11 Key Points In Pepsi-Cola Supply Chain Management

11 Key Points in Pepsi-Cola Supply Chain Management

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11. Key Points in the Pepsi Cola Supply Chain Management System
11. Key Points in the Pepsi Cola Supply Chain Management System

PepsiCo, the multinational food, snack, and beverage corporation, has built a global supply chain that is a model of efficiency, sustainability, and innovation. The company’s supply chain management strategies have enabled it to streamline operations, lower costs, and respond nimbly to changing market conditions and consumer preferences.

PepsiCo’s supply chain prowess is especially evident in its beverage business, which includes iconic brands like Pepsi-Cola, Mountain Dew, Gatorade, and Tropicana. The company’s state-of-the-art bottling and filling equipment, optimized production processes, and vast distribution network allow it to manufacture and deliver its products to millions of consumers worldwide.

In this article, we will explore 11 key aspects of PepsiCo’s supply chain management approach that have made it a leader in the beverage industry. From sustainable sourcing to automated production to efficient transportation, these strategies offer valuable lessons for any company looking to optimize its operations and gain a competitive edge.

One of the cornerstones of PepsiCo’s supply chain success is its global procurement strategy. The company sources ingredients, raw materials, and equipment from suppliers around the world to ensure consistent quality, competitive pricing, and reliable availability.

PepsiCo has a diversified supplier base that includes over 100,000 farmers, growers, and manufacturers across more than 60 countries. This allows the company to hedge against disruptions in any one region and maintain a steady supply of key inputs.

To manage this complex global procurement process, PepsiCo leverages advanced technologies such as:

  • SAP Ariba for sourcing and supplier management
  • Blockchain for traceability and transparency
  • Artificial intelligence for risk monitoring and mitigation
MetricValue
Procurement Spend$30B+ annually
Supplier Locations60+ countries
Supplier Diversity Spend$1.5B+ with diverse suppliers in 2022
Sustainable Sourcing87% of direct crops sustainably sourced
Key Procurement Metrics of Value Chain

Sources: PepsiCo 2022 Sustainability Report, PepsiCo Q4 2022 Earnings Report

In addition to ensuring a reliable supply, PepsiCo is committed to sourcing its agricultural ingredients sustainably and ethically. The company works closely with farmers to implement responsible growing supply chain practices that conserve natural resources, promote biodiversity, and improve crop yields and livelihoods.

PepsiCo’s Sustainable Farming Program (SFP), launched in 2015, provides farmers with training, funding, and access to innovative technologies to help them meet rigorous environmental, social, and economic standards. Today, the program reaches over 40,000 farmers across 60 countries.

The SFP is focused on advancing positive outcomes in 5 key areas:

  1. Building resilience to climate change
  2. Enabling next generation agriculture
  3. Improving soil health
  4. Enhancing watershed management
  5. Increasing biodiversity

These efforts not only mitigate risks in PepsiCo’s agricultural efficient supply chain, but also contribute to the company’s broader sustainability goals, such as:

  • Spreading the adoption of regenerative farming practices across 7 million acres by 2030
  • Extending access to sustainable irrigation across 100% of high water-risk farms by 2025
  • Improving the livelihoods of more than 250,000 people in its agricultural supply chain by 2025
Sustainable Agriculture Progress
Sustainable Agriculture Progress
Goal2022 Progress
100% sustainable sourcing by 203087% of direct crops sustainably sourced
7M acres under regenerative practices by 2030345K acres enrolled
100% sustainable irrigation in high-risk areas by 202551% of high-risk acres enrolled
Improve 250K+ ag supply chain livelihoods by 202538K livelihoods improved
Sustainable Agriculture Progress

Source: PepsiCo 2022 Sustainability Report

Beyond its agricultural ingredients, PepsiCo is also focused on responsible sourcing across its entire supply base. The company has robust policies and programs in place to ensure that all suppliers meet high standards for business ethics, human rights, and environmental stewardship.

PepsiCo’s Supplier Code of Conduct outlines the company’s expectations for supplier performance in areas such as:

  • Legal compliance
  • Labor practices
  • Health and safety
  • Environmental management

To monitor and enforce these standards, PepsiCo conducts regular audits and assessments of its suppliers using independent third parties. Suppliers are expected to participate in capability building programs and take corrective actions to address any non-conformances.

