A case study on Frito-lay: The backhaul Decision

1. Frito-Lay Inc.
The Backhaul Decision
Presented by:
Sahil
Amanpreet Singh
Akshay Jayrajan
Varun Singh Bhandari

2. Agenda
• Introduction of the company
• Logistics Process
• The Backhaul Proposal
• Problem Statement
• Solutions of the case
• Conclusion

3. Introduction
• Early 1930: Frito-Lay began its operations as two separate
entities.
• 1961: The two merged to form Frito-Lay Inc.
• 1965: Acquired by PepsiCo forming PepsiCo Inc.
• Frito-Lay’s product mix consisted of six core and specialty
products.
Potato Chips
Corn Chips
Tortilla Chips
Cheese flavored Chips

4. Introduction
• Frito-Lay faced three types of competitors in salty snack market:
o National
o Regional
o Private label
• Rather than distributing their product through third party, Frito-Lay
chose to deliver its product directly to retailers.
• They classified their manufacturing plants into three categories:
o Full-Mix
o Core-Mix
o No-Mix
• Purchasing was a centralized function

5. Logistics Process-Types of Trucks
Drop fame trailer
• Inside Shape is
Not flat
• Difficult to use
fork lifter for
unloading.
Straight fame
trailer
• It has flat
shaped floor
• Can use
forklifter for
unloading.
Roller bed
Trailer
• It has Roller
floor
• Easy unloading
because of
rollars.
• No need of
forklifter for
unloading.
• Refrigerated
Trailer
• Less unloading
time
Doubles
• It has flat
shaped floor
• Double trailer
• Suitable for
carrying more
units.

6. Logistics Process
Plant or regional
warehouse
Distribution
centers or bins
Drop off portion
assigned at
particular location
Collection Of KDs
Returning KDs to
traffic centre
Performance
measurement
(SSI)

7. Logistics Process
• Frito-Lay uses both its own private fleet and third party
carriers to transport its products depending upon sensitivity of
the shipment.
• They use variety of information and DSS to support its
logistics operations: CADEC and VSP

8. The Backhaul Proposal
• Proposal recommends using the return(backhaul) portion of
the routes covered by the company’s private fleet to carry
goods for other companies to cover delivery cost.
• Customer identification and backhaul sales would be the two
most critical portions of PDM’s backhaul responsibility.
Gaining Authority
from ICC and state
agencies
Gaining common
carrier authority
Gaining Interstate
authority

9. Annual Savings
• Total shipped cartons = 6,00,000
• Price per carton = 50 cents
o 6,00,000*50 cents = $3,00,000
o 3,00,000*260= $7,80,00,000
• Drop Trailers
o Size= 4652 cu ft.
o [4652*50 cents*1318(no. of trucks)*260(no. of days)]/4.7 = $16630916
• Roller Trailers
o Size = 3502 cu ft.
o [3502*50 cents *232*260]/4.7 = $22472408.51
• Annual Savings from KDs =
o 7,80,00,000-(16630916+22472408.51)=$388976534

10. Problem Statement
• Cost of Direct Store Delivery
• Cut Throat Competition
• Clash of Pickup of KDs and Backhauling
• Manufacturing concerns
• Quality Concerns
• Legal Concerns
• Marketing Concerns
• Drivers Concerns
• PDMs Concerns

11. Solutions
• Third Party Logistics
• More focus on backhauling rather than KDs
• Use of specialty products transport to collect KDs
• Use of fully automated information systems to feed data
• Use of Bidding to assign routes
• Use of artificial intelligence to load and unload
• Sanitization of complete trailer before forward loading
• Different team for marketing of backhauling
• Group establishment and neutral authority to award PDM
teams

12. THANK YOU