Frito-Lay's Supply Chain Practices Are A Boon For Its Growth
By Sam Lewis
Using automation and better got-to market delivery systems has steered the snack-manufacturing giant’s core operating profit up by a 6 percent compound annual growth rate
On Sept 3, Frito-Lay’s president, Tom Greco, addressed the Barclays’ 2014 Back-to-School conference in Boston. In doing so, he announced the company has dedicated itself to improvements across its entire supply chain which, has ultimately led to increased profits for the company. “We’re laser-focused on productivity which has led to a 6 percent CAGR (compound annual growth rate) on core operating profit,” says Greco.
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Over the last five years, Frito-Lay’s net revenue CAGR was just 3.8 percent. “We believe the productivity opportunity is significant. Our productivity agenda pursues cost reduction and capability building initiatives to deliver results,” according to Greco. The company has heavily invested in R & D and developing new products, but Greco says none of those could have happened without exceptional execution world-class productivity.
In a nutshell, Greco believes that Frito-Lay’s exceptional productivity has enabled growth. In 2012, the company introduced a go-to-market system that was based upon, but the company believed furthered, the model of traditional model of production facilities to warehouse to retail/grocer model. The company also developed its GES (geographic enterprise system) to lessen the amount of material handling in the supply chain while boosting productivity. According to Greco, Frito-Lay will have six GES sites in operation across North America. “GES continues to be a huge unlock for us, enabling more SKU capacity with fewer facilities while lowering inventory levels. The exciting part about GES is that it is both a productivity generator and a growth enabler,” says Greco.
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2012 also brought big leaps in Frito-Lays productivity agenda. According to Greco, an increase of 50 percent occurred that year, which stimulated growth in both 2013 and this year. “We’ve hit our productivity target each other the last three years,” he says. Additionally, the company will be taking advantage of automation technologies to further productivity and supply chain practices. Upcoming automation investments for Frito-Lay include automated packaging, case picking, and fork lift transportation.