Supply Chain Management in PepsiCo Pakistan

Supply train of mountains Management in PepsiCo PakistanPepsi was founded in 1898 by Caleb Bradham, a crude Bern North Carolina, pill roller who first of all formulated Pepsi-Colyeah book followed contribute cosmic string k 3 decisions phir push pull cycle view phr heads phr strike phr drivers phr distribution and recommendations be at the enda. Today Pepsi has expanded at a large scale and has a portfolio of beverage brands that includes carbonated soft drinks, juices and juiced drinks, humara link basically pepsi co sey b nae hai kyunki riaz bottlers be its suppliers aswell as maunfacturesr and they give that via transferrals to the sellers( stores hotel etc) then it goes to nodes .they pay back wargonhouses terminus sites proceedsion sites.its situated in gulbergso riaz bottler be e very(prenominal)thihumara link basically pepsi co sey b nae hai kyunki riaz bottlers are its suppliers aswell as maunfacturesr and they give that via partations to the retailers( stores hotel etc) then it goes to customers .they have warehouses storage sites performance sites.its located in gulbergso riaz bottler are everythingReady-to-drink teas and coffees, isotonic drinks, bottled water and enhanced water.PepsiCo has well know beverages such as Mountain Dew, Diet Pepsi, Tropi housea Pure Premium, Aquafina, Tropicana Juice Drinks, Tropicana Twister , MIRINDA and much more.Pepsi smoke grocery stores Frapoccuino ready-to-drink coffee through a partnership with Starbucks.PEPSI CO PRODUCT the product we are taking for the project of deliver scope management is MIRINDA.RIAZ BOTTLERSRiaz Bottlers (PVT) Limited (RBL) incorporated in Pakistan as a private limited comp both in 1976. RBL is the franchise holder of Pepsi Cola International with seven brands. Like PEPSI, PEPSI MAX, 7UP, MIRINDA and MOUNTAIN DEW etc. They have recently launched Aquafina and are in process of moving towards roughly some another(prenominal) products.RBL today is angiotensin conv erting enzyme of the best National Companies in Pakistan. At RBL, they believe that Our existence and success is more than just bearing our business objectives and we are proud of the success that the company has achieved. Together our people provide the skills, knowledge and expertise to deliver the quality of returns that our customers expect and upon which our reputation depends.RIAZ BOTTLERS AND SUPPLY mountain set up MANAGEMENTRBLs primary functions are to demeanor a methodical manufacturing and put out of the product without any tactical and strategic flaws. Backed by a effectual competitive placement and empowered by some effective fork up kitchen stove strategies, the group has been managing an effective contribute chain through out the region. It has make up a urbane manufacturing and storage plant in Lahore with output signal units and huge production subject matter.RBL has contrary management departments dealing with specialized Marketing, HR, IT and Suppl y Chain Processes. In this report we conducted the process of the basic supply chain management functions of RBL for MIRINDA by Pepsi co.COMPREHENSION OF MIRINDA SUPPLY CHAINThe goal of every supply chain is to maximize the oerall 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)DECISION PHASES IN SUPPLY CHAIN OF MIRINDASUPPLY CHAIN DESIGN OF MIRINDAA victorian decision regarding how to structure the supply chain over next upcoming years have been made and the short term aswell as the longterm 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 variouslocations, the modes of transportation to be made, information administrations and so on.Their supply chain invent is very expensive to alter on shor t notice and supports the companys strategic objectives. In order to go over a good supply chain strategy, Riaz Bottlers plans 1 to deuce years in advance. It has several contracts with manufacturing businesss, 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 bringing of products as well as the arrangement of third political party services for the procurement of products. The shipping department handles orders and the transport department decides the vehicles for safe language. Material plan and sourcing is carried out as well. Sources of supply of raw material two local and foreign are identified and terms and conditions are negotiated. Capacity planning is also through with(p) at this stage.Sales forecasting and production planning depends upon the competency of the organizat ion with respect toProduction.Storage Raw and packing.Storage Finished goods.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 hasincreased its distribution capacity from one to ten filling lines during the last few years lending ita competitive edge over Coca Cola.FIGURE 1SUPPLY CHAIN PLANNING OF MIRINDAAfter RBL set the design of their supply chain they do the planning which increases their surplus in supply chain and thats their goal too. The planning launches and make them set their constraints over some span of time according to the motivation of Mirinda. Pepsi co carries out gross revenue forecasting for local demand as well as for export purposes to countries such as Afghanistan etc for Mirinda. The annual sales target is conveyed to t he supply chain department of RBL. Planning is carried out on a monthly, weekly and passing(a) basis for order planning allocation , warehousing ,production scheduling origin planning and optimization. at RBL.images.jpgFIGURE 2SUPPLY CHAIN OPERATION OF MIRINDAIn RBL , the production , sales and supply chain departments get united to decide the origin on weekly basis. in that respect is always less uncertainty about the demand . the operation process includes customer orders in the best possible manner. During this RBL , allocate origin or production to individual orders, set a date (which is always according to the will of customers and they dont get disappointed) that an order is to be filled, generate a congruous pick lists at a warehouse in