Document Sample

                 REPORT TOPIC
                   PEPSI CO.

Subm itte d To:

Sir Sa lm an Jamal

Subm itte d By:

Mu ham ma d Uma ir S heikh

Nida A zh ar

University N ame

Newport Instit ute Of Co mm unic ati on & Ec on omic s
This humble effort is dedicated
    to our beloved parents,
     whose love and efforts
    can never be forgotten.

  Management Information System In Pepsi Co.   1
 We are highly grateful to almighty Allah
who gave us the power to complete this
report and we are also highly thankful to
 our honorable teacher Sir Salman Jamal
      for his support and guidance.

       Management Information System In Pepsi Co.   2
                            EXECUTIVE SUMMARY

PepsiCo is a world leader in convenient snacks, foods and beverages, with revenues of more than
$39 billion and over 185,000 employees. The company consists of PepsiCo Americas Foods (PAF),
PepsiCo Americas Beverages (PAB) and PepsiCo International (PI). PAF includes Frito-Lay North
America, Quaker Foods North America and all Latin America food and snack businesses, including
Sabritas and Gamesa businesses in Mexico. PAB includes PepsiCo Beverages North America and all
Latin American beverage businesses. PI includes all PepsiCo businesses in the United Kingdom,
Europe, Asia, Middle East and Africa. PepsiCo brands are available in nearly 200 countries and
generate sales at the retail level of more than $98 billion. Some of PepsiCo's brand names are more
than 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through
the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with
The Quaker Oats Company, including Gatorade, in 2001.
PepsiCo offers product choices to meet a broad variety of needs and preference -- from fun-for-you
items to product choices that contribute to healthier lifestyles. PepsiCo’s mission is: “To be the
world's premier consumer “Products Company” focused on convenient foods and beverages. We
seek to produce healthy financial rewards to investors as we provide opportunities for growth and
enrichment to our employees, our business partners and the communities in which we operate.
And in everything we do, we strive for honesty, fairness and integrity.”

PepsiCo Headquarters
PepsiCo World Headquarters is located in Purchase, New York. The seven-building
headquarters complex was designed by Edward Durrell Stone, one of America's foremost

Haidiri Beverages Private Limited, Pakistan
The Haidiri Beverages Group was set up in 1979 and is Pepsi's sole selling agent for District
Rawalpindi and Islamabad. It is based in the CDA Industrial Triangle, Kahuta Road, Islamabad. It
manages the supply for several wholesalers, retailers, restaurants, hotels and other such food
outlets. In order to achieve the projected sales targets effectively, the organization ensures a
comprehensive strategic alignment with the overall Pepsi Cola’s business strategy. Haideri
Beverages’ primary functions are to conduct a systematic manufacturing and supply of the
product without any tactical flaws. Pepsi products are safe, Pepsi analyze water, sugar and
flavorings in accordance with the best international guidelines Pepsi products comply with most
stringent international regulations, including the new regulations for carbonated soft.

                    Management Information System In Pepsi Co.                          3
Management Information System In Pepsi Co.

The microcomputers are linked up to Pepsi’s central computer system daily to update inventory
information system. Management estimates that over $25,000 per year may be saved because of the

     1) In Pepsi Co. it helps to recognize market trends: MIS helps Pepsi Co’s. Managers to
     recognize market trends, in respect of price, designs of products, fashions, etc. timely
     information of the market trend enable the firm to follow the right course of action.

     2) It facilitates marketing planning and control: effective marketing planning is required in
     terms of product planning, pricing, promotion and distribution. Such planning will be
     possible only if the company is possessing adequate and relevant information. This is also
     possible through MIS.

     3) Quick supply of information in Pepsi Co.: today a firm has to take quick decisions for this
     purpose it requires fast flow of information which is facilitated by a properly designed MIS.

     4) Improves quality of decision making: a properly designed MIS supplies reliable and
     relevant information. With the help of computers and other data processing equipments,
     the marketing managers of Pepsi Co. can make the right decisions at the right time.

