In the ever-evolving world of manufacturing and distribution, companies must consistently monitor supply chains to maximize efficiencies and increase ROI.
Sometimes this means re-strategizing, which is exactly what PepsiCo is doing.
The elimination of procurement professionals
In an effort to improve its operating model and processes, the company recently announced it has let its global procurement team go, which consisted of about 12 team members, some of whom have been placed in other departments, Advertising Age magazine reported.
"We continue to evolve our operating model to be more efficient and effective," a PepsiCo representative told the magazine. "These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business. Unfortunately, as a result of these changes, some positions have been impacted. These are never easy decisions but we are committed to supporting affected employees by offering severance packages and comprehensive career transition support."
Of course, laying off procurement professionals does not translate to the removal of procurement processes altogether. According to Ad Age, the company's brand executives will now be responsible for handling the wide range of agency services, including media buying, direct mail and sponsorship.
According to Spend Matters, PepsiCo's procurement division only needed to add 0.1 percent in value to the company's over $2 billion annual marketing allowance.
The place of procurement in future supply chains
PepsiCo just celebrated 50 years in business this month, and is the parent company of several well-known brands, including Pepsi, Tropicana, Mountain Dew, Quaker, Gatorade and Doritos. As one of the most established leaders in the market, its decision to rid the supply chain of any designated procurement team may influence other companies' approach to in the future handling of procurement operations.
By centralizing the marketing procurement department, companies are able to streamline operations in a way that increases effectiveness and efficiency. The reason for this is because brand executives "are closer to the consumer and allows them to more quickly balance cost value and quality in all of their decisions," explained a non-PepsiCo executive to Ad Age.
However, after surveying 148 members, the Association National Advertisers recently found that 68 percent of participants did not think the elimination of procurement departments would be a long-term solution for companies.
The participants indicated that procurement teams possess distinct value with specific capabilities, and that procurement processes are too substantial to be absorbed by marketing divisions.