Total Quality Management

I. Company Background

The success of Frito Lay is a tribute to two entrepreneur’s dreams. In 1932, C.E. Doolin purchased a bag of corn chips in a café in San Antonio, Texas. He learned that the chips manufacturer was selling his business so he purchased the recipe and began selling Fritos Corn Chip.

Meanwhile, that same year, Herman W. Lay began his potato chip business in Nashville by delivering snack foods. He then purchased the manufacturer, and the H.W. Lay & Company was formed. It soon became one of the largest snack food companies in the Southeast, and LAY'S brand Potato Chips is still America's favorite potato chip.

In 1961, the Frito Company and the H.W. Lay Company merged to become Frito-Lay, Inc. Today, Frito-Lay brands account for 59% of the U.S. snack chip industry. In 1965, Frito-Lay, Inc. merged with the Pepsi-Cola Company and formed PepsiCo, Inc. Since that time, Frito-Lay has operated as a wholly owned subsidiary of PepsiCo. Through Frito-Lay, PepsiCo is the largest globally distributed snack food company in the world.

The primary snack food brands produced under the Frito-Lay name include Fritos corn chips, Cheetos cheese-flavored snacks, Doritos and Tostitos tortilla chips, Lay's potato chips. Something wonderful—a company that’s all about good fun—doing good things when it comes to making snacks and caring for the environment. This is the company vision of Frito Lay. For more than 75 years, they have been making snacks, starting with simple, farm-grown ingredients. Frito Lay continues to innovate, so that it can provide tasty products that are good as well as fun. They’re also reducing their environmental footprint by conserving natural resources as well as harnessing renewable energy technology that reduces harmful emissions.

Corporate Awards:

8 U.S. Green Building Council Gold LEED sites (2005-11) this award is about being able to transform the way they build, design and operate buildings for healthier places that save precious resources for people to live, work, learn and play in. To achieve LEED for Existing Buildings Gold certification, the company's Beloit sustainability strategy included applying a number of green design and construction features, water reduction technologies and practices, as well as improved waste management. With these strategies in place, Frito-Lay Beloit was able to reduce its dependence by 35 percent of natural gas, 20 percent electricity and water by 50 percent per pound of finished product since 2000.

EPA and DOE Partner of the Year for conservation leadership (2006-09)

Frito-Lay, one of a select number of businesses and organizations, was recognized by the United States Environmental Protection Agency (EPA) for energy conservation. To unceasingly develop innovative programs that will improve our business performance and protect the environment by taking full advantage of the use of natural resources, is Frito-Lay's promise to sustainability, while recycling or removing ineffective or polluting resources from our processes. Over the years, the company has willingly developed and implemented programs aimed at environmental sustainability.

One of Fast Company’s Most Innovative Companies (2010-2011)

One of the companies that were named Most Innovative Companies is Frito Lay for its plan to move all 32 of its plants to zero-waste status. The snack giant has completed what is perhaps an even more ambitious project: a 75% net-zero energy plant that the firm is calling the "greenest manufacturing facility in the U.S”

II. Product Discussions

A. Specifications

Lay’s potato chips have two sizes. The small pack 28.3 grams while the large pack weighs 184.2 grams. The potato chip itself is about 2.5 inches in diameter.

B. Quality Dimension

Performance

Frito Lay North America is a top player in the snack food industry in United States, with a 65% of the market share at the presence of principal competitors such as Proctor & Gamble Company, Kraft foods Inc., Kellogg Company, etc. The company’s biggest money earner is the Lays potato chip which has become a part of the consumers’ lives. They continue to receive patronage because of their quality and delicious potato chips. As the trend now is to have healthy dietary habits, Lay’s boast of its all natural ingredients to further penetrate the market.

Features
Lay’s potato chips brands itself as an all natural product emphasizing on three simple ingredients – potato, oil and salt. Since 2003, the company removed transfat from most of its products including Lays and declaring the potato chip as having 0g Transfat in their packaging. It is also MSG, soy, gluten and milk ingredient free to also cater to consumers who have health concerns on the said substances. Moreover, Lay’s potato chips is a good source of potassium and are only made from Grade A potatoes. Furthermore, Kosher OU is featured in the snack which means it is acceptable to be eaten by those who practice and follow the Jewish dietary laws.