Status of MIS

                 Computer Information Systems
                 –   Electronic Data Interchange (EDI)
                         • Information exchange between companies

                 –   Direct Exchange (DEX)
                         • Information exchange between hand-held computer and store’s
                             delivery system

                     Management Information System In Pepsi Co.                            4
Strategic Business Units

      1.             A distinct mission and specific target market
      2.             Control over their resources
      3.             Their own competitors
      4.             Plans independent of other businesses

Business Process
There are so many products, operations centers, and offices require massive coordination of
each department, activity, geographic location and employees. PepsiCo uses MySAP Business
Suite applications in the management of their enterprise resource management. The systems
help to standardize the internal software and systems through the elimination of legacy systems,
thus reducing the redundancy and error that are common in the nature of legacy systems. The
system is built with the industry best practices that allow Pepsi to be at the forefront of the
industry in each area of the business.

Current Enterprise Applications
1. Current Enterprise Resource Planning Systems (ERP)

The ERP Corporate portion of MySAP serves to help streamline the processes of everyday
business to reduce costs. It has reduced the number of steps needed to accomplish a single
activity by not sending it through as many departments. Also included is a tool related to
reducing travel expenses. There is, of course, a portion of the software devoted to financial and
management accounting. These programs are linked to the production lines and the sales
software in order to automatically account for certain expenditures and sales.
The Enterprise Performance Management portion of the software is used to measure how
management objectives are being met by profits. This then allows managers to plan and
strategize for operations, profit, and growth. It allows for the integration of information from,
for example, both human resources and operations, in order to budget personnel for a specific
production line. The entire company can be consolidated into representation in a single budget.
Individual employees at all levels of the organization are able to access information documenting
their own contributions and the progress made within their department.
Another important part of the ERM at Pepsi is the enterprise human capital management. This
system has processes that help managers place employees, provide rewards for performance,
and promote valuable employees.

                     Management Information System In Pepsi Co.                           5
2. Current Supply Chain Management Systems (SCM)

PepsiCo is in charge of managing the suppliers of many of its smaller subsidiaries. Right now
PepsiCo has many bottling plants situated all over the globe. PepsiCo must make sure that all of
its supplies (water, corn syrup, food colorings, carbonation, plastics, aluminum, and paints to
name a few) come into an appropriate plant so as to keep customers satisfied with no
shortages, yet not make too much additional inventory in stock which hangs up extra resources
and cash flows. As stated earlier, PepsiCo uses the help of MySap Business Suites applications
for its business solutions. MySap helps communicate with its supplie rs and generate a forecast
of demand so that an overabundance or under abundance of inventory does not happen.
MySap helps PepsiCo generate a forecast in order to keep up with demand. The forecast takes
into account past sales plus additional information about sales right now, seasonality’s,
economic turns, diet fads, health changes, and environmental changes. (PepsiCo wants to keep
up with demand but also keep the world safe)
PepsiCo also has been trying to broaden their supplier base. They have a program in place to
encourage minority and women in their business program. In fact, in October 2004 both
PepsiCo and Toyota received a “Corporation of the Year” award from the National Minority
Supplier Development Council. The encouragement will encourage suppl iers to take part in
PepsiCo’s functions and hopefully broaden their customer and market base.

3. Current Customer Relationship Management Systems (CRM)

Businesses use customer relationship management systems to “capture and integrate customer
data from all over the organization, consolidate the data, analyze the data, and then distribute
the results to various systems and customer touch points across the enterprise” (Laudon, pg
369). These systems are useful in improving sales, marketing, and customer service in a
business. For Pepsi, CRM systems play a crucial role in integrating the companies nearly
400,000 across the enterprise. Through the use of CRM System, Pepsi has been able to deliver
top-line growth and superior customer service.
Pepsi’s current CRM application has allowed for conversion of former disparate sales systems
into an integrated Internet application solution, a 360 degree view of the entire customer base,
simplification of the resolution process, accurate and timely deliveries, and reduction of
product inventory close time by one to two days. Through the use of real -time customer
information, tel-sel agents, or telemarketers, are able to have up-to-date information on any
issues of needs of the customer through their account, allowing for a clear picture of their
customers and their relationships with the company. This also allows workers to uncover
potential sales opportunities with their customers. The use of real -time information is also used
to improve customer interaction and satisfaction through the use of help desks, customer
service representatives, and allowing customers themselves access to real -time information.
Pepsi uses CRM applications to determine profitable customers, uncover potential sales
opportunities, improve customer interactions and relations, and provide the enterprise with
up-to-date customer information.

