PepsiCo: A Global Food and Beverage Leader PepsiCo, Inc. is an American multinational food, snack, and beverage corporation headquartered in Purchase, New York. Its business spans all aspects of the food and beverage market, overseeing manufacturing, distribution, and marketing. Formed in 1965 by the merger of Pepsi-Cola Company and Frito-Lay, Inc., PepsiCo has grown from its original Pepsi Cola product to a diverse range of brands. Major acquisitions include Tropicana Products in 1998, Quaker Oats (adding Gatorade) in 2001, and Pioneer Foods in 2020 for $1.7 billion.
PepsiCo is a global leader in the food and beverage industry, with a portfolio that includes household brands like Pepsi, Mountain Dew, Gatorade, Lay’s, and Doritos. Operating in over 200 countries and territories, PepsiCo’s diverse product mix and international presence ensure a strong competitive stance. Its broad portfolio caters to varied consumer needs, from lifestyle drinks to favorite snacks, and benefits from cross-functional promotional opportunities. The extensive global distribution network leverages economies of scale and best practices across regions. In 2023, PepsiCo’s supply chain was consistently ranked among the top 10 in the FMCG sector.
Resilient Supply Chains in the F&B Sector Geographically, the growing markets of Asia and the Middle East have faced the challenges of unstable political environments, war-torn economies, and devaluing currencies, putting today’s brands under immense pressure to remain profitable. We live in a VUCA world (Volatile, Uncertain, Complex, and Ambiguous), where a brand’s success is often judged by its profitability. The cost and availability of crucial ingredients have become significant challenges, complicating the delivery of quality products consumers’ demand.
The F&B sector is evolving, driven by changing consumer preferences, technological advancements, and environmental concerns. Trends include the rise of convenience foods, a focus on health and wellness, demand for sustainable and ethically sourced products, and the increasing influence of technology. Today’s supply chains must demonstrate cost leadership through sustainable processes and innovations like upcycling food waste, which reduces costs and minimizes environmental impact. Sustainable packaging remains a priority, and achieving net zero status, especially given the industry’s significant water usage, is now critical.
Supply chains must become antifragile, effectively managing VUCA with resilience. Embracing uncertainties, designing robust supply chains, and executing flawlessly are essential. Educating all supply chain stakeholders on managing uncertainty is crucial for success.
Advancing Sustainable Supply Chains
Innovation and benchmarking form the bedrock of our supply chain processes. Our supply chains continuously learn and improve through internal and external references, incorporating cross-sector learnings at an unprecedented pace. Innovations span every facet of the supply chain, not just products. Sustainable manufacturing practices, including plant electrification, heat recovery, low-energy alternatives, advanced water reclamation, and reduction and reuse technologies, are being rapidly adopted globally.
Digitizing tasks enables effective daily operations, building towards a paperless, smart, and digital manufacturing environment. Next-gen process controls, like digital twins for optimizing equipment performance, are implemented across factories worldwide.
Significant strides are being made in sustainable logistics, with an increasing fleet of company-owned trucks using alternative fuels like CNG or electric vehicles. Third-party logistics providers are selected based on the net impact of their transportation activities. Initiatives such as using recycled packaging, converting potato slurry into biogas to power machinery, and other sustainability efforts are standardizing processes and enhancing product sustainability.
Transforming Logistics for Efficiency and Customer Delight
Logistics plays a crucial role in supply chain management, enhancing efficiency throughout the process. Its primary objective is to deliver products to customers on time, with the right quality and cost. Through strategic partnerships with suppliers, shippers, and warehouses, and integrating these services via automated systems such as WMS (Warehouse Management Systems) and TMS (Transport Management Systems), logistics operations are streamlined, reducing overhead costs and improving delivery speed. This enhances customer satisfaction, measurable through Fill Rate and On-Time In-Full KPIs, while optimizing costs. Efficient planning of warehousing and transportation activities is essential to reducing order fulfillment times. Implementing WMS improves Warehouse Turnaround Time (TAT) from order receipt to dispatch, while TMS optimizes transport planning, identifying cost-effective carrier routes and maximizing truck utilization. This transformation positions logistics as a value creator, delivering stakeholder value and customer satisfaction.
