Operations management problem in Pepsi

Introduction
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 n 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). full!fledged department is allocated to
look after this need of the organization. In addition o 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 "uality 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. #esearch 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., Riett, !. (196"),
pp. 4#-$$).
The eighteenth century saw the introduction of the operations management theory. $ater also in
the whole of Industrial #evolution, various new theories of operations management and other
ideals were used. This ideas let to a great increase in the business of organizations and at the
same time ensure that the various approaches developed as part of the operations management
theories were used by the organization. Out of the many sub theories and approaches that were
developed as part of operations management are %altham!$owell system, assembly line
practice, etc. In addition to this, the scientific management and the development of the theories
of the operations management systems ensured that these help the oragnzaition gain sucees and
florish (Ackoff, R., Riett, !. (196"), pp. 4#-$$).
One such organization of the &nited 'ingdom that was once one of the most known brands in
terms of taste and "uality and that suffered great losses due to miss management and problems in
the operations management department is the (epsi. This is a well known name in the field of
beverage industries. (epsi boosts to be one of the latest branches of confectioneries (%&S'llian,
(., )on*, !. (1991), pp.1"9-##). (epsi today stands as one of the trusted brands because of the
strategic planning and management and marketing techni"ues that it has been using since long.
Thus, it can be said that the operations department of (epsi has to play an important role in the
establishment of the (epsi as one of the most important names in this sector. )owever, even such
a pronounced operations department of (epsi could not handle the "uality of the *adbury
products (Sweet, Franklyn H. 1964, pp 89-90). There was news in the media that the (epsi was
adulterated with pesticides. This news spread everywhere like wildfire. This negligence by the
operations department of (epsi affected the organization in terms of monetary value and also in
terms of loss of trust and brand name (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/"). This indeed
came as a shock to the entire nation as no one has expected that even the most trusted brands like
(epsi could have ever faced such as problem. ll 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 (epsi and become more aware of the important of "uality 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
lthough the finding of pesticides in the (epsi was world news and it started being banned in
most of the places. ll stock of (epsi was seized and that in the factories were stooped from
coming out of the company (Sweet, Franklyn H. 1964, pp 89-90). This "uestioned the already
existing operations management techni"ues that were being used and prominent in the (epsi
industry. This also urged the management of (epsi to think of the processes that were already
existent in the organization. In addition the "uality assurances of these processes as well as the
authenticity of these processes were "uestioned and evaluated. (epsi has always levied
importance in the maintenance of the "uality processes that were already existent in the
organization and that were being used under strict monitoring and check. %hen this issue
relating to the "uality of (epsi came up, then a reflection of the process map started taking shape
(01affee, 2. 198#. pp "4-"#). The various processes that was already existing in the organization
are given below+
,anufacturing of the soft drink+ at first the ingredients re"uired for making the soft drink are
made available. These ingredients are vanilla beans, flavor oils, kola nuts and sweeteners. *are
was taken that these items are best of the "uality and that the water used in it are distilled and
free of all impurities (01affee, 2. 198#. pp "4-"#).
Transferring of the (epsi to the packaging house+ fter the soft drink is prepared, it is taken to
the packaging centers in cans (01affee, 2. 198#. pp "4-"#). -pecial 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
"uality remains the same as that while manufacturing (01affee, 2. 198#. pp "4-"#)
(ackaging+ This steps also re"uires optimum care of maintaining the "uality of the soft drink. It
is ensured that the sealing of the (epsi 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 re"uired "uantity. -pecial care is taken in carbonating the drink as the actual
"uality if the soft drink depends on this. -pecial e"uipment is brought in use to uncase the cans
of (epsi.
-torage+ &tmost 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 (!eter+, ,. an- )ater.an, R. 198/, pp.
1/-/").
R elevant 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 (TQ.
This philosophy is an important part of the operation management department of any
organization and (epsi is no exception to this rule (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-
/"). This, care is taken that the T/, techni"ues remain an important part of the customer
service and marketing as well as all other branches of an organization. )owever, more
importantly the operations management department of (epsi should ensure that the principles
and procedures of T/, techni"ues 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 (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/"). (epsi thus need to use the T/,
techni"ues and principles and gain back the trust of the customers and stakeholders of the
organization. In order to gain organizational ob0ectives, the strategies and principles of the T/,
techni"ues are used to meet the "uality standards (Re1fel-, 3.2. 1994, pp. #6-#9). Thus in order
to solve the problem that (epsi is facing by using the T/, techni"ues, they have to ensure that
they go through the following steps and stages+
!) Identifying the pro"lems# (epsi has been facing certain problems in the operations
department and due to this reason it is constantly facing problems in the "uality of the products.
Thus, to deal with this, the (epsi 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 "uality
of the (epsi group. In addition to this, the problems are also presented in a easy format. In doing
this various techni"ues such as 1ish bone drawing etc can be used so that the problems are easily
identified by the senior management of (epsi.
$% Analysis of the Pro"lem
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 (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/").
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 0otted 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 (Ha.el, 4. 5 !ra1ala-, 0.6. 1994, pp.
"4-"8).
&% 'enerating Ideas
2enerating of ideas is very important to solve the problem. 1or example, the processes that are to
be taken for the rectification of the problems are foist 0otten down and then ideas are generated
as part of the tea or at personal levels that will help in the solving of the issues. -uch 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.
(% Testing Ideas
2eneration of ideas in important but the process does not end there. fter the listing and 0otting
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 (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/"). 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 (Ha.el, 4. 5 !ra1ala-, 0.6. 1994, pp. "4-"8). %ithout
testing of ideas, it is not generally used directly in any organization.