                    Management Information System In Pepsi Co.                            6
Proposed Enterprise Applications

Proposed ERP System
Something that PepsiCo could do to improve their ERP is to take advantage of the Business
Process Outsourcing. “For a growing number of organizations, outsourcing peripheral activities –
business process outsourcing (BPO) – to external providers is becoming an attractive, cost
effective alternative to handling them internally. By outsourcing non-core business processes,
such as human resources and procurement, companies can focus more on core competencies
and free up valuable resources to drive growth and innovation, which is essential in today's
tough markets” (SAP BPO). MySAP does not provide BPO, but SAP supports BPO providers in
setting up services that generate sustainable business benefits by reducing costs, lowering risks,
and improving process quality.

Proposed SCM System
We would propose PepsiCo to do things as they are doing now, because they are doing a good
job, but, like any business, they can never be too careful, especially if PepsiCo continues to
encourage more suppliers to enter their domain. PepsiCo needs to keep an information system
like MySAP that will integrate all their suppliers to their main needs. PepsiCo needs to also make
sure that whatever information they use in the future can accurately predict changing consumer

Proposed CRM System
Overall, Pepsi’s CRM applications seemed to have greatly improved after trying a variety of
software systems. Currently, Pepsi is using MySAP enterprise applications, where they had
previously used other applications including Oracle’s PeopleSoft. We see the current CRM
application as being very beneficial to the company. One proposition that would likely improve
the system is integration of a CRM application across all subsidiaries under the Pepsi name. This
will allow for further interaction between the company and customers to see where
improvements in interaction can be made, as well as to determine overall profitability of the
customers. We also feel the CRM application can be used to develop future marketing
campaigns designed to meet the needs and desires of customers in specific areas. Other than
these minor changes, we feel that the present CRM application is very promising for Pepsi.

                                       Predictable supply &
     Predictable                       uncertain demand or                   Highly uncertain
     supply and                        uncertain supply &                    supply & demand
     demand                            predictable


                     Management Information System In Pepsi Co.                           7
Electronic Business Applications in Pepsi Co.
PepsiCo and Pepsi Bottling Group (PBG) Select MEDSTAT
Advantage Suite System to Manage Employee Benefits.
This multi-year license agreement provides PepsiCo and PBG with a decision support system and
reporting applications for proactively managing individual and organizational health in order to
improve productivity and profitability.

"The MEDSTAT decision support system integrates all our health benefits information into a
single, central source," said Dawn Werle (or Wenden) was a principality in the Holy Roman
Empire that was founded in 1235. It was created in the partition of territories in Mecklenburg
that followed the death of Henry Borwin II of Mecklenburg (d. 1226). , director of health and
welfare benefits at PepsiCo. "It will enable us to understand the potential impact of benefit plan
design changes and evaluate the clinical effectiveness of our benefit programs." Greg Heaslip,
director of benefits at PBG, added, "We plan to use the system to help us identify the drivers of
rising healthcare expenditures and ensure all employees are receiving the highest quality care

PepsiCo provides health benefits for more than 116,000 employees and retirees while PBG
covers some 83,000 employees and retirees.

MEDSTAT Advantage Suite seamlessly integrates data warehousing capabilities, advanced
healthcare analytic methodologies, and business intelligence applications to provide a powerf ul
decision support solution.

                     Management Information System In Pepsi Co.                           8
Corporate Overview and Financial Performance
PepsiCo, Inc. is one of the most successful consumer products companies in the world, with
2000 revenues of over $20 billion and 125,000 employees. The company consists of: Frito-Lay
Company, the largest manufacturer and distributor of snack chips; Pepsi-Cola Company, the
second largest soft drink business and Tropicana Products, the largest marketer and producer
of branded juice. PepsiCo brands are among the best known and most respected in the world
and are available in about 190 countries and territories.

