OPERATIONS MANAGEMENT-1

ASSIGNMENT 1 (TRIM 2)

Topic: Study On Unique Operation Management Strategies Of

PepsiCo. And Parle Agro Co.

Submitted by:

Ankit Bhardwaj

Nishchaya Sadhwani

Radhika Agrawal

Contents

................................................................................ 4

EXECUTIVE SUMMARY: ........................................................................................................... 4

Company Profile: ........................................................................................................................ 4

Business Statement:..................................................................................................................... 5

Vision: ......................................................................................................................................... 5

Mission: ....................................................................................................................................... 5

THE DISTRIBUTION NETWORK OF PARLE G: ...................................................................... 6

Intensive Distribution:................................................................................................................. 6

The Channel Members of the Distribution Network of Parle: .................................................... 6

The Channel Members and Logistics:......................................................................................... 7

Channel Dynamics: ..................................................................................................................... 7

THE PARLE DISTRIBUTION NETWORK LOGISTICS............................................................ 7

Selection of Channel Members for Parle .................................................................................... 7

CHANNEL MEMBERS OF THE PARLE DISTRIBUTION NETWORK .................................. 8

EVALUATION OF CHANNEL MEMBERS:- ........................................................................... 10

THE DISTRIBUTION CHANNEL AND PARLE:- .................................................................... 10

SUGGESTIONS FOR DISTRIBUTION CHANNEL ................................................................. 11

............................................ 12

Introduction:- ................................................................................................................................ 12

Mission:- ....................................................................................................................................... 12

Vision:-.......................................................................................................................................... 12

Distribution Operations:- .............................................................................................................. 13

1. Direct store Delivery:- ........................................................................................................... 14

2. Vending and food service systems:-...................................................................................... 14

3. Broker warehouse distribution:- ............................................................................................ 14

PepsiCo’s Logistics Operations .................................................................................................... 14

PepsiCo’s Logistics Two Main Phases Were: .............................................................................. 15

Benefits:- ....................................................................................................................................... 16

EXECUTIVE SUMMARY: Over the years, Parle has grown to become a multi-million US Dollar company. Many of the Parle

products - biscuits or confectionaries, are market leaders in their category and have won acclaim

at the Monde Selection, since 1971. Today, Parle enjoys a 40% share of the total biscuit market

and a 15% share of the total confectionary market, in India. The Parle Biscuit brands, such as,

Parle-G, Monaco and Krackjack and confectionery

brands, such as, Melody, Poppins, Mangobite and Kismi,

enjoy a strong imagery and appeal amongst consumers.

Be it a big city or a remote village of India, the Parle name

symbolizes quality, health and great taste! And yet, we

know that this reputation has been built, by constantly

innovating and catering to new tastes. This can be seen

by the success of new brands, such as, Hide & Seek, or

the single twist wrapping of Mango bite.

Parle-G grew bigger by the minute. Be it the packs sold,

the areas covered or the number of consumers. It became

a part of the daily lives of many Indians. It wasn't a biscuit

any more. It had become an ICON. The next level of

communication associated the brand with the positive

values of life like honesty, sharing and caring.

Company Profile: In 1929 a small company by the name of Parle products emerged in British dominated India. The intent was to spread joy and cheer to children and adults alike, all over the country with

its sweets and candies. The company knew that it wouldn’t be an easy task, but they decided to take the brave step. A small factory was set up in the suburbs of Mumbai, to manufacture sweets

and toffees. At Parle Agro, it's not just about the business. It's how they go about it. It's about the people. It's

about the culture and ethics. It's also about sustainability and social responsibility. Their philosophy is built around the need to lead, the need to innovate, and the need to make the world

a better place with a little contribution.

Business Statement: "We are in the business of refreshing India with our products, refreshing the market with new

categories and refreshing ourselves through innovation."

Vision:

"To be the leaders in our business, we will stand apart from the competition by being the first in the market to innovate."

Mission: "We will be the leaders in our business by - maintaining high quality, introducing new and

innovative products, reaching every part of India, remaining customer-centric, constantly upgrading our knowledge and skills.