gulberg , allocate to shipping, set delivery and so on.PROCESS cipherS OF MIRINDA SUPPLY CHAINThe processes in a supply chain are divided into a series of cycles each performed at the interfacebetween two successive stages of a supply c hain.CYCLE VIEW OF SUPPLY CHAINscm12FIGURE 3Supplier / manufacturers The suppliers to Pepsi Co are franchise operative (RBL) 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 LahoreDistributors They are located throughout the country every city has its distributors. The distribution 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 line of business via transportation i.e. trucks etc which carries distribution from point to point in different allocative routes.Customers Its customers are all sort of target grocery stores from friendly class A to C and ra nge within all demographical and pyschographical parameters.PUSH AND PULL VIEW OF MIRINDA SUPPLY CHAINThe push process implementation is commenced in anticipation to a customer order. MIRINDA has a seasonal demand. 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.MIRINDA Sales order and processing The tape transport 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.fig1107FIGURE 4COMPETITIVE AND SUPPLY CHAIN STRATEGIES in that location are three major sustainable advantages that give PepsiCo a competitive edge as theyoperate in the global marketplaceBig, muscular brands. prove abili ty to innovate and create differentiated products.Powerful go-to-market systems.PepsiCos ( Mirinda) overall mission is to increase the value of shareholders enthronement. 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 eyepatch adhering to the highest standards of integrity.A customer while purchasing a bottle of Mirinda will consider product quality, price and availability of the product. Thus, Mirinda in Pakistan particularly focuses its competitive strategy as to producing sufficient conformation, reasonable prices, and the availability of the product.SUPPLY CHAIN STRATEGIESSTEP ONE THE CUSTOMER AND SUPPLY CHAIN UNCERTAINTY.Identifying customer take RBL needs to show the customer needs for eac h targeted particle and the uncertainty the supply chain faces in satisfying these needs. As RBL deals with beverages, which are a fast moving consumer good, it knows the requirements of consumers.Mirinda 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. RBL caters to both cities and rural areas. It understands the needs of both. As demand for beverages is seasonal, the quantity of product postulate 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 simulation mirinda has apple flavor too now).Demand uncertainty and implied demand uncertaintyDemand for Mirinda varies by product. For example there is a with child(p)er demand for Mirinda ascompared to Mirinda Apple, which is sort of new. Hence, Mirinda has a low demand uncertainty as compared to Mirinda Apple. The product Mirinda is approaching its maturity stage in the PLC whereas Mirinda Apple is in the introductory stage. Mirindas 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 Mirinda is not available at that time such as Fanta, Gourmet cola, Amrat cola ), need for greater variety and higher level of service, implied demand uncertainty increases. This is true for cities where unmet demand by Mirinda is met by Coca Cola Company, Gourmet Cola and other such competitors. Supply uncertainty is also affected by new products. New products have higher supply uncertainty. perplexity for the capability of the supply chainAfter determining the demand uncertainty it takes a look at the uncertainty resulting from the supply chain. Mirinda is not a new product and its market is going towards maturation. The company does not have many difficulties in delivering a pr oduct and has a fixed delivery schedule (on daily basis). Mirinda hence has a predictable supply and approximately uncertain demand depending on market conditions.STEP TWO UNDERSTANDING THE SUPPLY CHAIN CAPABILITIESThe capacity and reactivity varies according to the consumer needs, implied demanduncertainty, product type and market segments. In remote areas Pepsi Co ( Mirinda) focuses on being middling 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, because as the company has focus on cost reduction, uses slow and inexpensive modes of transportation, the demand is certain, and uses economies of scale in production, the product Mirinda is more inclined towards being somewhat efficient.In cities, the company focuses its attention on being highly responsive as Mirinda 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.Highly efficient somewhat efficient somewhat responsive highly responsiveIn towns MIRINDA In citiesFIGURE 5STEP 3 ACHIEVING THE STRATEGIC FITThe Mirinda 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 as making one stage more responsive allows the other stage to focus on being more efficient. While discussing the Mirindas supply capability it is seen that Mirinda 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 RBL to adjust its strategies accordingly tai loring the supply chain to best meet the needs of each beverage demand.SUPPLY CHAIN DRIVERS AND METRICSBonding drivers with Product Life Cycle (PLC) Supply chain strategyMirinda mainly follows a combined cost effective responsive supply chain strategy in lahore. The intensive supply of the product is being ensured throughout the city market with the help of RBL distributors. Mirinda 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 normal beverages sales volumes as compared to any other cities .Although there is an overwhelming stability in the product market yet there are some remote areas where there are conditions for a possible straining out due to their remoteness. For addressing this risk Mirinda has financed different whole sellers in those areas to respond immediately. Mirinda in Lahore and in most parts of Pakistan can be rightly placed into the category of an ever growing mat ure business.Responsiveness In case of Fast