Presentation on theme: "Building an Information Savvy company"— Presentation transcript:
1 Building an Information Savvy company Pepsi AmericasBuilding an Information Savvy company
2 AbstractHow IT and Business Leaders created an information savvy organizationStream of Investments & org. changes evolve PAS from business that shipped just drinks to an enterprise that delivered hundreds of SKUs as needed to retailers.IT capabilities help respond to market, enhance competitivenessHow will Pepsi leverage its information –based capabilities?
3 Introduction Global Economic Downturn. Recession less threat compared to:1) Declining U.S market, carbonated soft drinks2) Powerful customerTransform business to address challengesIn 2001, business results depended on the effort of truck driversBy 2009, reliance on central oversight of P-V dynamics and retailer relationshipsConversion from low-tech firm to dependent on information and tech.Learn to use IT not just automate processes, but informed decision making
4 Changing Market – Conventional Route Sales Model Had long met needs of industryTruck Drivers = SalespersonsEstimated day’s requirements, loaded product at distribution centerCalled customer, took orders, stocking shelvesWorked: Pepsi & Mountain Dew = 90% of businessMarketing & Advertising, basicNetwork TV was major medium, reaching 90% of house holds – Effective in exposureCan packaging = 70% of the transportation volumeEfficient to produce, transport, store, and deliver.
5 Changing Market – Conventional Route Challenges Becoming impracticalProduct line grew: water, energy drinks, juices, teas, coffees, etc.Packaging: diverseBulky water bottles took 2.5 more transportation volume vs. canned sodaCOO, Ken Keiser est: SKUs had grown from in the early 90s to nearly years later.Truck drivers could no longer estimate product mix to be loaded on a truckConstant innovation, trademark of industry“The ability to react to these changes quickly and without disruption to the supply chain and the entire organization is critical to our success” – Rich Frey, VP Sales Operations
6 Changing Market – Regional Structure 13 regional divisionsProduction, distribution, salesLeaders within the regions designed system to own needsInefficient for diverse product lineIneffective in meeting demands of retailersIT-enabled business changes to address changing market demand
7 Initiative#1: Next Gen: Defining a Common Platform First business change initiative: Next GenRedesign sales & distribution processReplaced CRS process with a pre-sell processPre-sell involved 3 specialists:1. Sales Rep: customer2. Driver: distribution center warehouse3. Merchandiser: stock shelves, displaysIntroduction of common systems & technology platform across its 13 regions
8 Next Gen: The handheld project Hand held devices for “presell”Captured order dataPlan truck loadsPlan & execute the picking and loading of trucksChallenge of initial implementation:No handheld devices on the market in ’01 to meet needsDeveloped internallyConstantly fixing components: battery, wire, cell connection; only choiceConstant issues, billed this initiative as the “handheld project”Technology issues only tip of the iceberg….
9 Next Gen: Mixed Success, Painful Experience Underestimation of the impact of the changeOne of greatest challenges: Reluctance for changePAS formed from merger of small businesses; entrepreneurial cultureDeviations limited gains and ability to meet needsNext Gen’s success: mixed and experience: painfulStill great for PAS, no other way to keep up with increasing number of SkUs or demands, had to be done.Result: common tech. platform, rapid integration of acquisitions
10 Initiative #2: Customer Alignment: Meeting Customer’s Needs Reorganize to accommodate the firm’s national customers“Organized around ourselves versus around our customers”Inconsistencies in business process and duplication of effort limited ability to serve growing and powerful retailersCustomer Alignment initiative reorganized the firm around centralized functionsRegional Sales & Distribution Structures Customer Segments1. Large customers that mandated shipments to warehouses2. Large DSD customers3. Small DSD customers4. Foodservice customers: restaurants, vending machines
11 Customer Alignment: Process Centralization Very little IT workAlready using Next Gen PlatformCustomer Alignment drove process centralizationSales managers were dispatched to take pre-sell ordersEmpowered sales managers to address most powerful customersCall center workers captured orders for customersProcess improved control and enhanced decision making dataStandard pricing and activities with customerBy 2007, Customer Alignment: savings of $15-$17M; improved dataAggregation of data and realigning of responsibilities exposed opportunities for improvement
12 Initiative #3: Building an IT-Business Partnership Drive value from technology initiativesAgreed that difficulties from Next Gen came from misunderstanding of capabilities & limitations of ITCommon technology platform leadership role for I.T.From ‘01 to ‘04, CIO Ken Johnsen initiated management changes to enhance the leadership capabilities of the IT unit.Created an IT governance board that included the CEO, COO and most of the senior executive team.Results of the Customer Alignment initiative led to establishment of IT investment priorities
