Module Title: International Assignment CW1

Logistics Number
Module Code: 6020SSL Assignment Title Report

International Logistics

[Student Name]

[Student ID]

[Name of University]

[Name of Module Leader]

[Date]
 i

Table of Contents

Overview of PepsiCo.......................................................................................................................2
Defining Concept of Logistics.........................................................................................................3
Effectiveness of Logistics Operations - Case of PepsiCo................................................................4
Role of IT in improving the efficiency of logistics operations of PepsiCo.....................................5
Transport Mode Strategy of PepsiCo...........................................................................................7
Conclusion.......................................................................................................................................8
References......................................................................................................................................10
 2

Overview of PepsiCo

PepsiCo is a leading organization that deals with food items, snacks, and drinks. It has a

net worth of 39 billion dollars and has hired more or less 185,000 workers (Eades and Thornhill

2017). The three major divisions of the company are positioned in Latin America, North

America, and its worldwide subsidiary units. Operational management is a key component in the

contemporary business world; it is an imperative part of an organization and a strategic unit

within the organizational structure. PepsiCo provides an extensive range of items to cater to

client demands, requirements and wants. They choose products that support healthy living and

strong lifestyles. The headquarters of the company is located in New York.

According to the theory of Operation Management, it refers to a design, operating

activities and the development of a company's scheme that enables the creation and distribution

of products and services to the target customers. PepsiCo deals in the production of drink

products like Diet Pepsi, Mountain Dew, Tropicana, Aquafina along with snacks products like

Cheetos, Lays and much more (Venkataraman and Summers 2017). One of the key reasons for

the PepsiCo's massive growth over time and the leading position it has attained in nearly all

business segments was due to effective logistic operations and distribution systems. It integrates

technology in an attempt to improve the performance of logistic operations (Purkayastha and

Rao 2017). This assignment aims to discuss the role of information technology in improving the

efficiency of logistics operations of PepsiCo.

 3

Defining Concept of Logistics

According to the study done by authors like Rushton, Croucher, and Baker (2014),

logistics is usually the detailed organization and execution of a complex operational activity. In a

business context, it refers to the management of the flow of operations among the source of

origin and the point of utilization to cater to the demands of clients. As per the study of Levinson

(2006), it is the process of that transfer or moves goods within the supply chain of an enterprise.

On the other hand, this procedure comprises of different functions that have to be suitably

managed to bring inefficiency within the organization's supply chain. Logistics functions usually

get impacted by the inventory holding and replenishment policies. Inventory could vary from

raw materials, finished products and much more. Suitable inventory holding would optimize the

supply chain, remove unnecessary cash flows, and decrease the likelihood of stock shortage

raised by other variables or business constraints.

Bowersox, Closs, and Cooper (2013) talked about the benefits of logistics. As per the

study of an author, managing logistics properly would provide an organization control over in-

bound shipment, keep stock at optimal levels, organize the reverse flow of products and use

freight moves on a suitable transport medium - all of which can reduce cost in a significant

manner. However, Murphy and Knemeyer (2015) critiqued that departmental wars may occur

within the logistic functions and this may associate with its key drawbacks. Logistic activities

take account of multiple departments like purchasing, planning, production, and delivery. All

these departments need to work in coordination to develop operational efficiencies. Logistic

projects demand strong senior leadership to intervene with multiple departments (Reid and

Sanders 2019). These senior leaders should be able enough to eliminate factors of inter-
 4

departmental disunity because of the reality that there would be numerous hurdles to be

addressed.

Effectiveness of Logistics Operations - Case of PepsiCo

The supply chain within an organization is intended at maximizing the value of products

created. It is deemed as the disparity between the value final goods and the costs incurred at the

time of meeting the client's request. The supply chain at PepsiCo is decided by the size and

capacity of production, warehouse facilities, and the goods to be made, stored and transported.

An effective supply chain must be well programmed and a strong supply chain strategy must be

executed (Bowersox, Closs and Cooper 2013). In PepsiCo, the key decision is where the

production plant must be located. The case company has made sure that the production process is

automatic (robotic) for operational efficiency.