In 2000, PepsiCo has a reported net sale of $20,348 and a comparable net sale of $20,144 in
comparison to its 1999’s net sales of $20,367 and $18,666 respectively. PepsiCo has increased
its comparable net sale of 8% in 2000 while it had an increase of 15% in 1999. This reflects the
increasing rate is going slower. On the other hand, PepsiCo’s interest expense declines 39%
showing that the company is significantly lower the average debt level. Back to 1999, the report
shows that the company’s interest expense dropped 8%, which indicates that the company is
performing well in managing its financial strategies. More details about the financial
performance of the company will be discussed in the later part of this paper.

                    Management Information System In Pepsi Co.                           9
Supply Chain Strategy or Design
During this phase a company decides how to structure the supply chain over the next several years.
The company makes long term decisions in regards to location and capacities of production and
warehousing facilities, the products to be manufactured or stored at various locations, the modes of
transportation to be made, and information systems and so on. The supply chain design is very
expensive to alter on short notice and supports the company’s strategic objectives. In order to ensure
a good supply chain strategy, Haidri Beverages plans two years in advance. It has several contracts
with manufacturers, and receives raw material on a convenient basis. The company also decides
where production plants are to be placed. Haidri has production plants at Peshawar and Islamabad.
The production process is 65% automated. The company has to provide and manage transport for
the delivery of products as well as the arrangement of third party services for the procurement of
products. The shipping department handles orders and the transport department decides the
vehicles for safe delivery.
Material planning and sourcing is carried out as well. Sources of supply of raw material both local and
foreign are identified and terms and conditions are negotiated. Capacity planning is also done at this
stage. Sales forecasting and production planning depends upon the capacity of the organization with
respect to:
1. Production (180,000 converted 250 ML crates per day).
2. Storage: Raw and packing (80,000 Sq Ft)
3. Storage: Finished goods (120,000 Sq Ft)
Haidri has a procurement budget of Rs 2.9 billion. Approved suppliers cannot go beyond this budget.
The supplier is audited by the most cost efficient quality control department. Distributors are also
decided by the company, keeping in mind past performances.

Supply Chain Planning
As the above configurations have been set, planning must be done within the above stated
constraints. The goal of planning is to maximize the supply chain surplus. Planning establishes
parameters within which a supply chain will function over a period of time. Companies start the
planning phase with a forecast for the coming year of demand. Pepsi carries out sales forecasting for
local demand as well as for export purposes to countries such as Afghanistan. The annual sales target
is conveyed to the supply chain department of Haidri Beverages. Planning is carried out on a
monthly, weekly and daily basis at Haidri.

Supply Chain Operation
Company makes decision regarding individual customer orders. The goal of supply chai n operations is
to handle incoming customer orders in the best possible manner. During this phase, firms allocate
inventory or production to individual orders, set a date that an order is to be filled, generate pick lists
at a warehouse, allocate to shipping, set delivery and so on. There is less uncertainty about demand.
At Haidri, the production, sales and supply chain departments get together to decide the inventory
usually on a weekly basis.

                       Management Information System In Pepsi Co.                              10
Achieving the Strategic Fit
Making one stage more responsive allows the other stage to focus on being more efficient. The Pepsi
supply chain assign different roles to its different stages, the company has to decide either to transfer
the responsiveness to the manufacture stage or to the retailer stage. While discus sing the Pepsi’s
supply capability it is seen that Pepsi tends to be more responsive in the cities and a bit less in towns.
Therefore, transferring the responsiveness to the retailer and distributor, allowing them to face the
higher implied demand uncertainty. This in return allows the manufacturer and supplier to be more
efficient. At the same time, multiple beverage types contribute to a broader product portfolio
causing Haidri to adjust its strategies accordingly; tailoring the supply chain to best meet the needs of
each beverage demand.

Expanding Strategic Scope of Pepsi
In Pepsi the agile inter-company scope of strategic fit is essential because the competitive playing
field has shifted from company-versus-company to supply chain-versus-supply chain. Strategic scope
must cover all boxes, at least at the supply chain end. The agile inter-company scope of strategic fit
requires the company to evaluate every action in the context of the entire supply chain. As
competition increases, Pepsi is expanding their strategic scope as they are increasing their product
line by adding “Pepsi Max,” “Mountain Dew” and “Mirinda Apple” to their beverage line.

Human Resource Management
In Pepsi Co. the goal of HRM is the effective and efficient use of the human resources of a
       • Human resource information systems are designed to support:
       – Planning to meet the personnel needs of the business.
       – Development of employees to their full potential.
       – Control of all personnel policies and programs.

