BỘ GIÁO DỤC VÀ ĐÀO TẠO
TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN
GROUPWORK
FROM FARM TO SHELF: THE SUPPLY CHAIN OF LAY’S POTATO
CHIPS – A PRODUCT OF PEPSICO
Class: TMKT1122E
Lecturer: Le Thi Thai Ha
Full Name
Student ID
Role
Dương Phương Quỳnh Anh
11240432
Leader
Đàm Phương Linh
11243309
Member
Trần Minh Ngọc
11242573
Member
Nguyễn Thuý Anh
11243888
Member
Phạm Hồng Giang
11247278
Member
Trần Hương Nhi
11243708
Member
Hà Nội – 2025
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TABLE OF CONTENTS
INTRODUCTION................................................................................................. 1
1. Overview of PepsiCo and Introduction to Lay’s Potato Chips .................... 3
1.1. Overview of PepsiCo, Inc .......................................................................... 3
1.2. Introduction to Lay’s Potato Chips ......................................................... 3
2. Lay’s Potato Chips Supply Chain Mapping ................................................... 4
2.1. Lay’s Potato Chips Supply Chain Diagram ........................................... 4
2.2. Lay’s Potato Chips Supply Chain Description ....................................... 4
2.2.1. Upstream Stage ...................................................................................... 4
2.2.2. Downstream Stage ................................................................................. 5
2.2.3. Integration of Material, Information, and Financial Flows ............... 7
2.3. Lay’s Potato Chips Supply Chain Strategy ............................................ 7
3. Lay’s Potato Chips Supply Chain Risk and Mitigation Strategy................. 8
3.1. Identified Supply Chain Risk ................................................................... 9
3.2. PepsiCo’s Mitigation Strategy .................................................................. 9
CONCLUSION ................................................................................................... 12
REFERENCES .................................................................................................... 13
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INTRODUCTION
“Great
companies
are
built
on
great
supply
chains.”
— Harvard Business Review, 2020
This statement perfectly captures the growing recognition that Supply
Chain Management (SCM) is not just an operational function—it is the strategic
backbone of success in the global Food and Beverage (F&B) industry. In a sector
defined by fast-changing consumer preferences, tight margins, and the constant
pursuit of freshness and quality, SCM determines how efficiently raw ingredients
move from farms to factories and finally to consumers worldwide.
Within multinational corporations, effective SCM plays a vital role in
sustaining competitive advantage. It enables cost optimization and flexibility
through global sourcing, streamlined manufacturing, and agile logistics networks.
It also enhances resilience—the ability of a business to withstand and recover from
disruptions such as climate change, agricultural shortages, or geopolitical
instability. Moreover, SCM drives innovation and sustainability by integrating
digital technologies, predictive analytics, and environmentally responsible
practices across every stage of the value chain.
This report focuses on Lay’s, a flagship product under PepsiCo, as a
representative case of effective SCM implementation in the F&B industry. Lay’s
supply chain exemplifies global coordination and innovation: sourcing potatoes
from multiple regions, employing advanced manufacturing and quality control
systems, and distributing products to millions of consumers daily through a
synchronized global network.
The objective of this paper is to analyze the supply chain of Lay’s and
evaluate how PepsiCo applies core SCM principles to achieve operational
efficiency, resilience, and sustainability.
The paper is structured as follows:
•
•
•
Section 1 – Overview of PepsiCo and Introduction to Lay’s Potato
Chips: provides background information on PepsiCo and Lay’s.
Section 2 – Lay’s Potato Chips Supply Chain Mapping: illustrates the
flow of materials and products across tiers.
Section 3 – Lay’s Potato Chips Supply Chain Risk Analysis and
PepsiCo Mitigation Strategy: discusses key challenges and mitigation
approaches.
