As Pepsi o is the biggest player in the international beverage industry, the company has to maintain its distinct position by successfully handling the operational strategy. The operational strategy of Pepsi Co aims to meet the business needs in ten strategic decisional areas. These areas under the operational management include the design of goods and services, quality management, process and capacity design, location strategy, layout design and strategy, job design and human resources, supply chain management, inventory management, scheduling, and maintenance. The ultimate aim of the operational strategy is to maintain ad efficient response time to the fluctuations in demand (Gregory, 2015).
Three Task Lacking Alignment with Operational Strategy
Inventory Management System
According to the operational strategy, the firm has to have an automated inventory management system which must promise adequacy, scheduling, cost minimization and attainment to key objectives of the strategy. The computerized monitoring of inventory is no wonder an efficient approach, but the company needs an innovative approach to the inventory management as the old tactics cannot meet the challenges of this information age. It is becoming difficult for the organization to achieve production-oriented goals and objectives including equipment utilization, and labor efficiency.
The inventory management system also has a weakness that it was leading to run large batch sizes which were highly dependent upon the availability of raw materials. The production managers have not been looking at the expense of the bigger picture and primary focusing on utilization of labor and equipment.
Another weakness in inventory management system is that the purchasing manager is extensively focusing on getting the best prices out avoiding the consideration of supplier performance and reliability.
There is a significant need to implement just-in-time inventory management system as it is the most effective solution for effective and efficient inventory management. It can allow the company to deliver high cost and perishable products and enhance the customer satisfaction in terms of availability of the product. Best quality, efficient delivery and value for money.
2. Pepsi Bottling
During the bottling process, the system uses a number of sensors that monitors the bottles as they pass through the sequence of steps. The wide number of sensors has made the process very complex, and it is getting hard for the bottling management system to stay aligned to the operational strategy which is based on reduced response time and efficiency. The complex bottling process has become time-consuming which is restricting the company to attain its productivity goals.
The bottling lacks a strategic approach to maintenance which is necessary to have a successful process because smallest of delays can cause the plant to suffer the loss of thousands of dollars. It lacks effective parts management, use of reliable equipment for repairs which restricts the efficiency level.
The operational strategy supports that company has to achieve on-time-delivery and reduce the transportation cost. Although Pepsi have a history of successful business operations and performs at the highest possible levels, but at the current situation the Pepsi’s transportation management technology needs up gradation in order to stay in compliance with the aim to provide on-time-delivery efficiently (ICMR, 2012).
The weakness of logistics operations is that they lack access to real time and near time access to the information. There is a need to utilize transportation optimization solution which can allow the firm to have comprehensive supply chain data having significant managerial implications.
Formulating a New Operations Strategy Based On the Four Competitive Priorities
The formulation of a new operational strategy for Pepsi Co is dependent upon the four competitive priorities including low cost, high quality, fast delivery, flexibility and high standards of services. The cost core competency reflects that company is distinctive as it offers low cost products, quality is associated with the provision of unmatchable quality, and delivery reflects the firm’s ability to provide the products quickly to the customers and flexibility refers to providing a wide variety of products and services. These four core competitive priorities can help the Pepsi co to follow the strategy of order qualifier or order winner. As Pepsi has a close and direct competitor Coca Cola, it is important for the operational strategy to incorporate those competitive priorities that provide it distinction as compared to the competitors and serve as order qualifiers (Simister, 2011).
The operational strategy of Pepsi co cannot incorporate all four elements but being a vice president of operations; it can be decided that which priority is critical for the long-term and short term success and resources can be utilized upon those competitive priorities. As the core concept of Pepsi’s operational strategy is to provide the speed of delivery, it cannot provide flexibility in terms of providing a vast variety of products. But because of its long history of successful business practices, Pepsi is enabled to offer a number of variations and flavors in the core product along the speed of delivery. The chosen competitive priorities are the speed of delivery and top notch quality.
As sped of delivery is considered to be the core priority the company’s operational strategy must incorporate Just-in-time inventory management system by overcoming the existing weaknesses of overutilization of equipment and labor and avoiding the performance of supply chain partners. JIT will keep the customers satisfied by the time, availability which is a clear source of gaining and attain a strong competitive advantage. The weakness in the bottling is to be handled by using strategic management tactics as customers are highly sensitive to the product quality and quality of the packaging as well. The competitive priority to provide top notch quality can differentiate the product from rest of the competitors. Last but not the least new operational strategy aims to offer low prices and overcome the weakness of lack of real time information. Low prices and cost differentiation can rapidly attract the target market as Pepsi brand name I already associated with brand quality, so offering top quality and low price can gain long term customer satisfaction and loyalty (Ward, McCreery, Ritzman, & Sharma, 1998).
Analyzing the Structure of the Competitive Priorities and Infrastructure of the Production Process
The structure of competitive priorities and infrastructure of the production process is needed to be aligned in order to gain maximum output from the implementation of on time delivery and provision of top quality as the competitive priorities.
Supplier Coordination and Relations
As the competitive priority is to ensure on time delivery by using the just in time method, the coordination and relationship with the suppliers serve as a strong enabler. It can enable the firm to incorporate the priority and make it consisted with the infrastructure of production for the long run (Gadde s& Snehota, 2000).
reduction in delivery time
reducing is lot size
consistency in the quality of materials received
long term relationship with suppliers can build dependency and increase complacency
selecting the wrong supplier can compromise on the quality of material used
makes it difficult to test the market from time to time against the alternative
Development of Human Resource
The training and development of human capital within the organization can have a substantial impact on improving the quality of products and services. Moreover, the training of sales and marketing staff can have a significant impact on the quality of customer services.
improvement in product quality
reduced process defects and rejections
decreased level of waste and scrap
the human resource training and development can significantly increase the costs
it is difficult to measure that how much impact human resource development has imposed increasing the sales and profitability of the company
it might make the firm over-reliant on the performance of human resource
It avoids unplanned downtimes
perform a dual function by improving the quality through technology and reducing the lead time with the use of the latest equipment
Reduces the number of stoppages in the production process
incorporation of latest technology requires continuous improvement which might require a transformation in the business processes
it is time saving but highly expensive
demands human resource training to use the advanced technological equipment
Gadde, L. E., & Snehota, I. (2000). Making the most of supplier relationships. Industrial marketing management, 29(4), 305-316.
Gregory, L. (2015). PepsiCo’s Operations Management, 10 Decisions, Productivity. Retrieved January 28, 2017, from http://panmore.com/pepsico-operations-management-10-decisions-areas-productivity
ICMR. (2012). Supply Chain Management of PepsiCo. Retrieved January 28, 2017, from http://www.icmrindia.org/casestudies/catalogue/Operations/Supply%20Chain%20Management%20of%20PepsiCo-Excerpts1.htm#Manufacturing_Operations_
Simister, P. (2011). Order Winners and Qualifiers And How They Create Customer Preference. Retrieved January 28, 2017, from http://www.differentiateyourbusiness.co.uk/order-winners-and-qualifiers
Ward, P. T., McCreery, J. K., Ritzman, L. P., & Sharma, D. (1998). Competitive Priorities in Operations Management. Decision Sciences, 29 (4), 1035 - 1046.