Tag: Frito-Lay

OM Podcast #15: Automation, AI, and Operations at Frito-Lay

In the latest podcast, Barry interviews Tom Rao, Senior Vice President of US Field Operations for Frito-Lay, a division of PepsiCo.  Tom and Barry discuss various operations improvements at Frito-Lay, general plans for how Frito-Lay plans to utilize AI to support the business, and how Frito-Lay is addressing the challenge around labor shortages.

 

Transcript

A Word document of this podcast will download by clicking the word Transcript above.

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM.  See our  earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more!  https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html

Video Tip: Starting Your Fall Semester With Videos

magicStarting about 20 years ago, with our 6th edition, Jay and I began developing a series of company video and cases. They have ranged  from manufacturers of potato chips, boats, and ambulances, to service firms like a hospital, an NBA team, Red Lobster, and Hard Rock.  The videos are brief (5 – 12 minutes) and tie directly to the content of a specific text chapter.  There may be as many as seven videos on one company (such as Arnold Palmer Hospital or Hard Rock Café) and students seem to like following one or two organizations throughout the text/semester.  We are very pleased, that over the years, our 35 videos have won many awards, including 2 Silver Addy’s for the best short video, selected from 10,000’s of entries each year. We are even up for an Emmy award for one of our Orlando Magic videos!

hard rockI have always started the first week of the semester with one or both of the following:  Hard Rock Café: OM in Services (8 minutes) and Frito-Lay:  OM in Manufacturing (7 minutes).  The first shows how a service firm that is known throughout the world approaches some of the 10 OM decisions around which we structure the text.  This firm is especially interesting because it is a lot more than a restaurant. We show that Hard Rock makes almost the same revenue from its small retail shops as it does from the food side of the house.

The second video provides a perfect contrast to Hard Rock and makes for a great class discussion on how manufacturers differ from service firms.  Frito-Lay is also a product everyone knows.  But this company does not let outsiders in to tour, and has proprietary processes that even we were not allowed to film.  This video reviews how Frito-Lay deals with all 10 of the decisions that OM managers have to make.

I hope our video series helps get your Fall, 2015 semester off to a successful start. And there is more to come, as we introduce five new videos featuring OM at Alaska Airlines in January, 2016!

OM in the News: Social Media on the Factory Floor

social mediaAccording to a recent survey by the Manufacturing Leadership Council, 13% of manufacturing executives plan to digitize their design/production processes, and social media tools represent an important component. By 2023, that percentage will rise to more than half. “What’s the goal of increased social media-based interactions, ” asks Cisco News Network? Manufacturers want to tap into valuable customer opinions, preferences and desires. They also want to encourage collaborations between employees, partners and suppliers in order to create better end products.

For example, Frito Lay offers one illustration of a manufacturer going directly to its core constituency for critical product feedback. The company collaborated with customers via social media to define and select the most appealing flavor ideas. Such combinations of crowdsourcing—a form of distributive problem-solving—and taste buds represents a novel, and completely different, approach to the use of social media in manufacturing.

At the other end of the spectrum, a range of more industrial companies are beginning to employ social media-driven, collaborative tools for their workforce.  Airbus offers partners and dealers a range of interactive procurement portals. These platform-based resources enable suppliers to describe their capabilities to Airbus buyers in addition to exchanging requirements and proposals online during the bid process.

Such social media trends extend even further. Industrial Mold and Machine in Twinsburg, Ohio makes custom molds for plastic bottle manufacturers. The company empowers its workers by providing an iPad-accessible Social Media platform for production-line quality control, design access and problem-solving.

It appears that more and more manufacturers will use collaborative Social Media technology to advance their operations through multiple, diverse collaborations.

Discussion questions:

1. Do you think social media can add value to the manufacturing process?

2. What is crowdsourcing?

OM in the News:Frito-Lay’s Move to All-Natural Snack Foods

In this latest edition of our OM text, Jay and I focused on Frito-Lay, including five new video case studies on topics from manufacturing strategy, to SPC, to sustainability, to inventory control, to maintenance. We picked the massive company because it made a product line that every student could relate to.

So The Wall Street Journal’s  article (March 24,2011) on Frito-Lay’s attempts to retool its product line (Ch.5) to focus on “natural ingredients” was eye-catching. My family and I had consumed probably a 100 large bags of chips during our company research and filming time– a far cry from our normal organic-only household routine.

In a move to make half its snacks with only natural ingredients by the end of 2011, Frito-Lay is gambling that: (1) customers really do want to eat only healthy snacks, (2) retooling doesn’t end up making the products “taste like cardboard”, and (3) the 35% higher ingredient costs will not drive prices too high. Under pressure from the FDA to reduce sodium in the chips, the company has done so (by 25%), but in a very clever way so the taste buds will not know about it. (The secret was to cut salt crystals differently so they remain on the chip’s surface, closer to the tongue, instead of falling into the chip’s recesses).

The firm is also saying goodbye to MSG and 3 dozen other artificial ingredients, and eliminating trans fats. (Its baked chips, by the way, are tasty and have much reduced saturated fats, so I do sneak them into the shopping cart now and then).

The “all-natural” market represents about 20% of the $15 billion in annual US snack sales and is growing rapidly at 14% a year.

Discussion questions:

1. How does this new strategy impact the operations function?

2. How can the “house of quality” (QFD) be used?

3. How does this fit into Frito-Lay’s “green” strategy (see Ch.7).

Video Tip: Inventory at Frito-Lay

If you cover the subject of Inventory Control (Ch.12), you may want to show the (8 min.) video, “Managing Inventory at Frito-Lay”. There aren’t too many more interesting products that students can relate to than potato chips…and this video goes from the farm to the truck to the plant to the truck to the store…in showing the production process. What makes it really exciting is that the whole journey often takes less than one day! We follow the inventory from the time the potatoes (12 semi-trailers full each day, at 50,000 pounds of potatoes per trailer) are loaded at a farm near each plant,  unloaded, washed , sliced, seasoned, baked, bagged, boxed, loaded for delivery, shipped to supermarkets, and put on a shelf. It’s a real eye-opener to see how fresh the product at the store can be.

