The similarities and similarities between the pepsico system in practice and theoris

School of Industrial Management – Manufacturing System Report HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY SCHOOL OF INDUSTRIAL MANAGEMENT MASS PRODUCTION AT PEPSICO Instructor: Dr Le Phuoc Luong Group 2: No Stu.ID Name 205308 205304 215342 205316 2152711 Hà Xuân Hương 205317 215351 205257 Contribution Phạm Lê Ngọc Huy Nguyễn Duy Khang Đinh Anh Kiệt Trần Nguyễn Gia Kỳ Dương Văn Lâm Bành Khánh Linh Nguyễn Thụy Khánh Linh School of Industrial Management – Manufacturing System Report HCM city, Table of Contents I OVERVIEW History Vision: Mission: II THEORY OF CHAPTER Manufacturing lead time: Unit cost: 2.1 How much does it cost to produce Pepsi? 2.2 The price of making a bottle of coke Routing: 3.1 Following are how the most popular product of PepsiCo - Pepsi-Cola is made 3.2 Packaging Department in Killingly, CT Volume 10 4.1 (A PepsiCo franchisee) Varun Beverages Limited 10 4.2 PepsiCo’s Frito-Lay - The Frito-Lay’s manufacturing facility 11 Equipment: 11 Wokers’skill: 15 Scheduling 16 Dispatching 16 III THE SIMILARITIES AND SIMILARITIES BETWEEN THE PEPSICO SYSTEM IN PRACTICE AND THEORIS 18 The similarities 18 1.1 Pepsico production line system in Vietnam .18 1.2 The production process of carbonated soft drinks at Pepsico 19 1.3 Production line and some equipment 21 The Differents 25 IV STRENGTHS OF MASS PRODUCTION IN PEPSICO: .27 V WEAKNESS OF MASS PRODUCTION OF PEPSICO 29 High initial investment 29 Inflexible to consumer demand 30 Environmental impact 31 School of Industrial Management – Manufacturing System Report VI SOLUTIONS .31 Solutions for environmental impact: 31 Solutions for consumer demand: 34 Solutions for investment: 36 VII REFERENCES 40 I OVERVIEW Modern technologies have advanced to the point where they can produce in large factories while maintaining quality and providing customers with a sense of satisfaction As goods become more complex, so the processes that create them, making it more complicated and requiring work to be coordinated using machines rather than engineering At the time, they were only in charge of a small portion of the overall work, rather than overseeing the entire product's development More planning and organization of activities are required to monitor work processes in factories Slowly but steadily, production systems are being built Keeping this in mind, modern manufacturing would be heavily reliant on the production system As a result, we looked into Pepsico's manufacturing process Pepsico is a multinational food, snack, and beverage corporation headquartered in Harrison, New York History After a joint venture between SP Co and Macondray - Singapore founded the International Beverage Company (IBC) in 1991 with a capital contribution ratio of 50 percent - 50 percent, the capital structure was modified in 1998-1999, with PepsiCo owning 100% of the company In 2003, PepsiCo Vietnam International Beverage Company changed its name to PepsiCo Vietnam International Beverage Company Many non-carbonated soft drinks were introduced, including Sting, Twister, Lipton Ice Tea, and Aquafina 2005 Recognized as one of Vietnam's leading liquor companies following the company's expansion of food production and sales with Poca's, a well-known brand among consumers and young people, as well as its soy milk business PepsiCo Vietnam announced in 2010 that it will continue to invest $250 million in the country over the next three years, marking a significant milestone A new factory in Can Tho was officially opened on February 2, 2010 In April 2013, Suntory Suntory Holdings Limited and PepsiCo, Inc formed the PepsiCo Vietnam strategic beverage alliance with the introduction of new tea products Olong Tea + Plus and Mountain Dew, with Suntory owning 51 percent and PepsiCo owning 49 percent School of Industrial Management – Manufacturing System Report Pepsi's success in expanding into Vietnam is growing, and it will so until the end of the year PepsiCo established itself as a globally recognized food and beverage corporation with a portfolio of more than 22 brands with the introduction of Frito Lay in 1965 (Lays Chips, Gatorade, Quaker Oats, just one) Until 2017, a few examples) generated annual revenue of more than $ 63 billion (Introduction - PepsiCo, 2017) Frito-Lay, PepsiCo's food division, generates more than $12 billion in annual revenue for the automaker In 1932, C.E Doolin invented the Frito-Lay concept, with Fritos recipe purchasing and selling work and then selling goods from their own cars In the same year, Herman W Lay established H.W Lay & Company, which goes on to become one of the Southeast's most successful snack companies By 1961, Lay's and Frito-Lay would have merged to form Frito-Lay (Global Division PepsiCo, 2017) Vision: Their goal is to be the global leader in comfort foods and beverages by winning with purpose This reflects their desire to compete in a sustainable manner and grow their bottom line while remaining committed to doing good for the environment and our communities Mission: Their goal is to make their customers happy with every sip and bite by creating joyful moments through tasteful and nutritious products and unique brand experiences For their customers: By being the best possible partner, bringing industry-changing innovation, and delivering unrivaled growth In honor of their communities and partners: By making meaningful opportunities available By providing meaningful opportunities for associates and communities to work, learn new skills, and advance in their careers, as well as a diverse and welcoming workplace For the sake of the planet: by safeguarding nature's valuable resources and promoting a more prosperous future for our children and grandchildren They have the following shareholders by delivering top-tier TSR on a long-term basis and