Since Pepsi Bottling Ventures (PBV), Raleigh, N.C., formed 10 years ago, bottling has become more complex, to say the least. The production model of the ’90s was heavily based on carbonated soft drinks. In 10 years, PBV has not only seen its SKUs double, but has added more complexity from new non-CSD products.
“What we’ve done is we’ve carefully leveraged both new processes and new technology,” says Matthew Bucherati, PBV’s senior vice president of operations and supply chain. “We’ve looked at every aspect of our complete supply chain and really got into all of those buckets and said, ‘How can we really improve our bandwidth? How do we do more with less, or better, and with more efficiency?’”
PBV distributed more than 70 million cases in 2008 by managing complexity in every phase of the supply chain from planning through manufacturing, distribution, fleet operations and retail. The company also grew its manufacturing capacity to 100 million cases this year with the addition of a direct-blow-fill non-carbonated line and a $25 million investment at its Garner, N.C., plant.
PBV owns and operates five production facilities and is partial owner of two others. The company’s Garner bottling and warehouse facility is its largest and newest and has a capacity of 45 million cases. Its second-largest facility in Winston-Salem, N.C., can produce up to 30 million cases. In 2004, PBV acquired Pepsi-Cola Bottling Co. of Salisbury, Md., and its bottling facility on the Delmarva Peninsula. It is able to service the Delaware, Maryland and Virginia areas from that facility, which has a 15 million case capacity. PBV also operates two small plants on Long Island, a bottling facility in Garden City, N.Y., and a can and fountain syrup facility in Patchogue, N.Y.
The company’s most recent acquisition, Pepsi of Burlington, Vt., in 2007, did not come with its own production facility, but with an ownership stake in two large manufacturing cooperative ventures located in Massachusetts. Bucherati sits on the board of those co-ops.
Most of PBV’s facilities are able to service the areas where they are located, although most of the company’s very complex products are produced in Garner or Winston-Salem, and shipped to other locations.
The bottler produces more than 95 percent of its sales volume, and the few beverages it doesn’t produce are hot-fill products. The company carries in excess of 500 SKUs, and 120 new launches already are scheduled for next year. Additionally, packaging innovation continues to expand production demands.
“For many years we dealt with the big three or four packages, 2-liters, 12-packs and 20-ounce, and now there are custom package sizes for almost every channel and every type of consumer,” Bucherati says.
In general, PBV considers itself a very low-cost producer in all of its markets, particularly in North Carolina, Bucherati says. “Our manufacturing and distribution costs are very low compared to the industry standard we benchmark,” he says.
But when a bottler has long-distance logistics, fuel is a great cost. “It’s very hard to be any more productive to overcome that fuel penalty, especially when you are already at the low range of the cost scale,” Bucherati says. “You don’t have a lot more to dig out.”
To combat the fuel challenge, PBV uses route optimization software to determine which accounts are best serviced from its 23 distribution warehouses. Centralized supply chain planning also plays a significant role in leveraging its distribution software.
Growing through technology
Around 700 employees, or about one-third of the company, work in production and distribution, with the vast majority involved in warehouse distribution. Because PBV’s plants are very automated, particularly the Garner plant, the company has low staffing levels in manufacturing, Bucherati says.
With PBV’s rapid growth in water and non-carbonated small package beverages during the past four years, the company quickly was reaching capacity. PBV knew it needed to expand, but at the same time, wanted to lower operational costs and the costs of goods, Bucherati says.
“The right way to do that is to gain more control of our overall supply chain by moving into self manufacturing,” he explains.
In February 2007, PBV broke ground on a 65,000-square-foot addition to its 290,000-square-foot production and distribution facility in Garner. The new space accommodates an $18 million investment in a direct-blow-fill line, with room to house another line in the future.
“Essentially, we’ve just taken over part of the supply chain that used to be provided to us by a third-party bottle supplier,” Bucherati says. “That dramatically reduces our cost of goods by eliminating the transportation of empty bottles, which is like shipping air.”
In addition, PBV has the ability to considerably lightweight those bottles, since they are blown and filled concurrently. The bottles are 10.9 grams, which represents a 40 percent reduction in the company’s PET usage. This lightweighting helps the company meet its sustainability initiatives, Bucherati says.
“This is one of those perfect combinations of adding capacity, dramatically reducing our costs and significantly impacting our sustainability footprint,” he says.
“I would only build bottle lines that include blowing equipment,” he adds. “And the lines we do have, we are going to add self manufacturing to in the future. It doesn’t make sense anymore to not self manufacture. It’s a process that we know we can do.”