Conformance

Lay’s plant is capital intensive with only a minimal work force needed to operate several machines used to produce its products. The potatoes are precisely cut into thin chips by machines to ensure crispiness when eaten by consumers. Several machines are used throughout the process of making the chips to guarantee their uniformity. Bad chips that have burnt spots are removed by a machine so that only perfect chips are packed and received by the consumers.

Reliability

The printed date on the Lay’s potato chips packaging is an “unopened” date which means the snack will stay fresh, if unopened, until that date. Beyond the freshness date, the snack may lose its crispness and optimal flavor. Tightly sealing the package and storing in the freezer will prolong freshness.

Serviceability

When one visits the Frito Lay website, he can drop his general comments and question in the contact us page of the company. Consumers are highly encouraged to communicate with the company as they provided so many ways to do so like in chat, phone, letter and social media. They also provided FAQs (Frequently Asked Questions) that could help give information to consumers about their snacks.

Aesthetics

Lay’s potato chips are in simple but attractive packaging. It has picture of a potato that is cut into thin slices and some of them have become potato chips similar to what’s found inside. This symbolizes that Lay’s potato chips are all natural just as what the company claims. The packaging contains useful information about the product such as nutrition facts, features, other company products that consumers can try and also its unique selling proposition, Happiness in Every Bite.

III. Pre-manufacturing Activities

In 1983, Frito-Lay formally launched its Supplier Diversity program with the intent of sourcing diverse suppliers who could provide the company with high quality goods and services at competitive prices. Today, the program is 20 years strong. The Supplier Diversity program has also allowed the company to be proactive in the economic development of their communities. Frito-Lay’s comprehensive strategy for integrating these businesses into the supplier development process supports their supply chain efficiency and effectiveness, as well as the company’s bottom line. It's a vital part of their day-to-day business.

Frito Lay has several suppliers for their potatoes in which they take pride on for their best quality. Potato farms have quality controls to make sure that potatoes are of their best grade. Frito Lay’s standard for the quality of the potatoes are among the highest in the food industry so suppliers have to plant, grow and harvest with the utmost attention to detail and quality. Potato suppliers for Frito Lay are located in North Dakota, New England, Florida, Michigan, Texas and California. Each of them has been supplying the company with high quality potatoes for generations and has a good relationship with the company. The company has its own research and development department that was established in 1937. It is in charge of thinking of new products and innovations for existing products.

Lay’s Potato Chips have gone local in 2009. Dubbed "Lay's Local," the campaign focuses on the 80 farms (scattered across 27 states) that grow the potatoes used to make the chips. Knowing where food is made and grown is important to consumers. Sharing with consumers how regional the brand is was relevant and compelling. With other companies promoting the use of natural and local ingredients, it comes as no surprise that the snack maker has jumped on the bandwagon.

Recently, the eating habits of consumers have changed which resulted to them being more health conscious as evident in slowing growth sales of the Lay’s Potato Chips. Faced this problem, the company began promoting Lay’s as all natural and healthy salty snacks. They revealed the process on how to make their chips and how simple these processes are. The less process means the more naturally Lay’s Potato Chips are made. Frito Lay also provided a lot of information in their website that can answer their health concerns.

Frito Lay is also introducing more flavors to capture a larger market. They are becoming more consumer centric as they have a contest which is called “Do Us a Flavor.” The people can submit their flavor idea simply through the “Do Us a Flavor” Facebook application or through text. Through both submission channels, fans have to provide their flavor name, up to three possible ingredients and a 140-character description or inspiration for their flavor. In this way, the company can get a lot of feedback and ideas from the consumers which can help Frito Lay in the business.

IV. Manufacturing Process

Frito Lay in Perry Georgia is one of the biggest chip factories in the world. It has 93,000 sq. feet of area, 12 production lines, and 1,500 people to make their product. The crews usually make about 300,000 kilo of salty snacks daily. The Frito Lay’s number one seller is the classic potato chip. They order twenty trucks of potatoes a day which means a million pound (450ton) of potatoes. But before they accept the load, the crew does a quality check. They are looking for a perfect potato. They don’t want too big at the same time they don’t want also too small. There is this table where potatoes are sorted according to their size. If they think that the potato is not of a good quality after observing and checking it, they don’t accept the potato. They use a device to know how hot a potato is. This will tell them how long a potato can last.

With their machines, the potatoes are cleaned and then peeled. Next, an automated slicer slices each potato into thin layers, turning them into chips. The uncooked chips then pass to a vacuum system to remove excess water as they are next put into the hot fryer with a temperature of 175oC.