implementing best-in-class corporate governance II THEORY OF CHAPTER 5: Manufacturing lead time: All the plants of PepsiCo are at device oriented The involvement of workers is really low and hence the skills specialized needed are likewise low The plants produces standardized products and for that reason, the company are taken part in mass production Almost the plants of PepsiCo all over the world can produce 3000-36,000 bottles/hour, approximately 0,1 second per bottle For example, The new factory in Quang Nam can reach a maximum capacity of up to 850 million liters per year with a total of 10 production lines, of which, production lines have been put into operation with 300 million liters per year, and the remaining will be installed and implemented in the second phase The factory in Dien Nam - Dien Ngoc Industrial Zone, Quang Nam Province is considered as one of the most modern and large- School of Industrial Management – Manufacturing System Report scale plants compared to other Suntory plants in Japan and PepsiCo plants in the region and internationally Unit cost: 2.1 How much does it cost to produce Pepsi? There are two main factors that keep the production costs of Pepsi to a bare minimum: The ingredients themselves aren't particularly expensive to purchase and, although the exact recipe is a trade secret, we can safely assume that ingredients like fructose-syrup, caramel, and glycerin aren't exactly hard to come by The second factor is that, because The PepsiCo operates on such a large scale, the costs of production are minimal This economic concept is known as an 'economy of scale', whereby mass-production causes the unit cost price to drop 2.2 The price of making a bottle of coke Because of the aforementioned factors, The PepsiCo can afford to make a liter of its beverage at a cost of under cents However, there are several additional expenses other than production that also need to be taken into account For example, PepsiCo spends a significant amount of money advertising their product - which has an effect on calculations of the unit cost There are also additional shipping, storage, taxation and other costs that will vary depending on the areas' production All these factors go into the overall cost of producing a bottle Despite this, it's safe to assume that the PepsiCo maintains a significant profit margin on the sale of its products Routing: PepsiCo owns several manufacturing plants all over the world and the manufacturing of the beverage takes place every day in these units Most of the beverages are processed and manufactured at local canning and bottling companies 3.1 Following are how the most popular product of PepsiCo - Pepsi-Cola is made School of Industrial Management – Manufacturing System Report School of Industrial Management – Manufacturing System Report Water processing: coagulation and filtration A traditional approach to remove all impurities in the water(microbes, organic matter, ) is the sequence of coagulation, filtration, and chlorination The process of coagulation is the mixing of precipitate of a gelatinous substance into the water and the floc which can be aluminum sulfate (Al2(SO4)3) or ferric sulfate (Fe₂(SO₄)₃) All the suspended particles in the water are absorbed by the floc so that the filters easily trap them Water sterilization: chlorination and dechlorination For the removal of fine floc particles, the water is sterilized by being poured through the sand filter The water is collected in a tank and is treated with chlorine in a couple of hours The water is then dechlorinated with the help of activated carbon filters which removes any left organic material Before the water is passed to the dosing station, it is deaerated with a vacuum pump The maximum alkalinity maintained until as much as 50ppm Bottle washing The bottle washing is completely an auto process which takes place within washer machines The machine has three compartments Bottles for washing are placed on the conveyor, come inside the machine and get successive treatment They are treated with 4% caustic soda in the first compartment at a temperature of 100- 150oC Next these are conveyed to the second compartment, where bottles are again washed with hot water at a temperature of 80-100oC In the third compartment bottles are treated with water at room temperature Time duration in each compartment is 10 minutes These bottles are then sent through the inspection center Those still containing any dust or other unwanted particles are removed from the line here Syrup processing The dosing station includes closed tanks filled with syrups which contain flavor concentrates and the dissolved sugar Flash pasteurization or UV radiations are used to sterilize the syrups stored in the tanks Then they are passed through the cooler water where syrup temperature is reduced from 80-100oC to 25-30oC From here, they are transferred to the batch tanks Ingredients mixing Beverage carbonation The ingredients are mixed carefully under a controlled condition else it will lead to unwanted aeration The syrup and water are mixed with some certain ratio To avoid the mixture to get aerated, carbon dioxide (CO2) is pressurized into the vessels Carbonation is a process where the liquid is dissolved with carbon dioxide, which is also known as Fizz This is basically done under very high pressure Carbon dioxide releases out of the drink on reducing School of Industrial Management – Manufacturing System Report the pressure This creates the effervescent in the liquid This makes the carbonated water The temperature of the liquid has to be maintained under controlled conditions Carbonators are nowadays equipped with automatic cooling systems Bottle filling The washed empty bottles are filled by an automatic filler machine This machine can fill 60 bottles in one minute The cans and bottles are filled to the neck and are then sealed