1. Building an Information Savvy company
Pepsi Americas
Building an Information Savvy company

2. Abstract
How IT and Business Leaders created an information savvy organization
Stream 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 competitiveness
How will Pepsi leverage its information –based capabilities?

3. Introduction Global Economic Downturn.
Recession less threat compared to:
1) Declining U.S market, carbonated soft drinks
2) Powerful customer
Transform business to address challenges
In 2001, business results depended on the effort of truck drivers
By 2009, reliance on central oversight of P-V dynamics and retailer relationships
Conversion 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 industry
Truck Drivers = Salespersons
Estimated day’s requirements, loaded product at distribution center
Called customer, took orders, stocking shelves
Worked: Pepsi & Mountain Dew = 90% of business
Marketing & Advertising, basic
Network TV was major medium, reaching 90% of house holds – Effective in exposure
Can packaging = 70% of the transportation volume
Efficient to produce, transport, store, and deliver.

5. Changing Market – Conventional Route Challenges
Becoming impractical
Product line grew: water, energy drinks, juices, teas, coffees, etc.
Packaging: diverse
Bulky water bottles took 2.5 more transportation volume vs. canned soda
COO, 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 truck
Constant 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 divisions
Production, distribution, sales
Leaders within the regions designed system to own needs
Inefficient for diverse product line
Ineffective in meeting demands of retailers
IT-enabled business changes to address changing market demand

7. Initiative#1: Next Gen: Defining a Common Platform
First business change initiative: Next Gen
Redesign sales & distribution process
Replaced CRS process with a pre-sell process
Pre-sell involved 3 specialists:
1. Sales Rep: customer
2. Driver: distribution center warehouse
3. Merchandiser: stock shelves, displays
Introduction of common systems & technology platform across its 13 regions

8. Next Gen: The handheld project
Hand held devices for “presell”
Captured order data
Plan truck loads
Plan & execute the picking and loading of trucks
Challenge of initial implementation:
No handheld devices on the market in ’01 to meet needs
Developed internally
Constantly fixing components: battery, wire, cell connection; only choice
Constant 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 change
One of greatest challenges: Reluctance for change
PAS formed from merger of small businesses; entrepreneurial culture
Deviations limited gains and ability to meet needs
Next Gen’s success: mixed and experience: painful
Still 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 retailers
Customer Alignment initiative reorganized the firm around centralized functions
Regional Sales & Distribution Structures  Customer Segments
1. Large customers that mandated shipments to warehouses
2. Large DSD customers
3. Small DSD customers
4. Foodservice customers: restaurants, vending machines

11. Customer Alignment: Process Centralization
Very little IT work
Already using Next Gen Platform
Customer Alignment drove process centralization
Sales managers were dispatched to take pre-sell orders
Empowered sales managers to address most powerful customers
Call center workers captured orders for customers
Process improved control and enhanced decision making data
Standard pricing and activities with customer
By 2007, Customer Alignment: savings of $15-$17M; improved data
Aggregation of data and realigning of responsibilities exposed opportunities for improvement

12. Initiative #3: Building an IT-Business Partnership
Drive value from technology initiatives
Agreed that difficulties from Next Gen came from misunderstanding of capabilities & limitations of IT
Common 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 methodology
To support new methodology:
Business leads were paired with IT leads
Major projects, PAS created execution teams
ex-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 partnership
Partnership between business execs and IT: biggest change for the organization
IT representative at executive staff meetings
Business representative at IT staff meetings
IT 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 strategy
They 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 backbone
Mobile platform.

16. Competitive Edge Component#1: Information Backbone
Though improved performance, Customer Alignment Initiative exposed inconsistencies in data definitions
i.e.: idiosyncrasies in customer naming conventions, impossible to roll up data
Provide accessible data for both operation decision making and business analysis
IT unit created 2 important data assets:
1. A Central Data Repository (CDR): set of transaction files from where can obtain and store data
2. 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 new
Data interfaces with CDR vs. own customer records
Allows for:
Reduced redundancy
Increased integrity
DW stored long-term data

18. The data warehouse – 360◦ view of the business
Information on each customer transaction
Are we giving the right price to our customers for us?
CDR and DW designed to create data that would be used across the company
IT unit formatted data to meet PAS specific data needs.

19. Competitive Edge Component #2: Mobile Platform
IT Management unable to find software to meet needs
PAS developed own software
Thousands of employees rely on mobile technology
Drive benefits from its technology expertise by reusing technology, data, and business process components
Upgraded handhelds to reuse parts for other handheld applications
Reduce the cost of developing and maintaining IT systems

20. Initiative #6:Customer Optimization Reaping the Benefits
Competitive Edge Initiative: time to learn application
Customer Optimization ³ (CO³), initiated in ’07
Focus: drive value from capabilities
Use data to improve performance of cross functional processes
Three components:
Demand Planning
Algorithms to calc demand/pricing from historical data
Avoid out-of stocks/excess inventory in warehouse
Power pre-sell
Introduced handheld device for firms frontline sellers
Statistical 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 Pallet
Standard warehouse layout, loaders wearing voicepick headsets.
Voicepick automatically ID’ed out of stock items, adjust invoices, replenish SKUs

21. Epilogue
In 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. Questions
Q: Which initiative was billed the “hand held” project?

23. Questions
Q: Which initiative was billed the “hand held” project? A: Next Gen

24. Questions
Q: What element did Richard Frey, VP of Operations say was critical for Pepsi Americas success?

25. Questions
Q: 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. Questions
Q: Which organization led to a stronger IT-Business partner relationship?

27. Questions
Q: Which organization led to a stronger IT-Business partner relationship? A: Project Management Organization