An approach to sourcing optimization at a high volume soft drink manufacturer

Abstract

The Pepsi Bottling Group (PBG) is the world's largest manufacturer, seller, and distributor of carbonated and non-carbonated Pepsi-Cola beverages. The supply chain network in the United States consists of 52 plants, over 360 warehouses, and an ever growing portfolio of SKU's. Currently, there is no robust method for determining the sourcing strategy - in which plant(s) to produce each product. The objective of this thesis is to develop an approach that allows PBG to determine where products should be produced to reduce overall supply chain costs while meeting all relevant business constraints. An approach to sourcing utilizing an optimization algorithm is presented, along with a suggested implementation plan. This approach has demonstrated the potential to generate significant cost savings throughout the supply chain. The research for this thesis was conducted during an internship with the Pepsi Bottling Group, in affiliation with the Leaders for Manufacturing program at the Massachusetts Institute of Technology.