Accounting Information Systems
In Pepsi Co. computer-based accounting information systems record and report the flow of funds
through an organization on a historical basis and produce important financial statements such as
balance sheets and income statements. Also emphasize: Cost accounting reports, Development of
financial budgets and projected financial statements, Analytical reports comparing actual to
forecasted performance.

                       Management Information System In Pepsi Co.                             11
Total Quality Management (TQM)
PepsiCo has enjoyed a long, proud history dating all the way back to 1898. Take a trip down
memory lane with us and explore some of our more memorable moments.
TQM, is the process of instilling quality throughout an organization and its business processes. In
the PepsiCo. The system aims at achieving success and customer satisfaction through embedding
an awareness of quality all the way through a business, through planning and feedback. In the
PepsiCo. Company for the Total Quality Management model to work, everyone in the
organization has to get involved. The theory is to work towards using the best possible processes
to offer the best possible products to produce the best possible customer satisfaction. Of course,
perfection is an impossible goal, but working on a basis of continuous improvement can mean
that the impact of Total Quality Management is immense. However, ‘continuous’ must mean
just that – TQM requires commitment over many years and should not be treated as just a fad.
PepsiCo has adopted strict corporate standards that govern our operations and ensures
accountability for our actions.

  Strategies Of Pepsi Co.
  As a consumer products company, PepsiCo does not have the major environmental
  problems of heavy industry. Their biggest environ- mental challenge is packaging
  generated by their products. Packaging is important to public health and a critical
  component of the distribution system that delivers products to consumers and
  commercial establishments. To meet both consumer demand and safeguard the
  environment, they recycle, reuse and reduce packaging wherever possible. Each
  business is also committed to responsible use of resources required in manufacturing
  their products.

  Continually fine-tuned to address the opportunities and risks of the global marketplace.
  Concentrate our resources on growing our businesses, both through internal growth and
  carefully selected acquisitions. Company developed its traditional products and
  expanded into low- fat and no-fat snacks as well as salsas and dips.

                     Management Information System In Pepsi Co.                            12
Divisional Structure
They centrally manage commodity derivatives on behalf of their divisions. These commodity
derivatives include energy, fruit and other raw materials. Certain of these commodity derivatives
do not qualify for hedge accounting treatment and are marked to market with the resulting gains
and losses reflected in corporate unallocated expenses.

These derivatives hedge underlying commodity price risk and were not entered into for
speculative purposes. These gains and losses are subsequently reflected in division results when
the divisions take delivery of the underlying commodity. Therefore, division results reflect the
contract purchase price of these commodities.

                  Management Information System In Pepsi Co.                          13
Technological Factor in Pepsi Co.
Development of additives such as sugarless sweeteners, caffeine free products, and new
flavorings enables PepsiCo to provide products that meet changing customer tastes and
preferences. In addition, computerized manufacturing technologies are great contributions to
higher efficiency and quality in bottling operations. For Pepsi, a critical business challenge is
ensuring that the distribution processes can deliver the right products to the right place at the
right time. According to Jerry Gregoire, Vice President, Information Services, “The competitive
advantage will go to the company that can apply technology to areas such as logistics, getting
costs out of the distribution pipeline and getting products into the stores less expensively while
increasing the availability of sales information.” Pepsi NA’s data communication network is an
important element in the company’s efforts to address sales and distribution challenges with
technology. Connecting nearly 330 manufacturing, distribution, and sale sites around the U.S. and
Canada, the Pepsi NA network transports data help management in controlling inventory. For
instance, sales data helps managers identify regions where certain products are not selling well,
and move any excess inventory to areas where those products are in demand. Sales data also
helps Pepsi’s managers make decisions about products before they reach the freshness date and
must be pulled from the shelf and discarded.

Strategic Alternatives
Out of the many strategic alternatives that PepsiCo could choose to follow, we have chosen to
endorse one that fosters continued growth and diversification. Although their over-diversified
portfolio has hindered their International Growth, these strategies strengthen their overall
corporate worth and market presence domestically.

Pepsi should focus on increasing sales globally to compete effectively with Coke. They
have been beaten badly in some markets, and need to focus more on “un-tapped” areas.

