Page 281 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes

Task In what ways can customer service performance be improved by incorporating
flexible distribution operations into a logistical system design?

Self Assessment

State whether the following statements are true or false:
11. A strategy of least total cost seeks a logistical system network with the lowest fixed and
variable costs.
12. The typical starting point for customer service availability analysis is to assume
performance at a generally acceptable fill rate.
13. The basic service capabilities of a network can be increased or decreased by variation in
number of warehouses, change in one or more performance cycles to decrease speed or
consistency of operations, and/or change in safety stock policy.
14. Logistics managers are often asked to estimate the inventory impact of adding or deleting
warehouses.
15. No generalizations can be offered regarding the cost/service improvement ratio attainable
from performance cycle modification.



Case Study PepsiCo’s Distribution and Logistics Operations

PepsiCo has continually been at the forefront of standards adoption, promoting industry
efficiency and adding value throughout our supply chain.
- Al Carey, Chief Operating Officer, PepsiCo Beverages and Foods, North America
Headquartered in New York, the US-based PepsiCo is one of the world’s leading beverage
and snacks food companies. In its 2002 annual report, the company claimed to have the
largest share in the US beverage markets.
PepsiCo served diverse markets with its six group companies – Frito-Lay North America,
Frito-Lay International, Pepsi-Cola North America, Pepsi Beverages International,
Gatorade/Tropicana North America and Quaker Foods North America. For the fiscal year
ended December 2002, PepsiCo Inc. (PepsiCo) reported revenues of $25.11 billion, an
increase of 6.8% from the 2002 revenues of $23.51 billion.

Analysts felt that one of the main reasons for the company’s massive growth over the
decades and the leadership status it has acquired in almost all its business segments was
PepsiCo’s efficient distribution and logistics management operations. Depending on the
product involved, PepsiCo chose between the various standard distribution methods
employed, such as the Direct Store Delivery (DSD) system, the broker warehouse system,
the vending and food service system and the pre-sell method.
PepsiCo adapted these systems to the local conditions of the various countries in which it
operated. PepsiCo’s highly advanced distribution system was well supported by state-of-
the-art logistics systems. PepsiCo upgraded its technical capabilities consistently in order

Contd...

276 LOVELY PROFESSIONAL UNIVERSITY