topic analyze the pepsicos purchasing management 2

However, no company has problems in purchasing management, and Pepsi is no exception.We had time to research the media to synthesize and plan the company''''s solutions for future developme

THE SAIGON INTERNATIONAL UNIVERSITY

Cao Ngọc Vân Anh - MSSV: 97512102175.Đặng Trần Minh Uyên - MSSV: 97512102216.Lê Thị Tường Vi - MSSV: 97512102217.

Lecturer: Nguyễn Văn Thịnh

1 Introduction

In the current era of economic integration, the birth of multinational companies hascreated many opportunities for developing countries, including Pepsi Pepsi has long gradually asserted its position and become a familiar drink to everyone However, no company has problems in purchasing management, and Pepsi is no exception.

We had time to research the media to synthesize and plan the company's solutions for future development.

The layout of the article includes 3 parts:

+Part I: Overview of PepsiCo Corporation and PEPSI products.+Part II: PepsiCo's purchasing management process.

+Part III: Conclusion.

1.1 Operating System

PepsiCo Ltd Joint Stock Company is a beverage company with a greatreputation worldwide in the FMCG market PepsiCo ranks 6th in the FMCGbusiness PepsiCo is a multinational company in 190 countries with over 400brands Possessing 185,000 employees worldwide, the Company has an annualrevenue of $39 billion, and this number is proliferating Pepsico providesvarious products to meet consumers' diverse needs, including Frito-lay snacks,Pepsi-Cola drinks, Gatorade sports drinks, and Tropicana juice In addition,PepsiCo also Invests in 17 brands with $1 billion more planned for retailbusiness activities every year In particular, in India, there are 37 bottlingplants The history is as follows:

● Founder: Mr Caleb Bradham● Year of foundation: 1890

● Name formation: Founded to relieve indigestion, it was later named Pepsibeverage.

● The first factory was established in 1905, in America● By 1936, the company earned a profit of 2 billion USD

● To date, PepsiCo's business activities have spread to more than 190 countries and more than 500 companies.

● In Gujarat, Pepsi has 1 plant, a Jhagadiamega G.I.D.C Bharuch, built in 1997with GRB (glass refilling bottle).

● In India, the first PepsiCo company was

● In 2001 PET (polyethylene tetracycline) was started.● In 2003 AQUAFINA plant was started in Jhagadia● In 2010 SLICE plant was started in Jhagadia

Although Pepsi products were born nearly 13 years after Coca-Cola, they still have a great advantage and become the main product line bringing huge profits to the company of about 20 USD annually (accounting for about 1/5 ofthe total revenue of the parent company) To meet the needs of consumers PepsiCo has diversified its packaging and ingredients to suit customers such as cans, plastic bottles, glass

bottles of different volumes,and zero-calorie, low-calorievarieties sugar, or originalflavor

2 PepsiCo's purchasing management process.

2.1 Supplier selection

2.1.1 Choosing Sources for the Supply Chain

Pepsi outsources, which means that a third company handles the supply chainfunction It is among the most significant issues the company is dealing with Viacontracts, raw materials for manufacture and packaging are outsourced.Transportation of goods both inbound and outbound from the manufacturing facilityto the distribution center and ultimately to the end user is also contracted out to a thirdparty The fundamental things to think about are:

● Pointing out sources of supply and negotiating with suppliers● Sourcing of raw materials from local and foreign suppliers● Deciding terms and conditions with the supplier

● Coordinating activities and documentation with suppliers● Cost comparisons and quality assurance.

Pepsi decides where to outsource by bidding in local newspapers The tender serves asa general offer to all interested parties whether they are involved in the supply of rawmaterials or the means of distribution The company's sourcing process includessupplier selection, supplier contract design, product design collaboration, procurement

of materials and services, and performance evaluation supplier in case of raw materialprocurement.

2.1.2 Supplier Scoring and Assessment

Pepsi considers other factors that can affect a supplier's overall cost beyond agiven price when comparing suppliers In addition to the advertised price, thefollowing variables are also taken into account: additional time, supplyflexibility, supply quality, price terms, exchange rate, taxes and houseviability provide Pepsi evaluates and ranks suppliers based on the fact thattheir performance sets them apart from their competitors in terms ofreplenishment times and on-time performance Suppliers are required tosubmit product samples immediately after advertising the notice inviting bidsto purchase raw materials.