immediately with pressure-resistant closures After the containers are filled with the cold drink, they are kept coming to room temperature which is very necessary Containers are then packed and kept into the cartons and are then loaded to the trucks 3.2 Packaging Department in Killingly, CT The equipment in the packaging department of the PepsiCo Frito-Lay manufacturing plant located in Killingly, CT The Killingly Plant runs 24/7 over three shifts, but closes for seasonal holidays The plant has sixty-seven packaging lines: six Smartfood packaging lines, thirteen non-automatic corn packaging lines, and forty-eight automatic lines for corn and potato chips There are three main companies that manufacture the packaging machines used on the packaging floor 3.2.1 The Regarding Formers: Formers are a removable piece of the bundling line, changed dependent on various sacks on the creation plan Tony Stolo, the activities chief for corn bundling at the Killingly location, assessed there are 115-120 formers on the bundling floor; with each packaging line having at least one spare former Images of typical former with reference labels School of Industrial Management – Manufacturing System Report 3.2.2 Rationale: Axiomatic Design Decomposition: For the work with PepsiCo, a design matrix was used to qualify the first Axiom of the axiomatic design: maintain the independence of the functional elements of the design The focus was on FR0, which addressed the handling of the formers and the necessary time for removal and installation From this, the functional requirements are split into two FRs, one focusing on sanitation problems when handling the formers and the other targeting the ergonomic stress impacting the workers FR1 and FR2 are broken down further into subsets that cover the needs of the customer, PepsiCo From each of the functional requirements, a matching physical domain was created Each physical domain was defined as a system to meet the functional requirements The physical domains are shown below: School of Industrial Management – Manufacturing System Report The connection between the FR’s and DPs can be visualized through the design matrix created using Acclaro software There was a transportation device and a lift assistive device; the transportation device fulfilled the facilitation of former sanitation and the distance portion of the ergonomic stress, while the lift assist device fulfilled the decrease of ergonomic stress on employees Since each functional domain is only dependent on one physical domain, they act independently This means that anything in the system can be changed without affecting the entire system Volume 4.1 (A PepsiCo franchisee) Varun Beverages Limited 10 School of Industrial Management – Manufacturing System Report Cost objects and costs incurred in the process: Cost objects are things whose costs are computed individually or components whose values are allocated independently Sales are reported to drift for a variety of causes, including tax excises on soft drinks, campaigns, and elections, as evidenced by a research on campus shops in Berkley The study discovered that seasonal differences in consumption are largely influenced by customer intake of the product More study, however, is needed, according to Cornelsen and Smith, to uncover the reasons why prices shift in relation to demand based on behavioral trends Brand marketing and consumer loyalty also influence product purchase prices and, as a result, the entire manufacturing cost The packaging process has been recognized as a cost item in the Pepsi Company's soft drink production process With the identification of the cost objects employed in the manufacturing process, each successful organization must manage and strategize how they will control various costs in response to the business environment Direct, indirect, direct variable, and indirectly variable costs are the different types of cost items The direct fixed expenses spent during the packaging process include labor, power expenditures, and packaging materials They are costs that are directly tied to the product's output The cost objects involved in manufacturing will influence the final price of the commodity, necessitating the use of cost leadership and differentiation strategies in design and production by enterprises For Pepsi, the classification of numerous cost items necessitates the application of life cycle costing to understand the cost implications of a commodity throughout its production phases till ultimate completion Indirect fixed expenses in the packaging process will include storage marketing and advertising since they are involved with ensuring that the entire manufacturing and delivery of the product is efficient Variable costs vary based on the company's manufacturing methods The beginning manufacturing process entails direct variable costs; hence, throughout the packaging process, the prices that will grow at the initial phases include package design and inventory Indirect variable expenses are those that are not directly tied to the product and so not alter its goods, such as utility bills IV STRENGTHS OF MASS PRODUCTION IN PEPSICO: Increased productivity - Uniformity: Mass production makes it possible to manufacture large volumes in less time There’s no need for workers to run around to gather supplies or tools when manufacturers use mass production techniques.Mass production helps ensure each product is the same As a result, manufacturers have greater control over quality, and consumers know what to expect Faster production: When companies use machinery and mass production techniques, they can develop and produce products much faster This means they can beat competitors in a race to distribute and market new products, giving them an edge they might not have otherwise 28 School of Industrial Management – Manufacturing System Report To help