Inventory Mgmt at Frito Lay

Frito Lay  Assignment

Robbi Palacios

Subject: Operations Management Regis Program

Question 1: First of all, Frito lay is a product focused facility meaning it invested much on it’ s on capital equipment; this reliance on machines mean’s Frito lay must keep a reliable inventory of MRO. Where as a cabinet shop does not need much MRO compared to Frito Lay.In contrast, a cabine shop or a machine shop keeps high raw materials, wip and final products in inventory since the order basis have variations. The demand for  Frito Lay is not by order basis compared to a cabinet shop so it can produce more volume and it has to produce the potato chips efficiently and faster than the production rate of a cabinet or machine shop. In addition, Frito Lay transforms its raw materials into wip faster then into final goods to distribution chain in just 1.4 days compared to a machine shop which is longer and requires more labor. Question 2: What are the major inventory items at Frito Lay, and how rapidly do they

move through the process The major inventory in Frito Lay is of course the potato which is the raw material. Then comes the corn, the corn meal, the seasonings and then the canola oil. For example, the potatoes arrive through trucks then are loaded for chopping, these potatoes are then seasoned and fried. These inventories are consumed in only 1 shift! These are distributed in just 1.4 days. Question 3: What are the four types of inventory? Given an example of each at Frito Lay.

The four types of inventories are as follows: 1. Raw Materials  – potatoes, corn, seasonings, canola oil. 2. Work in process  – cleaned potatoes, seasoned potatoes then cooked potatoes. 3. Finished Goods  – bag of chips, cartons of chips. 4. MRO – parts for motors,gears, and all materials necessary to make the equipment running and prevent breakage.

Question 4: How would you rank the dollar investment in each of the four types(from

the most investment to the least investment)? Below ar ethe investments from the most to the least. 1. MRO – Since this is a machine intensive industry, there is no doubt that they invest heavilyt to maintain the operations of their machines. 2. Finished Goods  –This incurs more cost since this is the final good where the raw materials, processing and bagging accumulates plus the holding cost. Though the processing speed is fast, it is still 1.4 days that these final goods are kept in their inventories before being distributed. 3. Work in Process  – ofcourse when the raw materials are processed they are now more expensive. 4. Raw Materials  – This is the least because no processing has taken place.

Question 5: Why does the inventory flow so quickly through a Frito Lay plant?

Inventory flows quickly in a Frito Lay plant since it is highly automated thru machineries. Other than that, it is technology advanced and is efficient. Moreover, it has to move rapidly because the potato and the corn ingredients are perishable goods. They must be processed fast and must be put in bag to prevent spoilage. Question 6: Why does the company keep so many plants open?

It keeps many plants open because the plants must be strategically located to where most of the markets that a certain product has more demand or it is where their major  suppliers are located. Another advantage of this is they can move products from one location to another. Question 7: Why doesn’t Frito lay make all its 41 products at each of its plants.

Frito lay does not make all its products in the 41 locations. Some products are just manufactured in some plants with specialty equipment because it is more cheaper to do so and reduce their cost. Processing is done on different plants since conditions or  regulations might be suitable