PepsiCo is also committed to increasing its spend with diverse suppliers, including businesses owned and operated by women, minorities, veterans, LGBTQ+, and people with disabilities. The company’s Supplier Diversity Program provides mentoring, training, and business development support to help diverse suppliers grow their capacity and competitiveness.

In 2022, PepsiCo spent over $1.5 billion with diverse suppliers across its global operations, representing a 58% increase from 2020. The company has pledged to expand its diverse supplier spend to $1.6 billion annually by 2025.

MetricValue
Suppliers trained on Code of Conduct100% of direct suppliers
Supplier sites audited for compliance1,350 sites in 2022
Diverse supplier spend$1.5B+ in 2022 (58% increase from 2020)
Diverse supplier spend goal by 2025$1.6B annual
Responsible Sourcing Metrics

Source: PepsiCo 2022 ESG Summary

PepsiCo’s supply chain efficiency is enabled by advanced manufacturing technologies that streamline production, reduce waste and costs, and ensure consistent product quality. The company has made significant investments in automation and digitalization across its global production network.

PepsiCo’s beverage plants are equipped with state-of-the-art bottling and canning lines that can produce up to 2,000 cans or bottles per minute. These high-speed filling machines use precision sensors, servo motors, and control systems to optimize liquid flow, carbonation levels, and product sealing.

In addition to bottling and canning equipment, PepsiCo also uses automated systems for:

  • Raw material handling and blending
  • Beverage mixing and pasteurization
  • Packaging and palletizing
  • Quality testing and inspection

By automating routine production tasks, PepsiCo is able to:

  • Increase throughput and efficiency
  • Reduce labor costs and safety risks
  • Minimize product defects and waste
  • Improve traceability and data capture

PepsiCo is also exploring the use of emerging technologies such as robotics and additive manufacturing to further optimize its production processes. The company has piloted the use of collaborative robots to perform repetitive tasks like case packing and material handling, freeing up human workers to focus on higher-value activities.

Plant LocationEquipmentOutput
Mexico City, Mexico36-head rotary filling machine900 bottles/min (72,000 cases/day)
Tingalpa, AustraliaRobotic case packing system120 cases/min (16 hours/day)
Minneapolis, USA3D printed spare parts$10K in spare parts per month
Automated Production Examples

Source: PepsiCo Engineering

After production, PepsiCo’s beverages are stored and staged for distribution in a network of automated warehouses and distribution centers. These facilities use advanced technologies to optimize inventory management, order fulfillment, and transportation planning.

PepsiCo’s warehouses are equipped with automated storage and retrieval systems (AS/RS) that can rapidly move pallets of finished goods in and out of high-density racks. The AS/RS is controlled by a warehouse management system (WMS) that tracks inventory levels, SKU locations, and order statuses in real-time.

The WMS is integrated with PepsiCo’s enterprise resource planning (ERP) and transportation management (TMS) systems to enable dynamic order allocation and shipment routing. When an order is received, the WMS automatically identifies the optimal inventory location and shipping method based on factors such as:

  • Product availability and freshness
  • Customer location and delivery window
  • Carrier capacity and cost
  • Environmental impact and sustainability

PepsiCo is also deploying Internet of Things (IoT) sensors and artificial intelligence (AI) in its warehouses to further optimize operations. For example:

  • IoT sensors on equipment can predict maintenance needs and prevent unplanned downtime
  • AI-powered cameras can automate quality inspections and detect damage or tampering
  • Machine learning algorithms can dynamically adjust inventory levels and safety stocks based on demand forecasts

By digitizing and automating its warehouse operations, PepsiCo can improve order accuracy and on-time delivery while reducing labor, inventory, and transportation costs.

BenefitImprovement
Inventory accuracy99.5%+ (vs. 96% for manual warehouses)
Order processing time30 minutes (vs. 3 hours manually)
Perfect order rate98%+ (vs. 94% industry average)
Warehousing cost per case$0.10-0.20 (vs. $0.50-0.75 manually)
Smart Warehousing Benefits

Source: PepsiCo Supply Chain Benchmarks

Transportation is a critical link in PepsiCo’s supply chain, moving raw materials to plants and finished goods to customers. The company operates one of the largest private fleets in the US with over 11,000 vehicles, complemented by a network of third-party carriers and logistics providers.

