Thursday, December 1, 2011

Constant Logistical Improvements at Frito-Lay

A close friend of mine, Jen, was a supply chain management major at Shippensburg and now works as a factory manager for Frito-Lay.  We talked this summer about how they manage logistics and the enormous amount of diverse products they have to get to stores.  When we talked about logistics and lean management in class, it triggered the memory and I decided to research more about it.

Frito-Lay is a division of PepsiCo and holds 60% of the market share on chips in the United States.  Frito-Lay has 41 manufacturing plants, 1,900 storage warehouses and 200 distribution centers.  For the most part, a single bag of chips will stay for some period of time at each of these Frito-Lay centers.  In the beginning, Frito-Lay attempted to make almost every type of chip at every manufacturing plant and then send a mixture of all types of chips to the local storage warehouses.  However, in time they realized that this couldn't possibly be the most efficient process.  Currently, manufacturing plants are commonly devoted to one type of chip, Doritos for example.  These chips are then sent all over the country.

The impressive amount of miles that the Frito-Lay fleet of delivery trucks had to drive was impressive, but Frito-Lay once again realized that the system could be improved.  They hired Menlo Logistics to handle all of their route management.  Not only did Frito-Lay begin routing trucks more efficiently - they also realized that they could use empty trucks to pick up used packaging boxes and deliver them back to any warehouses, plants, or distribution centers they passed on their return drive.

Frito-Lay already had an impressive internal system of information technology that allowed them to know where raw potatoes, truck shipments, and inventory levels were at any point of time, but they needed better knowledge of what was going on in the more than 400,000 stores that sell Frito-Lay products.  To do this, they created and provided each store with software that could show the most efficient and cost effective way to allocate shelf space and show each store how they compared to Frito-Lay sales in similarly sized stores nationwide.  In return, Frito-Lay had an enormous amount of knowledge at its fingertips.  It could now know seasonal local demand of each of its products and exactly how much inventory each store had at any time.  By knowing local demand for each product at all times, it could better plan seasonal and local promotions.  By knowing specific inventory at each store, Frito-Lay could better plan and improve its routing and inventory systems.

As a factory manager, Jen is in charge of all the factory workers on the floor for an entire 12-hour shift.  She makes sure that the factory equipment runs smoothly, the product being produced is up to par, and that trucks being loaded and unloaded are being used efficiently.  As much as possible, they use information systems to make sure that everything is above the possibility of human error.  She says that the hardest part is encouraging factory workers that aren't used to using tablets and computer software to trust that the integration of technology will make their jobs easier, not harder.  As I've talked to Jen and learned more in this class, it really seems like Frito-Lay is doing an excellent job of constantly improving their supply chain management, especially the logistics.

An Integrated Outbound Logistics Model for Frito-Lay: Coordinating Aggregate-Level Production and Distribution Decisions
Value Chain Analysis- Frito Lay 

1 comment:

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