Ten Strategic OM Decisions

▶ Frito-Lay, a subsidiary of PepsiCo, has ov

er 40 product lines, 7 of which having sale
s exceeding $1 billion each.
▶ In this video, it reviews the 10 OM strategy
decisions and briefly describe how Frito-La
y addresses each one.
Page 63

Identify how each of 10 OM strategy decisions is

applied at Frito-Lay

© 2014 Pearson Education, Inc. 1-1

 Ten Strategic OM Decisions
TABLE 1.2 What Operations Managers Do
DECISION CHAPTER(S)
1. Design of goods and services 5, Supplement 5
2. Managing quality 6, Supplement 6
3. Process and capacity design 7, Supplement 7
4. Location strategy 8
5. Layout strategy 9
6. Human resources and job design 10
7. Supply-chain management 11, Supplement 11
8. Inventory management 12, 14, 16
9. Scheduling 13, 15
10. Maintenance 17

Identify how each of 10 OM strategy decisions is

applied at Frito-Lay
© 2014 Pearson Education, Inc. 1-2
 DECISION CHAPTER(S)
What Operations Managers Do at FritoLay
1. Design of goods and services Company is constantly innovating with
new products. Each of Frito-Lay’s 40-plus
products must be conceived, formulated
(designed), tested (market study), and
evaluated for profitability.
2. Managing quality For quality assurance, it uses multiple
inspection points both within and outside
the factory, and it utilizes statistical
process control (SPC)
3. Process and capacity design The plant applies a product focus
strategy, which is appropriate for a high-
volume, low-variety producer
4. Location strategy As raw materials are perishable and shelf
life is relatively short, plant location
decisions are driven by proximity to raw
materials or markets.
5. Layout strategy The Frito-Lay facility would be a process
facility, with great care given to reducing
movement of material within the facility.

© 2014 Pearson Education, Inc. 1-3

 DECISION CHAPTER(S)
What Operations Managers Do at FritoLay
6. Human resources and job design The plant has low employee turnover,
driven by good benefits, respect for
people, and a strong concern for safety
and ergonomics
7. Supply-chain management Low inventory and R/M are perishable;
SCM is necessary. Frito-Lay must focus
on developing and auditing raw material
from the farm to delivery.
8. Inventory management Inventory levels are quite low, and
inventory is turned over 200 times per
year. Potatoes are delivered 10 times per
day. Freshness and spoilage require
constant effort to drive down inventories.
9. Scheduling Schedules are driven by demand
forecasts and adjusted for local events,
such as the annual Daytona 500 auto race
10. Maintenance High utilization requires good
maintenance, from machine operator to
the maintenance department and depot
service.

© 2014 Pearson Education, Inc. 1-4