the coke just has 20% markets share. Pepsi is operating in Pakistan, through its 10 bottlers all over Pakistan. These bottlers are Pepsi's strength. Pepsi has given franchise to these bottlers. Bottlers, produce, distribute and help in promoting the brand. Pepsi also launched its fast food chain KFC i.e. "Kentucky Fried Chicken.” Some of territories where the franchised units are produce and sell by Pepsi-Cola are: Bottlers in Pakistan 1. Punjab Beverages Co. (Pepsi)

City Faisalabad

2. Shamim & Co. (Pepsi)

Multan

3. Bolan Beverages Co. (Pepsi)

Quetta

4. Haidri Beverages Co. (Pepsi)

Islamabad

5. Noubahar Bottling Co. (Pepsi)

Gujranwala

6. Northern Bottling Co. (Pepsi)

Peshawar

7. Pakistan Beverages Co. (Pepsi)

Karachi

8. Sukkur Beverages Co. (Pepsi)

Sukkur

9. Raiz Bottlers Co. (Pepsi)

Lahore

10. Pepsi bottlers Hattar industrial Estate

Hatter,KPK 6|Page

11. Other small bottlers in different cites

2. Details of Products or Services: A product is anything that can be offered to a market to satisfy a want or need and a service is an act or performance that is essentially intangible and does not result in the ownership of anything. What products or services have to be offered to the target market depends on the market requirement and also the organization’s profits. The organization will offer those products and services, which result in maximum profits and minimum costs. There are following contents according to which types of PEPSI are described. Product Line of Pepsi Pakistan Beverages

Water

Juices

Snacks

Pepsi

Aquafina

Tropicana

Kurkure

Slice

Cheetos

7UP Mirinda

Lays

Teem Mountain Dew Diet Pepsi Lemon 7UP (sugar free) Sting Energy drink

Product Packing Details: BRANDS PEPSI

PACKING

UNITS

VOLUME

250 ML

24 bottles per case

250 ML per bottle

1000 ML

12 bottles per case

1000 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

175 ML

24 bottles per case

175 ML per bottle

1 Cylinder

114000 ML

1000 ML(PET)

6 bottles per case

1000 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

300 ML(NR)

12 bottles per case

300 ML per bottle

250 ML

24 bottles per case

250 ML per bottle

1000 ML

12 bottles per case

1000 ML per bottle

POST MIX

MIRINDA

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1500 ML(PET)

6 bottles per case

1500 ML per bottle

1 Cylinder

96000 ML

1000 ML(PET)

6 bottles per case

1000 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

300 ML(NR)

12 bottles per case

300 ML per bottle

250 ML

24 bottles per case

250 ML per bottle

1000 ML

12 bottles per case

1000 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

1 Cylinder

114000 ML

1000 ML(PET)

6 bottles per case

1000 ML per bottle

300 ML(NR)

12 bottles per case

300 ML per bottle

250 ML

24 bottles per case

250 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

250 ML

24 bottles per case

250 ML per bottle

1000 ML

12 bottles per case

1000 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

1 Cylinder

114000 ML

1000 ML(PET)

6 bottles per case

1000 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

24 bottles per case

250 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

250 ML

24 bottles per case

250 ML per bottle

1500 ML(PET)

6 bottles per case

1500 ML per bottle

330 ML CAN

12 bottles per case

330 ML per bottle

300 ML(NR)

12 bottles per case

300 ML per bottle

POST MIX

TEEM

POST MIX

7UP DIET

7UP

POST MIX

MOUNTAIN DEW 250 ML

PEPSI DIET

Aqua Fina

500ml 250ML

12bottles per case 12 bottles per case

500mL per bottle 250 mL per bottle

Sting Slice mango

250ml

12 bottler per case

250ml per bottle

8|Page

Beverages-Products  Pepsi Cola Pepsi is a carbonated soft drink produced and manufactured by PepsiCo. The market in Pakistan is surely

dominated by Pepsi. It has proven itself to be the No.1 soft drink in Pakistan. Now days Pepsi is recognized as Pakistanis National drink. It is consumed by all age groups because of its distinctive taste. Compared with other Cola in the market, it is a bit sweeter and it contributes greatly to its liking by all. Consumer’s survey results explain the same outcome and Pepsi has been declared as the most wanted soft drink of Pakistan and is available in different packaging and sizes like tin packaging & PET bottle packaging of different quantities.