the company better utilize its internal resources and reduce costly troubleshooting delays, the Rockwell Automation Services Agreement included TechConnect Support This remote support service provides the plant with 24/7 access to Rockwell Automation technical specialists When a problem occurs, Pepsi technicians can call for immediate troubleshooting assistance to resolve it as quickly as possible To help facilitate problem resolution, Rockwell Automation technical specialists can also perform remote system diagnostics through an Allen-Bradley modem installed at the Pepsi facility Leveraging Rockwell Automation Services & Support has proved to be a smart decision for Pepsi Bottling Group The improved inventory and parts management capabilities helped reduce downtime and inventory costs, and standardizing on Allen-Bradley products eased training requirements and minimized the technology learning curve These benefits have ultimately enhanced productivity by percent and reduced the overtime required to fill orders In addition, the plant was able to reduce the number of sensors it uses from 180 to 46, a decrease of 66 percent Likewise, it was able to reduce the number of drive styles from several hundred to 14 https://www.reliableplant.com/Read/20149/pepsi-improves-equipment-reliability,-cutsspare-parts-inventory Lower cost: Mass production enables companies to produce larger quantities with fewer workers Instead of having to pay several workers to complete a task by hand, manufacturers use machines to produce goods much faster This allows companies to sell their products at a lower cost without losing profit The bottles on the small-PET line are conveyed in mass to two Lanfranchi high-speed bottle unscramblers, on which rotating turrets orient the bottles in an upright position The plant requires two unscramblers to keep up with the line speed Level sensors in the hopper of each unscrambler turn delivery elevators on and off to maintain bottles in the hoppers The bottles from both unscramblers converge in single-file and are injected into the neck-guided air-conveyance system, where the bottles are supported by rods beneath their neck finishes Air blowing in the conveyor chamber pushes them along The depalletizing workcell, which includes three depalletizers, is designed to allow two operators to feed containers to three production lines The use of unscramblers is new to Pepsi and is a direct result of new and more-difficult-to-handle bottles The unscramblers improved material handling with a reduction in labor Increased worker safety, Less error: Manufacturers who mass produce goods often employ automation technology to complete strenuous or dangerous tasks.Machines are designed to perform specific tasks, and they are less likely to make mistakes than humans during production Consider how a machine doesn’t get distracted or won’t perform poorly due to lack of sleep Machines help reduce the cost of error For machine safety, PEPSICO has been leveraging virtual design reviews and augmented reality to conduct technical risk assessments and centerline our equipment PEPSICO has also invested in ergonomic wearables to address posture behaviors and reduce our ergonomic risk Additionally, they are leveraging hands-free remote collaboration tools to conduct virtual audits and inspections All of these new technologies are helping to provide new insights into the risks and allow our teams to respond in an agile manner 29 School of Industrial Management – Manufacturing System Report https://contact.pepsico.com/pepsico/article/how-does-pepsico-protect-the-safety-healthand-well-being-of-its Job specialties: The Industrial Revolution and mass production have led to the creation of specialized jobs For example, factory workers are trained to perform highly specialized tasks Employers benefit from hiring skilled and efficient employees, and employees develop marketable skill sets Employees with specific skills may also feel more secure in their careers because they are harder to replace Mass production has also helped create jobs for individuals to teach special skills and train workers Lastly, mass production has created jobs for workers to repair machinery or make improvements PepsiCo aims to engage creative and innovative employees who can fuel short-term success, while simultaneously fostering new capabilities and the growth of the next generation of leaders whose skills, experiences and understanding of new technology will help drive their long-term success As PepsiCo noted, the skills employers need are shifting rapidly As education struggles to keep up with this demand, companies have shifted their focus to soft skills, aiming to hire workers with solid communication and leadership skills, for example, and training them on technical skills as needed https://contact.pepsico.com/pepsico/article/how-does-pepsico-hire-and-develop-talent Rapid evolution: Imagine a world where everything was still made by hand and produced in small shops This is how it was before the Industrial Revolution, and it took a lot longer to spread new products and ideas than it does today Mass production speeds up evolution across all industries, and one innovation leads to the next A place where Pepsi is innovating using AI technology is in the manufacture of its famous Frito-Lay’s potato chip subsidiary The brand wanted to develop a method to help it determine the texture of its chips without handling or destroying them To this end, it developed a new laser sensor array that could bounce beams of light off the finished chips and then use AI technology to process the sound feedback, which would create a reading of the snack food’s texture https://foodandbeverage.wbresearch.com/blog/pepsi-ai-dna-strategy V WEAKNESS OF MASS PRODUCTION OF PEPSICO High initial investment The equipment you use to mass-produce goods involves an expensive