ISY205 Enterprise Systems That Increased PepsiCo Productivity Case Study Assessment Answer
This report has provided a detail discussion about Enterprise System or ERP system that helped PepsiCo increase operational efficiency and productivity. The ERP system has been software package which integrates business procedures and information from overall organization. In order to lead business growth and survive in changing market, PepsiCo has implemented SAP-ERP system as an effective approach to achieve competitive advantage through the increased supply chain, decision making, business model to innovate, improved supplier and consumer intimacy. The company's incapability of redesign business procedure to match software, absence of superior administration support, insufficient reskilling and training of staffs has led PepsiCo to encounter the risk of implementing an ERP system. On the other hand, the strategic implementation of SAP-ERP with including costlier business venture has led PepsiCo to decrease friction over supply chain with increased business operational efficiency.
The implementation of the Enterprise Response System (ERP) or Enterprise System (ES) has been a complex IT project that benefits business organization to enhance their operational efficiency including supply chain operation in large scale. The ERP solution and products are available within the market for as per business needs and help in promoting competitive advantage. This report will produce a brief discussion of the large firm 'PepsiCo' highlighting the nature of ES that the company adopted for improving operational efficiency, supplier intimacy, decision making, creation of new products, business model and obtain competitive benefits. The risk of dependencies over the supply chain of the company that disrupts the operation of the organization will be explained. The successful adaptation of ES to decrease friction on the supply chain will also be discussed in detail.
The Enterprise system has been largely adopted by several business organizations across the globe to transform their corporate processes. Among which the PepsiCo as the American beverage manufacturer has strategically adopted ES implementation for leading process innovation that improves service, distribution, data processing standards with employment of latest software, hardware and human resource. PepsiCo is the second leading distributor and manufacturer of Pepsi beverage holding operation within the United States, Caribbean, Eastern as well as Central Europe (Annualreports 2020). The company is a huge producer of non-alcoholic beverage and food with an important branch within North America at Frito Lay. PepsiCo controls nearly 20% of the overall market share and its constituent branches control major section (Annualreports 2020). The Frito-Lay supervises nearly 60% of the overall snack food marketplace in the US. The company was founded in the year 1965 with the merger of Frito-Lay and Pepsi Cola. It includes certain world's highly popular brands involving Mountain Dew, Lay's, Doritos, Diet Pepsi and Pepsi Cola (Annualreports 2020). PepsiCo brands have noted to available within almost 200 nations and territories. The organization generates an income of above AUD 43 billion with employing nearly 168,000 staffs that support business growth in a competitive manner (Annualreports 2020). The supply chain of the company involves the procurement of raw material obtained from several suppliers. The various other activities involve the purchase of operations, repair and repair related supplies with non-metal elements needed within products from vendors or third parties. The company also runs several manufacturing facilities to produce a huge variety of beverages and scans item within several states of Australia as well.
Describe the nature of the Enterprise Systems that the organisation adopted to improve or maintain operational efficiency, improve customer/supplier intimacy
In late 2006, the PepsiCo has considered initiating adaptation of Enterprise System to address the limitation of its current technological system and wished to include company business departments for increasing operational efficiency and supplier intimacy. The nature of ES or ERP has been SAP software as an effective way to incorporate core business function to expand overall company growth capacity and enhance consumer engagement as well as retention. The several reasons PepsiCo initiated to implement ERP system involve the following criteria-
Ending legacy system: PepsiCo legacy system has involved poor functionalities to cater to the latest marketplace and consumer need, especially within the region of inventory control and demand forecasting. Westervelt (2020) argued that the legacy system utilized the obsolete programming platforms that were offering hardship for the company to source knowledgeable developers related to the platform.
The poor capability of supporting existing operation: PepsiCo business has outgrown the ability of legacy system with it no longer supporting the existing business operation. The company initiated to encounter issue to maintain consumer accounts and maintaining sales.
Increase business growth: PepsiCo was encountering healthy growth till the year 2008, where global recession, declining market demand for carbonated drinks and increase of superior retailer has reduced the company profit margin (Cowley 2020). The company needed a flexible system that effectively accommodates increase within consumer numbers, income improvement and acquisitions of business.
Poor communication amongst wider business groups: The proprietary software used by PepsiCo branches in the different nation became incompatible with the legacy system. Cowley (2020) added that the communication related to business information across business groups were ineffective and cumbersome.
Auditing and compliance: The consequence of US-dependent financial scandal, PepsiCo has been forced by the regulators to initiate huge financial transparency and taxation audits in a strict manner. The ruling extended to every regional office involving Australia and the need for controlled financial activities for ease of accountability and auditing has increased.