Miranda

Miranda has been owned by PepsiCo since 1970. It is available in fruit varieties including orange, citrus, grapefruit, apple, strawberry, raspberry, pineapple, pomegranate, banana, passionfruit, lemon, hibiscus, guarana, tangerine, watermelon and grape flavors as well as tamarind. A "citrus" flavor is also available in certain areas of the Middle East. It is part of a beverage area often referred to as the flavor segment, comprising carbonated and non-carbonated fruit-flavored beverages. The orange flavor of Miranda now represents the majority of Miranda sales worldwide following a major repositioning of the brand towards that flavor in the early 1990s. It competes with Coca-Cola's Fanta and Dr Pepper's Orange Crush or Sunkist (soft drink) brands, with flavor brands localized to individual countries. As with most soft drinks, Miranda is available in multiple formulations of flavor, carbonation and sweetener depending on the taste of individual markets.

 7uP 7 Up is a brand of lemon-lime flavored, non-caffeinated soft drink owned by PepsiCo, The rights to the brand are held by Dr Pepper Snapple Group in the United States, and PepsiCo (or its licensees) in the rest of the world. The U.S. version of the 7 Up logo includes a red cherry between the "7" and "Up"; this red cherry has been animated and used as a mascot for the brand as Cool Spot. There exists a myth that the 7 Up name comes from the drink having a pH over 7. That would make it neutral or alkaline on the scale; however, this is not the case, as the 7 Up pH is close to 9|Page

3.79, similar to other drinks of the type. The real origin of the name is unclear, though Britvic claims that the name comes from the seven main ingredients in the drink, while others have claimed that the number was a coded reference to the lithium contained in the original recipe, which has an atomic mass of approximately.

Variations in 7uP 7 Up Ten Introduced in 2013, along with "Ten" variations for most of the major Dr. Pepper/SevenUp brands, this contains 10 calories. Tropical 7 Up Introduced in 2014 for a limited time, this is a pineapple/mango-flavored 7 Up 7 Up Retro It is also available in 12 oz. glass bottles with a label inspired by 7 Up's original logo. Diet 7 Up This diet soda was originally introduced in 1963,it was discontinued in 1969 due to the U.S. government ban of cyclamate sweetener. After reformulation, it was reintroduced as Diet 7 Up in 1970. It was renamed Sugar Free 7 Up. Cherry 7 Up Cherry 7 Up flavor, with these ingredients listed: Carbonated water, high fructose corn syrup, citric acid, natural and artificial flavors. Diet Cherry 7 Up Diet Cherry 7 Up has recently been re-introduced due to popular demand after having been missing due to the existence of 7 Up plus Cherry flavor. 7 Up Free 7 Up Free is sold in the UK, Ireland, Spain, Norway, Argentina, Iceland, Finland, UAE, Uruguay and Pakistan. It contains no caffeine, sugar, colorings or preservatives and is marketed as "Natural Lemon and Lime flavor" similar to the "100% natural" American version. It contains a combination of artificial sugars, and for eight years was the only variety on the Norwegian market. 7 Up Light In International markets, PepsiCo sells 7 Up Light as the diet version of 7 Up. 7 Up Lime 7 Up Lime is sold in the U.S. and in Argentina. In the U.S. it is not as strong and is less carbonated. In Argentina it is much more carbonated and is 5% lime juice.



Mountain Dew

Mountain Dew (currently stylized as Mtn Dew in the United States) is a carbonated soft drink brand produced and owned by PepsiCo. The original formula was invented in 1940 by 10 | P a g e

Tennessee beverage bottlers Barney and Ally Hartman and was first marketed in Marion, Virginia; Knoxville, Tennessee and Johnson City, Tennessee with the slogan "Ya-Hoo! Mountain Dew.

 Slice (Soft Drink) by PepsiCo Slice is a line of fruit-flavored soft drinks manufactured by PepsiCo and introduced in 1984. In early 2006, Pepsi resurrected the Slice name for a new line of diet soda called Slice ONE. Marketed exclusively at Wal-Mart stores, Slice ONE was available in orange, grape and berry flavors, all sweetened with Splenda. As of 2009, Slice (orange, diet orange, grape, strawberry and peach flavors) was available solely from Wal-Mart Stores. In India and Pakistan, Slice is a mango flavored soft drink under the PepsiCo brand.