It’s also important for students to see that there are 4 types of inventory at Frito-Lay (and, of course, at other firms): raw materials (the potatoes, seasonings, packaging material, etc.), work-in-process, finished chips in a bag, and MRO. This may be an unusual product, in that a major raw material decays quickly, but the importance of inventory turns, W-I-P levels,  and smooth production flow are all illustrated in this company’s excellent inventory management.

Jay and I really enjoyed filming this Frito-Lay series (our most recent featured company) and you will see why when you view the closing scene, filmed in my driveway. The company lent us a truck to use for the day and loaded it with hundreds of bags of chips of all brands. At the end of the day of filming our closing comments, we assumed we had to not only return the truck, but the massive quantity of chips as well.  But we got to keep them! Since Jay couldn’t carry many back to Texas, we Renders ate chips for months….a big exception to my wife’s organic/healthy food house rules.

OM in the News: Which is Better–Electric Cars or Electric Trucks?

My blog on Oct.31, 2010 dealt with forecasting the demand for electric cars. Who doesn’t  love the idea of electric vehicles (EVs)?  But as we wrote: “everybody feels that everybody else should be driving environmentally-friendly vehicles”. With gas hovering under $3/ gallon, does it really pay financially for you or me to invest in a $40,000 Chevy Volt?

Maybe not, but logistics managers at such firms as Staples, Frito-Lay, FedEx, and AT&T have come to find that electric trucks make a lot of sense for their commercial delivery fleets. As The Wall Street Journal (Dec.8,2010) writes:” electric delivery trucks…make more sense in many ways than electric cars”. That’s because delivery trucks generally drive  short, defined routes each day–better suited to the limits in range of EVs. And  EVs have lower maintenance costs, a big concern to companies with large fleets.

“We’re a business here”, says  Staples’ VP-Fleet  Services. “They have to justify themselves”. Staples just bought  41 trucks from Smith Electric Vehicles, in Kansas City, and plans to double the order. The trucks have a top speed of  50 mph, and can carry 16,000 lbs. They cost about $90,000, which is $30,000 more than a diesel, but Staples expects to recover that expense in 3.3 years. The EVs have no transmissions; need no fluids, filters, or belts (which cost around $2,700/year); have “regenerative” brakes that last 4-5 years, vs. 1-2 on regular trucks; save $700/year because there is no exhaust system  to maintain; and cut fuel costs by $6,500/year. It all adds up to $60,000 savings over the 10 year life of a truck.

Frito-Lay, with an order for 176 Smith trucks, plans to convert 2,000 more delivery vehicles to EVs. Similarly, FedEx, which has 19 EVs in London, Paris, and LA, expects a proliferation of electric trucks. Its not a “good deed for the sake of a good deed. There is a great return on that investment”, adds a Frito-Lay OM exec.

Discussion questions:

1. Do you think use of electric trucks will spread faster than electric cars? Why?

2. What limits the proliferation of electric trucks?

3. Make the case for the USPS to switch to an EV fleet.

Video Tip: Green Manufacturing and Sustainability at Frito-Lay

As a Math/Physics undergrad in the late 60s, I somehow took an elective course called FORTRAN. This turned out to be quite a break, as McDonnell Douglas hired me to design jets based on this one, well-timed class. At a time when very few people knew much about computers, this was a great edge.

I think today’s “great edge” is Sustainability.  Hundreds of college are offering courses in the subject now, but it is still in its infancy, with a huge demand building in the coming years for knowledgable grads. Johns Hopkins U. has just started the nation’s 1st B.S. in Sustainability.

With this background, I encourage you to show our newest video, “Green Manufacturing and Sustainability at Frito-Lay”, when you cover Supplement 5, Sustainability. Frito-Lay is a leader in solar, “going green”, moving off the power grid, and conservation/recycling resources. Its Sun Chips, for example,  are produced under full solar power. The firm has received the LEED (Leadership in Energy and Environmental Design) award and has “zero environmental impact” as a long- term goal. Will this help sell potato chips? Can only multi-billion dollar firms step up like Frito-Lay is doing?

Jay and I are especially proud of this video as it won the prestigious Silver Addy as best educational film in 2010. We hope you and your students enjoy the film and the case study in Supp.5.

Video Tip: SPC at Frito-Lay

Of the 30+ videos Jay and I have produced to accompany our books, I would have to say my favorite is the one called “Frito-Lay’s Quality Controlled Potato Chips” (to accompany Supp.6, SPC). Why is it top of my list?

There are a few reasons. First, its the only video we ever made where I got to star! Normally, our films are narrated, then Jay and I come on at the end to summarize a few points. But in this one, I act as narrator. Second, this is a pretty exciting topic…watching how chips are made and seeing how critical a role SPC and TQM take.  Third, because my older son and some of his friends were given a cameo eating chips (early in the video).

But the most important reason I like to show this 10 minute video in class is because it shows the SPC process from start to finish. We see how the chips are inspected and tested at 9 checkpoints. Even better, we create, from scratch, an X-bar chart. This means setting the upper and lower control limits in a real company, for a real process that every student can relate to. So this video is a tutorial of sorts.

When I teach SPC, I stop the video at each math step along the way and recreate the numbers in the video on the board. I like to take my time and make sure the students comprehend each calculation in the video. Supp.6 takes on a more important role when the class sees that an everyday firm has to use all the tools we talk about.