Business Management Case Study: Frito-Lay

(a) Frito-Lay is billion-dollar company who manufactures snack foods. The company has over 40 different product lines, and 7 of which produce each a billion dollars in revenue alone. One of their main popular products is potato chips. In order for the company to produce their products, they must have a stock of inventory. Frito-Lay’s products are some of the freshest products around, and in order for the company to maintain the freshness of its products, it has to be able to manage its inventory. The company must manage its 4 basic inventory types. One of it’s main ingredients/inventory, potatoes, are perishable, so the company only keeps about 20 hours’ worth on hand. Some of Frito-Lay’s other ingredients such as corn, corn meal, oil, and

(b) The inventory concepts discussed at the very beginning of the chapter correspond very well to Frito lay. Frito lay has the four main types of inventory discussed in the chapter for their manufacturing business processes. The snack company has a raw material inventory, a work-in-process inventory, an MRO (maintenance/repair/operating) inventory, and a finished good inventory. As a manufacturer of snack foods, Frito-Lay needs a raw material inventory in order to produce chips and their other products. The company has 5 basic raw ingredients—potatoes, corn, oil, seasoning, and packing. They must manage these inventories well in order to have plenty on hand to produce chips, but at the same time not so much that it costs them storages costs, and at the same time also not so little that they run out of materials and are waiting for a shipment of materials. A second type of inventory the company has is work in process (WIP), or snacks in process. For chips, as soon as the potatoes are peeled, they become

While they are just simple inventory basics, the operations that Frito-Lay only require such simple methods. The best inventory use, in my opinion, is the MRO inventory. The application of the MRO inventory by Frito-Lay is perfect for the company’s operations because whenever the company has downtime, they are losing precious time and money, so the application of the MRO helps the company reduce the downtime, which in turn helps reduce lost revenue. I believe Frito-Lay has applied all of the OM techniques it can for its business, after all, Frito-Lay is a billion-dollar company. I think many businesses globally can learn from the chip company and apply the OM technique of MRO inventory. It may not be applied in the same way as a manufacturing firm like Frito-Lay, but it can be applied in different aspects. Different international and national types of businesses can use the MRO inventory concept to help ensure their business processes are always running all the time which will help ensure the minimization of lost revenue. They can keep an inventory of “parts” on hand to make sure their process is supplemented. For example, a company such as UPS or Amazon can keep extra parts or even trucks on hand to ensure if something happens such as a truck breaks down, or it has a dead battery, they can continue to make deliveries and satisfy their customers. All in all, Frito-Lay’s use of their OM techniques are