In order to address all these issues, PepsiCo has implemented SAP software to ultimately enhance operational efficiency, supplier and consumer intimacy. The establishment of ERP has allowed PepsiCo to enjoy advantages linked with the utilization of an operational system. It has led to effective communication across business units, developed data quality that resulted within common goals and vision amongst employees are implemented (Ali and Miller 2017). The utilization of the SAP-ERP has helped increasing operational feasibility with making it easier for PepsiCo’s financial department to become complaint with modern regulation, laws and taxation. The company experienced developed shared services across business units and departments. Kim (2017) opined that the suppliers and consumer intimacy has been brought by SAP ERP with a customized solution, increased efficiency and productivity with integration of real-time information, staffs perform more work along with handling consumer queries rapidly. The updated information allows several departments to communicate effectively and the consumer becomes capable to relate to the brand as they make orders, track and pay for their goods. Grube and Wynn (2019) determined that SAP ERP offers consumer relationship system that ensures the organization enhance consumer services with staffs utilizing the system of the supply chain to track the inventories. It allows them to monitor transaction between the suppliers, consumers and business. Additionally, the supplier's intimacy is increased with the adaptation of the SAP enterprise system increasing visibility in the supply chain, overall accuracy with ease of scalability. It has offered market-leading supplier threat solution that let PepsiCo tailor threat views along with alerting the business to every supplier relationship. With the overall view of every supplier, the company becomes capable to make more contextual, accurate, timely business decision and enhanced collaboration with the trading partners.
ES to improve decision making, create new products, services, and business models (i.e. to innovate), and to gain a competitive advantage
PepsiCo has chosen SAP to offer the primary business proposal for unifying operations, enhance business model and standardize procedures across the division. The choice of mySAP business suite would facilitate PepsiCo with the general information system channel to integrate business procedures effectively across the enterprise. It has been observed that the company joins the increasing number of customer’s products, beverage and food companies which have adopted SAP solution for accomplishing improved decision making as well as a competitive advantage. Volkoff (2020) explained that ERP software has been the triple advantage with the platform helping business streamline core procedures, administer innovation and inform decision making within nearly every niche. The utilization of SAP-ERP for making decision and forecasting has led PepsiCo to save cash, enhance sales along with optimizing routine operation for competitive advantage. The decision making of the company has been improved with ERP offering valuable corporate intelligence. The programs collected data from several sources including in-house consumer records, social media or internet and complied this information within a single place. The business owner access such data for making an essential decision related to business development, drawing from several key performance indicators such as sales rate or income generated (Volkoff 2020). The competitive advantage achieved by PepsiCo has been achieved with SAP-ERP system facilitating older business model to innovate and creating the latest services or product. Hiebl et al. (2017) argued that with rapidly increasing product variant numbers and ever-shorted service or product lifecycle, discrete manufacturing organization encounters increasing challenges. This has called for streamlined manufacturing processes, optimizing value chain and cutting edge technology. The adaptation of enterprise system has allowed PepsiCo to accelerate product improvement along with bringing innovation to the marketplace faster and cost-effectively in comparison to the rivals. The company has gained a competitive advantage with continuous product lifecycle administration of beverage and food range from development and research to after-sales services within the manufacturing procedure. Westervelt (2020) discussed that enterprise system has led business model of PepsiCo to innovate with establishing end-to-end product lifecycle administration, grasp opportunities of IoT or internet of things and unlocking potential related to digital manufacturing. The company has been benefited with acquiring real-time brief through analytics. The IoT allowed business within discrete manufacturing for making precise prediction depending on real-time sensors information or data from machines along with offering consumer suggestion for future activities or actions (Majeed and Rupasinghe 2017). It has paved the way to the innovative business model for PepsiCo with consumption dependent contracts, facilitate business to provide customer higher added value. The competitive advantage within the market has been gained by the organization with SAP-ERP system facilitating advance manufacturing execution system and sensor technology unleashing the potential of business data (Grube and Wynn 2019). Moreover, with the real-time monitoring technology along with data analytics, the PepsiCo may leverage sensor information or data to build a new, service-dependent business model and obtain additional capabilities. The ES facilitating artificial intelligence has allowed the company to enhance accuracy and productivity through automation.
