PepsiCo committee unfolded the operational problems that lead

PepsiCo
is an American multinational beverage, snack, and food corporation formed in
1965. PepsiCo is the second largest company in the global food and beverage
industry. For many years, PepsiCo maintained continuous international growth
and expansion with its exceptional operations, marketing and management
strategies. However, the company suffered huge losses due to critical issues in
its operations management division. In India in 2003, the Center for Science and
Environment (CSE) claimed that based on its research findings, 12 brands of
Pepsi and Coca-Cola contain pesticides levels up to 24 times higher than the
permissible limits set by the Bureau of Indian Standards (PTI, 2004, para. 2).

The pesticides allegations affected PepsiCo’s public image and hit its sales
substantially. In fact, a few years after the release of the groundbreaking news,
Pepsi and Cola’s soft drinks’ production and sale were banned for a few months
within Kerala, India in 2006, and in many schools and colleges around the world
(Gentleman, 2006, para. 13).  To the two
large company’s relief, the problem came to an end in 2010 in their favor.

Luckily, the Supreme Court of India ruled out that the percentage of pesticides
did not exceed the tolerance limits, since there were no standards for
pesticides adulteration prescribed at the time of the accusations (Business
Standard, 2013, para. 2).

Cause of The Problem

The
company’s investigation committee unfolded the operational problems that lead
to the pesticides contamination. While PepsiCo assured customers the use of
high-tech machinery to purify the water used in beverages, tests showed that
the ground water being used for the production of the soft drinks in India was
highly contaminated (Gentleman, 2006, para. 30). In addition, the storage rooms
that were used to store the beverages before they were packaged were not of the
required hygiene and degree of cold temperature. Both of these factors dangerously
altered the beverages’ chemical composition and allowed for the growth of
microbes, which ultimately lead to contamination. Lastly, results show that
PepsiCo lacked in proper quality training of its employees and staff (para. 22).

This is also shown by their negligence in storing the beverages within the
particular required environment, temperature, and pressure.

Areas of Operations
Management Affected

The
allegations affected many areas of operations management, one of which is the product
design. The contamination impacted the quality promised to customers, and
in return created customer distrust. In addition, the Quality Management area
was under questioning as the quality of production caused the contamination.

Another area affected is the process design, since the production
process and equipment used to produce the soft drinks required revaluation. Human
resources also got affected, as better quality training of employees and
staff was later on required to ensure product safety. After the allegations
began, all stocks of the soft drinks were in custody, therefore affecting the inventory
area of the operations management. In addition, machinery and equipment
used in the product required reassessment and maintenance to prohibit
any contamination.  Lastly, the
controversy caused by the contamination of the beverages affected the location
in which the company operates, and forced for relocation as a result of
Kerala’s ban of Pepsi’s production and sales.

Addressing the
problem

PepsiCo
refused to address the allegations, and claimed that the CSE’s report was
inaccurate. The company also formed committees in India and the U.S. to work on
legal and public relations issues. However, the company’s unresponsiveness to
the allegations was ineffective and created customer suspicion instead. The
company then attempted to decrease backlash by advertising its products’
safety, and inviting Indians to visit its plants to see how the products are
made (Gentleman, 2006, para. 29). Those measures were found ineffective since most
customer trust and loyalty was not retrieved until many years later, after the
court ruled out the allegations.

Ideas for future
improvements

Since
the company’s operations management was fully responsible for the issue, PepsiCo
should show its customers that it is undergoing assessments and evaluation of
its existing OM areas to ensure customers of the products quality and safety,
and restore customer trust. A little more communication and transparency on how
the company plans to solve the problem would have increased credibility amongst
India and toned down the backlash. Most importantly, the company should
incorporate more quality checks and higher monitoring at all of the production
levels. 

Conclusion

Operations
management is a key part in any business, and any problem in the OM division
can obstruct the growth, development, and image of a company. This is proven by
the allegations that PepsiCo faced of having pesticides contamination in its
soft drinks due to the lack of proper operations management and monitoring and
the tremendous impact that the company endured towards its sales figures and brand
image. Similar problems in other organizations are easily observed in many case
studies where major issues stem out of neglect for the key role that operations
management plays within any company’s process. The implication out of such
situations is that more care should be given to constant monitoring and
updating of the operations management strategy to improve the company’s proper
growth, development, and image. 

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