Tag: PepsiCo

OM in the News: PepsiCo Turns To Digital Twins To Rethink Plants

We posted recently about the joint nuclear fusion digital twin work of Siemens and NVIDIA. Today’s news is that PepsiCo is working with the same two firms  to change how it designs, tests, and expands its plants and warehouses using AI and digital twins. “Physical industries are entering the age of AI. For companies with real-world assets, digital twins are the foundation of their AI journey,” said NVIDIA’s CEO.

By modeling factories and distribution centers digitally before making physical changes, PepsiCo hopes to cut down on costly mistakes while improving speed and capacity.

With AI-driven digital twins, teams can simulate plant layouts, equipment movement, and supply chain operations in detail, reports SupplyChain (Jan. 7, 2026). Instead of expanding facilities the old way, which can be slow and expensive, they can test changes virtually and see what works before spending money on physical upgrades.

“The scale and complexity of PepsiCo’s business is massive—and we are embedding AI throughout our operations to better meet the increasing demands of our consumers and customers,” said PepsiCo’s CEO. The digital models recreate machines, conveyors, pallet routes, and even worker movement, helping teams spot problems early and test different setups in weeks instead of months.

By finding bottlenecks and unused capacity in a virtual setting, teams increased throughput by 20%. The same approach has also shortened design cycles and helped cut capital spending by 10-15%. Testing ideas digitally first, teams can plan ahead, compare options, and move faster without the usual surprises that come with physical expansion.

Classroom discussion questions:

  1.  How is PepsiCo employing digital twins?
  2. How do AI and digital twins work together?

OM in the News: Pepsi’s Supply Chain Emissions Problems

Two years ago, the CEO of a large British food chain, Tesco, told PepsiCo and its other suppliers: “We don’t sell air — and we don’t transport air”. He then warned all suppliers that, if they did not address the problem of overpackaging, their products were at risk of being removed from Tesco’s stores.

PepsiCo listened: it began cutting down on packaging and bringing in more eco-friendly materials, such as cardboard. Now, writes Financial Times (Feb. 22, 2022), the $235 billion company is looking to exert a similar influence on its own suppliers.

Like many consumer goods companies, PepsiCo set out ambitious climate goals, saying it would cut greenhouse gas emissions throughout its value chain by at least 40% by 2030. But 92% of PepsiCo’s total emissions come from outside its own operations, so it has to persuade suppliers and customers to cut emissions amounting to 22.6 metric tons of carbon dioxide per year — equal to taking about 5 million cars off the road.

The maker of Mountain Dew, Doritos and Quaker Oats is not alone in the scale of the challenge it faces. Tesco’s other suppliers risk falling behind on their climate aims because more than half of them lack any climate targets at all, and only one in 40 have science-based targets.

PepsiCo will make changes to its transport and to the coolers used for its drinks and will also push its suppliers to switch to renewable energy. But to achieve its emissions goals, it must also look back along its supply chain and persuade farmers who produce millions of tons of commodities annually to change their own practices. When it comes to Frito-Lay chips, this is comparatively straightforward. While PepsiCo does not own potato farms, it buys the crop directly from potato farmers, so it is piloting a program to process potato peelings into low-carbon fertilizer on its supplier farms. This has the potential to reduce fertilizer emissions by 70%.

In Illinois, for example, PepsiCo is working to pay farmers for switching to greener farming methods such as no-till cultivation and cover crops, to target 20,000 acres of land. Farmers are a conservative group, however, and not prone to rapid change. But they will need to scale up rapidly if PepsiCo is to reach its goals.

Classroom discussion questions:

  1. Watch the Supplement 5 video in MyOMLab called “Green Manufacturing and Sustainability at Frito-Lay” or read the case study on page 209 of your text. What other tools is PepsiCo (the parent company) employing to help environmental concerns?
  2. Why is sustainability a major issue for operations managers?