13 Initiative #4: Building an IT-Business Partnership: Project Management Organization IT management change: project management organization (PMO)Implement a more disciplined project management and systems development methodologyTo support new methodology:Business leads were paired with IT leadsMajor projects, PAS created execution teamsex-dispatchers, ex-warehouse people that wanted to learn something new: how to change management.Resulted in new solutions
14 Building an IT-Business Partnership: I.T part of strategy for growth The PMO led to a stronger IT-business partnershipPartnership between business execs and IT: biggest change for the organizationIT representative at executive staff meetingsBusiness representative at IT staff meetingsIT no longer a support department, but part of the firm’s strategy as the firm moves forward
15 Initiative #5: Competitive Edge: Building IT Infrastructure for Business Agility .In ‘06, PAS IT unit, with the help of an outside consulting firm, developed an IT strategyThey IDed 8 critical future business capabilities: (read from slide). These capabilities aligned with the firm’s stated strategic planks.Once the future business capabilities were defined, PAS knew that they needed to somehow centralize their data.They needed to build a mobile platform where they could plug in different devices, a handheld or a cell phone or something to capture and access the operating data.The C.E. initiative developed the IT infrastructure needed to support PAS critical business capabilities.Competitive Edge had two major components:Information backboneMobile platform.
16 Competitive Edge Component#1: Information Backbone Though improved performance, Customer Alignment Initiative exposed inconsistencies in data definitionsi.e.: idiosyncrasies in customer naming conventions, impossible to roll up dataProvide accessible data for both operation decision making and business analysisIT unit created 2 important data assets:1. A Central Data Repository (CDR): set of transaction files from where can obtain and store data2. A Data Warehouse (DW): extracted & organized historical data for subsequent analysis.
17 Competitive Edge: Central Data Repository and the Data Warehouse CDR: gateway to shared transactional data, existing and newData interfaces with CDR vs. own customer recordsAllows for:Reduced redundancyIncreased integrityDW stored long-term data
18 The data warehouse – 360◦ view of the business Information on each customer transactionAre we giving the right price to our customers for us?CDR and DW designed to create data that would be used across the companyIT unit formatted data to meet PAS specific data needs.
19 Competitive Edge Component #2: Mobile Platform IT Management unable to find software to meet needsPAS developed own softwareThousands of employees rely on mobile technologyDrive benefits from its technology expertise by reusing technology, data, and business process componentsUpgraded handhelds to reuse parts for other handheld applicationsReduce the cost of developing and maintaining IT systems
20 Initiative #6:Customer Optimization Reaping the Benefits Competitive Edge Initiative: time to learn applicationCustomer Optimization ³ (CO³), initiated in ’07Focus: drive value from capabilitiesUse data to improve performance of cross functional processesThree components:Demand PlanningAlgorithms to calc demand/pricing from historical dataAvoid out-of stocks/excess inventory in warehousePower pre-sellIntroduced handheld device for firms frontline sellersStatistical forecasting algorithm produced a “suggested order”Avoid out-of stocks in stores; by ‘09, decreased from 14% to 3.7%Backroom inventory in stores dropped by 52%Perfect PalletStandard warehouse layout, loaders wearing voicepick headsets.Voicepick automatically ID’ed out of stock items, adjust invoices, replenish SKUs
21 EpilogueIn August of 2009, PepsiCo announced that it would acquire its two largest bottlers, Pepsi Bottling Group (PBG) and Pepsi Americas (PAS)“Fully integrated beverage business will enable PepsiCo to bring products faster, streamline manufacturing and distribution and react more quickly to changes in the marketplace” –Indra Nooyi, CEO of Pepsi Co.Better position to compete and grow now and in years ahead
22 QuestionsQ: Which initiative was billed the “hand held” project?
23 QuestionsQ: Which initiative was billed the “hand held” project? A: Next Gen
24 QuestionsQ: What element did Richard Frey, VP of Operations say was critical for Pepsi Americas success?
25 QuestionsQ: What element did Richard Frey, VP of Operations say was critical for Pepsi Americas success? A: Ability to react quickly without disruption to the supply chain and the entire organization
26 QuestionsQ: Which organization led to a stronger IT-Business partner relationship?
27 QuestionsQ: Which organization led to a stronger IT-Business partner relationship? A: Project Management Organization