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PepsiCo Distribution Warehouse

BUS 473 Term Project

Brandyn Cox

on 5 April 2011

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Transcript of PepsiCo Distribution Warehouse

Introduction Current Process Alternatives Pepsi Beverages Company BUS 473 Term Project Q&A Session Public corporation headquartered in Purchase, Harrison, New York, USA
Competes in the global food, snacks, and beverages industries
Pepsi, Mountain Dew, Lays, Doritos, Quaker etc

Financial Overview
PepsiCo PepsiCo subsidiary
formed from the recent merger of Pepsi Bottling Group and PepsiAmericas
Operates in the US, Canada and Mexico
encompasses approximately 75 percent of PepsiCo's North American beverage volume.
Brands: Pepsi, Mountain Dew, Sierra Mist, Aquafina, Gatorade, SoBe, Lipton, and Amp Energy
Pepsi Beverages Company Located on Annacis Island
was a PBG facility until the 2010 acquisition by PepsiCo, since been re-branded as a PBC facility
Warehouse is located in the same building as the production facility and the sales and administration offices
PBC Delta Warehouse Project Scope 1) Lance Curpen, Product Availability Supervisor and Scott Davis, Product Availability Manager.

2) Taranjeet Bhangu
Recommendations Main Goal: Reduce overtime required during the upcoming busy summer months
Aiding supervisors in scheduling employees and helping management decide whether investment in new equipment is needed
Primary Goals Outline Forklifts would be assigned specific jobs
“Builders” would build pallets + drop them at wrappers “Loaders” would load wrappers, remove pallets afterwards and load the bulk trucks
All pallet jacks would be assigned to building
Bay truck process is unchanged
Alternative #1 – Drop Bulk Pallets Alternative #1A - 5 Building FLs 10 builders (5 pallet jacks) + 2 loaders (forklift)
Builder capacity of 37.5 pallets / hour
Loader capacity of 30.0 pallets / hour (constrained by wrapper capacity)
Backlog at wrappers builds by 7.5 pallets / hour, to a max of 67.5 pallets (about 1 A.M.)
Total wage costs (bulk) incl. overtime: $4,050
Alternative #1B - 4 Building FLs 9 builders (5 PJs) and 2 loaders (forklifts)
Builder capacity: 33.75 pallets / hour
Loader capacity: 30.0 pallets / hour
Maximum backlog (wrappers): 37.5 pallets
Total wage costs incl. overtime: $4,125
Alternative #1C – 3 Building FLs 8 builders (5 PJs) and 2 loaders (forklifts)
Builder capacity: 30.0 pallets / hour
Loader capacity: 30.0 pallets / hour
Aligned capacities creates no wrapper backlog
Total wage costs incl. overtime: $4,200
$150 cheaper than 1A x 100 days = $15000
Pick Area Warehouse Layout 1 2 3 4 5 Outline the current process and problems Use of operating management tools at facility Analysis of the process Alternatives for improvement Recommendations Alternative #2 - Night Shift In lieu of having employees work overtime

Relieve necessity to have employees frequently work overtime
“100 Days of Summer”

‘fresher’ workers = less errors in the process?
Current system (overtime @ $45/hr): $2160 overtime
Night shift (@ regular wage of $30/hr) = $1440
Wage cost savings = $720 each day Night Shift Analysis
Complication: supply of night shift workers

$30 ≤ wage rate < $45

Built-in incentive only a 4-hour shift (12:00-4:00)
-Part-time workers? Night Shift Analysis -The most pricey alternative
Other alternatives should be considered first
-Requires more warehouse space
Spaced limited due to the extra-inventory stored around the warehouse
-If process remains unchanged, this shifts a bottleneck to the pallet jacks and forklifts Alternative #3 - New Wrapper New Wrapper - Advantages Greater capacity to meet higher summer demand
Increases process flow somewhat
Reduces overtime expenditures
Enables better allocation of resources
Implementation will clear inventory built up around the wrappers -Capacity increases from 30 to 33.488 pallets/per hour
-A cost of new wrapper: $100,000
-Amount saved on one hour overtime
$45*12 = $540 per day
During busy summer period of 100 days this amount grows up to $54,000
Present Value : 54,000/(1.015692)^6= $ 50,698.77 New Wrapper - Analysis New Wrapper - Resource Allocation -Lower Utilization rate at Bay area allows:

Enables shift of workers to bay area until completion (2 hours); afterward, full capacity of 15 workers can move to bulk area

However, space limits do not allow all 15 to work in such a small space; full benefits are therefore not achievable

Operational costs decrease from $5,220 to $4,050
Effects of New Wrapper Summary - New Wrapper •Optimal solution with limited resources

•Most cost-efficient alternative

•Better synchronization of process
-Optimal solution with limited resources:
Additional 4 workers are added to the bay section to complete the order, and then to shift back to the bulk

-Enables more flexibility and greater effectiveness of resources

-Reduces necessity for overtime
Alternative #3 Hand-Wrap Small Bulk Pallets -Reduces work load of process bottleneck (wrappers)
Throughput increases
No required investment in new machinery

-Hand-wrap + machine wrap simultaneously

-166 less pallets sent to wrappers
These pallets are then built at:
15mins (Build) + 1min (Printer) + 0.5mins (Hand-wrap) + 1min (Load Truck) = 17.5mins per pallet
Instead of 21.5mins
Lower quality wrapping, but
Small size somewhat offsets this
Should be fine during shipping process
Bottleneck shifts to builders of medium and large pallets

-Investigate further! Hand-Wrap - Conclusions -Optimal choice is one of the following:
Drop bulk pallets with 4 pallet-building forklifts with 2 at the wrappers
Drop bulk pallets with 3 pallet-building forklifts with 2 at the wrappers

-Trade-off exists

-4 forklifts:
Bulk process wage cost is $4,125
Hour less of OT
Wrapper backlog reaches 37.5 pallets

-3 forklifts
Bulk process wage cost is $4,200
Same OT as current process
No wrapper backlog
Drop Bulk Pallets Other Recommendations Introduction of a night shift
Hand-wrapping small bulk pallets
Unambiguous benefits from each
Combination of several alternatives Sources of Information Sviatoslav Moldavanov
Brandyn Cox
Taranjeet Bhangu
Slavica Aleksic
Hans Melis
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