It also manages the transport for the distribution of products and the third party is

involved in the product procurement. The shipping departmental unit of PepsiCo is accountable

for orders whilst the transportation department determines matters of distribution to make sure

that products reach destination securely (Heizer 2016). In the case organization, material

sourcing and planning is also an imperative phase of the supply chain. Concerning the sourcing

and supply of raw materials, the company has recognized both local and overseas suppliers at

negotiable prices (Dutta, Dutta and Sengupta 2016). At the phase of raw material supply,

capacity building is essential since the sales forecasts and production plan depends on the

capacity of this phase. All materials to the PepsiCo are audited by the quality control system.

Distribution relies on the firm's choice and it depends on the previous performance of the

distributor.
 5

The alliance between the supply chain strategic approach and the business strategy of

PepsiCo is attained using suitable utilization and the utilization of supply chain drivers (Slack

2018). Dealing with the supply chain activities involves managing the relationship between

vendors and clients, managing inventory levels and forecasting demand along with gaining

feedback regarding what is happening in different stages of the supply chain.

Operational Policies of PepsiCo

Managing the company is a huge task and being responsible for its regular operations is a

challenging task. To attain and to manage the operations efficiently, there must be suitable

infrastructure and updated data and information communication and technology. Fruits

accessibility is at the heart of the company's policy as it is the prime product. PepsiCo

communicates its policies to people involved in supply chain activity together with their animal

wellbeing policy (Murphy and Knemeyer 2015).

Along with that, it has strict corporate protocols that direct operational activities and

duties performed by the workforce. The policy covers areas like corporate governance, human

wellbeing, ecological sustainability, and safety. Human sustainability policies are initiatives such

as food and security, ethical marketing and healthcare programs. PepsiCo has a strict

environment based policies that direct its agriculture and packaging programs (Purkayastha and

Rao 2017).

Role of IT in improving the efficiency of logistics operations of PepsiCo

Information technology plays a central role in enhancing the efficiency of logistics

operations of PepsiCo. The initiation of the Social Vending Scheme, which is a user-friendly

vending technology, has enabled the PepsiCo's to form connections with the clients at the
 6

purchase points (Haksever and Render 2017). This technology lets the clients of PepsiCo design

gifts from their peers via the internet medium. The utilization of telemetry has provided ample

gains to the company and led to efficiency within the logistic operations of PepsiCo. It enables

close supervision of inventory levels by the clients, which can let them deliver schedules through

a remote workstation without having to travel. PepsiCo has agreed to a three-year contract with

Combine Net to utilize its Truckload manager to promote its truckload transport system and to

improve effectiveness in the transportation network.

By incorporating technology within the logistics, organizations become able enough to

plan, predict, replenish inventory levels and keep pace with client needs. The use of IT is logistic

operations aid companies to improve distribution time as well as accurateness (Ivanov,

Tsipoulanidis and Schönberger 2017). Considering the case of PepsiCo, it has digitalized its

nearly all business segments and streamlined the supply chain to improve operational

performance. It is further making efforts to integrate different sources of data to get a better

insight into existing clients as well as potential ones. At a personnel level, it is attaining the talent

and culture essential for the worldwide changes it has in mindset; information technology would

aid redevelop several back-office roles to generate better employment and decrease labor costs.

At a corporate level, the company is attempting to drive operational efficiency across the

globe, with the supply chain as one main area of focus for improving accuracy and resilience

(Dutta, Dutta and Sengupta 2016). Technology and data implementation were highlighted as

drivers since the company considers renovating its cost setup to a more tactical role

(Venkataraman and Summers 2017). Amid the leading five food and drink producers in the

glove, the case company is always trying hard on developing its production and client-facing

technologies. It is using IT to drive success within its operations and worldwide business
 7

services. In its Mexico operations, for instance, PepsiCo used to call on 22 stores every day on a

normal route, and by using IT now they can increase that to 25 each day. This has cut the time

people had to work and developed improved loops for senior managers.

Transport Mode Strategy of PepsiCo

Transport is the ultimate solution for planning, implementation, and management of the

overall operational cycle. It is usually intended to let a company use and manage the entire

infrastructure system, and decrease cost whilst enhancing the overall performance of the

transportation. A suitable transport strategy enables companies to manage data comprehensively

and report key distribution costs accordingly (Purkayastha and Rao 2017). PepsiCo manages its

transport while focusing on two strategic goals. One is to provide timely delivery to clients and

second is to minimize the transport cost. The transport network of the company is empowered

with technically optimized procedures that let employees perform beyond expectations.

