How PepsiCo Revamped Its Supply Chain

Pepsi, Doritos, Lay’s, Tostitos … even Captain Crunch. They are the food and beverages of our youths, and likely of our adulthood too, but they just don’t magically appear on store shelves. They arrive there thanks to the extensive supply chain network parent company PepsiCo North America has built over decades.

But that supply chain needed an update a few years ago. And an update it received.

“It is a large and complex supply chain, and what I’m going to do this morning is share our story, our story of transformation that started three years ago when we announced a big, bold vision and all the things that we needed to do to adjust and start to embrace the complexity that that transformation afforded,” Laura Maxwell told the audience at the recent Manifest conference in Las Vegas. Maxwell, who is the senior vice president of supply chain for PepsiCo North America, went on to tell her audience that it’s “important to take a step back and understand where you’ve come from.”

Performance with purpose

Maxwell detailed the transformation of PepsiCo’s supply chain as it introduced the concept of “performance with purpose.”

“We have a tremendous CEO, Steven Williams—he a visionary—and he set up this vision for us coming out of COVID that said we needed to be always everywhere,” Maxwell related. “Now always is about the consumer. So always says that we should always be the consumer’s choice in foods. Well, if you’re always going to be the consumer’s choice in foods, you can hardly just be chips in a bag. Although chips in a bag are great, we had to be about canisters and meat snacks and pasta and mixes and syrups and cookies. So, the complexity of going from a foods organization that was very much focused on a small number of substrates to a complex group of line items was definitely something that we had to embrace.”

Playing catchup

Maxwell said looking back, she realized PepsiCo was behind in manufacturing and distribution capacity.

“We didn’t have the space or the number of SKUs that we needed in any of our fulfillment centers,” she said. “We had done fine on our sustainability journey. That’s what I’d call it; we were doing fine on the journey of sustainability, but there was a lot that we needed to change and transform in a very quick way.”

The supply chain was good at meeting line-item optimization, simplification of ingredients and location reduction, but to Maxwell, “those were not things that were going to help us transform into an always everywhere world. So we knew we had to change.”

Giving credit to the vast team that made the transformation possible, Maxwell noted three areas that needed attention: technology partners, innovation partners, and digital partners. PepsiCo Labs led that journey, she said, with a vision to be “a leader in tech innovation by integrating emerging tech solutions into PepsiCo.”

Connecting with innovators

PepsiCo Labs has empowered the “big ship” that is hard to move to connect with innovators.

“They literally connect us. And what I think they do is it’s about the potential of both businesses, both our business and the partners that we go with,” Maxwell said. “And there are two distinct things that they have done that I think set them apart from anyone else that does something like this. Number one, they know the business. If they were up here on stage with me, they know the supply chain as well as any of us know the supply chain. So, they don’t just find solutions trying to chase down a problem that it would be good for. They understand the problems of the business and then go seek out emerging technology innovation, digital solutions that can help us solve them. Secondly, they have a very unique way of getting through this rapidly so that we can pilot and scale, whether it’s manufacturing, warehousing, fleet, all the way through sales because they partner with all kinds [and] all sides of the business.”

Maxwell said PepsiCo Labs has evaluated over 2,500 startups and ultimately settled on approximately 200 pilot projects. Some of those have scaled, like autonomous technologies. The other area where PepsiCo Labs has led the transformation is in goal setting.

“Now that sounds obvious, we all set goals, but I don’t know about you from a supply chain perspective, as an engineer, I was raised to only do smart goals. They have to be smart, they have to be achievable … but here’s what I’ve learned: When you have to transform, you need to set enormous goals, goals that scare people and then figure out how to go after them,” Maxwell said.

Measure once, twice …

A couple of those goals were to measure everything—water usage, carbon output—and to create a path to decarbonization. PepsiCo is expecting to have all vehicles going in and out of a Queens, New York, distribution center to be electric before the end of this year. In Modesto, California, PepsiCo is running Tesla electric semi-trucks.

“We have been very focused,” Maxwell said. “By the end of last year, all the direct fleet coming in and out of Modesto achieved a 91% reduction in greenhouse gas thanks to those teams. So declaring enormous goals and going after them was definitely a part of the dream.”

The final factor in the transformation, which Maxwell touched on earlier, is the partnership aspect.

“When we came out of COVID and we said, okay, we’ve got to transform, what I said to myself as a leader is, truthfully, I will be happy just to get back to pre-COVID levels,” Maxwell said. “That’s where I’ll be happy. And again, I get to stand on the stage, but thanks to the amazing teams in supply chain, those goals have been far exceeded in the last three years. And so much of that is because we didn’t choose to go out on this journey alone. We chose partners.”