PepsiCo values E2M as a supplier that "exceeds expectations"
The $60 billion company spent nearly $1.3 billion with first- and second-tier diverse suppliers in 2009, and has seen steady growth in its program
PepsiCo (Purchase, NY) is a $60 billion food and beverage company with a worldwide presence. Its very familiar products range from the signature cola drink to Tropicana orange juice and Quaker Oats.
Today's huge company was formed in 1965 by the merger of PepsiCo and Frito-Lay. Each of them had, and continued, their own supplier programs until one centralized supplier diversity program was created in 1982. "PepsiCo has always understood the importance of diversity to the bottom line," says Ernest Freeman, senior manager of supplier diversity since 2004. As more companies joined the PepsiCo family, the supplier diversity program grew.
The procurement organization evolved as well. The supplier diversity team is now part of strategic supply management (SSM), and PepsiCo has three supplier diversity managers with matrix responsibility to the procurement categories and operations they support. They report to a director on the SSM leadership team.
Part of the overall effort
Supplier diversity is considered part of PepsiCo's overall diversity and inclusion effort. The idea is to maintain current achievements and make gains in new areas.
"At the moment our emphasis is on increasing awareness of the importance of supplier diversity among our associates," Freeman says. "We are launching an e-learning curriculum and trying to identify opportunities to expand supplier diversity visibility.
"We're also redefining success," he notes. "Our spend is not the only important variable: it is essential to have a stable supply chain. We want to ensure that our diverse suppliers always have a place at the table, regardless of the economic climate."
PepsiCo offers training in programs like Lean Six Sigma to help its suppliers build capacity that strengthens their capabilities. "We have hundreds of diverse suppliers," says Ron Costephens, director of global capital procurement for beverages. "We select companies to participate in these programs."
PepsiCo spent nearly $1.3 billion with first- and second-tier diverse suppliers in 2009. "Developing processes that ensure the validity of that performance is important," Freeman declares. "Certification is the qualifier and catalyst that drives our supplier diversity agenda.
Although some local and municipal certifications are accepted, diverse suppliers are preferably identified through NMSDC and WBENC. "We're big supporters of those organizations," says Freeman. "As corporate sponsors we have access to NMSDC and WBENC databases.
"But we have many other resources as well," he notes. "I've met likely suppliers at regional conferences and local events. We encourage suppliers to register with us and then we deploy that information internally." PepsiCo buyers often attend the conferences with him.
Costephens notes that the company also hosts its own matchmaking events. "We invite minority firms and non-minority firms in to meet our people. The events focus on products and services that PepsiCo needs."
"Matching requirements and needs with the audience is the DNA of a good matchmaking event," Freeman adds.
Suppliers' own programs
PepsiCo requires its larger first-tier suppliers to have supplier diversity programs of their own. More than 180 of the company's prime suppliers report on their second-tier spending, and the number of minority and women-owned firms among those second-tier suppliers is substantial. "A prime supplier may have thirty or forty minority firms in its own programs," Costephens notes.
The value of the program at PepsiCo, however, goes far beyond the dollars and numbers tracked by the supplier diversity organization. "We sell to a very diverse customer base and we want to reflect that in our supply chain as well as in our talent. We need to reflect the markets we serve," says Costephens.
E2M: from packaging to manufacturing consulting
Stephen Elliott founded E2M (Duluth, GA) in 1985, and Wayne Young, current CEO and president, joined the company as a partner that first year. The two had worked together at Procter & Gamble and understood the need for high-speed packaging.
Young, who has a 1971 BSME from Howard University (Washington, DC), came on board to handle the business and financial side, but, as an ME, he also helped run projects in those early days. Today the company has broadened its offerings to provide not only packaging systems, but material handling and distribution, system analytics and modeling and manufacturing consulting to a number of large corporations.
E2M is certified as an MBE by the Georgia Minority Supplier Development Council, an affiliate organization of NMSDC.
"Around the world with Gatorade"
The relationship with PepsiCo began in the early 1990s with work for Gatorade and other PepsiCo branches. "We worked around the world with Gatorade, including the Far East, Mexico and the U.S.," says Fran Skwira, commercial manager for E2M.
Like Young, Skwira is an ME by training, with a 1967 BSME from Western New England College (Springfield, MA) and a 1969 MSME from Worcester Polytechnic Institute (Worcester, MA). He's the point person for PepsiCo at E2M.
The relationship with PepsiCo helped E2M win large packaging projects with several other customers. Matchmaking events have helped expand E2M's business within PepsiCo. "The people we need to see are at those events. Meeting them might otherwise take years," Skwira says.
The work for PepsiCo helped E2M develop new system supply contracts. "Traditionally engineering is bought using service agreements, but we were able to work out a systems supply agreement that gave us performance fees. This gave us additional margins and helped the company grow faster," says Skwira.
Costephens emphasizes the benefits of the continued working relationship with E2M. "We don't have to explain our many technical requirements and regulations to E2M. As an existing supplier they are already familiar with these requirements," he says.
It's clear that PepsiCo appreciates the services provided by E2M. In fact, Wayne Young has received PepsiCo's Harvey C. Russell inclusion award, an important chairman's award given to suppliers as well as employees who exceed expectations.