The Production of Pepsi Essay

Transcom Beverage Ltd (TBL) is the exclusive PepsiCo Franchisee for Bangladesh. TBL owns and operates modern plants in Dhaka and Chittagong for bottling the renowned soft drink brands such as, Pepsi, 7UP, Mirinda, Slice, Mountain Dew, Pepsi Diet and 7UP Light. Both plants has the capability to produce at least 50,000 crates per day Mission:

Our mission is to be the world’s premier consumer Products Company focused on
convenient foods and beverages Vision:
Our vision is to continuously bring improvement in food and beverages product and market, the environment, society and economy for a healthier and better tomorrow. Organizational Structure:

Mass Production:
Both the plants of Transcom Beverage Ltd are machine oriented. The involvement of workers is very low and hence the skills required are also low. The plant produces standardized products and therefore, the company is engaged in mass production.

Supply Chain Management:
Supply Chain Planning
The goal of planning is to maximize the supply chain surplus. The company carries monthly, weekly and daily basis. Supply Chain Operation:
Company makes decision regarding customer orders. The goal of supply chain operations is to handle incoming customer orders in the best possible manner. During this phase, firms allocate inventory or production to individual customer orders, set a date that an order is to be filled, generate pick lists at a warehouse, allocate to shipping, and set delivery and so on. There is less uncertainty about demand. Process views of a supply chain:

The processes in a supply chain are divided into a series of cycles each performed at the interface between two successive stages of a supply chain. * Cycle View of Supply Chain:
There are five stages in a supply chain (Supplier Manufacturer Distributor Retailer Customer)and four supply chain process cycles (customer order, replenishment, manufacturing, procurement cycle). Customer


Push/Pull View of Supply Chain:
With push process execution is initiated in anticipation to a customer order. Pepsi has a seasonal demand. Just in time concept is applicable in non-seasonal period and not applicable in seasonal period. Pepsi Sales order and processing: The Shipping Manager receives sales order from Sales Team, distributors through telephone, fax & email one day before dispatch. The sales are made to base distributors on advance payment against orders then shipping manager plans according to the demand of distributors on daily basis. Supply Chain Strategy

Step 1:
a. Identifying Customer Needs
Transcom Beverage Ltd deals with beverages, which are a fast moving consumer good, it knows the requirements of consumers. Pepsi is considered as a drink which is refreshing during summer, and taken regularly during winter, with demand hiking around festivals like New Year, such as weddings. Pepsi caters to both cities and rural areas. It understands the needs of both. As demand for beverages is seasonal, the quantity of product needed for each lot is taken care of with past demand in mind. Consumers generally require a small response time, high service level, reasonable price and some variety (for example health conscious people favor diet versions of sod b. Demand Uncertainty and Implied Demand Uncertainty

Demand for Pepsi varies by product. For example there is a greater demand for “Pepsi” as compared to “Mountain Dew,” which is relatively new in Bangladesh. Hence, Pepsi has a low demand uncertainty as compared to “Mountain Dew”. The product “Pepsi” is approaching its maturity stage in the market whereas “Mountain Dew” is in the growth stage. Pepsi’s implied demand uncertainty varies with the product type as well as the customer needs. Due to decreased lead time (the customer may purchase its competitor’s product if Pepsi is not available at that time), need for greater variety and higher level of service, implied demand uncertainty increases. Step 2:

Understanding the Supply Chain Capabilities

According to the company, it does not deal with distributors who do not have 20 to 25 vehicles, therefore as the company focus on cost reduction, uses slow and inexpensive modes of transportation, the demand is certain, and uses economies of scale in production; the product Pepsi is more inclined towards being somewhat efficient. In cities, the company focuses its attention on being highly responsive as Pepsi has to meet short lead time, meet a high service level, handle a large variety of products and respond to wide ranges of quantity demanded especially at the retail stage.

