Project Administration within Pepsi New Product Commercialization

1. Project Administration within Pepsi New Product Commercialization by John Ellingham Sr. Manager - Commercialization, Pepsi Cola R&D and Ed Mahler President, Project Administration Institute and PMI Westchester

2. Agenda John • Pepsi R&D • Who We Are • How We Support the Business • R&D’s Challenges • Role of Commercialization Engineering • Project Administration – Benefits to Commercialization Engineering Ed • Project Administration Defined • Initiation challenges and solutions • Planning process • Status update process • Management views • The repository • Backup • Summary: What’s been accomplished

3. Who We Are Pepsi Cola’s Worldwide R&D is located in Valhalla, NY Product Development & Innovation Process Development & Commercialization Ingredient & Flavor Technology Technical Insights

4. New Product Process STAGE 1 NEEDS/OPPORTUNITY IDENTIFICATION STAGE 2 IDEAS STAGE 7 POST LAUNCH STAGE 3 FEASIBILITY STAGE 4 DEVELOPMENT STAGE 5 COMMERCIALIZATION & TEST MARKET (TM) • Research • Integration • Dissemination • Post Launch Review • Trade Product Quality • Business Performance vs. Plan • Ideation • Screening • Assessment • TM Preparation • TM Execution • TM Evaluation / Optimization • Refinement & Validation • Feasibility & Planning • Optimization & Final Validation • Commercialization & Planning Stage 6 - BROADSCALE LAUNCH GATE 5 GATE 4 GATE 3 GATE 2 GATE 1 Involves cross functional efforts from many stakeholders… Product Development, Marketing, Consumer Insights, Finance, Engineering, Operations

5. R&D’s Role Raw Materials ManufactureConcentrateComponents FinishedProducts Syrup Customer Consumer Concentrate Company Focus Bottling Company Focus R&D Focus Our Business Is Unique and Complex…

6. Situation Assessment We have evolved from an organization that manufactured carbonated soft drinks… … and salty snacks Key Challenges: • Globally, consumers demanding more variety • Keep pace with greatest growth opportunity in international markets • Innovate faster with less … to one of the largest food & beverage companies in the world through growth and acquisition

7. Portfolio Growth 1986 2004 CSDs Non-Carbs • Pepsi • Pepsi / Diet Pepsi • Caffeine Free Pepsi / Diet Pepsi • Pepsi Max • Wild Cherry Pepsi / Diet Pepsi • Pepsi & Diet Pepsi Twist • Pepsi & Diet Pepsi Vanilla • ONE, EDGE • Mt. Dew • Regular & Diet • Caffeine Free Dew and Diet Dew • Code Red & Diet Code Red • Live Wire • Pitch Black • Paso de Los Toros 7-Up (Int’l.) • Slice Manzanita Sol • Mug Kas • Patio Mirinda • Dukes Yedigun • Sierra Mist (Reg & Free) • Evervess Mixers CSDs • Juice/Drinks • Dole • Citrus Hill • Tropicana Juices • Trop Twister • Trop Juice Drinks • Tea • Lipton Brisk • Lipton’s Iced Tea • Water • Aquafina • Aquafina Sparklng • Flavor Splash • Coffee/Dairy • Frappuccino • Double Shot • Isotonics • PI Gatorade • New Age Beverage • SoBe • Pepsi • Pepsi • Diet Pepsi • Pepsi Light • Mt. Dew • Mug • Patio • Mirinda • Teem Our Portfolio has grown considerably with minimal increase in resources

8. Role of Commercialization Engineering In support of Pepsi’s rapidly expanding product portfolio, Commercialization Engineering wears many hats Responsibilities • Support during Development Stage • Consumer test productions, feasibility • Leadership for manufacturing assessment & capability for both concentrate and bottling systems • Processing, yield • Field trials • Documentation • PM in Commercialization and Launch stages • Identify resource requirements • Stakeholder & team alignment • Schedule development & maintenance • Ongoing facilitation, communication, & risk management • Support key productivity initiatives and new manufacturing platform feasibility and assessment

9. Impact of Portfolio Growth on Commercialization • 18 CE’s on staff • Managing 80+ projects, ~70% international, ~30% domestic • Average 3-6 projects per engineer ongoing • 70% with < 5 years experience with Pepsi • Serving many masters/audiences • Cross functional team (marketing, development, procurement, operations, quality) • Senior management/HQ • International liasons (BU’s, production facility personnel) • Average launch time frame has been compressed • 2 months for “off the shelf” products (International only) • Typically 6-7 months for most new products • ~1 yr for more complex projects (Product + Process + Package) • Planning process tended to be reactive rather than pro active • Schedule updates occurred for management meetings rather than to help manage the project and risk

10. Project Management Challenges • The Commercialization group is being challenged… • Do more with less • Communicate more effectively • Manage compressed and constantly changing project schedules