Figure 1 Timeline overview of Parle

1959

Operations started as Baroda Bottling Company for carbonated beverages

1985

Launched India's first fruit based drink - Frooti in a unique Tetra Pak Format

1986

Launched India's first Apple Nectar - Appy

2005

Launched India's first sparkling Apple drink - Appy Fizz available in a champagne shaped PET bottle

2012

Diversified into the snack food category with the launch of Hippo, a move that took the company closer towards its vision of becoming a leader in the foods and beverages industry.

THE DISTRIBUTION NETWORK OF PARLE G:

Intensive Distribution:

Parle uses Intensive Distribution for Parle G. This is the ideal strategy for the market leader as

intensive distribution has the following advantages:

Increases coverage and sales

Increases product availability

Encourages retailers to compete aggressive .Higher competition leads to narrower margins for

the retails hence, increases the ultimate margin for the manufacturer.

The Channel Members of the Distribution Network of Parle:

The Parle distribution network for biscuits has essentially four levels as enlisted below:

Parle Depots

Wholesalers and Distributers

Carry Forward Agents (if required)

Retailers

Manufacturing unit of parle at various locations

Parle depots

Wholesalers and distributors

Retailers

Procurement: Customers

The Channel Members and Logistics: Parle has nearly 1500 wholesalers, catering to 425000 retail outlets directly or indirectly. A two

hundred strong dedicated field force services these wholesalers and retailers. Additionally, there

are 31 depots and Carry and Forward agents supplying goods to the wide distribution network.

Parle has level 1, level 2, level 3 distribution channels levels.

Level 1

Level 2

Level 3

Availability of Parle G biscuits at

all departmental stores across the length and breadth of the country.

Since it’s an FMCG product this

channel exists for customers scattered throughout the country.

Mass consumption and suitable

for National and Internationa l coverage. For e.g. Parle’s internationa l

operations consist of serving markets in the Middle East,

Africa, South America, Sri Lanka, Australia and North America for which the3 level

distribution channel exists

Channel Dynamics: Parle has a multi-channel marketing system since it uses more than two marketing channels to

reach all its customer segments.

THE PARLE DISTRIBUTION NETWORK LOGISTICS

Selection of Channel Members for Parle

Parle takes into consideration a host of factors while selecting the channel members. This is

because it believes that selection of channel members is a long run decision and the rest of the

decision regarding the supply chain depends upon the efficiency and coverage by the channel

members.

The following are the host of factors considered by the company in selecting the channel members:

Authentication

Proof of solvency which requires name and address of the channel member’s bankers

Safety of the inventory

Inventory or the perishable goods kept by the distributor/ dealer should be in good

condition which means a detail of storage space and Refrigeration facility is to be provided.

# Details of the delivery vehicle, which includes the following:

# Light Commercial Vehicles,

# Matador,

# 3 Wheeler Van,

# Tricycle Van and Hand/Push cart.

# The number and model of each of the vehicle needs to be furnished to the company

Company acknowledges the fact that it needs to be sensitive to the market demands. For

this it requires that a number of salesmen needs to be present on the field.

The salesmen too are divided into various categories like

# The Field salesmen

# Counter salesmen

The details of Clerical Staff and labor are to be provided. The technical competence of the

salesmen needs to be mentioned.

Details of the various products of other companies that the channel member keeps have to

be provided. The following also need to be furnished with the above:

# The annual sales of these products have to be mentioned.

# Details of complementary products and product lines need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that Parle

believes that the reputation of the dealer affects the clientele in the long run.

Market coverage by the distributors needs to be defined which includes details of

Geographic coverage and Outlets per market area.

The company also requires the dealers to furnish any Advertising and Sales initia t ive

undertaken by them on behalf of the company.

CHANNEL MEMBERS OF THE PARLE DISTRIBUTION NETWORK 1. The Distributors:

One of the main factors, which keep the distributors motivated, is the margin.

Usually the margins offered by Parle are 8%. Now-a-days it has been raised to

8.5%.

