PepsiCo Supply Chain Management Strategy

PepsiCo Supply Chain Management Strategy

MGT 323 Principles of Supply Chain Management

PepsiCo Supply Chain Management Strategy

The company I identified to research with a successful global supply chain management strategy and provide basic background information is PepsiCo. PepsiCo is one of the top enormous foods and beverage corporations in the world with annual revenue of $63 billion. PepsiCo is well known for their carbonated soft drinks. PepsiCo is a big and powerful major organization which consist of hundreds of various and beloved household goods. Consumers’ are starting to lean toward more nutritious foods. PepsiCo has done an outstanding job of transitioning its supply chain volume to handle more multifaceted products to change along with the consumer trends to go healthy by eating more healthier foods consuming less carbonated soft drinks and processed snacks. PepsiCo has launched its premier health & wellness products which consist of such O.N.E. Coconut Water and Naked Juice. These products entail a more multifaceted supply chain than the carbonated beverage chains. These products require a global supply chain due to needing ingredients from all over the world versus a regional supply chain. A lot of the products require refrigeration, so a cold chain is needed for many of the products all the way to their destination. Nutritious products with a reliable supply chain are becoming more and more in demand by consumers. PepsiCo has improved significantly in areas such as sustainability initiatives, selective procurement, achieve a resilient, collaborative production scheduling, sourcing, setting inventory buffers, and efficient supply chain (Forbes, 2018).

How PepsiCo utilize strategies to get their products distributed internationally

According to a Senior Manager of the Supply Chain Planning Tim Rowell from the chilled supply chain portion of PepsiCo’s global nutrition segment (2018) “says his company has adapted to the changes for its premier health & wellness brands such as O.N.E. Coconut Water and Naked Juice” (para 3). PepsiCo has taken action to address the consumer’s sustainability preferences. The company is able to squeeze and ship more freight by using recycle bottles and making them square for the Naked Juice product line this allows them to reduce their carbon footprint. The PepsiCo corporate offices and bottling facilities are certified Leaders in Energy and Environmental Design (LEED) which is one of the worlds popular green building certification programs. They are changing their fleet of vehicle to become four-time more fuel efficient. They are also in the middle of setting up to use rail to ship more products. There is a concern as far as nutrition, so they will use non-genetically modified organisms (non-GMO) when using natural ingredients are not possible. No pesticide is used on any of the products they are all organic and are USDA Organic certified. The PepsiCo coconut water supply chain will be grown in Indonesia, and the Philippines and PepsiCo use copackers in Asia and in the United States. New York and California are where goods are imported in, and warehouses provide first line storage near the ports then the goods are redistributed to other distribution centers across North America based on demand. The Middle East, Europe, and Asia are where the packaging material is sourced (forbes, 2018).

How PepsiCo address risks and meet business demands.

PepsiCo supply chain has a network design and practices which is resilient and helps the avoid anything that might disrupt the companies supply chain. The coconut supply chain is in a region where typhoons are very common, so the network does not much offer much help.

It is impossible to avoid all disruptions such as typhoons. In addition to avoidance, PepsiCo has developed practices which are necessary which allows them to return to top performance as quickly as possible in the case of an adverse event. They use APICs Risk Management to help recover from and avoid disruption of the supply chain. These risk management includes the use of buffers, early warning signals, an appropriate supply chain configuration, and protection of brand equity. As far as buffering as an early warning signal, they use three copackers in Southeast Asia, with additional copackers in the United States as part of the network design. The relationship with the copackers is PepsiCo’s core early warning mechanism. The critical capacity bottleneck requires active collaboration, so communication with copackers is important. Without this communication with the copacker, weeks could go by and if they did not produce anything Pepsi would have no way to know it. By communicating with the copackers they are able to report every week if there is a sufficient amount of raw material to continue with the planed manufacturing , and how many cases of each SKUs they produced for the week and if there are any failures to prevent production and reason codes, they are able to receive alerts from copacker whom they have contracts with who alert them within hours of any significant disruptions rather than at the end of the month. During the peak summer season, the company ramp down production at this time any negotiation and compromise is made (Forbes, 2018).

I have identified PepsiCo chain management strategies which have made them successful globally and their basic background information. I have also discussed the corporation’s strategies that they use to distribute their products internationally, how they handle risks and meet business demands.

References

https://www.forbes.com/sites/stevebanker/2016/10/01/pepsicos-practical-application-of-supply-chain-resilience-strategies/#476fe63d6293Amacher, R., & Pate, J. (2013).

Wisner, J.D., Tan, K.-C., & Leong, G. (2012). Principles of Supply Chain Management (3rd ed.). Mason, OH: South-Western Cengage Learning. ISBN: 9780538475464