Please read the case scenario illustrated below and respond to the following questions:
Question 1) What was Pepsico's main business objective for this project?
Question 2) What factors were present to motivate the company to implement this project?
Question 3) Who were the main participants Pepsico had to involve in developing the Purchase to Pay system?
Question 4) Which systems development life cycle approach would have been best used for Pepsico's project? Explain please.
Question 5) Assuming that you were responsible for designing and implementing the new procurement system at Pepsico, what problems and opportunities would you have considered in conducting your initial systems investigation?
Case Scenario: PepsiCo Implements New Procurement System to Minimize Costs
PepsiCo is a world leader in manufacturing convenience foods and beverages, with annual revenues of about $25 billion and more than 142,000 employees. The company consists of the snack businesses of Frito-Lay North America and Frito-Lay International; the beverage of Pepsi-Cola North America, Gatorade/Tropicana North America, and PepsiCo Beverages International; Quaker Foods North America, manufacturer and marketer of ready-to-eat cereals and other food products. PepsiCo brands are available in nearly 200 countries and territories.
The volume of supplies and ingredients purchased by PepsiCo’s Frito-Lay division alone is huge. The company purchases raw materials from hundreds of vendors, which deal in everything from ingredients for potato chips to office products. To manage procurement processes across its divisions, PepsiCo implemented a system it named Purchase to Pay. Purchase to Pay tracks a variety of processes from product purchases to procurement management to vendor selection and payment.
In the company’s ongoing mission to reduce costs, PepsiCo turned to the Purchase to pay system to see whether it could assist staff in negotiating the best deals with suppliers. The investigation uncovered a considerable amount of waste in the procurement process. PepsiCo wasn’t getting good deals on supply purchases and sometimes was being overcharged. PepsiCo needed to improve the system to control its spending. The company’s IS staff set out to develop a standardized system to allow them to better track and analyze purchases. PepsiCo wanted to negotiate volume discounts with vendors and control individual, or “maverick,” purchases that were above negotiated prices.
In exploring procurement solutions from vendors, PepsiCo decided on a system from Business Objects Corporation. That vendor’s system would store procurement data in a database and provide business intelligence information through a Web-based user interface over the corporate intranet. “Ease of use, scalability, and support are some of the reasons why we chose the Business Objects solutions to be an integral part of PepsiCo’s Business Intelligence strategy,” said Tien Nguyen, vice president of application services at PepsiCo’s Business Solutions Group. “The real value in Purchase to Pay comes in the ability to analyze our spending patterns and identify cost saving opportunities,” explains Yelak Biru, Business Intelligence and Integration team member. “Business Objects is the ideal solution for this, and we can replicate the benefits as we extend it across our corporation.”
One example of how Business Objects has improved the Purchase to pay system can be found in PepsiCo’s raw materials payment system. PepsiCo typically pays vendors upon receipt of goods. During any month, the company may receive multiple deliveries from a vendor and will cut a check for each of the deliveries. Using Business Objects solution, PepsiCo can make one monthly payment that provides vendors with an itemized statement detailing each bill of lading, invoice number, the amount of each check, and the grand total, all via an extranet.
PepsiCo has minimized its expenses by streaming the Purchase to pay process. ^The company anticipates a savings of more than $10 million in the system’s first year of operation and more than $43 million over the next three years. Within the next few years, the majority of business intelligence reporting will be done using solutions from Business Objects. As users learn the system and as PepsiCo develops more reports, users are expected to experiment with ad hoc queries and dig deeper into the data. PepsiCo’s new and improved Purchase to pay system is a perfect example of the benefits of continuous improvement through the systems development process. By implementing a new system that is flexible and scalable, PepsiCo has simplified and improved its procurement processes both now and for the future as it changes to meet new challenges.