Managing Supply Chain for Global Competitiveness takes a strategic look at all of the core functions of global supply

chain management which includes product design, planning and forecasting, sourcing, outsourcing, manufacturing,

logistics, distribution, and fulfillment.

An example to illustrate this theory on the supply chain management is the PepsiCo, Inc. PepsiCo is under

the food consumer product industry and is the world leader in convenient foods and beverages. It was founded in

1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The

Quaker Oats Company, including the Gatorade in 2001.  PepsiCo offers product choices to meet a broad variety of

needs and preference -- from fun-for-you items to product choices that contribute to healthier lifestyles. PepsiCo

owns some of the world's most popular brands, including Pepsi-Cola, Mountain Dew, Diet Pepsi, Lay's, Doritos,

Tropicana, Gatorade, and Quaker. ().

            The Pepsi brand and other Pepsi-Cola products account for nearly one-third of the total soft drink sales in the

United States. In order for the company to make sure that their products reach the customers, the company needs a

efficient supply chain solutions.

 

PepsiCo’s Supply Chain Management

            PepsiCo, Inc. operates as a global snack and beverage company. It manufactures, markets, and sells a

variety of salty, convenient, sweet, and grain-based snacks; carbonated and noncarbonated beverages; and foods

worldwide.

            When it comes to delivering high cost and perishable products to manufacturing sites, just-in-time (JIT)

remains one of the most cost-effective supply chain solutions. In JIT process, on time delivery is an absolute

necessity.

            Just-in-Time (JIT) is a philosophy that defines the manner in which a manufacturing system should be

managed. It one of many initiatives that aimed in enhancing customer satisfaction in terms of availability of options,

assurance of quality, prompt delivery times, and value of money.

            Pepsi-Cola in North America, the refreshment beverage unit of PepsiCo, Inc., sells refrigerated soft drink

concentrate to Pepsi-Cola Bottlers in the United States and Canada. Delivered JIT fashion to companies without on-

site inventory, on-time delivery of this premium ingredient is critical to keep the production lines moving.

            The Pepsi brand and other Pepsi-Cola products account fro nearly one-third of the total soft drink sales in the

United States. In order to ensure that PepsiCo’s concentrates reaches bottlers as needed during the production, they

partnered with 3PL provider Penske Logistics to manage its transportation. Penske also provides warehouse

management for two Pepsi distribution centers in North America.

            According to , vice president of freight management of Penske Logistics, “in a JIT environment, leading-edge

technology and optimized transportation are very important. The customer’s primary concern above all else is having

a provider that can flawlessly execute the process and deliver on time, everytime.”

            In connection with this, PepsiCo set two objectives for transportation management. One is to achieve an on-

time delivery rate at 99.1% and another is to reduce transportation costs.

            In achieving a ninety-nine percent in delivery rate requires an experienced operations team with the

knowledge and skills to make the solution work in the real world. Moreover, they need to be empowered with

optimized processes and technology that enable the team to perform at the highest possible level.

            With the application of new technology that provides greater supply chain visibility, better organized data, and

access to higher level of real time or near real time information, even the best team can improve their performance.

            In 2000, Penske converted Pepsi’s transportation management technology from propriety software to i2

transportation optimization solution. i2 transportation platform was enhanced with the addition of interface between

the two companies

            i2 Transportation is a part of end to end solution for planning, execution, and management of the entire

transportation cycle. This solution is designed to enable an organization to utilize and manage an entire

transportation network, as well as reduce cost while improving transport performance. In addition, i2 transportation is

designed to employ sophisticated optimization and data techniques to define and evaluate alternative transportation

strategies. It is also designed to provide comprehensive data management, analytics, and reporting of key

transportation cost and service trade-offs.

            In addition, Penske’s partnership with Business objects provides comprehensive supply chain data from its

data warehouse, analysis and management applications. Penske’s with used of i2 transportation can track

performance at every stage in the process increases flexibility and provides greater control over the transportation

operation. This increase in visibility makes it easier to keep track of shipments, revise routes and schedules to

accommodate unforeseen changes and implement alternative plans to counter delays. By Penske’s putting a solution

in place to track and measure every shipment, Pepsi has been able to provide an on-time delivery performance of

well over 99 percent.

            Pepsi’s transportation is consolidated to a central location to reduce costs. Penske also provided a nation

wide carrier rate re-negotiation and service assessment to improve cost structure and achieve on-time delivery goal.

With this centralization, this allows negotiation in a large scale to secure the best rates and services.

            Furthermore, Pepsi’s orders are received electronically and optimized to ensure lowest transportation cost.

Advanced technology is deployed to select the lowest cost carrier, find the best routes and consolidate shipments.

Optimal load configuration ensures maximization of each truckload ( 2003).

            In summary, PepsiCo used the JIT process to its supply chain management. To make this possible, Pepsi

partners with Penske that has provide them with i2 transportation optimization solutions which has satisfies their

consumer with the on-time delivery and with the benefit to the company for it has also reduce transportation cost.