For example: the company's specialty is the production of Pepsi, whichrequires high-quality sugar and concentrates These samples undergo toplaboratory testing The sales department selects that particular supplier if thesample matches the set standards Due to its ISO 9001 certification andinability to market poor quality goods, Pepsi has strict guidelines when itcomes to the raw materials it purchases from suppliers.

2.2 How do pepsico manage supplier

As a multinational snack and beverage company, PepsiCo uses a number of tactics to manage its suppliers well and keep a strong supply chain The following are some crucial facets of PepsiCo's supplier relationship management strategy:

1 Cooperation, Integration, and Innovation:

 PepsiCo’s overall philosophy revolves around cooperation, integration, and innovation These guidelines aid in maintaining the stability, resilience, and flexibility of its intricate supply chain.

 Being a global business, PepsiCo works with a wide variety of products,each having unique needs Certain products require cold chain logistics, whereas others depend on ingredients that are acquired from different parts of the world.

 The business arranges for a large number of manufacturers, shippers, merchants, warehouse managers, and suppliers It also takes into consideration possible disruptions such variations in demand, seasonal requirements for sourcing, and weather changes1.

3 Purchasing and Sourcing:

 The two main pillars of PepsiCo's supply chain strategy are procurementand sourcing.

 The business builds trusting connections with suppliers and chooses ingredients with care Taste consistency and adherence to strict quality standards are guaranteed by this dedication to quality.

4 Diversity of Suppliers:

 PepsiCo aggressively encourages diversity of suppliers.

 They plan to double their spending efforts with Black-owned suppliers by 2025, focusing on growth across services, agriculture, sustainable packaging, and operations.

2.3 How to develop the supplier management of pepsico ?

PepsiCo uses a number of techniques to improve and advance supplier management Let's examine a few crucial facets of their strategy:

 PepsiCo wants to expand their scope of activity and establish mutually beneficial agreements with a variety of providers.

2 Sustainable Sourcing:

 Throughout its value chain, PepsiCo is dedicated to upholding human rights and promoting worker equality, safety, and well-being.

 They demand that vendors uphold the same moral principles as PepsiCo does.

 Their sustainable sourcing program includes formal risk

assessments, third-party audits, corrective actions, and capabilitybuilding.

3 Technology and Innovation:

 PepsiCo collaborates with emerging technology start-ups through programs like PepsiCo Labs.

 They scout for breakthrough tech solutions related to

procurement needs, such as spend analytics, market intelligence,supplier relationship management, and more.

2.4 Receiver process.

The process of receiving raw materials at a Pepsi factory involves several key steps:

1 Ordering: In accordance with production schedules and inventory levels, the plant sets orders with suppliers for the necessary raw materials.

2 Delivery scheduling: To guarantee that the supplies arrive when needed, the manufacturer works with the suppliers to arrange the delivery dates and times.3.Receiving: The factory's receiving department receives the raw materials and verifies that the right goods and quantities have been delivered by comparing them to the purchase order.

4 Sampling: To make sure there is consistency and adherence to standards, raw material samples may be obtained for additional quality testing and analysis.

5 Identification and Labeling: For traceability purposes, each batch of raw materials is tagged and identified with pertinent information including batch numbers,

expiration dates, and supplier data.

6.Quarantine and Approval: Before being permitted for use in manufacturing, raw materials may be put in a specified quarantine area for additional examination or testing Using only high-quality materials during the production process is ensured by this stage.

7.Storage: Following inspection, the raw materials are kept in specially designated sections of the factory, including storage silos or warehouses.

8.Inventory management: Raw materials received are documented in the inventory management system to ensure accurate inventory levels for production planning and scheduling.

9 Quality control: To make sure the raw materials fulfill the necessary requirements, continuous quality control procedures are put in place.

10 Documentation: For the sake of traceability and record-keeping, all pertinent documentation is kept, including delivery receipts, inspection reports, and inventory records

2.5 Analyze purchasing ABC

ABC (Activity Cost Analysis) is an effective cost management method that helps businesses identify and allocate costs to specific activities, products and services For PepsiCo, ABC analysis can be applied as follows:

- Group C: Other materials such as cleaning chemicals, protective equipment, etc These are small costs and have little impact on price.

