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Evaluate the design and operation of Frito-Lay's logistic network.

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Introduction

XP 75 Operations Management Frito Lay, Inc: The Backhaul Decision 1. Evaluate the design and operation of Frito-Lay's logistic network. Logistics is a supply chain effort involving the planning, implementation and control of the forward and reverse flow, storage and services of goods from origin to destination. Frito-Lay's logistics defined its mission as delivering the right product, to the right place at the right time, in the right amount, in a cost effective manner. The logistics system is complex and consists of six geographic zones. The managers of the zones were responsible for their own logistics and there was very little interaction between the zones. They primarily utilized their own private fleet of trucks and supplemented it with third party carriers to transport its less service sensitive shipments such as inter-plant shipments. They had a very high on-time delivery rate of 99.1%. The private fleet coupled with the CADEC system allows fleet drivers to maximize productivity and provide excellent customer service. The CADEC system is designed to support regulatory reporting. It routinely tracks trip events from the perspective of the driver and the time between significant points of travel. ...read more.

Middle

As a general approach, it should target companies that do not have transport/logistics as their core competencies. For instance, manufacturing companies may not necessarily have strengths in logistics/transport services and Frito-Lay, given its success in logistics and transport can leverage its strengths and capabilities in this area. This would then allow the customers to focus on their own core competencies. b. Company analysis: Frito-Lay should then evaluate its own core strengths in providing backhaul services. Does success as being its own logistics provider translate to efficiencies in being a third party logistics provider or are its current services too specialized for its needs? Does Frito-Lay have a unique positioning/competitive advantage in providing this service as opposed to other logistics providers? Arguably, Frito-Lay's current delivery system may be too customized for its own customers demands and it may be a challenge to coordinate backhaul services especially with its existing VSP system (vehicle scheduling program) which appears to be inflexible and unsophisticated to serve even Frito-Lay's own transport needs. c. Competitor analysis: Frito-Lay should systematically evaluate whether competitors exist in the market that can have a competitive advantage in providing logistic services. ...read more.

Conclusion

d. The evaluation of the expected gross margins seems aggressive at 65% after 11 years of operations, especially since at no point is competition introduced into the assessment. e. Another factor is that management would like to halt the rise in delivery costs, which may have more to do with excessive service to sales policies. Backhauling may simply mask a larger growing problem. f. The overwhelming lack of company support from the sales department to the drivers makes it very difficult to launch. Instead, in order to reduce the rise in delivery costs, Frito-Lay may consider the following: a. Invest in IT improvement, particularly their vehicle scheduling system (currently VSP), which is currently ineffective and cumbersome to use. A more efficient and coordinated IT system can streamline the scheduling process, thereby reducing delays and their attendant costs. b. Reevaluate its distribution network (plants, regional units) to find a way to minimize interplant transfers, or the tiered delivery process for specialty products. One way to address this is to evaluate the flow of goods through the various plants followed by reconfiguring the delivery routes to increase efficiency. An IT system (as mentioned in part a) can facilitate this process. ...read more.

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