Out of the fryer are the perfect chips which have the right color and crispiness. There is a machine that works like a scanner, checking out for the bad chips or chips that have brown burned spots. When it detects a chip that has an anomaly in color, the machine with a precise air jet, blows the chip out of the conveyor into the reject bin. It goes really fast and takes about 150 meter per second. The chips that are not rejected are on to seasoning. For that step, they also use machines that appear to be gigantic tubes or cylinders where the chips are coated evenly with the seasoning which can be plainly salted, barbeque, cheddar & cream, chili, salt & vinegar, sour cream & onion and etc. Lastly, the chips are packed by the packaging machines and are ready for shipment, delivery or storage. All in all, it takes five minutes to make a Lay’s Potato Chip which is Frito Lay’s number one product.

Manufacturing process of Lay’s potato chip

V. Post Manufacturing Activities

After the packed Lay’s potato chips are put inside the boxes, an automated system would transfer those boxes and stock them on a pallet via rail. An AGV or automated guided vehicle would be used to help transport the pallet into a storage area storing up to nine stories high. It scans the barcode of the products to be able to sort them according to their brand and place them to their designate area. The company’s system picks the products to fill orders. This happens in two ways. First, a machine would pick the boxes of large quantities of single products to fill orders and load them into the truck. Another is a person will bring together all small mixed orders to deliver them directly to the supermarket. The mixed loads travel a conveyer direct to the loading area where a machine feeds the boxes into the trucks. Frito-Lay uses intensive distribution. They use this way of distribution in order for their products to get to as many customers as possible. Their products are sold to stores like convenience stores, gas stations and grocery stores. This is the most efficient way to get their products out and will reach to as many customers as possible. Trucking, on the other hand, is what Frito-Lay uses as their form of transportation. Trucking enables to move their products across North America. This is an efficient way to deliver the products to where they need to be and on time. In 2010, Frito Lay has owned approximately 1,830 distribution centers, warehouses and offices for more than 40 countries. Product research and development, sales and distribution within the U.S and Canada is controlled by the division, Frito-Lay North America. Its essential brands are Lay’s, Ruffles, Potato chips, Doritos tortilla chips and etc. The products created by the said division are sold to independent distributors and retailers. These products are sold to independent distributor and retailers and are being transported into the distribution centers.

PepsiCo’s Latin Americas Foods sells Frito-Lay branded snack foods in Central and South America and in Brazil, they sell local brands such as Lucky snack.

While the primary global Frito-Lay brands are sold in some parts of Asia, Middle East and Africa, many snack food products have been created to match local taste and cultural preferences. Frito-Lay has also employed alternate distribution means in these regions. And in South Africa, they hired delivery drivers who grew up in their delivery areas, with the intent of "making the product seems less foreign.”

VI. Conclusion / Recommendation

Consumers nowadays are becoming more health conscious and want to pay attention to proper diet and healthy living. Although Frito Lay is selling chips that can be considered as junk food by many, the company should continue to promote its “all natural ingredients” in the packaging by using natural ingredients and less processes to produce the chips.

A woman is suing Frito-Lay, for what she says is deceptive use of the phrase “all natural ingredients” on its packages of products. Frito-Lay’s products contain genetically modified organisms (GMOs), aka corn and vegetable oils, which means that its products are not “natural,” according to the plaintiff. She says the company uses corn and oil from genetically modified crops, which are not naturally occurring. Therefore, Frito-Lay’s products are not natural and its advertising is deceiving consumers.

Frito Lay should make it clear to their consumers that not only their potatoes are natural but also the vegetable oil it uses. In this way, no one can complain about their deceptive “all natural ingredients.” The company should address its issues in the court and complaints received so as not to affect their reputation on quality.

While in the middle of the production, the electricity supply was sudden cut by a weather disturbance. This resulted to a sudden stop of all the machines in the factory. Several chips that are left in the fryer were burned and thrown away. Because of this, the company incurs a lot of costs. It usually takes 10 – 15 minutes before the backup energy supply comes. The group recommends the company to have a device that will give uninterrupted power supply to the machines. When the electricity supply of the machine stops, this device will automatically turn on and subsequently provide power to it. When the electricity from the generator is available, the device will turn off. In this way, the company can have continued production even when there is power outage.