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Pepsi Americas

Pepsi Americas. Building an Information Savvy company. Abstract. How IT and Business Leaders created an information savvy organization

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Pepsi Americas

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  1. Pepsi Americas Building an Information Savvy company

  2. Abstract • How IT and Business Leaders created an information savvy organization • Stream of Investments & org. changes evolve PAS from business that shipped just drinks to an enterprise that delivered hundreds of SKUs as needed to retailers. • IT capabilities help respond to market, enhance competitiveness • How will Pepsi leverage its information –based capabilities?

  3. Introduction • Global Economic Downturn. • Recession less threat compared to: • 1) Declining U.S market, carbonated soft drinks • 2) Powerful customer • Transform business to address challenges • In 2001, business results depended on the effort of truck drivers • By 2009, reliance on central oversight of P-V dynamics and retailer relationships • Conversion from low-tech firm to dependent on information and tech. • Learn to use IT not just automate processes, but informed decision making

  4. Changing Market – Conventional Route Sales Model • Had long met needs of industry • Truck Drivers = Salespersons • Estimated day’s requirements, loaded product at distribution center • Called customer, took orders, stocking shelves • Worked: Pepsi & Mountain Dew = 90% of business • Marketing & Advertising, basic • Network TV was major medium, reaching 90% of house holds – Effective in exposure • Can packaging = 70% of the transportation volume • Efficient to produce, transport, store, and deliver.

  5. Changing Market – Conventional Route Challenges • Becoming impractical • Product line grew: water, energy drinks, juices, teas, coffees, etc. • Packaging: diverse • Bulky water bottles took 2.5 more transportation volume vs. canned soda • COO, Ken Keiser est: SKUs had grown from 30-40 in the early 90s to nearly 400 15 years later. • Truck drivers could no longer estimate product mix to be loaded on a truck • Constant innovation, trademark of industry • “The ability to react to these changes quickly and without disruption to the supply chain and the entire organization is critical to our success” – Rich Frey, VP Sales Operations

  6. Changing Market – Regional Structure • 13 regional divisions • Production, distribution, sales • Leaders within the regions designed system to own needs • Inefficient for diverse product line • Ineffective in meeting demands of retailers • IT-enabled business changes to address changing market demand

  7. Initiative#1: Next Gen: Defining a Common Platform • First business change initiative: Next Gen • Redesign sales & distribution process • Replaced CRS process with a pre-sell process • Pre-sell involved 3 specialists: • 1. Sales Rep: customer • 2. Driver: distribution center warehouse • 3. Merchandiser: stock shelves, displays • Introduction of common systems & technology platform across its 13 regions

  8. Next Gen: The handheld project • Hand held devices for “presell” • Captured order data • Plan truck loads • Plan & execute the picking and loading of trucks • Challenge of initial implementation: • No handheld devices on the market in ’01 to meet needs • Developed internally • Constantly fixing components: battery, wire, cell connection; only choice • Constant issues, billed this initiative as the “handheld project” • Technology issues only tip of the iceberg….

  9. Next Gen: Mixed Success, Painful Experience • Underestimation of the impact of the change • One of greatest challenges: Reluctance for change • PAS formed from merger of small businesses; entrepreneurial culture • Deviations limited gains and ability to meet needs • Next Gen’s success: mixed and experience: painful • Still great for PAS, no other way to keep up with increasing number of SkUs or demands, had to be done. • Result: common tech. platform,  rapid integration of acquisitions

  10. Initiative #2: Customer Alignment: Meeting Customer’s Needs • Reorganize to accommodate the firm’s national customers • “Organized around ourselves versus around our customers” • Inconsistencies in business process and duplication of effort limited ability to serve growing and powerful retailers • Customer Alignment initiative reorganized the firm around centralized functions • Regional Sales & Distribution Structures  Customer Segments • 1. Large customers that mandated shipments to warehouses • 2. Large DSD customers • 3. Small DSD customers • 4. Foodservice customers: restaurants, vending machines

  11. Customer Alignment: Process Centralization • Very little IT work • Already using Next Gen Platform • Customer Alignment drove process centralization • Sales managers were dispatched to take pre-sell orders • Empowered sales managers to address most powerful customers • Call center workers captured orders for customers • Process improved control and enhanced decision making data • Standard pricing and activities with customer • By 2007, Customer Alignment: savings of $15-$17M; improved data • Aggregation of data and realigning of responsibilities exposed opportunities for improvement