initial investment in equipment and material If your product is successful in the marketplace, the investment will pay for itself But: Poor sponsorship ideas: PepsiCo also hands out sponsorships But if they’re endorsed by the wrong celebrity, the repercussions could lead the company in hot water Consumers are vocal on social media — especially when they don’t like or agree with a celebrity If PepsiCo products are close to a celebrity scandal, it could negatively impact their brand image too Brand Ambassadors: Wrong feedback or sick overall performance by well-known personalities/celebrities, in turn, may harm the brand image of PepsiCo as they’re the face of the organization Over-dependence on celebrities for endorsements is a massive risk 30 School of Industrial Management – Manufacturing System Report Controversial Advertisements: Companies are required to use their elevated position to advance society’s common good Unfortunately, in 2017, PepsiCo’s advert featuring Kendall Jenner was criticized for trivializing the Black Lives Matter movement Businesses have to make use of their positions of power to benefit society’s good The commercial was removed after just one day The company has released the following release: “Pepsi tried to convey an international message of peace, unity, and respect We clearly missed the mark and we are sorry We were not trying to minimize any serious problem We are taking the content off the site and will not allow any future release We apologize for placing Kendall Jenner in this position ” This is a huge disadvantage when compared to the positive aspects of living, like gatherings with family members that are consistently promoted in the majority of Coca Cola’s commercials Inflexible to consumer demand As mass production by definition focuses on the creation of one product in mass quantity, it is difficult to adjust to ever-changing customer demands if that product’s demand suddenly declines Within the food industry, it is notable that many food products go through peaks and troughs in relation to demand This is hard to predict and can be wasteful if the products are perishable In only one industry: PepsiCo offers 100 brands of products However, they’re only in the food industry It’s smart to offer so many choices in one industry But it’s still basically putting all their eggs in one basket If competitors like Coca-Cola decide to move into other industries, PepsiCo will find themselves scrambling to keep up Product Dependence: They are only present in the food and beverage industry, which can ultimately be harmful They need to diversify into other product segments to become global leaders.The weakness of PepsiCo is highly dependent on the domestic market in the USA in general, and on large supermarkets such as Wal-Mart in particular Moreover, PepsiCo brand image has been weakened to a certain extent in recent years due to a series of scandals such as“Aquafina” tap water scandal and Tropicana Kids orange juice productrecall There is an over-dependence on Walmart Walmart has a significant buyer power and can easily dictate prices over PepsiColeaving it with very small margins Effects of Failed Products: Failure in any venture is a weakness PepsiCo’s failed products such as Crystal Pepsi (Colorless Cola), Pepsi Blue, etc demoralized employees and portrayed them as incompetent in the public sphere giving room for the competition to grow also hurt the brand image of PepsiCo and thereby giving room for the competitors to grow For example: PepsiCo’s failed products such as Crystal Pepsi (Colorless Cola), Pepsi Blue, etc demoralized employees and portrayed them as incompetent in the public sphere giving room for the competition to grow also Competition and Products perceived as unhealthy: It has heavy opposition from Coca-Cola in its soft drinks category They are constantly neck to neck with each other This competition thereby offers room for a not so loyal client base to exchange brands quickly Take an example, Coca-Cola’s top brands also generally outperformed PepsiCo’s over the past several years It is difficult to reach a consensus on which company controls more of the market without drilling down to a specific type of drink, for example, diet versus regular 31 School of Industrial Management – Manufacturing System Report Beverage Digest reports that Coca-Cola’s key diet sodas fared better than PepsiCo’s core diets Besides, most of the soft drinks of PepsiCo are perceived as unhealthy The companies face competition from the growing market of healthier alternatives to sugary soda drinks, such as energy and nutritional drinks Although PepsiCo has created more health-conscious choices, such as diet Pepsi and Pepsi zero, the company continues to push their unhealthy food formulas more often to the public To adjust to these changing market conditions, both Coca-Cola and PepsiCo have developed their own alternative beverages but still face competition and market share erosion from other competitors Environmental impact The manufacturing processes and materials involved in mass production can have a negative impact on the environment because it often requires large amounts of resources Businesses can use eco-friendly packaging and clean energy to maintain ethical business practices and limit environmental impact Poor Environmental Record: PepsiCo was named one of the world’s top three plastic polluters by Break Free from Plastic The company has failed to adopt meaningful measures to increase the recycling of its bottles PepsiCo creates 137,000 tonnes of plastic pollution per year – equivalent to covering 22 football pitches a day Despite its policy proclamations, and 16 page progress report, field investigations in Latin America prove that PepsiCo has not ended its ties to bad actors involved in the kidnapping and intimidated human rights defenders and massive fish