)% 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 (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/"). fter 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.
*% +hec,ing the Results
This is the last and the finals stage of the implementation of the T/, techni"ues. lthough the
ideas were first tested for their potential results and the implemented, a check is always re"uired
at the final stage. Thus, even after the implementation of the ideas to solve the operational
problems, a check is re"uired to gauge the results of the implementation of the ideas. fter
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.
-ish "one theory
3r. 'aoru 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. 3r. Ishikawa was a 4apanese doctor and worked extensively in this field. $ater in her
career she was very depressed by the plight of 4apan after two nuclear bombs were dropped on
two cities of 4apan, )iroshima and 5agasaki (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-/").
-he always wanted that 4apan should get back its lost grandeurs and prosperity. Thus, in finding
out the ways in which 4apan 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 0otting down the
problems on a sheet of paper and then relating it to the cause and the effect (He+kett, 3. 1989, pp.
4#-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 0otted down and then analyzed. This gives the
problems a pictorial looks and thus ensures an easy and clear understanding of the problems.
-ish "one 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. spine of the fish is drawn and this the
plane in which the problems are written extending towards the outer sides. The problems are
0otted along the sides giving an impression that these are the bones of the fish (!eter+, ,. an-
)ater.an, R. 198/, pp. 1/-/"). 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. 1or 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.
)owever, 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.
nother 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 (!eter+, ,. an- )ater.an, R. 198/, pp. 1/-
/"). Thus the chart itself is very informative as the opinion of people from different experiences
and history
A comparison of the theory .ith the actual practice in the Pepsi group
It was seen that the fish bone diagram and the T/, techni"ues gave an idea of the various
problems that (epsi faced. In addition to this, the 1ish bone diagram also listed the various
strategies tat are already part of the (epsi group. These theories hint that the operational
department of (epsi had taken up strict measures for maintaining the "uality of the products of
(epsi. )owever, it is seen that there still were loop hole in these processes because of which
there were issues in the "uality of the (epsi company. The various loopholes in the processes that
were although defined in the guideline and "uality assurance of the (epsi company but were not
followed in practice are given below+
6. lthough various hi tech machines were used for the purification of the water that us
being used in the production of (epsi, there was issues in the "uality of the water. %hen
an investigation committee was set up to discuss the reason that led to the finding of
pesticides in the packaged cans of (epsi, it was found put that the ground water was
found to be contaminated (6earney, A.,. 199/, pp. 89-90). 7arious water purifiers are
available in the (epsi company and they boost of use of high boiling canisters that free
the water. In fact the "uality process of (epsi says that not filtered but distilled water is
used for preparing the soft drink. )ad this process be really followed in reality (epsi
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 (epsi
did not keep up the "uality assurance stages that was streamlines in its work plan
(6earney, A.,. 199/, pp. 89-90).
8. 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. )owever, this process
was not maintained properly and it was later inferred that the machines and storage room
that were made were not of the re"uired "uality. 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 (6earney, A.,. 199/, pp. 89-90).
9. lthough the (epsi 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 (epsi 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 (epsi.
:. lthough (epsi boost of having a very well trained staff, they failed to provide proper
"uality 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 "uality of the drinks (6earney, A.,. 199/, pp. 89-90). The employees and crew of
the (epsi company being unaware, ignorant and negligent of these issues ended up in
contaminating the drink.
+onsideration of its impact on quality and/or customer focus
These problems definitely had a greater impact on the organization. (epsi was a bigger name in
the beverage industry and none of the companies were as popular as it is and give it tough
competition. )owever, with the spread of the new of the (epsi drink containing pesticides, this
acted as a ma0or loss to the organization. (epsi was banned in all colleges and school on the
&nited 'ingdom. In addition to this, various factories of (epsi 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 (epsi. 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 (6earney, A.,. 199/, pp. 89-90). They also barred their
friends an children from having this drink. This indeed acted as a great set back to the (epsi
*ompany and destroyed its business. In addition to that the trust that it had managed to create
among the people was lost. ;ven till date many people avoid drinking the (epsi products as the
shock that they got regarding its contamination is not out of their minds still.
Recommendations that can "e given to the Pepsi group to solve the operational pro"lems
fter studying and analyzing the principles in the operational management department of (epsi
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 (epsi co
group are as follows+
6. It can be inferred that most of the problems that cropped up regarding the "uality 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 (epsi. Thus (epsi must ensure that all their staff are properly
trained before they become part of the manufacturing and operational team of the
company (6earney, A.,. 199/, pp. 89-90)
8. 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, (epsi should ensure that
the machines that they are using in the production and purifying of water should be the
best of "uality. ,ore and more high "uality machines need to be brought to test the
presence of microbes and other such organization and at the lowest possible level
(01affee, 2. 198#. pp "4-"#).
9. /uality assurance is an important part of the operational management department in
(epsi. This department has to take up the responsibility of ensuring that the products of
the organization are best of the "uality and that they are passed through various rounds of
"uality checks such that the products that finally pass out of the organization are best of
the "uality (01affee, 2. 198#. pp "4-"#).
:. 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. nd the loop holes are such that they resulted in blunders foe the organization,
Thus, the management needs to incorporate more levels of "uality checks and ensure that
there is strictly monitoring at all levels.

Fi+17one -ia*ra. for !ep+i
+onclusion
Thus, it is seen that (epsi 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 (01affee, 2. 198#. pp "4-"#). )owever 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
(epsi was able to regain its lost trust and business.