Pepsico, Essay Example

Introduction

A supply chain may be defined as the number of business practices that move goods from that of raw materials through supply, production and the final distribution of the goods to the customer. Most manufacturing organizations have a supply chain of some description. It is considered that all effective management practices must take into consideration the efficiencies of the component within the chain in order to avoid loss of quality and important customers within the business.  Pepsi Cola is one example of a Company that uses a successful supply chain management strategy.  Pepsi Cola are proactive in the way they address risks and meet the burgeoning demands of a competitive market place.(Pepsico, 2012)

The Pepsi Cola Process

Within any supply chain there are five key elements: 1) Production 2) Supply 3) Inventory 4) Location and 5) Transportation and Information.  Each of these are examined in turn.

Production

In order to facilitate strategic decision making relative to production it is important to understand both what the client wants and equally what the market demands. This leads to the development of supply chain agility and indicates how many products will need to be completed; the sequence to be completed, the individual components required and which plants are capable of producing them. Each of these decisions needs to focus on items such as inventory management, quality, capacity and the volume of goods to be produced in order to meet the customer need. In addition what techniques of quality control need to be introduced in order to meet the required standards of production?

Supply

This relates to the facility being able to produce efficient and economical goods whilst maintaining high levels of quality. This can be very hard for companies to achieve, particularly when the product incorporates external sub components made outside of the firm.  Hence there is a need to QA external products as meeting a required standard of quality. This not only applies to imported finished goods but also the quality of raw materials being used. When selecting a supplier it is a careful balance of cost, quality, reliability and flexibility. A good supplier relationship helps to build a strategic business relationship.

Inventory

Other important decisions relate to stock or inventory and as such it is a very fine balance between holding too much inventory and not enough. This becomes an important aspect of supply chain management and it is important to retain optimum levels of stock at different locations without holding too much inventory which creates under-utilized capital. There is also the risk of obsolescence for those goods that exceed their storage dates. Control policies need to examine the procedure for retention of inventory and this involves close customer relationship management.

Location

Strategic decisions are focused upon such items as the location of production plants, distribution and stock facilities and the location of these facilities to the market. Once customers are established it is important that they are services by having production facilities within close proximity to them. This was an important part of the success of the Industrial Revolution in Britain the mines producing raw materials i.e. Coal, Coke etc.  were close to the factories that needed to burn them for power and fuel, together with the steel plants that needed the coal for the furnaces.

Transportation

Transportation decisions are an important part of satisfying customer demand.  This has to be balanced between getting the goods quickly to their destination (expensive) against slower means like shipping and overland freight (cheaper). Air Transport has the advantages of speed and expediency to the customer but is a high form of expenditure compare to carriage by ship or rail transport. The adverse point of this is that it is often required to carry higher inventory levels than normal in order to meet customer demand.  It is important thatcustomer service levels are achieved in the equation when selecting the method of transport to be used (Rockford Consulting, 2012).

Conclusions

Pepsi understand the benefits of logistics management.  The Managers will be better informed and make smarter decisions if they understand the business processes within their organization. This is critical in the achievement of business goals. Efficient logistics management is also an important vehicle in the development of the business marketing strategy.

Works Cited

Pepsico. (2012, 10 19). Pepsico – Mission & Vision. Retrieved 10 19, 2012

Rockford Consulting. (2012, 7 20). Supply Chain Management. Retrieved from Rockford Consulting: http://rockfordconsulting.com/supply-chain-management.htm