• Continue to diversify their beverage selection through acquisitions. This will enable
PepsiCo to combat the decreased interest in cola. Going along with this, PepsiCo needs
to ensure that they can properly manage all of these acquired companies and should
divest those that show limited potential.

• Increase the use of exclusivity agreements to boost their sales in key markets. This
may make it harder to keep costs low but will ensure added revenues. Another reason
why Coke has continued to beat Pepsi is through its exclusivity agreements with
restaurant chains, sports and entertainment complexes, and college campuses. More
attention in this area will help to battle Coke’s dominance.

• Capitalize on their aggressive corporate culture in overseas dealings. This can help to
combat the weakness of their current international strategies.

                  Management Information System In Pepsi Co.                           14
Information Systems In Pepsi Co.
In responding to market demands for efficient 24- hour “order-to-delivery” process for
customer orders, PepsiCo has installed a computer system that links an effective wide
area network that allows immediate transmission of customer orders.

The outcome has been to integrate with a wide area network, transmit accurate,
complete customer order data, allowing the company to more efficiently load trucks,
schedule deliveries and save man- hours. Information systems link the vendor partners,
who share relevant work, personal, and health-related information about employees.

In order to manage its distribution systems effectively, PepsiCo had put in place advanced logistics
systems. PepsiCo sold beverage concentrate to bottlers, who added carbon dioxide, sweetener
and water to make beverages and beverage syrup. Syrup was ei ther sold directly to the fountain
accounts or was combined with carbonated water for bottling. Bottling companies were (with a
few exceptions) owned and operated by local companies in the countries where PepsiCo

The transportation network has been designed with a view to ensure responsiveness and boost
the availability of the product. For Haidri using fast mode of transport increases responsiveness as
well as the transportation cost but lowers the inventory holding cost. Haidri decides and selects
different modes of transportation having different characteristics with respect to the speed and
size of shipment.

                   Management Information System In Pepsi Co.                            15
Electronic Commerce in Pepsi Co.
Pepsi Takes the Plunge with an Online Campaign

PepsiCo's recent announcement that it would conduct a joint promotion of its products with
Yahoo, one of the most popular sites on the Internet, is promising news for Web site operators
that have struggled to persuade the richest advertisers to spend their money online.

Even as the Internet achieved mass-market audience levels, consumer goods advertisers like
Coca-Cola, Nabisco and -- until now -- Pepsi, have kept their wallets shut, spending mere pocket
change on the Web. They have argued that the medium may be great for direct marketing, but
it does little to advance their primary advertising goal: increasing brand awareness.

SAP announced global brand leader PepsiCo has selected mySAP Business
SAP announced on Wednesday that global brand leader PepsiCo has selected mySAP Business
Suite as the primary business platform for unifying its operations, standardizing business
processes and increasing efficiency across its divisions. The US$27 billion convenience food and
beverage company produces Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks,
Tropicana juices and Quaker foods.

SAP spokespeople declined to comment the value of the deal in either dollars or seats.
However, John Grozier, SAP's vice-president of CRM product marketing, told CRM Buyer in an
interview that PepsiCo selected mySAP to kick off of a major business transformation for the

                    Management Information System In Pepsi Co.                           16
Information Technology Improvements
           –   Executive Support System (ESS)

                   •   ability to closely monitor sales/market share

           –   Decision Support System (DSS)

                   •   reduces costs of raw materials and supplies

           –   Packaging Application Expert (PAX)

                      automates production and logistical processes

           –   Transaction Processing System (TPS)

                      saved 30-50 thousand man hours weekly

           –   Management Reporting System (MRS)

                      eliminated “stales”

                      improved product quality

                      less waste

                      Profit-vision

Marketing and Sales Strategies
PepsiCo has developed the national marketing, promotion and advertising programs that
support its many brands and brand image; oversees the quality of the products; develops new
products and packaging, and coordinates selling efforts.