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1. Overview of PepsiCo and Introduction to Lay’s Potato Chips
1.1. Overview of PepsiCo, Inc.
PepsiCo, Inc. is a U.S.-based multinational food and beverage corporation
headquartered in Purchase, New York. Operating in over 200 countries and
territories, PepsiCo owns an extensive portfolio of iconic brands, including Pepsi,
Gatorade, Quaker, Doritos, and Lay’s. The company’s mission centers on
delivering “more smiles with every sip and every bite,” driven by innovation,
consumer trust, and long-term sustainability.
Through its PepsiCo Positive (pep+) strategy, the company is reimagining growth
by integrating purpose into every aspect of its operations—targeting net-zero
emissions, regenerative agriculture, and a fully circular packaging economy by
2040. PepsiCo’s supply chain strategy reflects this transformation, prioritizing
global sourcing efficiency, digital automation, and sustainability-driven production
systems.
1.2. Introduction to Lay’s Potato Chips
Lay’s, a flagship snack brand under PepsiCo’s Frito-Lay division, is
recognized as the world’s No.1 potato chip brand. Founded in 1932, Lay’s has
become a symbol of consistent quality and flavor innovation. Only 10 potato
varieties out of more than 4,000 global types meet Lay’s stringent standards for
texture, crispness, and color.
The brand collaborates with over 100 family-owned farms across North
America and sources crops from more than 60 countries worldwide, ensuring a
stable, diversified raw material base. Lay’s manufacturing model emphasizes
proximity and freshness — during harvest season, farm-grown potatoes can be
transformed from field to bag within 48 hours.
PepsiCo has also embedded automation and sustainability into Lay’s
production process: smart factories use AI-based quality control and
energyefficient fryers, while packaging plants incorporate recyclable materials
aligned with PepsiCo’s circular economy goals. In 2025, Lay’s launched its largest
global rebranding initiative — removing artificial flavors and colors in the U.S.
market and highlighting transparency, authenticity, and farm-to-table storytelling.
Overall, Lay’s exemplifies how PepsiCo integrates global supply chain
coordination, technological innovation, and environmental responsibility to
maintain both operational excellence and brand trust.
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2. Lay’s Potato Chips Supply Chain Mapping
2.1. Lay’s Potato Chips Supply Chain Diagram
2.2. Lay’s Potato Chips Supply Chain Description
The Lay’s potato chip supply chain is a globally integrated system that
transforms raw agricultural inputs into finished snack products delivered to
consumers through diverse retail channels. The chain involves multiple
stakeholders working across five major tiers: Tier 2 suppliers, Tier 1 suppliers,
Frito-Lay manufacturing plants, distributors, and retailers. The entire system
functions with synchronized material, information, and financial flows to ensure
efficiency, quality, and sustainability.
2.2.1. Upstream Stage
 Tier 2 Suppliers – Provision of Raw Materials:
At the beginning of the chain, Tier 2 suppliers provide the primary
agricultural and industrial inputs required for Lay’s production.
- These include seed suppliers, fertilizer and pesticide manufacturers, and
equipment providers supporting PepsiCo’s contract farms.
- Potatoes are cultivated by over 100 family-owned farms across North
America and by certified contract farmers in Asia and Europe under PepsiCo’s
Positive Agriculture initiative.
- Tier 2 suppliers also provide vegetable oil (mainly sunflower, corn, or
palm oil) and seasoning ingredients such as salt, herbs, and natural flavor
compounds.
At this stage, PepsiCo ensures traceability through its AgroTech digital
platform, which monitors soil conditions, fertilizer usage, and crop yields in real
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time. Once harvested and inspected, these raw materials are transferred to Tier 1
suppliers for preliminary processing.
 Tier 1 Suppliers – Processing and Preparation of Key Components:
Tier 1 suppliers receive inputs from Tier 2 and perform value-adding
preparatory functions before delivering to Frito-Lay manufacturing facilities.
- Agricultural collection centers handle sorting, washing, peeling, and
grading according to Lay’s strict standards (e.g., specific gravity and sugar
content). Only about 10 potato varieties out of 4,000 global types meet Lay’s
quality specifications (PepsiCo, 2024).
