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Operations management problems in pepsico

Paper Type: Free Essay Subject: Business
Wordcount: 4024 words Published: 20th Apr 2017

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Operations management remains as an important branch of study both in the corporate world as well as in academics. Talking of academics, operations management is an important part of the study in the curriculum of management studies. In other words, it is seen that the theoretical base that a manager or a an executive needs to deal with the problems of the company are taught in the curriculum. Operations management is also an important part in an organization (Sweet, Franklyn H. 1964, pp 89-90). A full-fledged department is allocated to look after this need of the organization. In addition to this care is taken that the problems that the organizations face in the field of operations department is solved at the earliest so that the production and quality of the products that pass out of the company does not hamper the growth and image of the organization. Operations management studies the internal working and work process of a company. In fact it can be said that the planning, manufacturing and making of the products of the company is streamlined by the various processes of the operations department of any organization (Sweet, Franklyn H. 1964, pp 89-90). The technical aspects of an organization is taken care of by the operations management of that organization. In fact all organizations and firms have operations management officers and full fledged departments to take care of this aspect of the company. Thus, an organization tends to adopt the marketing strategies that form an important part of the operations management group. Research scholars and market analysts have conducted lot of studies and researches in this field and have confirmed that the principles of operations management and strategies are best suited in any organization and in any sector (Ackoff, R., Rivett, P. (1963), pp. 45-77).

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The eighteenth century saw the introduction of the operations management theory. Later also in the whole of Industrial Revolution, various new theories of operations management and other ideals were used. This ideas let to a great increase in the business of organizations and at the same time ensure that the various approaches developed as part of the operations management theories were used by the organization. Out of the many sub theories and approaches that were developed as part of operations management are Waltham-Lowell system, assembly line practice, etc. In addition to this, the scientific management and the development of the theories of the operations management systems ensured that these help the oragnzaition gain sucees and florish (Ackoff, R., Rivett, P. (1963), pp. 45-77).

One such organization of the United Kingdom that was once one of the most known brands in terms of taste and quality and that suffered great losses due to miss management and problems in the operations management department is the Pepsi. This is a well known name in the field of beverage industries. Pepsi boosts to be one of the latest branches of confectioneries (O’Sullivan, N., Wong, P. (1991), pp.139-55). Pepsi today stands as one of the trusted brands because of the strategic planning and management and marketing techniques that it has been using since long. Thus, it can be said that the operations department of Pepsi has to play an important role in the establishment of the Pepsi as one of the most important names in this sector. However, even such a pronounced operations department of Pepsi could not handle the quality of the Cadbury products (Sweet, Franklyn H. 1964, pp 89-90). There was news in the media that the Pepsi was adulterated with pesticides. This news spread everywhere like wildfire. This negligence by the operations department of Pepsi affected the organization in terms of monetary value and also in terms of loss of trust and brand name (Peters, T. and Waterman, R. 1982, pp. 12-23). This indeed came as a shock to the entire nation as no one has expected that even the most trusted brands like Pepsi could have ever faced such as problem. All the globe was sensitized at this as this acted as an opportunity for other brands to make their place in the market and also for new companies to fear thus this plight of the Pepsi and become more aware of the important of quality and a sound operations management department (Sweet, Franklyn H. 1964, pp 89-90).

An explanation of the process(es) under consideration in the Pepsi group and the process map

Although the finding of pesticides in the Pepsi was world news and it started being banned in most of the places. All stock of Pepsi was seized and that in the factories were stooped from coming out of the company (Sweet, Franklyn H. 1964, pp 89-90). This questioned the already existing operations management techniques that were being used and prominent in the Pepsi industry. This also urged the management of Pepsi to think of the processes that were already existent in the organization. In addition the quality assurances of these processes as well as the authenticity of these processes were questioned and evaluated. Pepsi has always levied importance in the maintenance of the quality processes that were already existent in the organization and that were being used under strict monitoring and check. When this issue relating to the quality of Pepsi came up, then a reflection of the process map started taking shape (Chaffee, E. 1985. pp 34-35). The various processes that was already existing in the organization are given below:

Manufacturing of the soft drink: at first the ingredients required for making the soft drink are made available. These ingredients are vanilla beans, flavor oils, kola nuts and sweeteners. Care was taken that these items are best of the quality and that the water used in it are distilled and free of all impurities (Chaffee, E. 1985. pp 34-35).

