Frito-Lay has flourished since its origin-the 1931 purchases of a small San Antonio firm for $100 that included a recipe, 19 retail accounts, and a hand-operated potato ricer. The multi-billion-dollar company, headquartered in Dallas, now has 41 products––15 with sales of over $100 million per year and 7 at over $1 billion in sales. Production takes place in 36 product-focused plants in the U.S. and Canada, with 48,000 employees. Inventory is a major investment and an expensive asset in most firms. Holding costs often exceed 25% of product value, but in Frito-Lay’s prepared food industry, holding cost can be much higher because the raw materials are perishable. In the food industry, inventory spoils. So poor inventory management is not only expensive but can also yield an unsatisfactory product that in the extreme can also ruin market acceptance.

Discussion Questions
1. How does the mix of Frito-Lay’s inventory differ from those at a machine or cabinet shop (a process-focused facility)?
2. What are the major inventory items at Frito-Lay, and how rapidly do they move through the process?
3. What are the four types of inventory? Give an example of each at Frito-Lay.
4. How would you rank the dollar investment in each of the four types (from the most investment to the least investment)?
5. Why does inventory flow so quickly through a Frito-Lay plant?
6. Why does the company keep so many plants open?
7. Why doesn’t Frito-Lay make all its 41 products at each of its plants?

  • CreatedJuly 23, 2013
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