Supply Chain: Pepsi

Manica Jain Medhavi Verma Rahul Asija Sudhanshu Nangru

PG2015278 PG2012 PG2012 PG20125631

SUBMITTED TO SUBJECT SUBMITTED ON MARKS ALLOTED REMARKS (IF ANY)

Ms. Poonam Nair Going to Market 27th November 2012

EXECUTIVE SUMMARY
One of the biggest and most well known brands of the world, Pepsi is a product of PepsiCo, an American multinational corporation providing the world with a wide variety of carbonated and non carbonated drinks for more than a hundred years. It entered Indian shores in 1989 and now has over 40 bottling plants across the country and is a major player of the almost Rs. 18000 crore beverage industry. PepsiCos well spread supply chain involves Carrying and Forwarding agents, distributors and retailers. Its sales process is of two types : organised and direct. Finally, we have included in the project various details from the point of view of a single intermediary in particular region: Gurgaon. Internationally, PepsiCo Inc. is considered to be one of the best supply chain managers of the world. They have pioneered the DSD (direct store delivery) model by collaborating with intermediaries and taking control of inventory management of their own products in retail stores to better leverage sales.

Through various push and pull strategies applies appropriately in several regions, PepsiCo has emerged to become one of the biggest, most successful companies of the world. It has become a role model for various other organisations around the world who have studied the companys supply chain thoroughly to help better their own.

PepsiCo,

Incorporated

is

Fortune

500, American

multinational

corporation.

Headquartered in Purchase, NY with interests in manufacturing and marketing a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and FritoLay. Its r evenue was USD 43.25 Billion in FY2010-11 and employs more than 1,85,000 employees round the world. The present Chairwoman, President & CEO of PepsiCo is Indra Krishnamurthy Nooyi.

Pepsi, the product that has given the world its best-known taste was born in United States, North Carolina, on May 8, 1898 and is now available in nearly 200 countries and territories around the world. It entered India in 1989 and now owns 43 bottling plants in the country, 17 of which are company owned(COBO) and 26 are franchisee owned(FOBO). Annual exports from India are worth over USD 60 million. The net worth of Indian Beverage Industry is worth 13000 crore. Major players include Pepsi & Coca-Cola. Energy drinks, packaged fruit juices, etc have entered the domain to compete with core players of the industry. YEH HAI YOUNGISTAN MERI JAAN, a tagline which has managed to attract 200 million people worldwide belongs to the brand PEPSI. Over generations, youngsters have grown up with Pepsi and shared an emotional connect with it. It suffices to be an iconic youth brand in India.

Locations of Company Owned and Franchise owned Bottling Operations in India

SUPPLY CHAIN STRUCTURE OF PEPSICOS 300ML PEPSI BOTTLE IN INDIA

MANUFACTURER

Carring & Forwarding Agent

Small Dealers

Distributors

Small Dealers (Village)

Retailers

Sales are done through two basic methods: 1. Organised Sales 2. Direct Sales

Organised sales o C&F: Carrying and Forwarding Agents (working as loaders, de-loaders, salesmen) o Distributor: Supplies to approximately 4000-4500 outlets. He supplies using multiple vehicles(90% used for organised sales, 10% used for direct sales). o Retailers.

Direct Sales o From C&F the secondary trucks leave for the semi urban and rural areas for the direct sales of the materials. Each truck consumes 6-7 L of diesel per day. This kind of selling is not used for demand forecasting but still generates

huge amount of revenue. That is why this practice is being followed despite having various limitations. o One truck carries 3 tonnes which includes 144 crates.

Each crate consists of 24 bottles. Weight: 14.4kg (case of 200 ml full bottles), 18kg(case of 300ml full bottles). Weight of 300ml bottle-700gms when full Weight of 300ml bottle-400gms when empty

INFORMATION FLOW STRUCTURE

SUPPLY CHAIN OF GURGAON REGION CHANNEL PARTNERS: Ramendra Enterprises There are 3 C&F agents (Carrying and forwarding agents) located in Gurgaon who collect products from the company, store in a central location, break bulk and despatch to Ramendra Enterprises. There are 20 dealers whom they supply to in Gurgaon. Remaining supply is done directly to retailers. C&F agents also supply to retailers.

LOGISTICS for SUPPLY CHAIN

There are around 100 trucks that the company has for the region of Gurgaon. These trucks also deal with promotions (carrying banners, advertising, etc) Ramendra enterprises have 4 depots located in Gurgaon. They have 20 trucks at each depot, i.e. a total of 80 trucks. Out of these 80 trucks, certain numbers are outsourced (taken on lease).