Transferring of the Pepsi to the packaging house: After the soft drink is prepared, it is taken to the packaging centers in cans (Chaffee, E. 1985. pp 34-35). Special care is also taken in taking up these steps as no chemicals are mixed with the soft drink so that the amount of soda in the soft drink is changed. In addition to this, the best technology is used at this stage to ensure that the quality remains the same as that while manufacturing (Chaffee, E. 1985. pp 34-35)

Packaging: This steps also requires optimum care of maintaining the quality of the soft drink. It is ensured that the sealing of the Pepsi cans are such that they are air tight and there is no chance of leakage. In addition to this, the cartons, caps and the carbon dioxide used to carbonate soft drinks is in the required quantity. Special care is taken in carbonating the drink as the actual quality if the soft drink depends on this. Special equipment is brought in use to uncase the cans of Pepsi.

Storage: Utmost care is also taken in the storage of the cans as it was said that while in the store, the cans were walked over by rats and other insects and this caused various diseases to the people. It is ensured that the cans are packaged properly and machines do the shifting and storing of the cans before they are send to the retailers and stores (Peters, T. and Waterman, R. 1982, pp. 12-23).

Relevant Operations theories

In order to deal with the operations problems that an organization faces, an organization needs to use various theories and approaches. These theories and approaches help an organization to be able to deal with the problems that have cropped up due to negligence on the part of the operations management department. The various theories are discussed below:

Total quality management (TQM)

This philosophy is an important part of the operation management department of any organization and Pepsi is no exception to this rule (Peters, T. and Waterman, R. 1982, pp. 12-23). This, care is taken that the TQM techniques remain an important part of the customer service and marketing as well as all other branches of an organization. However, more importantly the operations management department of Pepsi should ensure that the principles and procedures of TQM techniques should be incorporated in the operations department in order to ensure that there is no problem or companions in terms of manufacturing of the products of the organization (Peters, T. and Waterman, R. 1982, pp. 12-23). Pepsi thus need to use the TQM techniques and principles and gain back the trust of the customers and stakeholders of the organization. In order to gain organizational objectives, the strategies and principles of the TQM techniques are used to meet the quality standards (Rehfeld, J.E. 1994, pp. 56-59). Thus in order to solve the problem that Pepsi is facing by using the TQM techniques, they have to ensure that they go through the following steps and stages:

1) Identifying the problems: Pepsi has been facing certain problems in the operations department and due to this reason it is constantly facing problems in the quality of the products. Thus, to deal with this, the Pepsi co group has to first identify the problems it is facing and refer or address the problems to the top executives of the organization. This will ensure that they are aware of all problems starting from the grass roots level and that resulted in this drop of quality of the Pepsi group. In addition to this, the problems are also presented in a easy format. In doing this various techniques such as Fish bone drawing etc can be used so that the problems are easily identified by the senior management of Pepsi.

2. Analysis of the Problem

If the problems are listed or displayed in such a manner that it can be easily read, then the analysis of the problems can be easily studied (Peters, T. and Waterman, R. 1982, pp. 12-23). Thus, care will be taken that the analysis of the problems is easy. Only after the analysis of the problems, the various measures that need to be taken to solve the issues can be jotted down. This systematic solving of problems is very important so that the problems are first broken down in to smaller sections so that their root causes can be traced (Hamel, G. & Prahalad, C.K. 1994, pp. 34-38).

3. Generating Ideas

Generating of ideas is very important to solve the problem. For example, the processes that are to be taken for the rectification of the problems are foist jotten down and then ideas are generated as part of the tea or at personal levels that will help in the solving of the issues. Such thinking results in cropping up of excellent and effective ideas so that the problems are addresses in a better way and the root causes of the problems are gained.

4. Testing Ideas

Generation of ideas in important but the process does not end there. After the listing and jotting down of the ideas, they are tested whether the ideas can prove helpful in solving the problems. In addition to that, the stages in which the ideas are to be used also differed and so they should not be implemented without testing the (Peters, T. and Waterman, R. 1982, pp. 12-23). Thus, the effectiveness of these ideas are first tested and then depending on the results, they are finally implemented. The testing of ideas is more like a pilot survey that is made because the actual implementation of the ideas. This helps in gauging the effects of the implementation of the ideas in solving the problems beforehand (Hamel, G. & Prahalad, C.K. 1994, pp. 34-38). Without testing of ideas, it is not generally used directly in any organization.

5. Implementing Ideas

Testing the ideas give an idea of the kind of feedback that will be generated after the ideas are actually implemented. Thus after this pilot study the results is first analyzed and if the results are as desired, the ideas are implemented (Peters, T. and Waterman, R. 1982, pp. 12-23). After the implementation of the ideas, it is clear that the operations program can now be tacked such that the organization does not face similar problems again in future.