11. Centralized Project Administration Creation of a central Project Administration function has enabled the Commercialization Engineering group to become more effective Benefits • Planning, re-planning, & reporting service throughout project • From project identification through completion • Centralized repository - all project information available on network • Single source for plans and related information • Planning and reporting standards enabled • Daily group manager report issued • Sort by PM, Status Date, # of Changes, etc. • Biweekly status updates and reports provided to PM • Team Highlighted To Do’s; Late or Slipping Tasks • Format and content consistency • Key milestones locked down – Team and Management Views • Management Reports: Dates filtered & extracted from plans

12. Centralized Project Administration Benefits • Plan Integrity • Dependency logic discipline captures ripple effect of slippage and late tasks • Consistent resource identification • Team members contained in a shared pool • Identified by functional group • No filtering of negative information • Centrally Located Portfolio of Plans and Templates • Functional support group processes integrated • Documentation • Operations • Procurement • Analytical Services • Previous plans are leveraged to build new • Over 70+ projects active, 70+ completed since inception

13. Centralized Project Administration Benefits • Building Staff PM Skills & Practices • Developing and using a senior level PA allows • Mentoring of inexperienced project managers • New project managers become effective more quickly • Ensuring the process represents the interests of the organization • Management of… • Time • Scope • Communication • Data • Risk

14. Cost of not doing effective project administration Plan integrity reduces risk associated with task slippage • Cost of risk = Cost of negative event * Probability that the event will happen • Project Example - Cost of missed milestone date for Trade Sample shipments due to late graphic handoff: • As a result, 1 major East Coast retailer has refused to stock new item for 2 weeks wasting the coupon drops and ads • Example estimates: • $2.5K lost revenue per week per retail outlet * 20 regional outlets * 2 weeks + $20K unproductive advertising per week * 2 weeks = $140K = Cost of negative event (Task slippage) • Cost of risk = $140K * 5% probability = $7K • Alternative cost of risk: Air freight costs to ship required samples to all locations ~ 20 locations * $200 = $4K Multiplying by the total number of projects completed per year 100 projects * $4K = $400,000/year

15. Cost savings associated with project administration Centralizing Project Administration provides a 10% improvement in productivity plus the previously mentioned benefits • Assumption • Proper planning, tracking, and reporting of schedules is required for efficient use of resources, improving productivity, minimizing surprises and risk. • To accomplish this, 18 Project Managers need to spend 10% of their time minimally to plan, track, replan, and report their projects • This time estimate does not include • Archiving and backup of the data • Any training needed to perform the work • Result • 1.8 PM’s of effort to do project administration • The PA Equation • One PA adds 1.8 PM’s, a net gain of 0.8 + the benefits mentioned

16. Project Management Challenges We’ve moved from… To… • Inconsistent planning & delivery • Use of terms and definitions • Views tailored by the author • Updates depending on urgency • Moving targets = Heroics • Unsure of affects of date changes • Over allocation of resources • Inability to quantify causes • Inconsistent or no archiving of • Plans • Documentation • Consistency in communication • Format and content • Views tailored to the audiences • Regular update schedule • Plan integrity • Dependency logic & the ripple effect • Resource schedule identification • Tracking metrics & history • Centralized repository • Single source administration function • Redundant daily backup

17. Centralizing Project Administration

18. Centralizing Project Administration How its done • Project Administration Defined • Initiation challenges and solutions • Planning process • Status update process • Management views • The repository • Backup • Summary: What’s been accomplished

19. Project Administration Definition • Project planning, tracking and reporting • Components • Responsibility for planning, tracking and reporting • Mechanics of planning, tracking and reporting • Centralizing project administration is shifting the mechanics, not the responsibility, to a Project Administrator (in the project office)

20. Initiation • Challenges • “I manage without this kind of planning” • “I like doing my own plans” • PA – friend or foe • Solutions • Start with 1 project & someone that wants to do it • Flexibility • Availability • Responsiveness • No fault project management • Cookies • Management encouragement/mandate

21. Planning Prerequisites • PM must be a SME • PM must have a timeline/wish list with the major milestone dates of the project • PM knows who will do the tasks, how long they will take, and what has to happen before they can be done • One on one, with a team member, or with the team using a projector