Volume wise this comes out to be a big figure since Parle’s product has a good

demand in the market. However compared to the other companies the margins are

still lower since the new players in the market offer a much higher margin. But the

very fact that Parle’s products have good demand in the market motivates the

distributors to stock it.

Parle Products being a cooperative cannot afford to give heavy monetary

incentives. Parle’s products are considered to be value for money since the

company does not believe in charging high margins. In fact all monetary incentives

are just the short run means to promote the company’s product.

2. The Retailers:

Trade schemes: these are undertaken by the company only for the hard selling items

Glow boards: the company puts up glow boards at the retailer and pays the major

portion of the cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre-estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy beautiful stalls by formulating an easy payment program and a commitment to buy back the

equipment at a reasonable price when the value of the equipment has depreciated.

EVALUATION OF CHANNEL MEMBERS:-

Evaluation of the Channel Members at Parle is a three step process:-

Beat plan: This plan is generated for the various product categories. A weekly schedule is prepared for various markets and the retailers the turnover for each of

the product is calculated for the wholesale dealers.

Cumulative performance: the performance of the dealers is averaged out over a period of three years where a comparison is made of the present performance vis -

à-visthe previous ones.

Target versus achievement: the performance and the targets are compared and

therefore the gaps are identified which help in evaluating the wholesalers and the distributors and planning for the next year as well. This is done for each of the

product category.

THE DISTRIBUTION CHANNEL AND PARLE:-

The company’s strength is in the procurement of raw materials and essentially not the distribution of its product. Even though Parle is the market leader in biscuits. But, distribution logistics is the

industry’s main problem. While the other companies fail to replenish demand due to lack in procurement of raw material, Parle’s inventory management is sound.

Parle has loyal cooperatives that provide products only to them, over time the relationship of trust has built up with these people that Parle leverages now.

The transport channel is another strong point for Parle. As these transporters have grown with the company overtime; the bonding with them enables the company to give least margins when it comes to the distributors in the industry, lowering the costs.

Beat plan

Cumilative performance

Target achievement

Parle believes that there is an ongoing demand in the market and therefore no promotions are needed to increase the sales, also the fact this would affect the cost of the product the company

doesn‟t undertake many promotion schemes.

Parle is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins. Because of

the strong relationship that Parle shares with the constituent channel members, it forces the channel members to carry all its new products.

SUGGESTIONS FOR DISTRIBUTION CHANNEL

The following are the suggestions that Parle can implement to better its distribution channels:

Increase the margins: In order to motivate the channel members it is also very essential for the

company to increase the margins for the hard selling items.

Pushcarts: These should be increased in number in order to increase the market reach(especia lly the rural market). This can provide with a very effective channel.

Parle should also go in for ‘Parle’ Zones: It is primarily for big city retail outlets. Here all the Parle

products can be stalked. This can be an effective mode of umbrella marketing. This strategy can be implemented in regions where the footfalls are large in number.

Introduction:-

PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay. Pepsi-Cola was

created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist. Frito-Lay, Inc. was

formed by the 1961 merger of the Frito Company, founded by Elmer Doolin in 1932, and the H.

W. Lay Company, founded by Herman W. Lay, also in 1932. Herman Lay, former chairman and

CEO of Frito-Lay, was chairman of the board of directors of the new company; Donald M.

Kendall, former president and CEO of Pepsi-Cola, was president and chief executive officer. The

new company reports sales of $510 million and has 19,000 employees.

Mission:-

The mission of PepsiCo is to be the world's premier consumer product company focused on

convenient foods and beverages. We seek to produce financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate. And in everything we do, we strive for honesty, fairness and

integrity.

Vision:-

“Performance with Purpose”

The vision of PepsiCo is put into action through programs and a focus on environmenta l

stewardship, activities to benefit society, and a commitment to build shareholder value by making

PepsiCo a truly sustainable company.