To optimize its transportation operations, PepsiCo uses a combination of centralized planning and local execution. The company’s global transportation team leverages advanced analytics and automation to:

  • Forecast shipping volumes and requirements
  • Select the optimal mode and carrier for each load
  • Build efficient multi-stop routes and shipment consolidations
  • Track and trace shipments in real-time
  • Manage carrier performance and compliance

At the local level, PepsiCo’s fleet is equipped with telematics and driver-assist technologies to improve safety, fuel efficiency, and customer service. For example:

  • GPS tracking and geofencing for precise ETAs and delivery notifications
  • Collision avoidance and lane departure warnings to reduce accidents
  • Adaptive cruise control and predictive powertrain control to optimize fuel economy
  • Electronic logging and hours of service tracking to ensure driver compliance

PepsiCo is also investing in alternative fuel vehicles and intermodal transportation to reduce its environmental footprint. The company has committed to transitioning 15% of its global fleet to low-carbon fuels by 2025, and is piloting electric, CNG, and hybrid trucks in select markets.

MetricValue
Private fleet size11,000+ vehicles
Intermodal shipments28% of total loads
Freight and distribution expenses$8.1B (10% of net revenue)
Alternative fuel fleet goal15% by 2025 (2% currently)
Transportation Metrics

Source: PepsiCo 2022 Annual Report

A unique aspect of PepsiCo’s supply chain is its direct store delivery (DSD) model for certain products and markets. Under DSD, PepsiCo delivers products directly to retail stores rather than shipping through retailer distribution centers.

The DSD model allows PepsiCo to:

  • Maintain greater control over product freshness and quality
  • Provide higher service levels and in-store merchandising support
  • Respond more quickly to local market demand and promotions
  • Capture higher margins by selling directly to retailers

PepsiCo’s DSD operations are supported by a network of over 400 distribution centers and 20,000 route trucks across North America. The company’s DSD workforce includes:

  • Sales representatives who manage customer relationships and orders
  • Delivery drivers who stock shelves and build displays
  • Merchandisers who execute in-store promotions and planograms
  • Service technicians who maintain coolers and fountains

To increase the efficiency and effectiveness of its DSD operations, PepsiCo has rolled out mobile tools and automation. For example:

  • Handheld devices for real-time order entry and inventory management
  • Dynamic route optimization based on store orders and traffic conditions
  • Predictive analytics to forecast store-level demand and suggest orders
  • Image recognition to automate store shelf audits and identify stockouts

While DSD is more labor and asset intensive than warehouse delivery, it remains a strategic advantage for PepsiCo in high-velocity categories like snacks, beverages, and fresh foods.

DSD Network
DSD Network

Source: PepsiCo Investor Fact Sheet

Accurately forecasting consumer demand is critical for PepsiCo to optimize its production, inventory, and distribution. The company has invested heavily in demand sensing and shaping capabilities to stay ahead of evolving market trends and preferences.

PepsiCo’s demand planning supply chain process starts with collecting and harmonizing data from multiple internal and external sources, such as:

  • Point-of-sale data from retailers
  • Consumer sentiment from social media
  • Market share from syndicated data providers
  • Macroeconomic indicators from government reports

This data is then analyzed using machine learning algorithms to generate detailed demand forecasts at the SKU, geography, and customer level. The forecasts are shared with cross-functional teams in sales, marketing, supply chain, and finance to align plans and decisions.

PepsiCo also uses demand shaping techniques to proactively influence consumer behavior and smooth out demand variability. These include:

  • Price elasticity modeling to optimize promotions and discounts
  • Consumer marketing to drive brand awareness and loyalty
  • New product introductions to meet unmet needs and occasions
  • Collaborative forecasting with customers to align supply and demand

By combining demand sensing and shaping, PepsiCo can improve forecast accuracy, reduce inventory costs, and increase service levels. The company has set a goal of achieving 80%+ forecast accuracy at the SKU-location level.

MetricValue
Demand forecast accuracy75% at SKU-location level
Forecast horizon18 months for annual operating plan
Promotions forecasted20,000+ annually
New product introductions100+ per year
Demand Planning Metrics

Source: Pepsico Digital Supply Chain Transformation Webinar

PepsiCo’s supply chain success depends heavily on collaborative relationships with its customers, suppliers, and partners. The company has established joint business planning (JBP) processes and digital platforms to enable real-time data sharing, alignment, and value creation.

