The Frito-Lay - Pepsico Subsidiary Headquartered in Plano

Summary

The Frito-Lay case study is about a well-known PepsiCo subsidiary headquartered in Plano, Texas is known as the leading salty snack manufacturer. This snack manufacturer is made up of over 48,000 workers that assist with producing their various products in 36 different plants throughout the U.S. and Canada. In their 1996 net sales report, this company reported an “operating profit of 1.63 billion on net sales of 9.68 billion; which represented 31 percent of PepsiCo’s net sales and 60 percent of PepsiCo’s operating profit” (Kerin and Peterson, 2013). Frito-Lay is currently the lead manufacturer and distributor of snack chips in the United States that is recognized for their ability to “strike a balance between inventory management and customer service” (Heizer & Render, 2017, p. 490).

Key Concepts/Problem Statement, Techniques and Models

This case study provided a better understanding of how product-focused facilities like Frito-Lay use inventory management and planning systems to meet the needs of their customers. According to (Heizer & Render 2017), Frito-Lay uses the four functions of inventory to “add flexibility to the firm’s operations.” Since this company uses raw inventory in their production process a successful inventory management system is crucial for the continued success of the organization. Frito-Lay uses strict inventory control measures to prevent unusable inventory that could create “an unsatisfactory product that in the extreme can also ruin market acceptance” (Heizer & Render, 2017, p. 525).

Question Answers

1. How does the mix of Frito-Lay’s inventory differ from those at a machine or cabinet shop (a process-focused facility)?

Frito-Lay’s inventory is different from those at a machine or cabinet shop because they are a product-focused facility that produces a high volume with a small variety. This company invests a large amount of money into their capital equipment to ensure their production lines are operating as efficiently as possible while maintaining a maintenance/repair/operating inventory (MRO) since most of their products are made with perishable raw materials. Machine and Cabinet shops, on the other hand, do not have to worry about the upkeep of an MRO because they keep a high number of raw materials, work-in-progress, and final products in their inventory due to order variations. Since the demand for Frito-Lay products is not made-to-order like at machine or cabinet shops it can produce products faster and more efficiently than a machine or cabinet shop could.

1. What are the major inventory items at Frito-Lay, and how rapidly do they move through the process?

The major inventory items at the Frito-Lay plants are corn, corn meal, potatoes, oil, and seasonings. The potatoes are delivered to plants daily and held in storage for 7.5 hours until needed in each shift product production. The oil, corn meal, and seasonings last anywhere from 4 to 7 days in the production plants. It takes approximately 1.4 days for the finished products to move from the production lines to distribution chains because the company has equipped their factories and workers with the equipment needed to complete the production tasks.