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Key Operations Management at Frito-Lay

Sep 7, 2024

Overview of Operations Management Decisions at Frito-Lay

Introduction

  • Presented by Jay Heiser and Barry Render, authors of the textbook.
  • Focus on the 10 decisions of operations management in relation to Frito-Lay, a subsidiary of PepsiCo.

10 Major Operations Management Decisions

  1. Design of Goods and Services

    • Frito-Lay offers over 40 product lines, including popular brands like Cheetos, Lay's, and Doritos.
    • Regularly introduces new products (e.g., Flat Earth snacks, pretzels, non-salty snacks).
  2. Quality

    • Extensive inspection of raw materials (corn, potatoes, oil) before unloading.
    • Various inspection points throughout the production process.
    • Quality focus team meets weekly; scores displayed prominently.
    • Uses Statistical Process Control (SPC).
  3. Process Strategy

    • Follows a product-focused strategy; high-volume, low-variety products.
    • Heavy investment in technology for rapid processing.
  4. Location

    • Plants strategically located near raw materials and customers.
    • Ensures quick delivery, sometimes within 24 hours of harvesting potatoes.
  5. Layout

    • Utilizes a product-oriented layout for efficient processing.
    • Example: Potatoes are processed in a single assembly line within hours.
  6. Human Resources

    • Low personnel turnover due to competitive pay and benefits, emphasis on safety and ergonomics.
    • Uniforms provided to all employees.
  7. Supply Chain Management

    • Integral to Frito-Lay's success; controls from raw materials to finished goods in stores.
    • Owns farms and transportation for efficient logistics.
  8. Inventory

    • Perishable inventory results in significant holding costs; inventory turned over 200 times a year.
    • Just-in-time inventory system; raw materials delivered multiple times a day.
  9. Scheduling

    • Planners use historical sales data and local demand forecasts to prepare schedules.
    • Adjustments made for local events, e.g., Daytona 500 in Florida.
  10. Maintenance

  • Downtime has significant financial implications; $200,000 loss for every 1% of downtime.
    • High levels of plant utilization despite age.

Conclusion

  • All companies face similar operations management decisions.
  • Implementation may vary, but the core decisions remain consistent across industries (restaurants, hospitals, airlines, manufacturers).
  • Importance of effective management to maintain productivity and operational efficiency.