With large retailers like Walmart, Kroger, and Costco, PepsiCo conducts regular JBP sessions to:

  • Review sales performance and market trends
  • Align on demand forecasts and growth targets
  • Plan promotional calendars and marketing activities
  • Identify supply chain efficiencies and innovations

PepsiCo also partners with its strategic suppliers to co-develop new ingredients, packaging, and technologies that can improve product quality, sustainability, and cost. The company shares long-term growth plans and innovation roadmaps with suppliers to encourage investments and mitigate risks.

To streamline collaboration, PepsiCo has implemented digital tools such as:

  • Supplier portals for real-time information exchange and performance tracking
  • Blockchain solutions for transparent and secure transaction management
  • Virtual collaboration rooms for joint problem-solving and project management
  • AI-powered chatbots and voice assistants for instant communication and support

By fostering collaborative relationships, PepsiCo can tap into the expertise and capabilities of its partners to drive agility, innovation, and growth in its supply chain.

PlatformPurpose
Supplier ConnectSecure portal for suppliers to access PO, invoice, and payment data
Customer ConnectJoint business planning and execution platform for key customers
Innovation HubsCross-functional teams to co-create new products and solutions
PepsiCo PartnersStartup engagement program to tap into emerging technologies
Collaboration Platforms

Source: PepsiCo Digital Supplier Summit

In today’s volatile and uncertain business environment, building a resilient supply chain is more critical than ever for PepsiCo. The company has developed robust risk management processes and contingency plans to ensure business continuity and minimize disruptions.

PepsiCo’s risk management approach starts with identifying and assessing potential risks across its end-to-end supply chain, including:

  • Supplier risks (financial, operational, compliance)
  • Manufacturing risks (quality, safety, capacity)
  • Transportation risks (weather, accidents, congestion)
  • Demand risks (forecast error, market shifts)
  • Environmental risks (climate, water, waste)

For each risk, PepsiCo develops mitigation and contingency plans that leverage its global scale and flexibility. These include:

  • Dual sourcing of critical materials from different regions
  • Flexible manufacturing to shift production across plants
  • Redundant transportation routes and modes
  • Safety stock and strategic inventory buffers
  • Business continuity and disaster recovery plans

PepsiCo also uses predictive analytics and real-time monitoring to sense and respond to supply chain disruptions. The company has set up a 24/7 Supply Chain Command Center that tracks key risk indicators and alerts relevant teams to take proactive actions.

During the COVID-19 pandemic, PepsiCo’s risk management capabilities were put to the test, as the company faced unprecedented challenges in sourcing, production, and distribution. However, by leveraging its global network, collaborative partnerships, and digital technologies, PepsiCo was able to maintain supply and support its communities through the crisis.

ChallengePepsiCo Response
Raw material shortagesActivated alternate suppliers and formulas
Production disruptionsImplemented safety protocols and scaled up priority SKUs
Transportation delaysOptimized fleet and routing to minimize driver exposure
Demand spikes and shiftsFocused on high-velocity SKUs and channels like e-commerce
Community needsDonated $60M+ in food and PPE to vulnerable populations
COVID-19 Supply Chain Impacts

Source: PepsiCo 2020 Annual Report

Throughout its supply chain transformation, PepsiCo has embraced digitization and automation as key enablers of efficiency, agility, and resilience. The company has invested in Industry 4.0 technologies to streamline processes, improve visibility, and augment human capabilities.

Some examples of PepsiCo’s supply chain digitization initiatives include:

  • Building a digital twin of its end-to-end supply chain to simulate scenarios and optimize decisions
  • Deploying robotic automation in warehouses and distribution centers to improve speed and accuracy
  • Implementing artificial intelligence for predictive maintenance and quality control in plants
  • Using blockchain for transparent and traceable food safety and sustainability
  • Developing digital tools and apps for field sales and delivery teams to improve productivity

PepsiCo has also established a dedicated PepsiCo Digital team to accelerate its supply chain digitization agenda. The team works closely with business units and external partners to identify, pilot, and scale digital solutions that can create value and competitive advantage.

One such solution is PepsiCo’s Supply Chain Control Tower, a cloud-based platform that provides end-to-end visibility and orchestration across the company’s global supply chain. The Control Tower uses real-time data from multiple internal and external sources to:

  • Monitor supply chain performance and identify issues
  • Predict potential disruptions and risks
  • Prescribe optimal actions and decisions
  • Automate routine tasks and workflows
  • Collaborate with stakeholders and partners

By leveraging the Control Tower, PepsiCo has been able to improve its supply chain resilience, responsiveness, and effectiveness, while freeing up its employees to focus on more strategic and value-added activities.

