Ideas for today and tomorrow

SIP Report Presentation

Kolkata, July 29th 2015

India Region

Dr. Himadri Roy Chaudhury

(Associate Professor, Marketing)

IMI Kolkata

Presented to:

Dr. Rituparna Basu

(Assistant Professor, Marketing, Retail and Entrepreneurship)

IMI Kolkata

Mentored by:

Mr. Devnarayan Sarkar

MBA, FMS Delhi

Associate Director, Franchise Operations East

and Goa

PepsiCo India Holdings Pvt Ltd.

Introduction and Executive Summary

Company Background

Issues and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

It is the peak of Summer, April-May

Distribution Centers in Kolkata are bustling with activities to meet order targets

--Some are doing well some are doing not so well

Sub Distribution has been hit, a Customer Executive has resigned

Slice Tetrapack is expected to arrive from the Facility in Bangalore

A premium brand, Tropicana Slice Alphonso, an erstwhile exclusively online offering is being launched in the traditional trade channel

-- A kind of product that competitors have no substitutes for

-- Need for focus on pushing this new entrant

Another new entrant is 7up Nimbooz Masala Soda

Pepsi IPL is running in full flow

--Schemes are being devised around it

PepsiCo seeks a summer intern’s perspective on its Sales Operations Strategy…

Introduction and Executive Summary

Company Background

Issues and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

Entered India in 1989 as a wholly owned subsidiary of PepsiCo

Has the same Mission, Vision and Value systems of PepsiCo

Philosophy of “Performance with Purpose”

Deep Pocket investor with strong brands

Innovation driven and ever expanding portfolio of food and beverages

Follows a model of Partnership with farmers for sourcing, 24000 currently

Employment on the basis of Talent, currently employs around 2,00,000 Indians

Care for the Planet, efforts on water conservation and reduction of carbon footprints

Generates revenues of   1000 crore annually₹

PepsiCo India Holdings Pvt Ltd.

Operates through a partly owned partly franchised operating model

Varun Beverages Ltd. is their biggest franchise partner operating in East and North

Competes against Coca Cola, Parle Agro and a new entrant RC Cola

Headed by D. Shivakumar as CEO

India Operations

Organizational Structure

PepsiCo India

BeveragesFritoLay (Food & Snacks)

• Marketing

• HR• Finance• Legal• Corporat

e Affairs• R & D

Owned Operations

Franchise Operations

GM Sales

Regional Sales Head

ASM

CE

Owned Operations

PSR

Introduction and Executive Summary

Company Background

Issues and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

Reviewing the “Traditional Trade” channel and its operating efficiency…

Distribution and Logistics

Retailer Service

IT Implementation

Sub Distributor Operations

What are the efficiencies and inefficiencies of the existing system? Are there opportunities to enhance the activities existing system? What are competitors doing differently?

How satisfied are our existing retailers? What are they unhappy about? How to make them happier?

How has IT been implemented in Traditional Trade? To what extent does it provide visibility? What does it miss out? How to capture the missing links?

How are the sub distributors currently performing? How can they be connected better to direct distribution? How can the shared value creation be enhanced?

Merchandising How do we merchandise What do our competitors do better? How can we improve?

Inventory Management

Is the current method able to capture all variability? Is the material handling going alright? How to move towards JIT?

Introduction and Executive Summary

Company Background

Issue and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

The Distribution Channel for Traditional Trade

PLANT CNF DCs

Retailer

SD Retailer

Consumer

Level 3 Distribution system

Level 4 Distribution system

Distribution & Logistics

Spatial Convenience

Scalability

Flexibility

Relationship Building

Waiting Time

Assortment (Bundling)

Security of Goods

Flow of Reverse Logistics

Visibility

Availability to the consumer conveniently

The model’s applicability to different regions

Ability to capture seasonality and accommodate new products

Offering an opportunity for the channel partners to build a good relationship with one another

How long does the customer needs to wait in order to receive a product

Ability to accommodate complements

Ability to maintain a low damage rate of inventory while it moves through the channel

Smoothness of the flow of reverse logistics

Ability to track, monitor and control operations of partners

Expectation Description Status Competitor

CA

CA

CA

Effect Distinctive

CA

CA

Retailer Satisfaction53% SATISFIED 47% NOT SO SATISFIED

Good system of Order booking Good relationship with the PSRs Margins are better than competitors IPL Tickets are given to us at times

Often don’t get what I order Items are often out of stock VISIs do not perform well, not repaired It takes a long time to get a VISI Sometimes it takes 2-3 days deliver Pending Claims, Transaction cost is 3-4 months on

an average Don’t get any extra benefits/gifts Damaged items are not recollected on time Often get stock that has expired or about to expire People don’t buy as much from us like before,

places like Big Bazaar provide lower prices

IT Implementation

SAMNA

Benefits

Missing Links

--Sales Automated Management for the New Age--Integrated Real Time IT system that captures all information pertaining to order booking--Uses small hand held devices for on field activities and computers in offices

--Real Time update of stock levels and orders to everyone in the sales team--Centrally controlled communication of schemes--Automated generation of invoices--Facilitates data driven decisions

--Sub Distributor operations are not integrated--Retailer operations not integrated--Market Information, such as listing of New Stores, deletion of closed stores often remains to be updated--Results in skewed metrics leading to faulty decisions

Plant

CNF

DC

SDRetaile

r

Extent of Visibility

Merchandising

What are we doing

good?