 Sting Energy Drink by PepsiCo Sting Energy Drink is a carbonated energy drink from PepsiCo International and is available in different flavors, such as original Gold Rush, Gold (with Ginseng), Power Lime (Kiwifruit/Lime) and Berry Blast (Strawberry). Such as original Gold Rush, Gold (with Ginseng), Power Lime (Kiwifruit/Lime) and Berry Blast (Strawberry). After the launch of sting in Pakistan, PepsiCo started a widespread campaign, which included road advertising and TV commercials. Starting from Karachi, the Hummer (advertising vehicle) travels through different areas and offers free Sting energy drink to people on the roads.

 Aquafina Mineral Water by PepsiCo Aquafina is a brand of purified bottled water products produced by PepsiCo, Aquafina Pure Water, the primary unflavored product produced under the Aquafina brand, is derived from local municipal tap water sources and goes through a purification process that incorporates reverse osmosis, ultraviolet and ozone sterilization. The packaging has evolved from its original iteration for the purpose of partially offsetting environmental impacts of production and shipment. This has primarily involved packaging weight reduction. The weight of Aquafina bottles was reduced by approximately 50%, to 10.9 grams (0.38 oz), with a packaging redesign in 2009 which, according to the company, resulted in the use of 75 million fewer pounds of plastic during the production process. Aquafina is distributed in 500 milliliters, 1 liters and 1.5 liters bottles.

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Understanding the Supply Chain of Pepsi The 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 customer’s request. (Chopra, Meindl)

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, and set delivery and so on. There is less uncertainty about demand.

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. There are five stages in a supply chain:  Supplier  Manufacturer  Distributor  Retailer  Customer Supply chain process cycles:  customer order  replenishment  manufacturing  procurement cycle

Parties Involved… The company operates through a well-established network of a number of distributors. The company has two types of delivery systems i.e. 12 | P a g e

 Direct delivery system  Indirect delivery system The basic difference between the direct and the indirect delivery system is that in a direct distribution system, the company spends its own resources while in an indirect distribution; the dealer spends his own resources on all the factors which increases the sales volume:  Direct Delivery System Manufacturer

Retailers

Customers

Delivery of post mix cylinders & handling of key accounts: The key accounts are different wholesalers, restaurants and hotels like Pizza Hut, KFC, and Metro which serve as a place for key sale. These are known as national key accounts and are very important in terms of competition.

 Indirect Delivery System Manufacturers

Distributor

Retailers

Customers

o Through Base market distributors o Through Outstation distributors Before delivering the product some certain guiding principles are followed for the assessment of Distributor’s capability by RBL. Applicant must have 30 to 40 vehicles (depending on the area). Applicant must have 40,000 cases of empty bottles. Applicant must deposit Rs.5, 000,000 as a security. RBL-Riaz Bottler limited 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 Nonseasonal period and not applicable in the seasonal period.

Suppli er

Manufacture r

Distribut or

Retaile r

Custom er 13 | P a g e

The basic difference between the direct and the indirect delivery system is that in a direct distribution system, the company spends its own resources while in an indirect distribution, the dealers spends their own resources on all the factors which increased the sale. The company also has its depots in different cities. Which helps a lot in increasing its sale and directing the distribution system.

Supply Chain of Pepsi Riaz Bottlers Lahore

Supply Chain Design of PepsiCo Pakistan



Supplier & Manufacturers:

The suppliers to Pepsi Co are franchise operative (RBL-Raiz Bottler Limited Lahore) as well as company operative (LAYS chips) system and are located in eight cities of Pakistan. The cities are Lahore, Islamabad, Karachi, Peshawar, Hyderabad, Sukkhar, Gujranwala and Faisalabad. PepsiCo has its Plant, Factory, Workshop and Warehouse at the same place in Lahore. The Address is: Guru Mangat Road, Gulberg Lahore For Pepsi, outsourcing results in the supply chain function being performed by a third party. It is in fact one of the most important factors facing the firm. Raw material for production and packaging is being outsourced through contracts. Inbound and outbound transportation of 14 | P a g e

products from the manufacturing place to the distribution center and then to the final customer is also being outsourced to a third party. The basic considerations are:  Pointing out sources of supply and negotiate with suppliers  Sourcing of raw material from local and foreign suppliers  Deciding terms and conditions with supplier  Coordinating activities and documentation with suppliers  Cost comparisons and quality assurance . Pepsi makes the decision from where to outsource by inviting bids for tenders in the local newspapers. The tender works as a general offer to all the interested parties whether they are related to the provision of raw material or distribution vehicles. Sourcing process of the company includes the selection of supplier, design of supplier contracts, product design collaboration, procurement of material and services and evaluation of supplier performance in case of raw material procurement.