6. Checking the Results

This is the last and the finals stage of the implementation of the TQM techniques. Although the ideas were first tested for their potential results and the implemented, a check is always required at the final stage. Thus, even after the implementation of the ideas to solve the operational problems, a check is required to gauge the results of the implementation of the ideas. After getting the results after implementing the ideas, an assessment or evaluation of the results is done. This gives a feedback of the effectiveness of the ideas and helps decide whether the ideas are needed for the future processes or not.

Fish bone theory

Dr. Kaoru Ishikawa is credited with developing the fishbone theory and the fish bone diagram. It is seen that because this theory was developed by her, the theory was also known as Ishikawa diagram. Dr. Ishikawa was a Japanese doctor and worked extensively in this field. Later in her career she was very depressed by the plight of Japan after two nuclear bombs were dropped on two cities of Japan, Hiroshima and Nagasaki (Peters, T. and Waterman, R. 1982, pp. 12-23). She always wanted that Japan should get back its lost grandeurs and prosperity. Thus, in finding out the ways in which Japan would be able to do so, a theory was developed by her known as the fish bone theory. The root of this theory is that problems need to analyzed by jotting down the problems on a sheet of paper and then relating it to the cause and the effect (Heskett, J. 1989, pp. 45-49). This theory was later in used by various disciplined and branches of academic studied. The fish bone diagram now forms an important part of management studies and ensures that the problems that an organization faces is first jotted down and then analyzed. This gives the problems a pictorial looks and thus ensures an easy and clear understanding of the problems.

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Fish bone diagram

this diagram when seen after the completion gives an impression of being drawn on the model of a fish. In fact the diagram is of the shape of a fish. A spine of the fish is drawn and this the plane in which the problems are written extending towards the outer sides. The problems are jotted along the sides giving an impression that these are the bones of the fish (Peters, T. and Waterman, R. 1982, pp. 12-23). This pictorial representations makes the understanding of the problems easy. In addition, while listing the problems they are started form the grassroots level and decided into various categories. For example, the various categories of the organization that might be responsible for the operation problems cropping up in the organization are decided and then the problems that can be placed in these areas are listed. This gives a clear impression of the problems and when this is presented before the higher management, it become easy for them to link the cause and effect and then work towards solving the, . In addition to this another important reason because of which the fish bone theory acts as an important tool in the analysis of the operations problems is that it divided the problems into smaller sub sections. This makes the problem seem easy as when a problem is bigger no way to break that down is found. However, when the problems got broken into smaller parts they seem easy. In addition to this, the linking of the problem to the cause an effect also makes the problems easy to identify. Another pertinent reason that recommends the use of the fish bone theory is that it is generally made in a group. Thsu it cats as a medium through which various ideas and knowledge of different people are channelized into one single chart (Peters, T. and Waterman, R. 1982, pp. 12-23). Thus the chart itself is very informative as the opinion of people from different experiences and history

A comparison of the theory with the actual practice in the Pepsi group

It was seen that the fish bone diagram and the TQM techniques gave an idea of the various problems that Pepsi faced. In addition to this, the Fish bone diagram also listed the various strategies tat are already part of the Pepsi group. These theories hint that the operational department of Pepsi had taken up strict measures for maintaining the quality of the products of Pepsi. However, it is seen that there still were loop hole in these processes because of which there were issues in the quality of the Pepsi company. The various loopholes in the processes that were although defined in the guideline and quality assurance of the Pepsi company but were not followed in practice are given below:

Although various hi tech machines were used for the purification of the water that us being used in the production of Pepsi, there was issues in the quality of the water. When an investigation committee was set up to discuss the reason that led to the finding of pesticides in the packaged cans of Pepsi, it was found put that the ground water was found to be contaminated (Kearney, A.T. 1992, pp. 89-90). Various water purifiers are available in the Pepsi company and they boost of use of high boiling canisters that free the water. In fact the quality process of Pepsi says that not filtered but distilled water is used for preparing the soft drink. Had this process be really followed in reality Pepsi would have not suffered huge losses and spoiled the name and reputation of the organization. Thus it was seen that purification of water was one mis match where Pepsi did not keep up the quality assurance stages that was streamlines in its work plan (Kearney, A.T. 1992, pp. 89-90).

