Business, Management

PepsiCo’s Operations Management, 10 Critical Decisions, Productivity

Updated on Updated on by Lawrence Gregory
PepsiCo operations management, 10 critical decisions, strategic areas, productivity, Pepsi beverage business analysis and case study
An old machine that vends 7 Up, which PepsiCo distributes outside the United States. PepsiCo’s 10 strategic decisions of operations management address productivity concerns about consumer goods business areas and products, like Pepsi. (Photo: Public Domain)

PepsiCo’s position as one of the biggest players in the global food and beverage market is maintained with support from the company’s operations management (OM) practices for the 10 critical decision areas. These strategic decision areas are organizational aspects streamlined together to achieve optimal performance and productivity in consumer goods business operations. Effective operations management enables the business strengths and capabilities examined in the SWOT analysis of PepsiCo. Through these strengths and capabilities, best practices for the 10 critical decisions of operations management ensure PepsiCo’s success in its multinational operations for various markets for snacks and drinks.

PepsiCo’s integrated approach to the 10 strategic decisions of operations management considers variations in business areas and markets, productivity requirements, and other variables. This approach counteracts issues linked to competitors, including The Coca-Cola Company, Keurig Dr Pepper, and Unilever. The resulting competitive environment illustrated in the Five Forces analysis of PepsiCo requires holistically optimized operations management for leadership in the consumer goods industry.

PepsiCo’s Operations Management: 10 Critical Decisions

1. Design of Goods and Services. PepsiCo’s objective in this strategic decision area of operations management is to match goods and services, organizational capacity, and market demand and preferences relevant to the fast-moving consumer goods industry. The company’s operations management does so through market-based research and development and product innovation that match current trends, such as consumer lifestyles. The results of such research are used to determine the future direction of the company’s products, like Pepsi soft drinks. The design of goods and services reflects the business nature, purpose, and goals expressed in PepsiCo’s mission and vision, which focus on food and beverage products that satisfy consumer preferences and expectations in the international market.

2. Quality Management. An objective in this critical decision area is to optimize quality, considering PepsiCo’s business standards and consumer expectations. The company’s operations management aims to continue improving the quality of its consumer goods to satisfy human sustainability goals. For example, the company develops new and improved variants, such as low-calorie Pepsi soft drinks and less-salt Frito-Lay snacks. Quality management goals are also applied in the company’s facility maintenance, process design, inventory management, material sourcing and purchasing, and supply chain management. This critical decision area of operations management relates to PepsiCo’s growth strategies and competitive strategies, which use quality standards and specifications to grow and improve the business.

3. Process and Capacity Design. PepsiCo aims to optimize its productivity-cost ratio in this area, along with maximizing manufacturing capacity utilization, process efficiency, and organizational productivity. For example, the company’s manufacturing facilities are designed with high-output assembly lines. Also, PepsiCo’s operations management involves production processes that are automated for optimal efficiency and productivity. Efficiency designed into business processes satisfies PepsiCo’s sustainability goals and strategy for ESG and CSR.

4. Location Strategy. PepsiCo has many company-owned facilities and partner-owned facilities in strategic locations. This approach to operations management is based on the strategic objective of maximal reach to target markets for food and beverage products. Cost-effectiveness and productivity are also included in this critical decision area of operations management. For example, to minimize cost, PepsiCo facility locations are in areas with optimal proximity to target markets, distributors, and retailer clusters. The food-and-beverage company is especially interested in locations in or near establishments with high sales volume. The locations in this strategic decision area of operations management relate to PepsiCo’s organizational structure (company structure), which has divisions and offices that support business strategies in regional and local markets. PepsiCo’s marketing mix (4Ps) requires support from these structural divisions and from operations management approaches that optimize locations for marketing strategies.

5. Layout Design and Strategy. The efficient movement of people, materials, and information for optimal productivity and cost-effectiveness is PepsiCo’s operations management concern in this strategic decision area. For example, layout design in manufacturing facilities streamlines assembly line production and applies the principles of total quality management (TQM). This approach limits costs and supports high productivity and business sustainability, which adds to the brand strength of the company’s food and beverage products.

6. Job Design and Human Resources. PepsiCo’s human resource management addresses this strategic decision area through a combination of global corporate HR practices and divisional HR practices. An operations management objective in this decision area is to ensure the adequacy of the company’s workforce to support the productivity of different business areas. For example, PepsiCo has an HR policy and job design process for Frito-Lay, and a separate HR policy and job design process for Quaker Foods. These policies and processes comply with the company’s corporate standards and policy for talent sustainability. Operations management for human resources works with PepsiCo’s company culture (organizational culture) to enhance employee productivity and performance and job satisfaction.

7. Supply Chain Management. This strategic decision area focuses on operations management practices that optimize the supply chain to match demand for input materials and intermediary products. PepsiCo’s approach is to diversify and distribute its supply chain hubs. For example, the company operates supply chain hubs for each regional consumer goods market. In this way, PepsiCo optimizes response times to fluctuations in market demand.

8. Inventory Management. PepsiCo’s inventory management emphasizes automation combined with more traditional approaches. Inventory adequacy, scheduling, and cost minimization are key objectives in this strategic area of operations management. PepsiCo implements computerized monitoring of inventory. Inventory management involves access to real-time data to help managers make decisions that maximize production productivity. Manual checking and monitoring are also applied for some inventory types at PepsiCo facilities.

9. Scheduling. Facility, process, and human resource schedules are among the primary concerns in this strategic decision area of operations management. PepsiCo facility managers implement human resource schedules based on local data. However, automated scheduling is also used for some of the company’s manufacturing facilities. Proper scheduling minimizes idle time and improves the productivity of PepsiCo’s human resources and business processes.

10. Maintenance. PepsiCo’s maintenance concerns are widely varied, considering the company’s wide array of products and markets. This strategic decision area of operations management focuses on the adequacy of business processes, workforce productivity, and resources that grow with the consumer goods business. PepsiCo hires new talent and promotes from within the organization to grow its workforce. Facilities are expanded, constructed, or acquired to support the consumer goods company’s growth. Effectiveness regarding this critical decision of operations management leads to high productivity and business efficiency that supports business activities for addressing market and industry trends, such as the ecological factors examined in the PESTEL/PESTLE analysis of PepsiCo.

Productivity at PepsiCo

PepsiCo’s operations management practices ensure high performance and productivity. The company uses different metrics for evaluating productivity. The following are some of the productivity metrics at PepsiCo:

  1. Batches per facility per day (production facility productivity)
  2. New test variants per year (product R&D productivity, such as for Pepsi soft drinks)
  3. New accounts per year (marketing productivity)

References

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