 Distributors: Selection of distributors is a critical step, because the majority of supply to the retailers is handled by the distributors. Efficient and well-placed distributors are essential for ensuring product availability, which is the main target of the company Distributor located throughout the country; every city has its distributors. The distribution is done on direct and indirect ways that would be discussed in the distribution section of the report.  Retailers : Retailers outlets are all sort of shopkeepers, malls , hotels etc to whom the distributors provide the stock via transportation i.e. trucks etc which carries distribution from point to point in different allocative routes.  Incentives Mainly two types of incentives are given by the Pepsi Cola: Pepsi Cola provide various incentives to retailers on the best sales and achieving the predetermined sales targets. These incentives are in the shape of: Deep Freezers Return Tickets Free Transportation Services  Customers: Its customers are all sort of target markets from social class A to C and range within all demographical and pyschographical parameters. 15 | P a g e

RIAZ BOTTLERS AND SUPPLY CHAIN MANAGEMENT: RBL’s primary functions are to demeanor a methodical manufacturing and supply of the product without any tactical and strategic flaws. Backed by a powerful competitive strategy and empowered by some effective supply chain strategies, the group has been managing an effective supply chain throughout the region. It has set up a urbane manufacturing and storage plant in Lahore with production units and huge production capacity. RBL has different management departments dealing with specialized Marketing, HR, IT and Supply Chain Processes. In this report we conducted the process of the basic supply chain management functions of RBL by Pepsi co.

SUPPLY CHAIN OPERATION: In RBL, the production, sales and supply chain departments get united to decide the inventory on weekly basis. There is always less uncertainty about the demand. The operation process includes customer orders in the best possible manner. During this RBL, allocate inventory or production to individual orders, set a date (which is always according to the will of customers and they don’t get disappointed) that an order is to be filled, generate a proper pick lists at a warehouse in gulberg , allocate to shipping, set delivery and so on.

4. Internal Cycle Details of Parties & Link between Each Party: PUSH AND PULL VIEW OF SUPPLY CHAIN: The push process implementation is commenced in anticipation to a customer order. Just in time concept is pertinent in non-seasonal period and not pertinent in seasonal period. All processes that are part of the procurement cycle, manufacturing cycle, replenishment cycle, and customer order cycle are push processes. 

Supply Chain Management at Pepsico

PepsiCo's supply chain management had been based on the idea of collaboration and integration. 16 | P a g e

The company took several initiatives to have a more collaborated and integrated supply chain, which would become a source of competitive advantage... 

Procurement of Raw Materials

The raw materials used in manufacturing PepsiCo's beverage and food products were: apple, pineapple juice and other fruit juice concentrates, corn, aspartame, corn sweeteners, flour, flavoring, grapefruits, oats, oranges, rice potatoes, sucralose, sugar, vegetable and other oils, and wheat. Raw materials also included packaging material — plastic resins such as polyethylene terephthalate and polypropylene resin used for plastic beverage bottles, film packaging for snack foods, aluminum for cans, and also fuels and natural gases. 

Raw material Procurement

For the manufacturing of Pepsi products, raw materials procured are like packaging materials, bottles, cans, sugar and concentrate etc. from both local and foreign suppliers. The materials used in the manufacture of beverages are primarily being procured from various parts of the country. Sugar is purchased from several different suppliers chosen from a list already selected by PepsiCo International. The concentrate is obtained directly from PepsiCo International. The management usually advertises in the newspaper to invite tenders for the supply of these raw materials. The basic components of raw material are: concentrate, CO2, sugar and gas. 

Manufacturing Operations

PepsiCo employed many technologies at its production facility when it realized that production flow was not smooth due to the frequent breakdown of machine and mismanaged inventory. Production at PepsiCo plants began with the unloading of empty bottles from the trucks via the conveyor and their being moved to the DE palletizer. PepsiCo in Pakistan have manufacturing setup in Islamabad region in which they sales and distributes all over distributor in Islamabad / Rawalpindi region including Peshawar and azad Kashmir.

