Production Sourcing Optimization at Pepsi

Consumer Goods Technology (CTG) published a case study on the Pepsi Bottling Group (PBG) (now part of PepsiCo).

In the case, they discuss how Pepsi used a network optimization approach to production sourcing.  That is, they wanted to optimize what product is made when and where.  They wanted to do this considering the full supply chain.

The savings reported were significant.  The article quotes:

  • An increased number of cases available to sell due to reduced warehouse out of stocks
  • Reduction in raw material and supplies inventory from $201 million to $195 million
  • A 2 percentage point decline in the growth of transport miles even as PBG revenue grew
  • Increase in the return on invested capital

This example reminds us that an important part of network design is about deciding what products should be made in which locations.