PepsiCo’s Operations Management, 10 Decisions, Productivity

PepsiCo 10 strategic decisions areas of operations management, productivity, Pepsi case study and analysis
An old machine that vends 7 Up, which PepsiCo manufactures outside the United States. PepsiCo’s 10 strategic decisions of operations management address productivity concerns about business areas and products, such as Pepsi. (Photo: Public Domain)

PepsiCo is the second biggest player in the global food and beverage industry. To maintain this position, PepsiCo’s operations management (OM) practices must effectively address business needs in the 10 strategic decision areas. These decision areas refer to the aspects of business that need to be streamlined together to achieve optimal performance. PepsiCo’s continuing international growth and expansion also warrant continuing reforms in such operations management practices. However, the consumer goods company’s operations management approaches are generally appropriate for the global organization. Thus, PepsiCo’s policies and approaches effectively address the main issues and concerns linked to the 10 strategic decisions of operations management.

PepsiCo has an integrated approach to the 10 strategic decisions of operations management (OM). This approach considers variations in PepsiCo’s business areas and markets, as well as different productivity requirements based on product, market conditions, and other variables.

PepsiCo’s Operations Management, 10 Strategic Decision Areas

1. Design of Goods and Services. The 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. PepsiCo’s operations management does so through market-based research and development and product innovation. For example, PepsiCo conducts market research about current trends, such as consumer lifestyles. The results of such research are used to determine the future directions of the company’s products, such as future variants of Pepsi.

2. Quality Management. This strategic decision area has the objective of optimizing quality based on business and consumer expectations. PepsiCo’s operations management aims to provide the highest quality products under the company’s “Human Sustainability” goals. For example, new PepsiCo products are usually improved variants, such as low-calorie Pepsi products and less-salt Frito-Lay products.

3. Process and Capacity Design. Capacity utilization and process efficiency are the emphases in this strategic decision area of operations management. PepsiCo aims to maximize its productivity-cost ratio in this area. For example, the company’s manufacturing facilities are designed with high-output assembly lines. Also, many of PepsiCo’s production processes are automated for optimal efficiency.

4. Location Strategy. PepsiCo has many company-owned facilities and partner-owned facilities in strategic locations. Such an operations management approach is based on this strategic decision area’s objective of maximal reach to target markets. In PepsiCo’s case, such facilities are located in key areas near most retailers. The food-and-beverage company is especially interested in large retail outlets and food service establishments with high sales volume.

5. Layout Design and Strategy. Efficient movement of people, materials and information is the operations management concern in this strategic decision area. In PepsiCo’s case, spaces are designed with efficiency and productivity in mind. For example, layout design in PepsiCo production facilities is centered on the principles of assembly line production and total quality management (TQM).

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. The main operations management objective in this area is to ensure the adequacy of PepsiCo’s workforce. For example, the company has an HR policy and job design process for Frito-Lay, and separate HR policy and job design process for Quaker Foods. However, all of these policies and processes comply with PepsiCo’s corporate standards and “Talent Sustainability” policy.

7. Supply Chain Management. This strategic decision area focuses on operations management practices that optimize the supply chain to match demand for 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 market. In this way, PepsiCo optimizes response times to fluctuations in demand.

8. Inventory Management. PepsiCo’s inventory management emphasizes automation. Adequacy, scheduling, and cost minimization are the key objectives in this strategic area of operations management. PepsiCo does so through computerized monitoring of inventory. Inventory managers can access real-time data to help them make decisions.

9. Scheduling. Facility and human resource schedules are the primary concern 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 PepsiCo’s production space schedules.

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 adequate workforce and other resources that grow with the business. PepsiCo continues to hire individuals and promotes from within the organization to grow its workforce. Facilities are expanded, constructed, or acquired to support the consumer goods company’s growth.

Productivity at PepsiCo

PepsiCo’s operations management practices ensure high performance and productivity. The company uses different measures or criteria to evaluate actual productivity. The following are some of the productivity measures used at PepsiCo:

  1. Batches per facility per day (Production facility productivity)
  2. New product ideas per year (product R&D productivity, such as for Pepsi)
  3. New accounts per year (marketing productivity)