Improved supply chain productivity using automation and better go-to-market delivery systems has driven core operating profit up 6% CAGR, says the president of Frito-Lay North America.
Speaking at the Barclays’ 2014 Back-to-School conference in Boston, Massachusetts yesterday, Tom Greco said a dedicated drive on improvements across the supply chain had improved Frito-Lay's profit.
“We’re laser-focused on productivity which has led to a 6% CAGR [compound annual growth rate] on core operating profit,” he said.
Frito-Lay’s net revenue five-year CAGR was 3.8%.
“At Frito-Lay, we believe the productivity opportunity is significant. Our productivity agenda pursues cost reduction and capability building initiatives to deliver results,” he said.
While the company invested heavily in R&D and new product development, none of that could succeed without “world-class execution and productivity”, he said.
Productivity is a growth enabler
Back in 2012, Frito-Lay rolled out a go-to-market system that it said reconceptualised the traditional plant and warehouse to store model. Its geographic enterprise system (GES) was developed to reduce the amount of manual handling throughout the supply chain and drive productivity.
By the end of 2014, Frito-Lay North America would have six GES sites in operation, Greco said.
“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,” he said.
In 2012, the productivity agenda was increased by 50%, he said, and in 2013 and 2014 it continued to stimulate growth. “We’ve hit our productivity target each other the last three years.”
In addition, the company was leveraging automation, he said, including automating packaging, case picking and forklift transportation.
“Productivity allows us to invest in our growth,” Greco said.
In 2013, Frito-Lay announced it would shift 20% of its fleet from diesel fuel to compressed natural gas (CNG).
The project, it said, would slash Frito-Lay’s total fuel consumption and greenhouse gas emissions in the US by 50% by 2015, compared to 2007.
All quotes from the Barclays conference have been sourced from Seeking Alpha .