2.5.1 Analysis of the EOQ inventory model of Pepsico

EOQ is a mathematical model used to determine the optimal order quantity tominimize the total costs associated with ordering and holding inventory Key factorsaffecting EOQ include:

1 Annual demand: This is the amount of raw materials or finished products needed tomeet customer demand for one year.

2 Ordering costs: Includes costs related to placing an order such as shipping costs,order processing, etc.

3 Storage costs: Includes storage costs, financial costs, damage costs, etc.For PepsiCo, the EOQ model can be applied as follows:

- Annual demand: Based on market demand forecast.

- Order costs: Includes shipping costs, order processing, etc.

- Storage costs: Includes storage costs, financial costs, and product damage costs.Applying the EOQ model to calculate Pepsico Company's optimal order quantity:Therefore, the group decided to investigate soft drink inventory.

EOQ formula:We call:

D = Annual demand it units of a productS = Ordering cost per order

H = Holding cost per unit of the product

● The assumptions of the EOQ model are as follows:● Demand for inventory is stable (no change)

● The waiting time for goods from placing an order to receiving the goods is determined and does not change.

● The company receives all orders from suppliers at the same time There are only 2 types of costs: ordering costs and storage costs.

● No shortage occurs if the order is fulfilled on time, i.e if the order is placed after the optimal inventory is determined and the order is fulfilled on time, there will be no status at all Inventory shortages lead to production and consumption disruptions.

Assume that Pepsi's annual demand for products is 300,000 units The holding costis $80 per year involves keeping a product in stock and the ordering cost per order is$50,000.

So we have: D = 300,000 units; S = $50,000; H = $80Thus, EOQ = 19,365 units

This depicts that at the order quantity of 19,365 units per order, the company wouldhave minimum costs while keeping the required stock in hand.

2 Find and pre-qualify vendors:

- Use supplier databases, industry recommendations, and market research to findpossible suppliers for Pepsi Soft drink items.

-Pre-qualification of suppliers is done on the basis of factors like competitive pricing,delivery capabilities, sustainable practices, and adherence to legal requirements.

3 Negotiation and involvement of suppliers:

-Start negotiating advantageous conditions, such as price, terms of payment, deliveryschedules, and service level agreements (SLAs), with eligible suppliers.

-Insist on the significance of product quality, uniformity, and adherence to PepsiCoguidelines and specifications.

4 Establish an electronic bidding system: -Update or implement the e-procurementsystem to make the Pepsi soft drink products purchase process easier.

-Set up the system to handle vendor management, orders, approvals, reporting, andpurchasing requirements.

5 Submit buy request: - Using the electronic procurement system, the authorizedperson sends a purchase request including the amount, packing, delivery address, andany specific needs for Pepsi soft drink items.

6 Oversee the procedure of approval:

-In the e-procurement system, create a hierarchy for the approval process to assignpurchase requisitions to review and approval.

-Assign approvers in accordance with procurement policy, financial authority, andorganizational responsibility

7 Create and submit purchase orders: -In the e-tendering system, approved purchaserequisitions are automatically converted into purchase orders.

-Orders, along with pertinent information including product specifications, quantities,prices, delivery instructions, and contract terms, are sent electronically to a list ofapproved suppliers select.

8 Order fulfillment and delivery:

- After confirming receipt of the order, the supplier begins supplying raw materials forPepsi production.

-Monitor order fulfillment status using e-procurement system and liaise with suppliersto ensure that delivery dates and quality requirements are met.

Inspect incoming shipments of Pepsi production materials to ensure compliance withquality, quantity and specifications.

9 Processing bills and payments: -Check supplier invoices against matching purchaseorders after receiving Pepsi soft drink items, and obtain reports via the e-procurementsystem.

-Approve payment invoices in accordance with financial regulations and agreed termsof payment.

In order to preserve supplier relationships, process payments using the business'saccounts payable system, making sure they are accurate and made on time.

10 Performance evaluations and vendor input: -Keep an eye on supplier performanceindicators like SLA compliance, responsiveness, quality of product, and on-timedelivery.

-Give suppliers constructive criticism based on performance reports, emphasizingareas for development or incentives.

-Collaborate with suppliers to promptly and proactively address any problems orchallenges.

11 Continuous improvement and optimization:

-Continually assess the e-procurement procedure to identify areas for improvement interms of cost, efficiency, and streamlining.

-Ask end users, suppliers, and internal stakeholders for their opinions in order topinpoint issues and possible fixes.