Frito_Lay Case free essay sample

Frito-Lay was the largest manufacturer of salty snacks in the United States. With 27,000 employees and sales of $2. 053billion in 1982, it was the only full-line salty snack manufacturer distributing its product nationwide. Before the Motor Carrier Act of 1980, companies with private trucking fleets are generally prohibited from selling transportation services to other companies. Deregulation of the trucking industry in 1980 allowed private operators to provide transport services for hire. In 1983, as part of efforts to offset the increased costs of distribution, Frito-Lay considering selling your miles on other bands transports companies. Frito-Lay, management should consider the potential revenue from these services ensures possible degradation of service for sales of Frito-Lay. If the proposal is approved by the transport, marketing plan for transport services should be developed. (Hammond) Frito-Lay has a great company and a great way of taking care of things such as its logistics network. Frito-Lay logistics defined its mission â€Å"to deliver the right product, to the right place, at the right time, in the right amount, in a cost-effective manner. We will write a custom essay sample on Frito_Lay Case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page † The logistics role was to provide a bridge between manufacturing sales, distributing the product from plants and regional warehouses to sales distribution centers and bins. Logistics’ responsibility for finished goods ended at sales distribution centers and bins. There are changes taking place both in the environment in which Frito-Lay operates externally and within the company itself internally. The changes that took place in the environment in which Frito-Lay operates externally are the growth in the salty snack market, costs rising, and a decrease in industry growth. These are three big changes in external environment of the company. Costs are rising due to the huge growth in the salty snack market. There is such a high demand for salty snacks that Frito-Lay is spending more money to make more money. The Internal changes that take place in Frito-Lay are the rising costs, the backhaul proposal and the use of Frito-Lay’s private fleet and third-party carriers. Again, these are three huge changes in the internal part of the company. The biggest change of all and main point of this case is the backhaul proposal, which consists of many pros and cons. When talking about the backhaul proposal there are only two ways to look at the situation, you love it or you hate it. The pros of the backhaul proposal consist of helping other companies, additional revenue, rise in income, and rise in net revenue, obtain property-broker certification, eliminate third-party broker, create jobs, and reduced traffic centers. Frito-Lay can help other companies by helping them ship for a low price using Frito-Lay trucks. This proposal greatly helps Frito-Lay because it adds additional, a rise in potential income to $15million and a rise in net revenue from $7million-$9million. The company’s goal in the backhaul proposal is to obtain property-broker certification and eliminate third-party brokers. Also, in implementing the backhaul it could create jobs and also reduce traffic centers in the company. The cons of the backhaul proposal in my opinion weigh more than the pros. The cons consist of sales, timely delivery of product to distribution centers and bins, interferes with the removal of KDs, service, reduce number of trailers and length of time each was available to be loaded, contamination of company equipment, increase in theft, drivers are not on board, more time away from home. Sales were strongly opposed to any activities that might compromise service to sale. There could be issues with timely delivery of product to distribution centers and bins. The sales people worried that the backhaul program interferes with the removal of KDs, many of which were nearing capacity as the number of Frito-Lay products increased. This program reduces the number of trailers and also the length of time needed to load each trailer. By adding more products to ship you must do things faster to keep on schedule. A huge con in this program is contamination of company equipment, agricultural products might harbor rodents and insects that could infest the trailers and harm Frito-Lay goods. Another huge con is there could be an increase in theft depending on what the trucks are shipping. The trucks could be shipping items such as electronics, tobacco, or alcohol. I feel that Frito-Lay should come up with some type of insurance policy so that they are not held reliable if something happens to other companies products. The drivers will also most likely not be on board with this program because it keeps them away from home longer and worker harder and longer. There are strengths and weaknesses of the service offering from a customer’s perspective. The strengths are potential savings because Frito-Lay trucks must always drive back to their original distribution center, so they can offer low prices to ship other company’s products. Also, fuel costs go up because of weight, but with the amount of money that they will make shipping other companies products, the price of fuel would not even be a factor. Strength is that companies that are looking to ship low weight low cost goods for a low price, they could us the backhaul program. The weaknesses are that Frito-Lay is not a 3 party logistics, so cannot offer things that a 3 party logistics company could offer to a customer. Frito-Lay does not have the capacity or resources to take control of inbound logistics. They do not have the trucks or man power to go out and get all of their raw materials and still have enough trucks and man power to distribute products. The annual savings of the current KD program is about $23million per year. Other possible ways of saving would be to develop a container that lasts more than 4. 7 times or find disposable containers for less than 10cents each. Utilizing space is 50%, you can use the back haul to get to 100% filling it on the way back from your destination would be the optimization. In my opinion there are many more cons than pros and that is why I do not support the backhaul proposal decision. When all is said and done I feel that the backhaul proposal is a bad idea and I strongly disagree with it. Yes, Frito-Lay will make more money, but the cons drastically out-weight the pros. The truck drivers are the ones that have to take the biggest hit in this program. They are doing more work for the same amount of pay and that is just not fair to them. They will eventually demand more money. Another big factor in why this is a bad idea because Frito-Lay saves large amounts of money on their KDs and if there is no room for these empty containers, they are forced to use more containers hence wasting more money. Also, as I stated before depending on what type of products the Frito-Lay trucks will be carrying, if the trucks were to get things stolen from the truck, this act could damage the face of the company and nobody would ship through them if thing kept getting stolen from their trucks. Frito-Lay makes plenty of money and they are just trying to find ways to make more and they are getting very greedy. I believe that Frito-Lay should stay away from this backhaul program to keep its employees and its customers happy. The only benefit from this program is making more money and keeping top management happy, but if they employees and customers are not happy, then most likely the company would not function to its full efficiency.