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

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pepsi americas

Pepsi Americas

Building an Information Savvy company

  • 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?
  • 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
changing market conventional route sales model
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.
changing market conventional route challenges
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
changing market regional structure
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
initiative 1 next gen defining a common platform
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
next gen the handheld project
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….
next gen mixed success painful experience
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
initiative 2 customer alignment meeting customer s needs
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
customer alignment process centralization
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
initiative 3 building an it business partnership
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
initiative 4 building an it business partnership project management organization
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
building an it business partnership i t part of strategy for growth
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
competitive edge component 1 information backbone
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.
competitive edge central data repository and the data warehouse
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
the data warehouse 360 view of the business
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.
competitive edge component 2 mobile platform
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
initiative 6 customer optimization reaping the benefits
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
  • 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

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


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

A: Next Gen


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


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


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


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

A: Project Management Organization