Step 3
Achieving the Strategic Fit
The Pepsi supply chain assign different roles to its different stages, the company has to decide either to transfer the responsiveness to the manufacture stage or to the retailer stage. Pepsi tends to be more responsive in the cities and a bit less in towns. Therefore, transferring the responsiveness to the retailer and distributor, allowing them to face the higher implied demand uncertainty. This in return allows the manufacturer and supplier to be more efficient. Market Related Factors:

Labor Availability:
Cost of labor is very important while setting up a plant. There are lots of people in the area who are still unemployed and willing to work. So the workers are available at a cheaper cost. Energy Availability:

Since the plant requires a large amount of electricity, the electricity is available at location on similar prices like all other areas of Dhaka. Water Availability:
The plant requires a huge amount of water and the site has sufficient amount of underground water available there. Social Response:
Public opinion is very favorable toward the company. Mean while the organization is not causing any pollution. Transportation used:
The shipping department handles orders and the transport department decides the vehicles for safe delivery. Pepsi supply chain strategy is closely linked to the appropriate use of transportation.

The main purpose is to reduce the lead time. Transcom Beverages Ltd. (TBL) uses the TL (truck load)
approach. This approach maintains economies of scale and is able to meet service requirements while minimizing both trucks idle and empty travel time. Truck loads are more suited for Pepsi because of the use of warehouses and larger shipments therefore making it cheap. Raw materials from the suppliers are brought using trucks; finished products are transported to distributors and then retailers using trucks as well. TBL has its own fleet of small and large trucks and vehicles for carrying goods and raw material, while the distributors also use their own vehicles. Lead time:

Stock outs generally don’t take place. There is always a 10%-20% lead time provided. Lead time is usually 2 days and in an exceptional case it can be up to 4-5 days. Agility
Transcom Beverage Ltd (TBL) has additional supplies in their central warehouses that can be used when needed. Agility is the ability of an organization to respond quickly to the demand or opportunities. They have full sized and covered vans for transporting goods when needed.

Make or buy decision
Company produces beverages by using sugar, Carbon Dioxide, Ammonia and concentrate as raw material Concentrate is imported from the franchiser PepsiCo. Sugar is bought directly from the local sugar manufacturers of the area. CO2 is prepared within the premises, which is enough for the full capacity of two plants. The company has two bottle production plants in Dhaka and Chittagong which makes all the empty bottles. Standardization

All the products of Transcom Beverage Ltd are standardized and require no need for mass customization. Process Design:
In the company process is continuous supply of concentrate is critical but process can be automated. Process is flexible and production on plant can be changed within one hour. Production is of large scale and covers a wide area for the distribution of the product. Facility Design and Layout:

Facility design and physical layout of plant, supporting facilities and building is provided by the parent company that is PEPSI COLA International. Manufacturing Layouts
Fixed Position Layout:
Organization chooses to bring the necessary people and equipment to the item being produced. Work item does not move from one operation to another. Fixed position layout may be used because the work item is too fragile, too bulky, and too heavy to move without complications. Fixed position method necessitates the use of portable equipment. Many organizations find that no fixed type meets their needs but instead that combination of types works well Process Layout:

Involves the arrangement of activities in some sort of line along which a service receiver or product process moves. Machines or pieces of assembly equipment are located along the route over which product travel and are arranged in the sequence required by production plan. The path of flow may follow straight line or any other shape.

Transcom Beverage Ltd produces 20,000 bottles per hour. The process of producing bottles is described below:

Behavioral Approaches to job design:
Job rotation
The work should continue to challenge the employee, be interesting, and should vary. Job rotation programs where employees can reap the benefits of working on different assignments and in different areas of the company (a.k.a. a new job without leaving the firm) are very popular with the new generations. Job enlargement and job enrichment are seen as key ways to motivate top talent. Working conditions

Temperature and Humidity:
HVAC Installation is an industrial processing cooling system that keeps the rooms free from heating and good ventilation, supply air handling units, pumps, extraction ventilation system and air compressors Cold room installation is a machine that keeps the room fully cold and thus the room acts as a refrigerator. Safe Measures:

* Work quietly and carefully
* Never work alone
* Wear appropriate clothing

Quality control:

Quality control department is responsible for checking the quality of the product. After every 3 hours a quality check report is presented by this department to the production manager and GM technical. In case of any problem with the quality, after every half an hour quality is checked. They are responsible for the following functions:

* Water treatment (for bottle filling and washing)
* Syrup making (pasteurization room)
* Calibration
* Laboratory equipment
* Production equipment
* Raw material testing
* In process testing
* Finished goods testing
* Quality control of CO2 plant and boiler
* Market complaints handling
* Market rejection
* Customer rejection
* Trade sampling
Measuring Multifactor productivity:
* Quantity of production at standard price / (Labour + Materials + Overhead) * Cost of goods manufactured/ Salaries and Allowances + Material Consumed + Factory Overhead (Variable and Fixed) * =350146522 / (75653642 + 153654106 + 25591245 +1746065) = Tk 6.251 units of output per Taka of input

Design Capacity:
Maximum Capacity of the production facility is designed for. Effective Capacity:
Design Capacity minus Personal Time, Maintenance and scrap. Design Capacity = 45000 unit /day
Effective capacity= 30000 unit /day
Actual output = 25000 unit /day
* Efficiency = Actual Output/Effective Capacity
= 25000 / 30000
= 83.3%
* Utilization = Actual Output/Design Capacity
= 25000 / 45000
= 55.5 %

* From 2006 to 2008 Transcom Beverage Ltd has experienced an upwards trend in its net profit. * As such a linear trend can be seen between the number of years and the net profit. * Thus Transcom Beverage Ltd could use trend analysis to forecast future profits. * We used 2006 to 2008 years net profits to forecast net profits from 2009 to 2011. Regression Formula:

Regression Equation(y) = a + bx
Slope(b) = (NΣXY – (ΣX)(ΣY)) / (NΣX2 – (ΣX)2)
Intercept(a) = (ΣY – b(ΣX)) / N
Year | N(x) | Net Profit (y) | xy | x2 |
2006 | 1 | 1.5 crore | 1.5 | 1 |
2007 | 2 | 1.8 crore | 3.6 | 4 |
2008 | 3 | 2.836 crore | 8.51 | 9 |
Total | 6 | 6.13 crore | 13.61 | 14 |

Slope (b) = (NΣXY – (ΣX)(ΣY)) / (NΣX2 – (ΣX)2)
= (3(13.61) – (6)(6.13) / 3(14) – (6) 2 )
= 4.05/6
Intercept (a) = (ΣY – b(ΣX)) / N
= ((6.13) – (0.685)(6) / 3 )
= 0.673
Regression Equation(y) = a + bx
y = 0.743 + 0.735x
* The following diagram plots the best fit line to the set of sample points:

* Figures from annual 2011 (x=6)
Actual net profit: 3.164
Forecasted net profit: 2.81
* Figures from annual 2010 (x=5)
Actual net profit: 2.89
Forecasted net profit: 2.623
* Figures from annual 2009 (x=4)
Actual net profit: 2.43
Forecasted net profit: 2.31
y = 0.673 + 0.675x
* 2009 to 2011 forecast errors:
Year | Period | Actual | Forecast | Error | I Error I | Error^2 | (Error/ Actual) x 100 | 2009 | 1 | 2.43 | 2.31 | 0.12 | 0.12 | 0.0144 | 4.93827 | 2010 | 2 | 2.89 | 2.623 | 0.267 | 0.267 | 0.071289| 9.2387 | 2011 | 3 | 3.164 | 2.81 | 0.354 | 0.354 | 0.125316 | 11.118836 | Total | | | | 0.741 | 0.741 | 0.211005 | 25.365339 | MAD Mean absolute deviation = Σ Actual – Forecast / n

MSE Mean squared error = Σ (Actual – Forecast) ^2 / n – 1 =0.549081/2
MAPE Mean absolute percentage error =
{[Σ (Actual – Forecast) / Actual] x 100}/ n

* They should implement more ergonomics.
* Strict safety measures should be adopted

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