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Case Frito Lay

OM - Case study Frito Lay

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14 views4 pages

Case Frito Lay

OM - Case study Frito Lay

Uploaded by

houtarou28042000
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Production and operation management

FRITO LAY CASE STUDY ANALYSIS


Chapter 12
Introducion

1. How was Frito Lay form ?


- Frito-Lay began as two separate company in the early 1903.
- The company merge in 1961 to form “ Frito-Lay, Inc” by Herman Lay.
- It became a subsidiary of Pepsi-co in 1965.
2. About Frito-Lay company
- Frito-Lay is an American subsidiary of Pepsi-co that manufactures, markets and
sells corn chips, potato chips, and snack foods.
- Controlling more than 35% of the world markets and 60% in the US.
- Frito-Lay is the world in the salty snack category.
3. Frito-Lay product:
The primary snack brands produced under the Frito-Lay are:
 Fritos corn chips
 Cheetos cheese-flavored snacks
 Doritos and Tostitos tortilla chips
 Lay’s and Fuffles potato chips
 Rold Gold pretzels
 Walkers potato crisps ( in the UK and Ireland)
Each brand generated annual worldwide sales over $1 billion in 2009.
Frito-Lay Case
 Frito-Lay Company has problems in the supply side due to the raw material
storage management section.
 The problem is the time and quality of storage of raw materials when shipped and
packaging of supplies that take a very long time.
Relevant theories
Inventory Management refers to the process of ordering, storing, using and selling a
company’s inventory includes the management of raw materials, components and
finished product, as well as warehousing and processing of such items.

INVENTORY CASE:
 Raw Materials: represent various materials a company purchases for its
production process, must undergo significant work before a company can
transform them into a finished good.
 Work-in-Process: represents raw materials in the process of being transformed
into a finished product
 Finished goods: are completed products readily available for sale to a company’s
customers
 Merchandise: represents finished goods a company buy form supplier for future
resale.

Dicussion question:
1. How does the mix of Frito-Lay’s inventory differ from those at a machine or
cabinet shop ( a process-focused facility
2. What are the major inventory items at Frito-Lay, and how rapidly do they move
through the process ?
3. What are the four types of inventory? Give an example of each at Frito-Lay.
4. How would you rank the dollar investment in each of the four types ( from the most
investment to the least investment)?
5. Why does inventory flow so quickly through a Frito-Lay plant ?
6. Why does the company keep so many plant open ?
7. Why doesn’t Frito-Lay make all its 41 products at each of its plants ?

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 Company is a product oriented or focused manufacturer determined to


the large volume of a few different variety products.
 . Frito-Lay Company has invested in buying of the machinery in order to
maintain a volume manufacture lines in a seamless manner while at the same time
upholding the right MRO as a result of producing products that constitute of raw
consumable ingredients.
 . Frito-Lays manufacturing plants across the board have unique inventory because
they all concentrate on having a merchandise that makes use same raw materials.
2. What are the major inventory items at Frito-Lay, and how rapidly do they
move through the process?

The major inventory products in Frito-Lay are corn meal, potatoes, corn, oil as
well as seasoning. The case indicates that the potatoes come through trucks on daily
basis and consumed in a single shift because the company having a storage that can
only hold the potatoes for 7.5 hours. While the other inventory averages of 41/2 days,
4 days, and 7 days. In a span of 1.4 days, the finished products do move from
production to distribution
3. What are the four types of inventory? Give an example of each at Frito-Lay.

 Raw materials: (potato, corn, corn flour, oil, and seasonings)


 Work in process: (snacks that are in the process of making)
 Finished goods: (snacks that are bagged and ready to go)
 MROS: (motors gears parts and other repair materials)

4. How would you rank the dollar investment in each of the four
types (from the most investment to the least investment)?

1. MRO:
The dollar value of the inventory to run the plant efficiently will have the highest
inventory value.
2. Finished Goods from Frito-Lay Factory
Assessed at the cost of the finished product (including raw materials, labor,
depreciation and other conversion costs), 1.4 days of production is quite a value
because the more efficient in speed it is, the greater the cost.
3. Raw Materials that go into the production of processed foods at Frito-Lay
The availability of farm-based products will be seasonal and therefore storage
requirements during low seasons may increase. However, the income of raw materials
cannot always be predicted only by season, so it cannot be accelerated cost because
the seasons or the weather plays a role in the yield of the raw materials.
4. Work in process
Work-in-process inventory is the lowest among the four inventory categories, in terms
of dollar value. Because they only use services such as pressing the potato frying
button on the MRO machine, and others.

5.Why does inventory flow so quickly through a Frito-Lay plant?

 Raw materials are perishable so the Frito-Lay Factory needs to move quickly to
convert raw materials into finished goods
 The company is a highly automated capital intensive factory, they move raw
material i.e. potato to finished product in 1.5 shifts. In order to quickly form a
finished product from the processed raw materials.
 Quality of the product will affect customers interest so Frito-Lay makes the
finished product reach the distribution chain in 1.4 days in the fastest time

6.Why does the company keep so many plants open?

 Having regional facilities allows Frito-Lay companies to be able to cater to


specific region and possibly adapt their recipes to accommodate regional
customer preferences
 Packaged snacks such as those made by the Frito-Lay factory occupy a relatively
large space and transportation costs will be quite expensive if the finished product
has to be moved over long distances
 If that one plant is damaged; market can continue to be supplied from other
nearby FL mills until these plants are operational again

7.Why doesn't Frito-Lay make all its 41 products at each of its plants?

 Frito-Lay Factory has 7 products with annual sales of more than $1 billion and
another products with annual sales of more than $100 million that are in high
demand and it make sense for FL to manufacture them in all of their facilities
across North America, but the other 19 products are in less demand, so they can
only be produced in a handful of FL factories and distributed nationwide.
 Each factory will produce a well-known product and a product of choice which is
decided by the leader/director of the company based on the environment or region
where the condition of the raw materials that can be processed at the site.

Conclusion:

 According to the problem that Frito-Lay company face, cost savings and safety of
raw material products is the main goal to solve this problem.
 Frito-Lay keeps so many plants open so that production can still be carried out
when there is a problem in one factory, in addition the company also wants to
reduce the transportation cost when the finished product has to be moved over
long distances.
 Frito-Lay doesn’t produce all of their products in each factory because the
products that will be produced in each factory is decided by the leader/director of
the company based on the environment or region where the condition of the raw
materials that can be processed at the site.

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