Companies under PepsiCo:-

1) Frito- lay North America

2) Frito- lay International

3) Pepsi-Cola North America

4) Pepsi Beverage International

5) Gatorade/ Tropicana North America

6) Quaker Foods North America

Distribution Operations:-

Since its inception, PepsiCo attached a lot of importance to its distribution operations. Each day,

the company's products such as snack foods and beverages, were distributed through various retail

channels in the US and across the world. PepsiCo's distribution system was aimed at making

available all or most of the products in its portfolio within a distance easily reachable by

consumers. PepsiCo was conscious of the need to adapt its distribution systems according to the

needs and preferences of global customers. Based on its experience, PepsiCo had developed

various distribution models to offer its products and services to customers in the US.

1) Direct store delivery

2) Vending and food service systems

3) Broker warehouse distribution

Distributoion operations

Direct store delvery (DSD)

Vending and food service

systems

(V and FS) Broker warehouse distrubtion

(BWD)

1. Direct store Delivery:- DSD is an alternative distribution model to centralized distribution and tends to be used

extensively in the food industry for fresh products such as milk and bread where minimizing the

number of days in the supply chain is a key concern. It is the oldest method adopted by PepsiCo.

In this method employees take direct orders and deliver the previous ones. Orders are taken

manually and timely delivery and shelf management are ensured. It also ensures maximum

visibility of the product to the customers.

2. Vending and food service systems:-

PepsiCo’s sales personnel distributes through third party Vending and distribution. Through this

system goods are made available to the schools, colleges, offices, stadiums, restaurants etc. Huge

potential of distribution channel is developed the largest vending and food services sales in the

US.

3. Broker warehouse distribution:-

It is applicable for less duplicate and perishable goods. PepsiCo employs third party distributors

for such kind of distribution. Employees handle the products at stores and place them on the

shelves. This type of distribution is used for cold drinks and juices. The advantages of such type

of distribution is:-

i) It is economical

ii) It involves less number of employees.

PepsiCo’s Logistics Operations In order to manage its distribution systems effectively, PepsiCo had put in place advanced logist ics

systems. PepsiCo sold beverage concentrate to bottlers, who added carbon dioxide, sweetener and

water to make beverages and beverage syrup. Syrup was either sold directly to the fountain

accounts or was combined with carbonated water for bottling. Bottling companies were (with a

few exceptions) owned and operated by local companies in the countries where PepsiCo operated...

PepsiCo is the 2011 JDA Real Results Award winner for Best in Transportation & Logistics

Management. PepsiCo uses JDA solutions to plan and manage over 3 million shipments annually

in the U.S. and Canada. PepsiCo's internal 3PL subsidiary also uses JDA FreightMatrix to plan

and manage over 40,000 shipments annually for its joint ventures and suppliers. With broad

transportation and logistics visibility, PepsiCo can integrate its rolling assets, predict and manage

transportation issues, track-and-trace shipments and collaborate with customers at a much deeper

level than ever before.

PepsiCo’s Logistics Two Main Phases Were: 1. Giving syrup to the bottlers

2. Distribution of bottles/cans to retail outlets

• Product quality and uniformity standards should be maintained.

• Timely delivery

Beverage Manufacturing Unit to Bottlers

Pepsi-Cola North America (PCNA) produces and sells beverages & concentrate to bottling units

in the US and Canada. Syrup is either sold directly to the bottlers or is combined with carbonated

water for bottling.

PCNA’S objectives are:-

1. Timely delivery

2. Reduce transportation cost

PCNA in association with “Penske logistics” takes care of the transporting and warehousing of the

beverages. It uses - i2 transportation optimization system (TOS) software. It monitors movement

of products and makes necessary changes in routes and schedule to tackle unexpected situations.

Pepsi Cola concentrate

(2 plants)

Bottling and distribution plants

(company owned)

Retail stores Food service Vending

Bottling and distribution plants

(Franchise)

Retail Stores Food service Vending

Thus PCNA achieves more than 99.1% accuracy. PCNA has centralized transportation to single

location. It also employs six sigma quality process.

Benefits:- Order optimization,

Load configuration,

Lowest shipping cost,

Quick routes