Transport cost for PepsiCo is low since an economic model of transport (for example a

truckload) is used for inbound transfers to the storehouse, which is close to the client (Eades and

Thornhill 2017). Facility expense is somehow high due to loss of aggregation and at times end

up with high processing costs. The data structure needed is not that challenging. The distribution

network serves as a buffer between the producer and the client. Real-time visibility among

clients and warehouse is required while visibility among client and producer is not that much

needed. Response time is also minimized. Client convenience is high and another visibility with

producer storage becomes easy.

The distributor stockroom is well-positioned for medium to fast-moving products and it

could also manage a high level of product range compared with the retail store. However, the

current transport mode used by PepsiCo is based on truckload where fuel can damage the
 8

environment due to the release of greenhouse gases in the surroundings. This seems a great

challenge or dilemma for the company while considering its transport mode for the national and

global distribution of products.

Considering the case of PepsiCo, the suitable transport mode strategy for an organization,

including both national and international distribution requirements would be drone delivery. This

transport mode is used for delivering the packages since it aims to emit fossil fuels that are used

for energy (Chakravarthy, Sajid and BIST 2018). Fossil fuels are not good for the environment

and therefore ensure a sustainable transport system for PepsiCo. On the other side, drone

deliveries are a safe option and source of energy and by ordering through this transport mode,

one may contribute to saving the environment from the effect of greenhouse gases (Turker 2018).

Leading companies of the world like Amazon, Wal-Mart and many others are thinking about this

innovative technology of delivering products to the final users.

Conclusion

Operational management is a key function within a company as it moves around the

relationship with the firm's strategic plan. Operations management plays a central role in the

growth of a firm strategy, thereby, improving the competitive benefit of the enterprise. An

example is the planning procedure that enables the company to minimizing cost whilst getting

competitive strength in terms of cost reduction and competitive strength. It is thus essential for a

company to manage its operational activities as a means of improving its overall strategic

approach. From the analysis of PepsiCo logistics and operational system, it is clear that

constancy in production, groundbreaking items, and their quality are order champs while speed,
 9

costs, effectiveness, and originality are the order qualifiers. This has enabled the company to get

more shares in the market and increase purchase decisions made by the clients.
 10

References

Bowersox, D. J., Closs D J. and Cooper M B. 2013. Supply Chain Logistics Management. New

York: McGraw-Hill.

Chakravarthy, C.G., Sajid, M.D. and BIST, B., 2018. A STUDY ON SALES AND

DISTRIBUTION ON PEPSICO IN JAMSHEDPUR. International Journal of Pure and

Applied Mathematics, 119(12), pp.4021-4035.

Dutta, A., Dutta, A. and Sengupta, S., 2016. A Case Study of Pepsico Contract Farming For

Potatoes. IOSR Journal of Business and Management, pp.75-85.

Eades, K.M. and Thornhill, D., 2017. PepsiCo, Inc.: Cost Of Capital. Darden Business

Publishing Cases.

Haksever, C. and Render, B., 2017. Service and Operations Management. World Scientific

Publishing Company.

Heizer, J., 2016. Operations management, 11/e. Pearson Education India.

Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2017. Global supply chain and operations

management. A Decision-Oriented Introduction to the Creation of Value.

Levinson, M. 2006. The Box: How the Shipping Container Made the World Smaller and the

World Economy Bigger. Princeton University Press: Oxford.

Murphy, P.R. and Knemeyer, A.M. 2015. Contemporary Logistics. 11th edition. Harlow: Pearson.

Purkayastha, D. and Rao, A.S., 2017. Sustainable development at PepsiCo. In Case Studies in

Sustainability Management (pp. 77-98). Routledge.

Reid, R.D. and Sanders, N.R., 2019. Operations management: an integrated approach. John

Wiley & Sons.

 11

Rushton, A., Croucher, P., Baker, P. 2014. The Handbook of Logistics and Distribution

Management, 4th edition, Kogan Page Ltd: London.

Slack, N., 2018. Essentials of operations management. Pearson UK.

Turker, D., 2018. Socially Responsible Production and Operations Management. In Managing

Social Responsibility (pp. 73-98). Springer, Cham.

Venkataraman, S. and Summers, M., 2017. PepsiCo: The Challenge of Growth through

Innovation. Darden Business Publishing Cases.