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Logistics Network of Pepsi Co 

Distribution Network And Logistic Management

PepsiCo used different distribution strategies to bring its products to market depending upon product characteristics, local trade practices, and customers’ needs. It delivered fragile and perishable products which were less likely to be impulse purchases, from its manufacturing plant and warehouses to customer warehouses and retail stores. PepsiCo used third party foodservices and vending distributors to distribute its snacks, foods, and beverage to restaurants, schools, stadiums, businesses, and other locations. PepsiCo Pakistan have three major actors involve in re -logistics channel first is Depot sales point, second is distributor and third one whole seller/retailer In Pepsi Co 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. 

The Transportation Driver:

Transportation driver has a large impact on the responsiveness of the business. Faster transportation of the products allows to maintain sufficient levels of stock on the shelves. PepsiCo Pakistan transportation network is the collection of routes, modes and locations along 18 | P a g e

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 cities (Rawalpindi & Islamabad) which cater to the market demand. PepsiCo 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 PepsiCo Haidri using fast mode of transport increases responsiveness as well as the transportation cost but lowers the inventory holding cost. 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 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 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 

PepsiCo’s Relationship with Retailers

PepsiCo also made its supply chain better by establishing a collaborative relationship with its retailers. One such example was its relationship with Wingman’s retail. PepsiCo approached Wingman’s with a proposal for the Frito-Lay line which controlled two fifth of the world market for salty snacks and PepsiCo products.



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 19 | P a g e

against orders then shipping manager plans according to the demand of distributors on daily basis.

Purchase & Procurement Department & Process for PepsiCo NbcNAUBAHAR BOTTLING (PVT) LIMITED As oppose to its meaning the root purpose of the purchase department is savings. Purchase department is very important because it has to get the cost efficiency. NBC does not rely on one supplier because it will create the monopoly of that supplier that creates problems for the company. To avoid such kind of monopoly of the supplier, company always prefers to have more than one supplier in their supplier list.

PURCHASING PROCESS When store informs the purchase department about the purchase of a particular item, the purchase department gets information about the prices of desired items. At this level quotations are required by the department from its different suppliers. On receiving these quotations the selection of supplier is based on the low price and high quality. Another procedure is the negotiating the prices with the supplier. In this case the prices are settled at the desired level. After setting the prices, the order is placed to the supplier. When the goods are received their physical verification is done and in case of any shortage or poor quality product the respective supplier is informed. In this case the supplier has to bear the charges of shortages or low quality. In case of events like 14th August, Eids, Festivals Purchase department had to manage the supply at least 15 days before the occurrence of the event, because the production increases in these days due to high demand in the market.

SUPPLIERS NBC has both local and international suppliers of glass and pet bottles who are approved by the Pepsi Cola International. These are

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      

Balochistan Glass Factory Karachi Standard Manufacturers Lahore Plasco Plastics Hattar Ghani Glass Peshawar Concentrate from PCI Crystallite Products (pvt) Ltd Kaas-ul-Musaffa Karachi

Supplier selection Supplier selection is made mostly according to their quotations in which the two factors have main focus. These are  

Quality Price

No.

Material

Manufacturer/ Supplier(s)

Approved from

1.

Pepsi Concentrate

PepsiCo Inc. Ireland & PepsiCo Factory in Hattar Estate.

Approval at the factory

2.

Caps & Closures

Gatron Pakistan Limited

Approved form PepsiCo China.

3.

Plastic Bottles

Galtron Pakistan Limited

Approved from PepsiCo China.

4.

Glass Bottles

Baluchistan Glass Mills Tariq Glass Limited

Approved by PepsiCo China.

5.

Carbonated Water

Pakistan Bottlers (Pvt) Ltd.

Approved from PepsiCo U.A.E, Dubai.

Domestic and Foreign purchases The purchases in NBC beverages Pepsico are made from two sources;  Domestic Markets  Foreign Markets Domestic purchases 21 | P a g e

The purchase made from the country is called domestic purchase. It includes the purchase of sugar, co2, and for the factory it includes office stationery, vehicles spare parts, glass bottles, pet bottles, spare parts of production machinery and vehicles for transportation. Foreign purchases The purchases made from the international markets are called foreign purchases. Concentrates are provided to NBC by the Pepsi Cola International, crowns and heads of the bottles are also imported from Turkey and Dubai. The machinery is also purchased from the foreign markets.