Strategic Partnerships
Logistics Service Providers (LSPs) play a crucial role in creating overall value within logistics. Shared visions and aligned goals from the outset foster a collaborative environment that benefits both parties. The choice of warehousing and transportation models depends heavily on political-economic dynamics, cost factors, and the supplier landscape. For LSPs, delivering orders at the lowest cost and highest efficiency is paramount, ranging from 3PL models to long-term leased, company-operated warehouses. In the fastmoving consumer goods segment, customer service is a primary KPI for success, requiring technologydriven logistics to ensure timely order fulfillment. Establishing a long-term shared vision with LSPs forms the foundation for achieving overall success.
We collaborate with a wide range of Logistics Service Providers (LSPs) across various regions. Our selection process emphasizes key criteria: 3PLs must prioritize customer satisfaction and maintain high service levels. A robust, well-documented, and repeatable process is fundamental to success. Safety is paramount, and a strong safety record is essential in our LSP partnerships. Digitization is increasingly vital, with 3PLs expected to adopt technology like Warehouse Management Systems (WMS) to enhance process efficiency in their operations. Technology-centric teams within 3PLs align with our organizational goals. Flexible business agreements that accommodate seasonal and market fluctuations rely on the financial stability of our partners, a critical evaluation criterion. Lastly, a proven track record and positive industry reputation ensure the long-term viability of our LSP relationships.
Warehousing Strategy
Our warehousing strategy is built on the following pillars:
a. Efficient Warehouse Design: We optimize labor-intensive operations by making informed decisions about warehouse layout, based on inventory demands and seasonal fluctuations. Effective slotting of goods ensures smooth material flow, minimizing nonvalue-added travel. Affordable automation further streamlines material handling, enhancing efficiency.
b. Outsourcing: We strategically outsource non-critical warehouses to realize financial and operational benefits while maintaining control. We ensure these warehouses meet our standards for capability and technology, supporting our commitment to yearon-year cost efficiency.
c. Technology Integration: Implementing Warehouse Management Systems (WMS) enables real-time decision-making and enhances operational visibility, driving performance management through KPI monitoring.
d. Labor Optimization: Leveraging digital solutions, we optimize resource allocation for each warehouse activity. Flexible labor arrangements, including long-term contracts, help achieve efficiency metrics such as cases handled per man-hour.
Driving Agility through Supply Chain Digitization and Mitigating Procurement Risks
In today’s volatile, uncertain, complex, and ambiguous (VUCA) world, effective demand forecasting is crucial for building an anti-fragile supply chain. Leveraging Point of Sales (POS) data and AI/ML forecasting models enhances forecast accuracy, particularly for high-priority SKUs (A/B Class). This approach integrates real-time signals into forecasting discussions, improving sales performance and overall revenue.
Revenue management strategies, driven by POS data, enable granular pricing policies down to the distributor level. This approach boosts sales productivity, increases market share, and facilitates efficient supply planning, thereby optimizing capital employed in inventory.
Supply chain digitization plays a pivotal role in creating an agile and responsive supply chain. By digitizing procurement, planning, transportation, and warehousing, companies can swiftly adapt to market changes and customer demands through rapid prototyping and iterative improvements.
To mitigate risks in procurement, robust strategies include building strong supplier relationships and implementing risk management protocols. Measures such as dual sourcing, inventory buffering, and exploring alternative sourcing options help mitigate disruptions. Strategic use of futures contracts for key raw materials like oils directly impacts the bottom line, ensuring stability amid uncertainties.
Control Tower Approach
A supply chain control tower, encompassing all functions from procurement to sales, is crucial for seamless coordination across stakeholders. Built on digital stacks for each function, it consolidates inputs into actionable insights. The control tower analyzes causal events, devises mitigation plans, and conducts scenario analyses to support decision-making. By integrating data from multiple sources, performing prescriptive and descriptive analytics, it serves as a collaborative tool to enhance visibility, optimize operations, mitigate risks, and drive continuous improvement throughout the supply chain network.
Enhancing Demand Planning Precision
Consumer expectations have surged post-COVID, fueled by the rise of E-commerce and quick commerce. Today’s consumers demand fresher, high-quality products delivered in less than a day. We’ve enhanced our demand planning strategy on two fronts: improving data granularity and increasing data refresh frequency. Forecasting algorithms now operate at a granular level, from Distributor-Parent SKU for Traditional Trade to PIN Code-Parent SKU for E-commerce, allowing tailored treatment across trade channels. This precision, coupled with optimized inventory management, enables faster product delivery.
We’ve moved beyond monthly forecasts to weekly updates, integrating AI/ML-based demand sensing models for real-time adjustments. These tactics align replenishment strategies with evolving customer preferences.