It has been defined in the work plan of the organization that the store and the factory where the soft drink has to be manufactured are free from all types of temperature and humidity issues. In fact, the organization showed that various new and improved storage canisters and rooms have been specifically designed so that the soft drink after manufacturing is placed in better stores before they are packaged. However, this process was not maintained properly and it was later inferred that the machines and storage room that were made were not of the required quality. This made the soft drink being alter in their chemical composition in the high temperature differences in various countries. Thus, owing to theism there were chemical reactions and microbes were able to breed in them and thus contaminate this (Kearney, A.T. 1992, pp. 89-90).

Although the Pepsi company says that they have hygienic and special ceils to store the soft drink for long time till they are finally packaged and delivered, they did not take proper measures to make this practically happen. It was seen that after the Pepsi was manufactured they not stored in hygienic and cold storages. This change in temperature and the unhygienic conditions of the theories led to the contamination of Pepsi.

Although Pepsi boost of having a very well trained staff, they failed to provide proper quality management training to their staff and employees. Owing to this they were unaware of ensuring that none of the variation in temperature level, etc should be done as it drastically affects the quality of the drinks (Kearney, A.T. 1992, pp. 89-90). The employees and crew of the Pepsi company being unaware, ignorant and negligent of these issues ended up in contaminating the drink.

Consideration of its impact on quality and/or customer focus

These problems definitely had a greater impact on the organization. Pepsi was a bigger name in the beverage industry and none of the companies were as popular as it is and give it tough competition. However, with the spread of the new of the Pepsi drink containing pesticides, this acted as a major loss to the organization. Pepsi was banned in all colleges and school on the United Kingdom. In addition to this, various factories of Pepsi were seized and the drink that was already prepared was seized. This new also spread in other parts of the world. In fact all countries stopped the selling of the Pepsi. In addition this affect in the business, the customers also got sensitized by this new. They themselves became much aware of the contamination and abstained from drinking this drink (Kearney, A.T. 1992, pp. 89-90). They also barred their friends an children from having this drink. This indeed acted as a great set back to the Pepsi Company and destroyed its business. In addition to that the trust that it had managed to create among the people was lost. Even till date many people avoid drinking the Pepsi products as the shock that they got regarding its contamination is not out of their minds still.

Recommendations that can be given to the Pepsi group to solve the operational problems

After studying and analyzing the principles in the operational management department of Pepsi co, one of clear of the problems that the organization was facing and the reasons that led to these problems were identified. Thus, the various recommendations that can be given to the Pepsi co group are as follows:

It can be inferred that most of the problems that cropped up regarding the quality of the products is due to the negligence of the employees. It was seen that the staff and crew that were part of the manufacturing department were not well trained and well skilled. Owing to this they did not understand the importance of maintaining accurate temperature and pressure. They did nit understand that minor changes in the level of temperature and pressure while purifying the water etc can lead to drastic disasters as it happen in the case of Pepsi. Thus Pepsi must ensure that all their staff are properly trained before they become part of the manufacturing and operational team of the company (Kearney, A.T. 1992, pp. 89-90)

The company should also understand that when the product that they are producing are consumable items special care is taken that they are hygienic and do not cause any health hazards. This is because a slight negligence on the part of the company may lead to severe results on the health problem and thus in turn may be disastrous to the life of the company and they may even end up losing their license. Thus, Pepsi should ensure that the machines that they are using in the production and purifying of water should be the best of quality. More and more high quality machines need to be brought to test the presence of microbes and other such organization and at the lowest possible level (Chaffee, E. 1985. pp 34-35).

Quality assurance is an important part of the operational management department in Pepsi. This department has to take up the responsibility of ensuring that the products of the organization are best of the quality and that they are passed through various rounds of quality checks such that the products that finally pass out of the organization are best of the quality (Chaffee, E. 1985. pp 34-35).

The management also has to be sensitized towards this cause. They have to ensure that the work process of the organization needs to be changed as there are loopholes in the process. And the loop holes are such that they resulted in blunders foe the organization, Thus, the management needs to incorporate more levels of quality checks and ensure that there is strictly monitoring at all levels.


Thus, it is seen that Pepsi faced several problems due to the negligence by the operational management department. In addition to this there were various other problems that led to such huge loss of eh organization (Chaffee, E. 1985. pp 34-35). However with various theories and approaches of the management of the organization, the main problems that the organization faced were identified.. In addition to the identification, the methods and theories that need to be used in order to rectify these problems are highlighted. It is through the use of these theories that Pepsi was able to regain its lost trust and business.


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