Any Takers

Business Making Decisions

Frito Lay is a branch of Pepsi which sells manufactures and markets corn chips. Crisps, potato chips among other snacks. The common snack produced by Frito Lay is Frito corn chips; Lay’s and Ruffles potato chips, Walkers potato crisps, Rold Gold Pretzels Doritos and Tostitos tortilla chips and Cheetos cheese-flavored snacks. (Kinnear & Taylor, 2010)Fritos is sold in all 48 states and holds about 50,000 employees who enjoy facing new challenges every day. The motto in Frito Lay is “performance with purpose”. A great outcome comes with the motto plus creating high quality snacks for their consumers. The staff creates a caring environment to ensure customers stick to them and to them alone.

Analysis is important since it measure the progress a company has gone. If a company is experiencing losses, then it is important for them to realize earlier and also know the root cause of the losses. There are two factors that need to be checked to ensure that everything is running smoothly; new items and inventory control. For each factor there are respective variables involved for it to fulfill its main purpose. (Kinnear & Taylor, 2010)

The reason for any research is to define its relation in the world. To determine the best variables to use, we look at how the variable affects the outcome of the factor. We get both the dependent and independent variables. A good researcher needs to find out which variables give out quantifiable outcomes once manipulated. The independent variable is the key variable while the dependent variable measure of the manipulation conducted by the researcher. (Kinnear & Taylor, 2010) Some of the variables that we can use in giving an okay to a new product from the company are; technological innovations that came up with the product, political movements at the time when the item is about to be released, customer expectation, availability of competition and organizational turnover.

To ensure the research variables are under control, reliability and validity of the experiment has to be determined. This also helps eradicate the causal effect. Inbuilt error is also avoided when irrelevant variables are eliminated. With that the research is said to be valid. Reliability of a measure is its consistency while validity is checking whether the variable is checking what it is supposed to check.

The next factor is inventory control. For effective inventory management, one has to ensure variables that affect it are taken care of. (Brandon, 2012) The variables may be affecting both business and hence profit margin of the company. Assumptions should never be made. Actual research is the remedy. Some of the common variables associated with inventory are budget, expenses and income.

For instance a supplier gives a discount to a company for buying things in bulk. Once you are afraid of taking the offer, leave it. At times the discounts are enough to cater for the entire inventory costs. (Demers, 2002) You may lose your efficiency level of producing items in bulk. Fewer items ordered are more expensive than when dealing with bulk items. Expenses tend to be more since there is paying of invoices, paying the vendors, receiving items, putting them at the right place; maybe in a warehouse. Basically more resources get used when the inventory is low. This may have overall effects in the production level and hence the profits. Also you may increase your spending but still have low profit levels. (Demers, 2002)

Thorough inventory analysis is important since it also helps know which stock to order and how to order it. While ordering we have to make sure we keep the inventory as low as possible and less spending too.

Frito Lay is a Pepsi branch that manufactures, sells, and markets Crisps, corn chips, potato chips and other snacks. The problem that has been identified in this company is the inventory analysis. According to the information obtained, the company does not have an effective system that controls its inventory, making the company suffer from surpluses and shortages. In order to understand the problem and make recommendations, data from the frequency in which shortages and surpluses occurred within a period of six months was obtained. This paper uses descriptive statistics in analyzing the situation at the company in bid to coming up with effective recommendations for the situation.

Table: 1 A table showing how the number of times shortages or surpluses occurred in a particular month

Descriptive results for the shortages during the six months:

Mean = 6.83

95% confidence interval for actual Mean: 4.227 thru 9.440

Standard Deviation = 2.48

Hi = 10.0 Low = 4.00

Median = 6.50

Average Absolute Deviation from Median = 2.17

Descriptive results for the surpluses during the six months:

Mean = 10.3

95% confidence interval for actual Mean: 8.066 thru 12.60

Standard Deviation = 2.16

Hi = 13.0 Low = 7.00

Median = 10.5

Average Absolute Deviation from Median = 1.67

How data was obtained

In order to get the accurate data about the frequency in which surpluses and shortages occur within the company, an interview with the store manager in which he was able to provide records. In order to ensure that the data that was obtained was accurate, the data that was obtained from the store manager was compared with the records from the sales department in learning of the instances when the company was producing more than what is needed in the market and when it was producing less than what was needed in the market. However, it was assumed that other factors that influenced production such as employee morale, management, and availability of raw materials remained constant. Such an assumption would be helpful in drawing general conclusions about the inventory analysis within the company.

Data analysis

According to the above table, the mean obtained for the shortages experienced in the company during the six months was 6.83. Compared to the 10.3 mean obtained for the surpluses experienced during the six months, it can be observed that surpluses occur more frequently as compared to shortages. This could also mean that the company is focusing more on producing without a proper framework that identifies the pattern in which their products are purchased (Winkler, 2009).

According to the data obtained, there is no specific pattern in which either the surpluses or the shortages have occurred within the company. For the shortages, the year started off with 4 incidences where shortage was recorded, a number that increased by 1 in February and March, rose to 8 and 10 in April and May respectively and slightly dropped by 1 in June to 9. Such a non-uniform pattern is also evident in the surpluses with the frequency on January being 9 and 7 in June. However, it is also important to learn that for shortages, the figure started at 4 and ended at 9 while for surpluses, the figure started at 9 and ended at 7, creating an impression that the shortages are continuing to increase while there is a probability that the surpluses will reduce over time and surpluses to reduce over time other factors held constant (Winkler, 2009).

From a general analysis of the data obtained over the six months, there is an imbalance in the frequency in which shortages and surpluses are occurring in these companies. The data has also created an impression that the company has either been negligent or has not been effective in its inventory management. This is evident from the high frequency in which surpluses and shortages have been observed in the company for the six months recorded. Additionally, the non-uniform pattern in which the shortages and surpluses have been observed provide an insight on how ineffective inventory analysis of the company is and the immediate action that the company needs to make in its inventory management (Black, 2012).

Conclusion

In conclusion, Frito Lay has an ineffective framework in its inventory management. According to the data obtained during the first six months, there has been more incidences on both shortages and surpluses. It has also been observed that there have been more surpluses than the shortages, raising eyebrows on the production processes. Frito Lay should therefore be armed in ensuring that the data obtained with the seriousness it deserves and employ workable strategies that will help in controlling inventory within the organization. The company should also make sure that they use the available data in tracking on their areas of weaknesses in addressing the issue. Through such strategies, it will be possible for the company to effectively manage its inventory.

The appropriate inferential statistics method would be the hypothesis method. This is because of the conclusions deduced from the various findings made about the inventory management. Therefore, we do data analysis using the hypothesis method to substantiate the finds whether the shortages are increasing while the surpluses decreasing.

1. The confidence level would be 95%.

2. The hypothesis being tested id if shortages are increasing

3. Null hypothesis

H0: μ (mean shortage) = 6.5

Alternative hypothesis H1: μ (mean shortage) > 6.5

4. The level of significance is 5%

5.