Identify all risks including the dependencies on the firm’s supply chain that could affect or disrupt operations on the supply chain
In the implementation of ERP or Enterprise system by the organization there lie risks involving the dependencies of the supply chain that may disrupt or affect the business operation. Heinzelmann (2017) determined that the availability of an extensive pre-existence functionality within ES implementation decreases threat and enhance business performance. In the case of PepsiCo, the management decided to implement SAP-ERP has increased risk of incapability to redesign the business procedure to robust the software. The company with the older legacy system has to customize the ES system to match the existing procedure on costlier terms with time-consuming investment (Bystryakov et al., 2017). The absence of superior or expert individual to support implementation, insufficient training along with reskilling the workforce or end-users has included higher investment than expected. The company has encountered difficulty to retain and recruit good ES expert as its market rate has been higher. The developers of leading marketplace share ERP vendors such as SAP, Microsoft Dynamics, Infor and Oracle have been in higher demand as well as the shift from single consultancy task to others. The company's initial failure to recognize in-house ERP experts has been significant ERP establishment threat. The other risks that led to delayed implementation of SAP-ERP within PepsiCo involved incapability to acquire full-time dedication of the workforce towards project activities and management. Along with this, the company noted to lack in integration that covered business procedures relative to feasibility, prototyping, requirements and establishment of ERP functionalities. Such areas often become a source for issues within ERP establishment. Moreover, the ERP establishment increasingly consists of technical work with improved configuration features along with demand for extensive integration with a different system consisting supply chain, quality software or financial tools (Jagoda and Samaranayake 2017). The dependency of ERP implementation often leads to the risk of affecting of disrupting the operation of the supply chain.
Supply chain administration includes coordination, integration across the company and throughout the firm's supply chain. It has meant that supply chain administration needs external and internal integration. This has led the role of supply administration and supplier practices relative within the respective context. There have been several issues impacting the efficient administration of supply chain ion PepsiCo. The organization has undergone several changes within the past as an effort towards leveraging its international presence and advantage from synergies in their factories. The several technological modifications with the implementation of SAP-ERP system has been observed with IT positively impacting business procedure in the organization. Conversely, risks encountered made beverage business relatively costlier. It has led to a direct influence on an organization's profit margin. With the PepsiCo administration team virtually became engaged within tackling supply chain problem with ultimately directing employees efforts within operational regardless of strategic matters. The supply chain has been disrupted with supply hubs lead on verge of becoming extinct because of escalated operational expense encountered across PepsiCo board as an outcome of innovative business model with ERP implementation and automated way of working. The supply chain has been complex in PepsiCo including several stakeholders and hardship for the organization to answer fundamental questions related to nature of the product, its purchase, transport means as well as facilities engaged within processing (Annualreports 2020). Thus, it needed solution escalated costs to require strategic management for the purpose of neglecting further business losses.
Provide an assessment of how successful the adoption of the Enterprise Systems was to reduce friction on the supply chain, i.e. to maintain operational efficiency and a discussion of any success metrics that were used
The adaptation of SAP-ERP system has benefited business to obtain the capability of international integration with strategic management several risks involved and dependency of PepsiCo on the supply chain. The company gained capability for exploiting differences within the product market, capital, innovation, transfer of learning through the organization administration of uncertainty within the political or economic environment in several regions or nations. Jagoda and Samaranayake (2017) argued that adaptation of the ERP system has decreased friction over supply chain with increasing operational flexibility and efficiency. It has brought large level visibility across each business units within PepsiCo. This was linked with the integration of the database. The system has contributed development within logistics management, supplies of raw material, extended market reach, business innovation and effectiveness of PepsiCo. The risks related to the implementation of ERP have been addressed with training provided to staffs, experts hired on negotiable terms and huge ease of portability or integration of IT systems. Majeed and Rupasinghe (2017) supported that the enterprise system decreased friction over supply chain with increasing operational efficiency by automatically creating demand for product or service order received, effective procurement and production administration. The ERP system has benefited PepsiCo with streamlining supply chain by generating efficient job scheduling. As an outcome, the supervisors are informed within real-time related to resources consumed and production ideally starts when raw materials, as well as inventor, are complete. PepsiCo has considered ERP system review as success matrix to acknowledge the effectiveness of procurement management, production, shipment, lean inventory and demand forecasting ability gained in the supply chain of the company (Annualreports 2020). The region that was recognized underperforming was communication between PepsiCo, it's consumer and suppliers. From the analysis, it is deduced that implementation of ERP within the company did not include e-commerce abilities which manufacturing sector need. In order to address such, the up-gradation to the latest version of SAP ECC 6.0 had been planned (Annualreports 2020). It has ultimately brought developed capability and higher integration amongst the business units, departments, particularly with decreasing production bottlenecks and transparency in the organization.
In affirmation to the above discussion, it is concluded that adaptation of ES or ERP system has led PepsiCo to avail leading resolution that allowed the seamless introduction of latest technologies directly into daily operational standards. With the implementation of SAP-ERP as an effective enterprise system has led PepsiCo encounter increase in operational feasibility, decision making, supply chain, new services or product creation and business model to innovate meeting changing market demand. The several risks related to the implementation of ES has affected business to an encountered costlier business venture. On the other hand, the successful adaptation of ES has led PepsiCo to decrease friction over supply chain with increasing operational efficiency.