BenefitValue
Visibility50% improvement in OTIF
Agility30% reduction in expedites
Productivity20% increase in planner efficiency
Risk Management10% reduction in supply chain disruptions
Sustainability5% reduction in waste and emissions
Supply Chain Control Tower Benefits

Source: PepsiCo Supply Chain Transformation Press Release

PepsiCo’s supply chain management approach is a testament to the company’s commitment to operational excellence, customer centricity, and sustainability. By leveraging global scale, collaborative partnerships, digital technologies, and continuous improvement, PepsiCo has built a supply chain that is efficient, agile, and resilient.

As the beverage industry continues to evolve and face new challenges, PepsiCo’s supply chain will be a key source of competitive advantage. With its focus on innovation, sustainability, and digitization, PepsiCo is well-positioned to meet the changing needs and preferences of its customers and consumers around the world.

Other beverage companies and supply chain leaders can learn from PepsiCo’s example and adopt some of its best practices and technologies. By investing in areas such as automated production, smart warehousing, efficient transportation, demand planning, and risk management, companies can improve their own supply chain performance and create value for their stakeholders.

Pepsi-Cola’s supply chain strategy focuses on centralized forecasting, coordinated distribution, supplier collaboration, sustainability initiatives, and technology adoption to drive efficiency, resilience, and competitive edge. The company leverages data and partners to enhance visibility, minimize costs, and respond swiftly to market dynamics.

PepsiCo employs sophisticated forecasting models and real-time data analysis to optimize inventory levels across distribution centers and retail stores. By leveraging analytics, the company aims to minimize stockouts while avoiding excess inventory holding costs.

PepsiCo boosts operational efficiency through streamlined production processes, strategically located distribution centers, integrated IT systems, and advanced analytics. These enable the company to swiftly meet customer needs while keeping supply chain costs low.

PepsiCo harnesses technologies like AI, ML, IoT sensors, blockchain, etc. to enable predictive analytics, automated workflows, remote monitoring, and end-to-end traceability across its supply chain. This empowers data-driven, agile decision making.

PepsiCo’s supply chain resilience during Covid stemmed from sourcing flexibility, scalable manufacturing, analytics-led rebalancing of logistics flows, close retailer collaboration for inventory optimization, and omni-channel distribution agility.

PepsiCo leverages automation, pick-to-voice systems, IoT sensors, optimized slotting, and integration of WMS with demand data. This increases storage density, order accuracy, cold chain compliance, and inventory optimization in warehouses.

Key supply chain challenges PepsiCo faces include demand forecasting complexity, cost inflation, compliance needs, geopolitical disruptions, consumer focus on sustainability, and availability of supply chain talent needed to harness innovation.

Key focus areas in PepsiCo’s supply chain transformation roadmap include deploying AI/ML across planning and logistics, last-mile delivery improvements, expanding blockchain for transparency, implementing digital twin modeling, transitioning to sustainable packaging, and enhancing value-added visibility services.

  • PepsiCo owns one of the largest, most complex supply chains in the F&B industry spanning over 200 countries.
  • Centralized forecasting, integrated IT systems, and control towers provide end-to-end visibility for agility.
  • Collaboration with bottlers, retailers and suppliers enables responsiveness and continuous improvement.
  • PepsiCo adopts emerging technologies like AI, IoT sensors, blockchain to boost supply chain capabilities.
  • Sustainability is integrated across supply chain processes from sourcing to manufacturing to logistics.
  • Resilience during disruptions is enabled by sourcing flexibility, scalable manufacturing, and omni-channel distribution.
  • PepsiCo follows best practices like direct store delivery model, integrated technology architecture, risk management, and innovation focus.
  • Future supply chain focus areas include deploying AI/ML, strengthening last-mile delivery, achieving net zero emissions, and circular economy.
  • By integrating purpose into strategy, PepsiCo aims to craft an environmentally and socially responsible value chain.

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Picture of John Lau.
John Lau.

John Lau, oversea project manager, an engineering graduate with expertise in optimizing beverage production equipment during his university studies, is now at the helm of global projects in the industry. Committed to educating clients on the benefits of customized equipment solutions that notably boost operational efficiency, Lau views this specialization in tailoring bottling machines as a key facet of his professional commitment.

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