kills resulting from toxic effluent pollution into local waterways in Guatemala PepsiCo is proclaiming it received top scores in WWF’s ( World Wildlife Fund) scorecard and was recognised for ‘leading the way’ Yet WWF described the company as ‘not yet in the starting blocks’ and gave it a disgraceful score of 2.8 out of 10 for efforts to go beyond corporate commitments and reform its supply chain This ranking is not the glowing endorsement that PepsiCo is making it out to be in its PR campaigns that aim to mislead consumers across the globe PepsiCo claims a commitment to end deforestation, yet just in the last month its suppliers were implicated in the destruction of Southeast Asia’s most important rainforests in the Leuser Ecosystem—the only place on earth where Sumatran elephants, orangutans, tigers and rhinos coexist in the wild VI SOLUTIONS Solutions for environmental impact: To tackle the bad effects of the Pepsi’s products on the environment, they have come up with innovative methods of packaging solutions: Pulpex, The World’s First Fully Recyclable Paper Bottle Introducing new sustainable packaging formats, like the Pulpex bottle, is just one of the ways PepsiCo is realizing its pep+ (PepsiCo Positive) transformation, which puts sustainability at the center of its business The goal is to inspire positive change for people 32 School of Industrial Management – Manufacturing System Report and the planet Alongside a consortium of global consumer goods companies, PepsiCo is working to develop and scale the first fully recyclable paper bottle We expect the Pulpex bottle to be a gamechanger Made from sustainably sourced pulp, certified by the Forest Stewardship Council and designed to be fully recyclable in standard paper streams, the Pulpex bottle also meets the challenge of holding liquids This technology excites me because it provides a rare opportunity to create an entirely new packaging format, which will help us build a more circular and inclusive value chain Introducing Compostable Snack Packaging We’re looking at sustainable packaging solutions for use across our beverage and food portfolio In addition to new beverage packaging solutions, PepsiCo has been investing in breakthrough food packaging technology and is introducing a fully compostable snack bag made with plant-based materials Starting with Off The Eaten Path, one of Frito-Lay’s plantbased brands, this industrially compostable packaging is available to consumers in the U.S at select retailers The production of the materials for these bags creates 60% less greenhouse gas emissions than the production of traditional packaging, and reduces the amount of plastic waste We’re proud to play a role in creating a more circular food packaging system and, given the importance of these efforts, we plan to license the technology to other companies at no cost 33 School of Industrial Management – Manufacturing System Report Pepsi Moves To 100% Recycled Plastic (rPET) In Key Market In the U.S., all Pepsi-branded products will convert to 100% rPET bottles by 2030, with 11 European markets moving key Pepsi-branded products to 100% rPET by 2022 Leveraging our iconic brands to drive recycling awareness, education and advocacy, Pepsi celebrated this important move to sustainable packaging in the U.S with a new consumercentric platform tied to fall football, while in Europe a Pepsi MAX campaign touts “Nothing tastes better than a 100% recycled bottle.” We estimate this packaging shift will lower greenhouse gas emissions by approximately 30% per bottle The plan goes beyond the Pepsi brand in select European markets, incorporating 7UP, Mountain Dew, Lipton Iced Tea and Mirinda as well As a result of technological innovations in the appearance, functionality and availability of recycled plastic materials, we’ve been able to accelerate our progress and hope to drive toward additional packaging sustainability improvements 34 School of Industrial Management – Manufacturing System Report Driving Reuse With SodaStream Along with making our packaging more recyclable, we must continue to scale new business models that require little or no single-use packaging SodaStream, already sold in more than 40 countries, is bringing PepsiCo flavor options like Pepsi Zero Sugar, Lipton and bubly to 23 markets The SodaStream Professional platform, which lets people personalize their beverages in an environmentally friendly way at places like college campuses, offices and travel hubs, will expand into functional beverages and reach more than 10 additional markets by the end of 2022, helping consumers avoid more than 200 billion plastic bottles by 2030 As a company, we aim to build a stronger and more sustainable future, and I believe introducing these types of innovative packaging solutions can help move the needle and bring us one step closer to a world where packaging never becomes waste.(1) Solutions for consumer demand: PepsiCo has set out an ambition to cut the sugar in its drink brands and shift its snacks portfolio towards ‘healthier options’ in Europe: Sugar reduction in soft drinks PepsiCo said it will cut the average level of added sugars across its entire soft drinks range - including brands like Pepsi-Cola, Lipton Ice Tea and 7UP - by 25% by 2025 from a 2019 baseline The company aims to achieve a 50% sugar reduction by 2030 Garrett Quigley, General Manager and Senior Vice President, Categories, Western Europe, is confident of the company's ability to deliver its sugar reduction aims, insisting that a reformulation ceiling has not been reached for PepsiCo's soft drink brands He pointed to the success PepsiCo has seen in shifting its UK portfolio to zero sugar options after the introduction of the sugar tax in the country, suggesting that similar results can be achieved in other European markets.