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.