22. MAINSTREAM PEACH - LINE EXTENSIONSField Ready - US Timeline MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER Full Distribution 12/26/2005 3/7 CLT Tech Center Production TBD MARCOM TBD OPCOM 4/4 Field CLT 10/17 Bottlers Receive TRM & Start-Up Info 5/2 Full CLT Results 5/30 CLT/BASES Tech Center Production 10/31 Concentrate Production (Arlington) 6/6 Volume Forecast by Market & Package 6/6 Bottler Technical Requirements Defined 11/14 Concentrate Available for Order 6/13 Conc. Assess. Doc. 11/21 Concentrate and Packaging in Plant 6/27 Field 2nd CLT/BASES 7/4 All Bottler Letter (Marketing & FRT) 11/28 Arlington Approval 7/25 Topline Results from In-use Test 12/5 Product to Sales Centers 8/1 FINAL FORMULA 12/26 Full Distribution 10/3 Issue MIs and ACTs 7/4 Sales Forecasts Due to Bottlers 10/3 TRM Approval 9/26 Beverage Doc, MI and ACT Approval 8/1 Bottlers Order Packaging 9/26 Marketing Implementation Guide Distributed 8/1 Beverage Specifications finalized 9/26 Concentrate Scale-Up (Arlington) 8/1 Final Artwork handoff to GC 9/12 Plant Trial #2 8/8 Concentrate Scale-Up (Valhalla) 8/8 Draft Beverage Documents 9/5 Plant Trial #1 (Trade Sample Production) 8/22 Raw Mat. Procurement (ROD) 8/29 Yield Study 8/22 LIS handoff to Graphics Updated: 02/17/05

23. Local Repository on PC

24. The Planning & Tracking Activity Portfolio Manager PROJECTS ARE CONFIDENTIAL

25. Planning - Initial planning meeting results

26. Plan Construction Integrity Rules • Tasks • All have Predecessors, successors, & no constraints • Except • External dependencies “<” (no predecessor, preferably only one) • External deliverables “>” (successors optional) • Timing indicators “=” (provides date targets for key milestones) • Fixed duration preferably </= 2 wks • Resources • Identified from master resource plan • Working for $1/hour (enables earned value in person-hours) • Work effort >0 except milestones

27. Planning – Results of the 1st construction meeting PROJECTS ARE CONFIDENTIAL

28. The Outlook Public Folder Based Repository

29. The Outlook Public Folder Based Repository

30. Construction meeting report posted to the Repository

31. Planning - Communication Management PROJECTS ARE CONFIDENTIAL

32. Preparation for Tracking - Projects requiring update

33. Preparation for Tracking - Tracking Everything

34. Preparation for Tracking - Projects requiring update PROJECTS ARE CONFIDENTIAL

35. Preparation for Tracking - Invitation with To Do’s

36. Preparation for Tracking - To Do’s from 8/9 update

37. Tracking – 8/21 Status and the ripple effect

38. Tracking – 8/21 Status and the ripple effect (cont’d.)

39. Tracking – 8/21 Status and the ripple effect (cont’d.) Target date slippage

40. Tracking – 8/21 Status Summary

41. Tracking - The Planning & Tracking Activity Report

42. The Status Report…

43. Tracking & Reporting Integrity Rules • To Do’s • To Do’s are either on schedule, rescheduled, or unknown • Rescheduled & unknowns have a reason in the Notes column • Tasks added or deleted are flagged in the Notes column • Reporting • Continuity • Why things changed • Key target date changed from to • Project metrics • Highlight risks, concerns, caveats, information not revealed by the metrics

44. The Network Based Project Repository The Repository

45. The Outlook Public Folder Based Project Repository

46. Views in the Status Report… Milestone Timeline

47. MAINSTREAM PEACH - LINE EXTENSIONSField Ready - US Timeline MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER Full Distribution 12/26/2005 3/7 CLT Tech Center Production TBD MARCOM TBD OPCOM 4/4 Field CLT 10/17 Bottlers Receive TRM & Start-Up Info 5/2 Full CLT Results 5/30 CLT/BASES Tech Center Production 10/31 Concentrate Production (Arlington) 6/6 Volume Forecast by Market & Package 6/6 Bottler Technical Requirements Defined 11/14 Concentrate Available for Order 6/13 Conc. Assess. Doc. 11/21 Concentrate and Packaging in Plant 6/27 Field 2nd CLT/BASES 7/4 All Bottler Letter (Marketing & FRT) 11/28 Arlington Approval 7/25 Topline Results from In-use Test 12/5 Product to Sales Centers 8/1 FINAL FORMULA 12/26 Full Distribution 10/3 Issue MIs and ACTs 7/4 Sales Forecasts Due to Bottlers 10/3 TRM Approval 9/26 Beverage Doc, MI and ACT Approval 8/1 Bottlers Order Packaging 9/26 Marketing Implementation Guide Distributed 8/1 Beverage Specifications finalized 9/26 Concentrate Scale-Up (Arlington) 8/1 Final Artwork handoff to GC 9/12 Plant Trial #2 8/8 Concentrate Scale-Up (Valhalla) 8/8 Draft Beverage Documents 9/5 Plant Trial #1 (Trade Sample Production) 8/22 Raw Mat. Procurement (ROD) 8/29 Yield Study 8/22 LIS handoff to Graphics Updated: 02/17/05

48. Views in the Status Report… To Do’s for next time

49. Other Available Views… Status

50. Other Available Views… Milestone List