PRODUCTION/ MANUFACTURING PROCESS

Company is having flexible production plants. Company can change production according to demand fluctuations. Process is same for all products i.e. Pepsi Cola, 7-up, Mirinda and Mountain Dew. No plant is fixed for a specific product. 1st Stage (Getting Treated Water) ‘Lime’, Farris Sulphate (for iron) & chlorine are added to raw/hard water & it goes in “chemical tank” where carbonate and bi-carbonate are settled down, & they get treated/soft water. 2nd STAGE (PREPARATION OF SIMPLE SYRUP) Simple syrup is made by mixing up sugar into water after pasteurization of water at 80˚ C. After some time, this simple syrup is filtered & then cooled down at 19˚ C. Water is boiled at normal temperature like 32˚ C to 35˚ C to kill germs. 3rd STAGE (PREPARATION OF FINISHED SYRUP) Now this simple syrup goes into syrup storage tanks. Concentrate & flavor are added to simple syrup & it is called finished syrup. 4th STAGE (WASHING EMPTY BOTTLES) Empty returned bottles pass through steam under 57˚ C to 77˚ C, and then those bottles are dried. This stage takes 45 minutes. Now bottles are washed by Caustic-Soda, TSP and water. Now a light-test is conducted for washed bottles, where the bottles pass through a light. 5th STAGE (FILLING SECTION)

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Now finished syrup & treated water come to Carbo Cooler in which NH3 (Ammonia) chips are used for cooling purpose. CO2 gas also comes in Carbo Cooler. After a flowmix in Carbo Cooler, the resultant drink comes into filler where empty washed bottles are filled. 6th STAGE (CROWN FITTING) Now bottles come to Crowner where they are crowned and then bottles pass through a light test to have a check for over filled, under filled or any deficiency. 7th STAGE (PACKAGING) After passing through packager, the boxes of bottles are packed.

 Transportation/shipping: Shipping is a very critical area for any organization. It serves the role of coordinator or middleman between production and sales. Ensuring appropriate quantity and on time availability of empty & liquid stock is utmost important. Any malfunction in empty receiving, storage and supply to plants, liquid stock and distribution directly affects sales. This is a complete chain or cycle and any weak link, bottle neck or disturbances will slow down the whole operations. The Shipping System of NBC-PepsiCo is responsible for the management of the Following tasks:  Shipping is responsible for managing the empties that are required for production.  Shipping is responsible for receiving the liquid clearance from excise to dispatch it further to Depots & distributors or parties.  Shipping is also responsible for maintaining proper stock of liquids and empties as they appear in the liquid and empties stock register, so as the stock appears in the registers, it should also be physically present in the depots.  Shipping is also responsible for proper management of empties and liquid vehicles loading and off-loading i.e. time management is very important in this case.  Shipping also receives new empties of both RB and NRB and manages their storage and handling and their proper supply to production as they are required by the production for filling purpose.  The management of other empty stock is also the responsibility of Shipping Department 23 | P a g e

and its exchange is especially important in this case.



FINISHED GOODS STORAGE

Finished goods storage should be secured against sunlight, rainfall, moisture and other intimidation. 

Issued on FIFO (first in, first out) basis via validity of production dates. It ensures that

 

product is not expired, bad taste and visually unattractive. Shift wise record of daily transactions is maintained. These are physical stock taking for physical but not for expiry dates.

Handling & Packaging Forklifts are used for transferring FG shells I cases from production area to shipping hall or not delivery ducks to ensure product do no get damaged. All Pepsi Cola carbonated soft drinks are packed in glass/PET bottles or

post mix tanks. This

is called primary packaging. Filled glass/PET bottles are further secured by means of plastic or wooden shells/cases called secondary packaging.

 INVENTORY MANAGEMENT Pepsi Cola is handling four types of inventories which are 

Raw Material Raw material like syrup, sugar, filter papers, CO2, Ammonia, Empty bottles, packaging material, Bottle cases, Chlorine, Corks and Crowns etc.



Work In Process Work in process will contain all those bottles which are under the process of the filling and packaging. At the end of shift work in process inventory of is transferred to other shift.



End Products

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End products are in the form of cases containing 24 bottles. End product inventory is managed in two ways 1. Production department after production stores their finished goods in their godown which is located in the premises of factory. 2. Sales department transfer their needed inventory in their godown and issue required amount of cases to distributors. 