Moving Consumer Goods (FMCGs) that target a huge segment of market, responsiveness is a deciding factor for the organizational success. In a typical Pakistani market, quick response enables supply chains to meet the customer demands for evershorter lead times, and to synchronize the supply to meet the peaks and troughs of demand. Mirindas supply chain has been able to reinforce a greater response to the uncertain and unpredictable market carriage 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 and profitability.Framework for Structuring DriversFIGURE 6The fram ework is based on a motive to create strategic fit between the competitive and supplychain strategy. Mirinda Competitive strategy stands to provide a large variety of products veryquickly simultaneously the supply chain strategy stands to materialize the availability of thatvariety of products. Mirinda mainly follows a responsive supply chain strategy.Alignment of mirindas business strategy to a corresponding supply chain strategy is achieved through proper deployment of supply chain drivers. Mirinda has to deal with different set of market segmentssimultaneously. Most of the time the approach needs to be responsive enough to grow advantageously 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 FACILITY DRIVER aim , LOCATION AND CAPACITY In RBL the Mirinda is stored, assembled and fabricated at gulberg Lahore..Mirinda has established a flexible and a product-f ocused production instalment in order to respond effectively to the variability in demand.The storage facilities are knowing in order to provide maximum possible capacity for the inventory. It has franchising holding bottling operations. overall TRADE OFF ( RESPONSIVE) In order to ensure the responsive strategy implementation, the role of facilities is of prime importance in the supply chain of RBL 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 colligation with the responsive supply chain strategy the facilities have been geographically located close to the market.FIGURE 7FIGURE 8THE INVENTORY DRIVERROLE , LOCATION AND SEASONAL INVENTORY RBL has established a comprehensive plan to ensure the sufficient inventory levels to keep up with the market demand effectively. The inventory type is seasonal .For this purpose the main inventory storage has been established within the main plant area maneet road gulberg Lahore inside RBL. It has the storage capacity of 200,000 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. Theinventory capacity is being utilized and maintained in coordination with the production department and is based on the term production estimates.OVERALL TRADE OFF (RESPONSIVE) change magnitude inventory makes the supply more responsive to the customers. At RBL, managers bear a high inventory cost to ensure maximum levels of inventory and to reduce the production and transportation costs.inventory.jpgFIGURE 9THE TRANSPORTATION DRIVERDESIGN AND CHOICE OF TRANSPORTATION MODE PTN is providing transport to PEPSI CO( mirinda) in the form of big large trucks.Faster transportation of the products allows RBL to maintain sufficient levels of stock on the shelves.RBLs transportation network is the collection of routes, modes and locations along which t he product can be shipped. With the help of distributors the product is being supplied to the market.There are multiple supply and demand points within the city which cater to the market demand. RBL decides and selects different modes of transportation having different characteristics with respect to the speed and size of commitment.OVERALL TRADE OFF ( RESPONSIVE) The transportation network has been designed with a view to ensure responsiveness and boost the availability of the product. For RBL using fast mode of transport increases responsiveness as well as the transportation cost but lowers the inventory holding cost. Transportation driver has a large impact on the responsiveness of the business.THE INFORMATION DRIVERCOMPONENTS OF INFORMATION DECISIONS Connects all the supply chain stages effectively allowing them to coordinate and maximize total supply chain profitability. It is also all-important(a) to the daily operations of each stage in the supply chain. The unit manager ut ilizes the production scheduling system that is based on information on demand to create a schedule that allows RBL to produce the right amount of product. The warehouse in charge uses this information to create visibility of the warehouses inventory items. They dont have any enabling technologies such as EDI, ERP and RFIDOVERALL TRASE OFF (RESPONSIVE) Information sharing helps these firms improve its responsiveness within the market. It helps to accurately forecast demand and suck in frequency of updates, measurements of the effects of seasonal factors influencing the production, measurements of variances from the plan and the ratio of demand variability to order variability. Timely and accurate informationenables the distribution managers to fix potential stock out or oversupply problems.FIGURE 10THE PRICING DRIVERFIXED PRICING VERSUS MENU PRICING Mirinda keeps its determine strategy with the comparison of its competitors for example FANTA. And the demand is seasonal so during t he season on period the pricing is done on the fixed basis i.e. summers. And during winters which is the off season period the pricing is done on menu basis for example Rs 2 to Rs 5 ruppees off per 1.5 litre bottle etc.THE SOURCING DRIVEROUTSOURCED, SUPPLIER SELECTION AND procurement Pepsico has outsourced decisions in its supply chain as RBL is an outsourced company for it. They think that it was best to outsource Mirinda and other beverages aswell because the growth in total supply chain is solid with little entreeal risk. The responsive components are outsourced such as the PTN aswell which provides transportation to Pepsico ( Mirinda). It has number of suppliers within Lahore and all districts of the country. Both procurement in direct aswell as indirect ways