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Ciptapangan Visitor
Supply-Chain Fix for Pepsi
posted by admin on 21/06/06

Bottler's Move to Modernize Delivery Yields Efficiency Benefits 

In 2002, executives at Pepsi Bottling Group Inc. were getting an earful from unhappy retailers and from some of the company's own 30,000 U.S. employees. 

An antiquated ordering system and the lack of instant data in the field were delaying smooth deliveries of Pepsi products, leaving retailers' store shelves empty. Some Pepsi Bottling workers were struggling to fix that problem and manage a growing assortment of drinks. 

The product shortages, known as "out of stocks," were particularly frustrating for store managers on weekends because Pepsi Bottling employees often weren't immediately available to replenish supplies. On a recent market tour in Denver, Eric Foss, Pepsi Bottling's chief operating officer, said "the No. 1 top-of-mind concern with most [retail] customers is reducing out of stocks." 

Pepsi Bottling, which is PepsiCo Inc.'s largest independent bottler and distributor, got the message. It began an overhaul of its supply chain -- from order taking to truck loading to store deliveries. 

The new program, which included technology upgrades, revised work schedules and a renewed focus on customer service, went into effect earlier this year across its 41-state U.S. territory. Among the changes: Warehouse workers called "pickers" now wear headsets and bar-code scanners on their wrists to create "certified pallets," whose contents are almost 100% accurate with what retailers have ordered. 

Completely eliminating out of stocks and other service issues isn't realistic. But officials of Pepsi Bottling, Somers, N.Y., say at least now they detect problems in the supply chain sooner and can alert stores in advance. 

"It was almost like when I went to bed, I was Fred Flintstone and when I woke up, I was George Jetson," said Tracy Merritt, a customer-service representative at Pepsi Bottling in Denver. 

Until this year, the hand-held computer used by Mr. Merritt, a 15-year veteran at stocking and merchandising drinks, didn't have wireless capability. That meant he had to ask to unplug a fax machine at a Wal-Mart Stores Inc. location, so he could transmit his orders over a phone line before a 2 p.m. deadline. 

Now orders can be zapped to the bottling plant immediately throughout the day, allowing more time to load delivery trucks. Pepsi Bottling said many of its salespeople were wasting 30 minutes or more daily just trying to send orders. 

This change gives Mr. Merritt more time to walk the aisles of a Denver Wal-Mart hunting 

for places to hang an extra rack of Starbucks Frappuccinos or put several cases of Aquafina bottled water. He had success recently putting multipacks of Lipton Green Tea in the garden area, far from the beverage aisle. "The only way you get these spots is to outservice the competition," Mr. Merritt said. 

Increased efficiency has become paramount as the number of drinks on bottlers' trucks has soared. Both Atlanta-based Coca-Cola Co. and PepsiCo, Purchase, N.Y., are launching dozens of new noncarbonated drinks each year to meet consumer demand and compensate for flat soda sales. In Denver, Pepsi Bottling distributes more than 420 different drinks and package sizes, compared with about 200 five years ago. 

Pepsi Bottling found it also needed to improve the accuracy of assembling orders inside its warehouses, after determining that was the source of some out of stocks. So the company outfitted warehouse workers with bar-code scanners and headsets to reduce errors and eliminate paperwork. 

A computer program sorts through daily orders and generates an electronic voice instructing workers which drinks to load by hand or with a forklift. Then a worker affixes a printout with a bar code attesting to the accuracy of the pallet. 

Demonstrating to Wal-Mart that its deliveries are largely error-free has given Pepsi Bottling's delivery trucks priority status at the retailer's loading docks, meaning they face fewer time-consuming audits. Pepsi Bottling says this can save 30 minutes or more at the more than 1,700 Wal-Mart stores it serves, allowing some trucks to add more stops to their routes. 

To improve the company's service on weekends, Pepsi Bottling put more employees and supervisors on Saturday or Sunday work shifts, where permitted under union contracts. 

Gary Wandschneider, Pepsi Bottling's executive vice president of world-wide operations, said the bottler offers some form of Saturday service to 97% of its customers, up from 60% last year. 

Write to Chad Terhune at chad.terhune@wsj.com1


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