Spare Parts Spare parts inventory will contain items like Gear boxes, Belts or conveyers, Motors and Switch boards etc.

DECISION PHASES IN SUPPLY CHAIN OF PepsiCo Pakistan-Riaz Bottlers Lahore SUPPLY CHAIN DESIGN: A proper decision regarding how to structure the supply chain over next upcoming years is made both short term as well as the long term decisions have been made by the company 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. Supply chain design is expensive to alter on short notice and supports the company’s strategic objectives. In order to ensure a good supply chain strategy, Riaz Bottlers plans one to two years in advance. It has several contracts with manufacturers, and receives raw material on a convenient basis. The company also decides where production plants are to be placed. RBL has production plants at Lahore. The production process is 80% 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: Production, Storage: Raw and packing. Storage: Finished goods. 25 | P a g e

Riaz bottlers Lahore has a procurement budget of nearly Rs 10 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 ten filling lines during the last few years lending it a competitive edge over Coca Cola.

Pepsi Processing Model “Input – Processing – Output Model

Inputs 

Supply i. Manage supply ingredients to ensure availability to produce products. ii. Maintain purified water supply for quality and availability to produce products.



Manufacturing i. Ensure best technology is available to produce products and mix ingredients. 26 | P a g e

ii. Ensure quick storage and inventory processes to maintain freshness and quality. 

Sales i. Determine demand by past sales and future marketing. ii. Adjust quantities produced in real time to meet appropriate demand.

Output 

Supply i. Determine inventory of ingredients to order new supplies. ii. Maintain purified water supply so ensure continuance of production.



Manufacturing i. Ensure proper packaging to ensure quality and freshness in products. ii. Maintain quick local distribution to ensure freshness and quality products.



Sales i. Keep positive distribution levels to all sales outlets to maintain positive sales.

6. Description of Customers /Consumers The Customer and Supply Chain Uncertainty Identifying customer needs: PepsiCo needs to understand the customer needs for each targeted segment and the uncertainty the supply chain faces in satisfying these needs. As PepsiCo-Riaz Bottlers 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 winter. As demand for beverages is seasonal, the quantity of product needed for each lot is taken care of with past demand in mind.

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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).

 Description of Customers Our customers include authorized bottlers and independent distributors, including foodservice distributors and retailers. We normally grant our bottlers exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographic area. These arrangements provide us with the right to charge our bottlers for concentrate, finished goods and Aquafina royalties and specify the manufacturing process required for product quality Since we do not sell directly to the consumer, we rely on and provide financial incentives to our customers to assist in the distribution and promotion of our products. For our independent distributors and retailers, these incentives include volume-based rebates, product placement fees, promotions and displays. For our bottlers, these incentives are referred to as bottler funding and are negotiated annually with each bottler to support a variety of trade and consumer programs, such as consumer incentives, advertising support, new product support, and vending and cooler equipment placement. Consumer incentives include coupons, pricing discounts and promotions, and other promotional offers. Advertising support is directed at advertising programs and supporting bottler media. New product support includes targeted consumer and retailer incentives and direct marketplace support, such as point-of-purchase materials, product placement fees, media and advertising. Vending and cooler equipment placement programs support the acquisition and placement of vending machines and cooler equipment. The nature and type of programs vary annually.

 Types of customers at PepsiCo-Pakistan 1. Consumers (Public)

2. Business (Companies) 3. Government (Govt Offices)

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Pepsi Perfect main focus is the consumers which are the end users. Company has to make its marketing strategies keeping in view the consumer buying behavior. To forecast the behavior of the consumer is a business problem. Physical aspect of the consumer can be satisfied but it is difficult to satisfy the consumer psychologically. Consumer buying behavior is affected by certain factors like Cultural factors, Social factors, Personal factors and Psychological factors. So the producer should keep these factors in Mind while promoting their product so that they can acquire the customer and increase their market share. There are different consumers in a society whose behavior is not the same. Every consumer has a different perception of different products. Some consumers are impressed by one quality of the product which may be in the view of other consumer not that impressive. So to deal with different consumers in a society one should know about the consumer buying behavior process which may help in making a true picture of their product in the mind of the consumers.