are doneand they have a good coordination between its suppliers and buyers.images.jpgFIGURE 11statistical distribution NETWORK OF MIRINDADirect distributionDelivery of attitude mix cylinders handling of learn accounts The key accounts aredifferent wholesalers, restaurants and hotels like Pizza Hut, KFC, Metro whichserve as a place for key sale. These are known as national key accounts and are veryimportant in terms of competition.Export Parties.Indirect distributionThrough Base market distributorsThrough Outstation distributorsBefore delivering the product some certain guiding principles are followed for the assessment ofdistributors 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 uses light and heavy vehicles for safe delivery of goods to the distributors for timelydelivery. It follows the just in time concept which is applicable in Non-seasonal period and notapplicable in the seasonal period.REVIEW AND REVISE dispersionThis is usually done through taking over key revenue areas. If the distributor does not achieve itssales target, the distribution is taken ba ck and an addition of new distributor is done. ThereforeMIRINDAS supply is low supply uncertainty. Some of its supply source capabilities areLess breakdownsHigh qualityFlexible supply capacityMature production processFACTORES INFLUENCING DISTRIBUTION NETWORK DESIGNAt the highest level, performance of a distribution network should be evaluated along twodimensions1. Customer needs that are met2. Cost of meeting customer needsWhile customer service consists of many components we will consider those measures that are influenced by the structure of the distribution network for Mirinda .Response Time For Mirinda is minimal as the direct customers for it are the retailers and thenthe consumers. So with over 30 to 40 delivery trucks in Lahore , it is readily available to everyretailer within 30 minutes or an hour max . Lahore has 12 warehouses from where the supply to the market is done through trucks provided by PTN.Product Variety They have made their place in the market with their unique product line ranging from Mirinda to Mirinda Apple with refreshing gustatory sensation and great quality.Customers Desire customer desire more for mirinda instead of apple mirinda .Recently, the sales for 250 ml bottles has increased and 1.5 litre bottle decreased but they are trying to increase it as it gives the company higher profits.Availability 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 RBL 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 Mirinda 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 mirinda in Metro or Pizza Hut which a re the key accounts for the company.Order Visibility They are not really an electronic phenomenon where you can track your orderthrough computer. It is more of person-to-person contact and one can easily track down theirorders through the designated staff in each sector of Lahore or for that sake all over Pakistan.Returnability Pepsi Co ( mirinda) has always been very strong in a sense that unsatisfactory items can bereturned and changed on the spot. This is true for both the consumers and the retailers. They have laid down a system through which they can effectively manage this requirement. The retailers are told to take down thecomments and the address or phone numbers from the person who is returning the bottle. It seems at first that a customer always wants the highest level of performance along all these dimensions, in practice however this is not always the case.DESIGN OPTION FOR DISTRIBUTION NETWORKDistributor Storage with Carrier DeliveryIn Pepsi Co ( mirinda) inventory is n ot held by the manufacturers at the factories but is held by distributors/retailers in fair warehouses and package carriers are used to transport the products fromthe intermediate location to the final customer. This requires distributor storage to keep highlevels of inventory because distributor/retailer aggregates demand uncertainty to a lower levelthan 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 convenienc e is high and order visibility with manufacturer storage becomes easier. Distributorstorage is well suited for medium to fast moving goods and it can also handle higher level ofvariety than retail storesFIGURE 7VALUE OF DISTRIBUTION SYSTEMThere are basically two components of distributionStorageDistributionThe storage facilities of RBL 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. RBL has established several storage units nearby to the market in order to boostavailability.Transportation conducts inventory movement from point to point in supply chain of RBL. It incorporates a combination of modes and routes at different stages. Transportation choices have a large impact on the responsiveness strategy of the business . RBL 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 ofintegration amongst all supply chain components.The Pepsi Co 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 retailoutlets in the twin cities. Different products are being delivered conveniently on 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 andplace the orders. Whenever a store places an order it is immediately transmitted to the supplierthrough the distribution manager. Now RBL receives orders from all distribution centers and the shipment department delivers 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 dependsupon the sales volume. The system works on trust and does not require the delivery person to bepresent when store personnel scan the delivery. This reduces the delivery time at each store. individually truck has a capacity of 1572 cans.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 Pakistan connecting the remotest of places and providing g reat customer service.Globalization has increased the competition that the company for its products like mirinda is constantly coming up with new projects, campaigns and distribution.RECOMMENDATIONSRBL doesnt 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