               Management Information System In Pepsi Co.                       17
Competitive Advantages of Information Technology
      –   interrelates with strategic strategy

      –   creates barriers for new competition

      –   makes switching brands difficult for retailers

      –   gains efficiency through value chain analysis

      –   provides centralized data

Competitive Disadvantages of Information Technology
      –   creates claims of unfair competition

              •   shelf space issue

          Management Information System In Pepsi Co.       18
Software’s used by Pepsi Co.
Pepsi-Cola enhances reliability of machinery with Dyadem
Dyadem, a market leader in Operational and Quality Risk Management solutions, on July 29
announced that Pepsi-Cola Venezuela C.A., a joint venture between Empresas Polar and
Pepsico Inc., is using Dyadem software in its Venezuelan operations to improve reliability in the
company’s beverage manufacturing machinery and to prevent failures in the development of
its system processes. Pepsi-Cola Venezuela, C.A. has selected Dyadem’s FTA-Pro, a software
solution that analyzes the potential for failure from the top down and identifies all the possible
ways a failure can occur within a system. Empresas Polar is one of the country’s largest
producers of both food and beverages.

Dyadem’s FTA-Pro software solution uses the Fault Tree Analysis (FTA) methodology to
determine the reliability of production equipment and can predict when and where a failure
will occur. FTA-Pro facilitates compliance with safety and regulatory requirements, allowing
companies to reduce design defects, product recalls and production downtime. The result is an
increased ability to produce safe, reliable, high quality products. Dyadem’s FTA-Pro serves as an
effective early warning system that allows a company to make proactive decisions when
failures are predicted. This is an essential function for Pepsi-Cola due to the fact that it can take
up to a year to import new machine parts to Venezuela. Dyadem’s FTA-Pro identifies the
potential areas where a breakdown will occur, and gives Pepsi-Cola a warning to begin the
ordering process for replacement parts.

With FTA-Pro serving as Pepsi-Cola’s reliability solution, the company has realized a user-
friendly oversight system. Dyadem’s FTA-Pro is being used to improve Pepsi-Cola’s
maintenance program and is helping the company personnel understand the contributing
factors to a system failure while preventing future occurrences.

mySAP Business Suite

PepsiCo Inc. has selected SAP's full mySAP Business Suite to streamline its distribution and
delivery processes, improve planning and forecasting, and give better visibility to its global
supply chain.

PepsiCo, which manufactures, distributes and markets Frito-Lay snacks, Pepsi-Cola
beverages, Gatorade sports drinks, Tropicana juices and Quaker foods, is aiming to better
link its supply chain and inventory data with its customer data.

                Management Information System In Pepsi Co.                               19
PepsiCo Software Costs
Pepsi Co. capitalize certain computer software and software development costs incurred in
connection with developing or obtaining computer software for internal use when both the
preliminary project stage is completed and it is probable that the software will be used as
intended. Capitalized software costs include only (i) external direct costs of materials and
services utilized in developing or obtaining computer software, (ii) compensation and related
benefits for employees who are directly associated with the software project and (iii) interest
costs incurred while developing internal-use computer software. Capitalized software costs are
included in property, plant and equipment on our balance sheet and amortized on a straight-line
basis when placed into service over the estimated useful lives of the software, which
approximate five to ten years. Software amortization totaled $119 million in 2009, $58 million in
2008 and $30 million in 2007. Net capitalized software and development costs were $1.1 billion
as of December 26, 2009 and $940 million as of December 27, 2008.

Research & Development Activities in Pepsi Co.
They engage in a variety of research and development activities. These activities principally
involve the development of new products, improvement in the quality of existing products,
improvement and modernization of production processes, and the development and
implementation of new technologies to enhance the quality and value of both current and
proposed product lines. Consumer research is excluded from research and development costs
and included in other marketing costs. Research and development costs were $414 million in
2009, $388 million in 2008 and $364 million in 2007 and are reported within selling, general and
administrative expenses.

                 Management Information System In Pepsi Co.                           20
    Continue developing new information technology

    Enhance and upgrade DEX system

    Develop and implement training programs

        –   shared incentive programs

        –   shared purpose

        –   top-to-bottom implementation programs

 •   Implement new processes and mind-sets company wide

            Management Information System In Pepsi Co.    21

   Chopra, Mind (2006) Supply Chain Management: Strategy, Planning and Operation
   http;//
   Haidri Beverages Management Review
   Laudon, Kenneth (2007). Management Information Systems: Managing the Digital Firm. 10th Edition

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