 Customers Demographic Segmentation: Company study PEPSI PERFECT market at the different aspects of population. Markets can be divided on demographic factors like age, gender, education etc. The various demographic factors are :  Age: Analysing markets by age is to divide the total population into age groups and analyse the wants and needs of each group.  Income: PEPSI PERFECT Buying patterns depends on income of the consumers. No two individuals or families spend money in exactly the same way that’s why company launch economy packs of PEPSI PERFECT.  Family Size: The consumption patterns of PEPSI PERFECT definitely vary with the number of people in the household that’s why company introduce 1.5 ltr & 2.25 ltr bottles in the market.  Race: Consumption patterns of PEPSI PERFECT differ on the basis of race because market research if first 15% peoples purchased & used your product which have company launch others 85% peoples follow them.

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7. Problems in Supply Chain: Difficulties without Just-in-Time 

When an operation of the company was not just-in-time based, the demand or production planner strived to optimize production-oriented goals and objectives such as equipment



utilization, labor efficiency, throughput and uptime. Optimizing these goals often leads to run large batch sizes that are dependent on the availability of raw materials. This optimizes the equipment and labor utilization but the production planners and managers had not been looking at the expense of the bigger



picture. The sourcing or purchasing managers strived towards reducing company’s spending overall. This manager consolidated suppliers offering products or materials at the lowest



per unit costs through buying in volume. They even got the shipping and freight costs included in the purchase price, which led to



the increase in the price of the commodity. Purchasing managers focused on getting the best price, not putting into consideration the



supplier performance and reliability. The logistics/transportation manager was tacked with getting raw materials in and the finished goods out of the production process and seek to optimize the transportation and distributing network. This manager focused on the lowest cost and reliability of the logistics or transportation solutions. But lowest cost could only be attained if the purchasing team negotiates a delivered cost package deal with the supplier and the supplier is responsible of the reliability and performance of the carriers or transporters.

 Energy Crises: As there are energy crises in Pakistan, Pepsi also facing and effected due to it. As there is shortage of electricity and there is huge consumption of electricity to run the operations and

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maintaining temperatures in the factory while manufacturing, Pepsi is fulfilling it through generators which take their costs higher and reduces profit margins. Same as there is the shortage of natural gas as well. Pepsi needs natural gas to run the boilers for the operations, due to the shortage of natural gas which is the cheapest mean of energy, Pepsi is now using alternate means like coal and oil, which are more expansive than the gas, to run their operations. 

Feed Back

For feedback there should be a lean connection between major actors of distribution channels ,and this feedback should cater for under CRM customer relationship management ,at the same time CRM should be updated their feedback from customer, distributor and whole seller.

8. Recommendations / Suggestions RBL doesn’t have proper enabling technologies such as EDI , ERP , RFID and EDD . they should be having that for the better performance of its supply chain activities. These engagements would Identify specific opportunities to improve operational performance and reduce costs within your manufacturing, assembly, supply chain, and customer support processes Define specific process changes and the auto-id technology required to streamline each process step Address the business, manufacturing, logistics, information technology, and financial implications of RFID -- including starting points and scale-up plans

When integrated with enterprise resource planning (ERP) system, demand planning applications can help:    

Compare calculated forecasts to actual results over time for trend analysis. Focus on "hot spots" to prepare for what's coming into high demand. Share forecast information securely via the Web through role-based portals. Reduce operating costs. Streamline production. The end result: lower inventory costs, fewer stock outages, faster time to market, and happier customers.

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References           

http://en.wikipedia.org/wiki/Pepsi https://www.scribd.com/doc/8021114/supply-chain-management-of-pepsi-cola-pakistan http://www.wikinvest.com/stock/Pepsico_(PEP)/Customers#toc http://www.icmrindia.org/casestudies/catalogue/Operations/Supply%20Chain %20Management%20of%20PepsiCo-Excerpts1.htm http://vustudents.ning.com/group/mgt619finalprojectmanagement/forum/topics/projectinternship-report-of-management-total-quality-managementhttp://www.haidribev.com/point/products.html https://www.scribd.com/doc/61830380/Consumer-Behavior-Completed-Report http://www.euromonitor.com/soft-drinks-in-pakistan/report https://www.scribd.com/doc/46406818/Organizational-Design-and-Analysis-PEPSICola-Riaz-bottler-Lahore-and-haidri-beverages-Islamabad http://www.slideshare.net/avkoo7/pepsi-cola-pakistan https://www.scribd.com/doc/15005409/Report-on-Pepsi

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