  12. Initiative #3: Building an IT-Business Partnership • Drive value from technology initiatives • Agreed that difficulties from Next Gen came from misunderstanding of capabilities & limitations of IT • Common technology platform  leadership role for I.T. • From ‘01 to ‘04, CIO Ken Johnsen initiated management changes to enhance the leadership capabilities of the IT unit. • Created an IT governance board that included the CEO, COO and most of the senior executive team. • Results of the Customer Alignment initiative led to establishment of IT investment priorities

  13. Initiative #4: Building an IT-Business Partnership: Project Management Organization • IT management change: project management organization (PMO) • Implement a more disciplined project management and systems development methodology • To support new methodology: • Business leads were paired with IT leads • Major projects, PAS created execution teams • ex-dispatchers, ex-warehouse people that wanted to learn something new: how to change management. • Resulted in new solutions

  14. Building an IT-Business Partnership: I.T part of strategy for growth • The PMO led to a stronger IT-business partnership • Partnership between business execs and IT: biggest change for the organization • IT representative at executive staff meetings • Business representative at IT staff meetings • IT no longer a support department, but part of the firm’s strategy as the firm moves forward

  15. Initiative #5: Competitive Edge: Building IT Infrastructure for Business Agility

  16. Competitive Edge Component#1: Information Backbone • Though improved performance, Customer Alignment Initiative exposed inconsistencies in data definitions • i.e.: idiosyncrasies in customer naming conventions, impossible to roll up data • Provide accessible data for both operation decision making and business analysis • IT unit created 2 important data assets: • 1. A Central Data Repository (CDR): set of transaction files from where can obtain and store data • 2. A Data Warehouse (DW): extracted & organized historical data for subsequent analysis.

  17. Competitive Edge: Central Data Repository and the Data Warehouse • CDR: gateway to shared transactional data, existing and new • Data interfaces with CDR vs. own customer records • Allows for: • Reduced redundancy • Increased integrity • DW stored long-term data

  18. The data warehouse – 360◦ view of the business • Information on each customer transaction • Are we giving the right price to our customers for us? • CDR and DW designed to create data that would be used across the company • IT unit formatted data to meet PAS specific data needs.

  19. Competitive EdgeComponent #2: Mobile Platform • IT Management unable to find software to meet needs • PAS developed own software • Thousands of employees rely on mobile technology • Drive benefits from its technology expertise by reusing technology, data, and business process components • Upgraded handhelds to reuse parts for other handheld applications • Reduce the cost of developing and maintaining IT systems

  20. Initiative #6:Customer OptimizationReaping the Benefits • Competitive Edge Initiative: time to learn application • Customer Optimization ³ (CO³), initiated in ’07 • Focus: drive value from capabilities • Use data to improve performance of cross functional processes • Three components: • Demand Planning • Algorithms to calc demand/pricing from historical data • Avoid out-of stocks/excess inventory in warehouse • Power pre-sell • Introduced handheld device for firms frontline sellers • Statistical forecasting algorithm produced a “suggested order” • Avoid out-of stocks in stores; by ‘09, decreased from 14% to 3.7% • Backroom inventory in stores dropped by 52% • Perfect Pallet • Standard warehouse layout, loaders wearing voicepick headsets. • Voicepick automatically ID’ed out of stock items, adjust invoices, replenish SKUs

  21. Epilogue • In August of 2009, PepsiCo announced that it would acquire its two largest bottlers, Pepsi Bottling Group (PBG) and Pepsi Americas (PAS) • “Fully integrated beverage business will enable PepsiCo to bring products faster, streamline manufacturing and distribution and react more quickly to changes in the marketplace” –IndraNooyi, CEO of Pepsi Co. • Better position to compete and grow now and in years ahead

  22. Questions Q: Which initiative was billed the “hand held” project?

  23. Questions Q: Which initiative was billed the “hand held” project? A: Next Gen

  24. Questions Q: What element did Richard Frey, VP of Operations say was critical for Pepsi Americas success?

  25. Questions Q: What element did Richard Frey, VP of Operations say was critical for Pepsi Americas success? A:Ability to react quickly without disruption to the supply chain and the entire organization

  26. Questions Q: Which organization led to a stronger IT-Business partner relationship?

  27. Questions Q: Which organization led to a stronger IT-Business partner relationship? A: Project Management Organization

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