Besides supplying bottles to every retailer/dealer, they also provide refrigerators to them.

CHARACTERISTICS OF DEALERS Dealer does not have a clearly defined territory and may sell both in the market and from his shop. Dealer also deals in competitive products. Dealers extend credit selectively. They do reach-out to new dealers. They say that they are an already established brand; therefore, we dont need to market the product as such.

WHEN THEY OVER-STOCK or UNDERSTOCK Whenever they go under-stock or over stock, they either balance it either through schemes or creating stock pressures on retailers. They also try to come up with promotions through banners and at retail outlets if sales are not being met and are over stock. Most distributors have not yet faced over-stocking. This shows demand of the product.

ADDRESSING DEALER/RETAILER COMPLAINTS It is the customer executive who takes care of grievances or complaints that are forwarded by either dealer or retailer.

Besides customer executive, they also have a CRE (customer relationship executive) who resolves these issues/complaints. If we fail to meet their complaints, they can address it to management of the company (which has never happened).

DISTRIBUTION COST The total distribution cost which includes loading, unloading, diesel, labour, travelling comes to around Rs 3 per case. Here, 1 case is referred to as a pack of 24 bottles in a crate.

CREDIT PERIOD Maximum business is done on cash basis. 90% of the business is done on cash basis. 10% include those with whom the company tie-ups with. The credit period is 7 days 15 days to a maximum of one month. These credit customers are selective.

COMMUNICATING SALES DATA TO Mfg & Dealers/Retailers They use the customer relationship management software to maintain records of sales done. They do work on targets. The order fulfilment time is 1 day. The order of retailer/dealer is dispatched the next day. COLLECTING ORDERS FROM Dealers/Retailers The sales representatives have to roam around the region and verify stocks in retail outlets and dealer houses. Products, if any, expired are also taken back by the distributor which is a rare case. They visit them every third day of the week.

The order is dispatched to them on the next day.

MARGIN CHARGED by Ramendra Enterprises The commission that they charge is on the basis of the crates they sell. At an average, they earn Rs 6 per crates, i.e. at sales of 24 bottles; they make revenue of Rs 6. This amount varies on the size too, i.e. 300 ml, 500 ml, 1.5 ltr, 2 ltr.

INTERNATIONAL SCENARIO

Collaboration is an essential ingredient in the PepsiCo Inc. supply chain. For instance, the company has been a pioneer in the development of a direct store delivery (DSD) model. The concept of DSD centres on eliminating the warehousing step in the process of getting highturnover, high-volume perishable goods such as soft drinks and snacks to market; instead, the suppliers take their products directly to the store. DSD suppliers free up warehouse space for retailers, and are able to get a better handle on their product sales and inventories. Working with grocery store chain Wegmans, Pepsi and its Frito-Lay snack food division leased retail floor and shelf space from the grocer. In effect, Pepsi took over inventory management of its products within the Wegmans stores. By managing its own products

within a retail environment, Pepsi was able to better leverage sales of its high-margin FritoLay products while maintaining sales of its fast-moving but low-margin beverage products.

Meanwhile, PepsiAmericas Inc., a bottler of Pepsi products, has adopted a pre-sell strategy, a form of DSD in which a brand owner places an order before the delivery date. By incorporating wireless technology, PepsiAmericas account sales managers can take orders on-site, which are then remotely uploaded to a central order and routing system at headquarters via wireless connectivity. The result is that delivery trucks can be stocked more efficiently and accurately for the days routes. Drivers now have the capability to track inventory, record deliveries and wirelessly print invoices to portable printers.

Major Technology Providers: i2 Technologies Inc., Insight, PeopleSoft Inc., Symbol Technologies, UCCnet Major Logistics Providers: CH Robinson, Penske, Schneider National, Transplace

CONCLUSION

The distribution channel of PEPSI is extremely efficient and well planned. They have a well defined and designed distribution channel. The distribution channel also depicts that they have order fulfilment period of 1 day. PEPSI with its effective distribution channel is able to reach a huge geographical area, and cater to its customer. It is the combination of advertisements and promotions garnished with their supply chain has made it so elegant. They should enhance this core competency of theirs and maintain these standards.

REFERENCES www.pepsi.com http://mhlnews.com/distribution/outlog_story_6287/ http://www.docstoc.com/docs/24269813/Pepsi-Supply-Chain http://www.scribd.com/doc/35492024/Supply-Chain-Management-pepsi www.scdigest.com/ontarget/11-06-01-4.php?cid=4594 interview with Mr. Vinit Rai Sales executive of Ramendra Enterprises.