(2) 35 School of Industrial Management – Manufacturing System Report Here are four pointers for any entrepreneur considering diversifying a company: Ensure that the new offerings create value for the customer The best ways to diversify a company will always focus on providing the most value for the customer We started off selling pest control, but our long-term vision was always to provide a technology-based service because we knew that would be more valuable to customers We saw an upside to home security because it had more relevance for homes and families In pest control, we could provide a service just once or twice a year that was somewhat valuable But with home security, we could provide a fundamental service that customers needed and used every day of the year Be an expert in the market that your company is expanding into Once we had an idea that we knew would increase our company's value to customers, we had to make sure that providing that product or service fell within our realm of experience and expertise Not all interesting ideas are worth pursuing, especially if a company doesn’t have the systems and teams in place to implement them It’s important to ask, Do we know how to deliver this service to consumers? Does it fit? We saw a huge potential for growth in the underserved home-technology market And we were able to successfully enter and expand within that market because we knew it would align with our door-to-door sales approach and overall business model 36 School of Industrial Management – Manufacturing System Report Build on your strengths as a company Selling pest control services was not going to be our sweet spot forever, but it did play an important role in our building up a strong sales force and developing an effective business model until we were ready to make a move Likewise, having a strong base in the home-security field made expanding into providing home-automation and solar-power services a lot easier By building on strengths that our business already had, it was easy to explore and then implement completely new ideas for growing our company Have the right people in place Before extending a business in any direction, a company needs to prepare its team completely for the transition As we branched out into new areas, we added key talent to strengthen our teams and provided training across all departments These changes ended up affecting not only our employees but also our customers across North America, so it was crucial that our messaging was clear and cohesive from the top down We’ve also learned that the best way to bring customers on board with our new direction is by generating a lot of excitement among our employees The more passionate and informed employees are about a change, the more the customers will be as well There is a natural inclination to maintain the status quo as a business It’s safe and riskfree We have realized, however, that the most successful businesses are not afraid to things differently With every change and expansion we make, we want to reinvent the industry and things no one has before.(3) Solutions for investment: Initial expenses:The majority of the cost (75%) lies in material costs and labor Buying individual components, designing systems in maintaining and refining them, employing the right number of workers to handle the parts and providing them with adequate training – all require a proper scheme to be made which requires frequent updates depending on consumer 37 School of Industrial Management – Manufacturing System Report demands and which cannot be executed without the right tools Thus, we will now look at different methods of expenditure reduction for both raw materials and the workforce: Reducing material costs Change the design of your product Redesign your product to reduce the overall price of the finished product This can be done by analyzing which components are the most expensive and negotiating with the respective suppliers to lower prices An effective way of doing this is knowing what prices other suppliers are offering and hinting at bringing changes in the supply chain This will force the supplier to give in to your desired price Another way of driving down prices by strategically rethinking the product is by removing certain parts which are not critical for maximum consumer satisfaction For example, components with secondary functions such as packaging may be removed altogether This is especially helpful for online businesses which rely on e-commerce and are often seen to not print logos unless they want to boost sales Tweaking the product in such a way is called value engineering and it requires a strategic approach in removing non-value added processes such as transportation Apply the principles of lean manufacturing Lean manufacturing is based on the singular principle of keeping waste to an absolute minimum Seven types of waste must be dealt with: overproduction, inventory, conveyance, correction, motion, processing and waiting By creating an inventory which is mass-customized, products are only built when they are ordered and this is predicted by the demands in the market This means goods are not overproduced By correctly moving the product so that they are not sent back to the production line, products and workers can simultaneously move in a linear fashion which increases efficiency by saving time lags drastically Negotiate with your suppliers As mentioned previously, negotiations with your suppliers are fruitful in optimal reduction of costs One way to approach a supplier is to enter 38 School of Industrial Management – Manufacturing System Report into long-term agreements where you lose flexibility over changing suppliers and are bound by a contract to exclusively get raw materials from them In the long run, this loss in flexibility should be compensated by the benefits of a lower final price Suppliers of ancillary services may also be regionalized, i.e they are