After the bottles are blown, filled, capped, labeled and shrinkwrapped in cases on the new line, the cases are conveyed to new robotic case stacker. The machine consists of two robotic arms capable of gently handling the lightweight bottles. The first robotic arm sorts the cases to form a layer, and the second arm stacks the layers.
The addition includes other sustainably directed technology as well. It features light-focusing skylights that on most days provide enough light for the facility without activating the sensor-controlled overhead lights. PBV also uses the by-products of primary thermal processes involved in manufacturing to heat and cool the addition.
“In the summer, we’ll use natural vaporization of nitrogen, which is a primary process, to refrigerate this building,” Bucherati says. “In the winter, we’re going to be using the waste heat of our compressors, which are very large high-pressured compressors, to heat this building.”
PBV also invested in its water system and purchased equipment to improve reverse-osmosis efficiency.
The Garner plant houses four other high-speed, automatic lines: two additional PET lines, one can line and one fountain line. On small package sizes, the first PET line can fill up to 1,100 bottles a minute, and the second PET line is capable of producing 400 2-liter bottles a minute. The can line operates at 1,600 cans a minute.
With a focus on continually improving its plant capabilities, PBV approached Pepsi-Cola North America at the end of 2007 to produce Amp Energy Drink in house. PCNA previously contracted Amp production to a third-party operator, but wanted to bring the product into the mainstream bottling network, Bucherati says. The Garner facility was the first Pepsi facility to begin producing Amp in early 2008. As the pilot plant, PBV helped PCNA redesign Amp’s packaging, and also modified its existing can line to be able to produce it.
“The nice thing is that we saved our company and our parent company a lot of money,” Bucherati says. “…Our Amp Energy has had explosive growth and being able to pull cost out of the supply chain and invest those savings back into the product have helped a lot.”
Technological advancements also are playing a role in the company’s warehouse. About four years ago, PBV implemented voice-activated order picking through SAP software in its warehouse. Warehouse order pickers arrive in the afternoon and pick up their electric pallet jacks and a headset with microphones. Through the headset, the computer, called Pick Director, tells them what to pick. Wireless transmitters on the ceiling allow the computer and pickers to communicate, and no paper is involved.
“Think of it as an orchestrated dance because all the products are laid out in the order that they are picked,” Bucherati says. “It’s all done electronically so we have people always moving in the same direction. We essentially do electronic traffic control on this floor.”
One order picker usually picks 250 cases an hour. The technology allows PBV to train an order picker in two to three days vs. its old system, which took two to six weeks for an order picker to become proficient.
“We have an order picking of 99.98 percent accuracy, which is really good,” Bucherati says.
At the same time it installed the voice-activated order picking system, PBV put in semi-automatic layer-picking equipment that is capable of picking 2,500 cases per hour.
“We’ve begun to bring the automation process to our warehouse,” Bucherati says.
PBV also is working to tie every piece of equipment on its lines together with a central intelligence system. When completely commercialized, the company will know real-time metrics for performance analysis.
“It gives us a way to both analyze and respond and predict what our lines are capable of,” Bucherati says.
Every time PBV starts a new project, it must determine how the project will help the company reduce its environmental footprint or make it more sustainable. For example, PBV gives its vendors specifications for electrical usage and helps co-design equipment to be efficient.
In line with its sustainability goals, this year, the company is buying its first set of heavy-duty hybrid tractors, which are set to arrive in early May. The bottler has been buying small hybrid vehicles for the past three years. PBV also will change out all of its propane forklifts to high-efficiency electric forklifts.
In addition, the company has installed equipment with a focus on water efficiency. Water recycled from production is used to cool compressors or clean the facility or fleet.
“We’re not just treating water for primary use on a product, but we continue to retreat and reuse water that would normally be considered wastewater,” Bucherati says. “We’ll reuse water two or three times before it is finally used up … A fun part of this project has really been tasking our team to be creative in how we can best improve our water usage in the facility. We acknowledge that we’re a large user of water, and we want to make sure it’s all used very responsibly.”
In the future, PBV is looking at new equipment to add flexible canning capabilities for making multiple sizes of cans, tunnel pasteurization, and electron beam sterilization.
“Whenever we touch our lines to specifically engineer a new product or package, we really focus on maximizing capability,” Bucherati says. “What we already have now is vastly flexible and capable production lines. We are very nimble and capable already, but part of that means that we can commercialize even more exotic packaging very rapidly.
“Five years ago, we might plan something that might be a six-month lead time to accomplish. Now when we are contacted about new products, sometimes it’s a matter of just two or three weeks before we are able to actually run it. We created the ability to be very nimble in our capabilities.”