What are competitor

s doing better?

What is Lacking?

--Coming up with good promotional schemes--Planning innovative POP Displays for “Mom and Pop” Stores--Creating good merchandising schemes for retailers of new products such as Tropicana Slice Alphonso--Planogram for delivering similar experience to customers across stores

--Deliver a VISI cooler to a new store/existing store needing replacement four times faster--VISIs are better performers and withstands a retail store’s rigour well enough--Take special care to keep their VISI Coolers pure, 17 percentage points higher--Presence of VISIs are 21 percentage points higher--Have POP displays and in store branding about twice as much--Merchandise is more durable--Merchandise is forwarded to ‘Trusted’ Channel partners with ease--Introducing intelligent SKUs--Use innovative POP Display tools; e.g. Hangers for 5 Maaza Pouches₹--Delivering Merchandised gifts to the retailers; e.g. T Shirts--Taking advantage of our weaknesses

--Alignment of Timing--Effectiveness of Efforts--Trust on Partners--Communication of initiatives across the channel

Needs Substantial focus

Inventory Management

Ensure Least Stock outs

Start Forecasting

Better

Start Moving Towards JIT

PepsiCo’s Inventory Management Today Follows Base Quantity method; replenish stocks

to maintain base quantity

Stock outs are still common; occurs once in three sales calls (on the same retailer)

Moving average method of forecasting is used

Seasonality calculated on the basis of two years’ historical data

Variability of Demand due to changes in schemes is not captured well enough

Material Management needs to improve, stocks often expire in store, no systematic method of shipping

Channel Partners (DCs) reorder based on heuristics

Because lead time is short, 1 day, problems have remained hidden

Model not sustainable when distances increase

1

2

3

PepsiCo Today

Sub Distributor Operations

Key Questions

How to measure their efficiency? Are they sustainable? Improve them or Remove them? Should investments be made on sub distribution?

Broad Aspects to be Looked at

Operational Efficiency Loyalty

Methodology Adopted

Factor Rating Method

Theoretical Framework

OPPORTUNISTTRUE

ENTREPRENUER

NEEDS TRAINING

INDIFFERENT

Effi

cien

cy o

f Op

erat

ion

sLOW HIGH

LOW

HIG

HLoyalty

Parameters

RATO: Ratio

CSMO: Comparison with Super Distributor's Modus Operandi

CBPSM: Comparison with best performing sub distributor’s Metrics

QUALR: Qualitative Ratings

Outcome

3

1

2

456Ef

fici

ency

of O

per

atio

ns

LOW HIGH

LOW

HIG

H

Loyalty

OPPORTUNIST TRUE ENTREPRENEUR

INDIFFERENT NEEDS TRAINING

Guha & Roy Ent.

Tara Maa Ent.Munna Stores.

Saraswati Ent.Annapurna Agency

Sunita Ent.

Introduction and Executive Summary

Company Background

Issue and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

Where are we and how to move forward: Ideas for Today & TomorrowInitiative Areas What is Needed How can it be done

Distribution & Logistics

Reduce Waiting Time for retailers Ensure Greater Security of Stock in Transit

Plan logistics better, negotiate with DCs to invest in capacity Improve packaging material used Issue guidelines to all DCs to operate in a standardized manner Train Employees on better material handling and trucking

Retailer Satisfaction Reduce Delays in deliverables Reinforce belongingness

Integrate deliverables information in the IT system Train people on integrity and ethics Increase frequency of performance based gifts such as IPL Tickets,

T Shirts

IT Implementation Doing well, keep going Try and integrate the missing links, at least

sub distribution

Capture the missing links manually, create databases, integrate Keep market information updated Expand to areas other than capturing orders and schemes, e.g.

demand information, retailer information on pending claims

Merchandising

Compete on Speed VISIs need to be more sturdy Undertake initiatives to keep VISIs pure to

the extent practicable Involve channel partners Select durable material for merchandise

Align timing of Merchandising initiatives Forward merchandise to channel partners and monitor them Provide market information to VISI manufacturers Communicate effectively to the retailers on how to register

complaints to repair VISIs, impose penalties on non attendance Communicate benefits of POG to retailers

Inventory Management

More accurate forecasting Better Methods of Materials Management Issue standard guidelines for reordering Equip DCs to face variability on new scheme

Introduce better forecasting models, algorithms, use demand info. Handy notebooks, no big stock registers for SDs, simplify their format Introduce EEDFO method of inventory arrangement & shipping Reorders must be data driven, not heuristics driven Allow DCs time to order stocks before change of schemes

Sub Distribution Invest on the true entrepreneurs Prune the indifferent SDs and find new SDs Identify motivators for Opportunists

Forge stronger partnership with the true entrepreneurs, upgrade them to distributors if possible

Extend credit and manpower, expand margins

Introduction and Executive Summary

Company Background

Issue and Objectives of the Study

Observations and Findings

Analysis & Suggestions

Q & A

Today’s Discussion

Thank you

Q & A