geographically closer to your production site While this is a difficult task to achieve, if it can be done, this drives down transportation costs and provides a smoother vertical integration With some hefty incentives offered as part of the negotiation, suppliers may choose to simply relocate to an area closer to your factory Reducing labor costs Utilize part-time labor and limit the use of overtime Full time employees get bonuses, shares of profits and other fringe benefits such as housing and cars as well These costs can be removed once you hire more part-time labor Reducing overtime is also a smart way to reduce costs; often under pressure overtime seems like a good way of rapidly increasing production, the increased costs slowly chip away at the profits, thinning profit margins further Hiring “on-call” workers – employees who come to work when they want to make money – is helpful as well, as they are paid lower wages due to lesser working days and they tend to be highly specialized in their fields, so training costs are also reduced Automate processes as much as you can The internet of things(IoT), AI engaged widely in deep learning skills and the increased use of robots in manufacturing simply go on to show how rapid advancements in technology have reduced the need for the human touch in refining, developing and assembling the individual parts of a product Automated inspection and identification of parts saves plenty of time wasted by humans and are also less prone to errors, so the likelihood of damage control will be drastically lower An automated system, even though it requires a significant investment, has an extremely positive return in the long run in terms of operational costs.(4) Job Satisfaction - Employees who need to perform the exact same task day in and day out can lose motivation, and this can lead to job dissatisfaction and higher worker turnover: 39 School of Industrial Management – Manufacturing System Report Visual Communication in Mass Production Many workplace techniques can be used more effectively in mass production environments Visual communication is an excellent example of this By using visual cues in the workplace, employees can have a constant reminder of exactly what needs to be done, and when Using floor markings, for example, a facility can show the flow of products through the manufacturing process This makes it easier to track how things are done, and identify where problems are occurring Employees will also be able to better track where they are supposed to be throughout their work day, which can help to avoid mistakes or other issues within the workplace.(5) Flexibility: Without mass production, mass customization would not exist Mass customization refers to producing custom products quickly with low unit costs This allows manufacturers to meet consumer demand If a customer wants a certain design or feature, without high prices, manufacturers can deliver when they have mass customization capabilities Furniture companies, for example, often offer customers the opportunity to choose from different fabrics or components They have the resources to mass produce furniture while still creating personalized items Many consumers value customization One study, published in Heliyon, found that some consumers feel emotionally attached to products that have been customized and match their preferences Manufacturers who not want to get left behind can consider how they can incorporate mass customization in their system.(6) 40 School of Industrial Management – Manufacturing System Report VII REFERENCES [1] https://www.pepsico.com/ [2] https://vdocuments.mx/a-pepsico-franchisee-varun-beverages-limited-2018-10-06-apepsico-franchisee.html 41 School of Industrial Management – Manufacturing System Report [3] https://www.suntorypepsico.vn/en/news/index/suntory-pepsico-inaugurates-newfactory-in-quang-nam-with-an-expectation-production-capacity-of-850-million-litres-per-year [4] https://www.pepsico.com/news/stories [5] https://economictimes.indiatimes.com/ [6] 27 October 2015, FoodRavel, How is Pepsi Manufactured? - A Look into Beverage's Manufacturing (foodravel.com) https://www.foodbusinessafrica.com/varun-beverages-zimbabwe-commission-us20m-manufacturingplant/ [7] https://dokumen.tips/documents/between-pepsico-beverages-canada-pepsico-canadaulcrwdsuskcapepsico-beverages-canada-.html [8] https://www.indeed.com/jobs?q=PepsiCo%20Beverages %20Canada&vjk=e968b7afc1dc594f [9] https://www.indeed.com/jobs?q=PepsiCo%20Beverages%20North %20America&sc=0fcckey%3A8b7f84202d8cd5f4%2Cq%3A%3B&vjk=a41e53bae3a56cf0 [10] https://en.m.wikipedia.org/wiki/Dispatch_(logistics) [11] https://www.verizonconnect.com/uk/resources/case-study/pepsi-maximizes-itsdynamic-routing-with-verizon-co/ [12] https://www.forbes.com/sites/pepsico/2021/11/01/4-ways-pepsico-is-drivinginnovative-packaging-solutions/?sh=5faded106c42 [13] https://www.foodnavigator.com/Article/2021/07/02/PepsiCo-talks-health-andreformulation-across-drinks-and-snacks-The-key-is-to-get-a-product-that-consumers-choosebecause-it-tastes-great [14] https://www.entrepreneur.com/article/232881 [15] https://www.syncoria.com/blog/reduce-costs-in-mass-production/ [16] https://www.creativesafetysupply.com/articles/mass-production/ [17] https://gesrepair.com/mass-production-advantages-and-disadvantages/ [18] https://foodandbeverage.wbresearch.com/blog/pepsi-ai-dna-strategy [19] https://contact.pepsico.com/pepsico/article/how-does-pepsico-hire-and-develop-talent [20] https://www.reliableplant.com/Read/20149/pepsi-improves-equipment-reliability,-cutsspare-parts-inventory [21] https://ifoodvietnam.com/day-chuyen-san-xuat-nuoc-giai-khat-co-gas/ [22] https://foodandbeverage.wbresearch.com/blog/pepsi-ai-dna-strategy [23] https://www.foodnk.com/quy-trinh-cong-nghe-san-xuat-nuoc-giai-khat-co-gas.html [24] https://www.pepsico.com/about/mission-and-vision [25] 42