- Oil refineries refine and test oils for purity, oxidation levels, and
sustainable sourcing certification (RSPO or equivalent).
- Seasoning mix manufacturers blend and prepare precise combinations of
salt, herbs, spices, and flavor compounds according to proprietary Lay’s recipes.
These suppliers follow PepsiCo’s Flavor Quality and Safety Standards (FQSS) to
ensure taste consistency, allergen control, and traceability across all markets.
- Packaging converters produce multi-layer polymer films (PET, PE, or
aluminum foil laminates) that act as moisture and oxygen barriers to extend shelf
life.
After passing quality audits under PepsiCo’s Supplier Quality Expectations
(SQE) program, the prepared materials are delivered just-in-time to Frito-Lay
plants to minimize storage and ensure freshness.
2.2.2. Downstream Stage

The manufacturing stage:
Represents the transformation of raw inputs into finished Lay’s potato
chips. PepsiCo operates more than 30 Frito-Lay plants globally, including major
hubs in the U.S., Mexico, the U.K., and Vietnam. The production process follows
a tightly automated and data-driven sequence:
- Washing and slicing: Fresh potatoes are sliced into thin chips using
precision cutters.
- Frying: Chips are fried in high-quality oil at controlled temperatures to
achieve the desired crispness and color.
- Seasoning: Automated sprayers evenly coat chips with seasoning
powders developed by PepsiCo’s R&D centers.
- Packaging: Products are packed using Modified Atmosphere Packaging
(MAP) to retain freshness.
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Digital integration systems such as the Manufacturing Execution System
(MES) and AI-based Quality Control (QC) ensure that each batch meets consistent
quality standards and sustainability metrics. The company’s pep+ (PepsiCo
Positive) program also aims for net-zero emissions by 2040, emphasizing
renewable energy use and circular packaging.

Distribution Network – Movement to Market:
Once packaged, finished products flow through a dual-channel distribution
system designed to balance cost efficiency (Lean) and market responsiveness
(Agile). This system relies entirely on Indirect Selling, utilizing both a directtoretailer model and a traditional multi-tier model.
Indirect Selling (Direct Store Delivery – DSD): The Direct Store Delivery
(DSD) channel is Frito-Lay’s key competitive advantage. This approach involves
Lay’s products moving directly from the plant to the retail shelf, minimizing transit
time and eliminating the retailer's handling costs.
- Target Channels: This DSD channel primarily serves high-volume
partners, including Large Retail Chains (like Walmart and Tesco) and Convenience
Store Chains/Local Groceries.
- Rationale: The DSD model ensures optimal product freshness, maximizes
on-shelf availability, and guarantees precise merchandising control at the shelf
level.
- Logistics Note: While DSD is the primary method, for large chains, some
products may be shipped in bulk to the retailer's own Distribution Centers (DCs)
based on the retailer's request, bypassing Frito-Lay’s dedicated DSD fleet.
Indirect Selling (Via Wholesalers/3rd Party Partners): This multi-tier
channel is used to efficiently reach specialized and lower-volume accounts.
- Target Channels: Products are sold to independent Wholesalers, Food
Service Distributors, and Vending Operators.
- Rationale: This route serves highly specialized accounts, such as
Cinemas/Restaurants (Food Service), Vending Machines, Small Online Retailers,
and Independent/Low-Volume Retailers that prefer to purchase a variety of goods
from a single third-party supplier.
PepsiCo’s overall distribution is highly optimized through a global
transportation management system, which integrates GPS and RFID tracking to
improve routing efficiency and ensure real-time visibility across the fleet.

Retailers and End Customers:
6
- Retail partners encompass both modern trade (supermarkets, e-commerce
platforms) and traditional trade (small stores and kiosks). The efficiency of the
final mile is achieved through a continuous Information Flow.
- Point-of-sale (POS) data from retailers is continuously shared with
PepsiCo’s Sales and Operations Planning (S&OP)system. This integration allows
the company to rapidly adjust production forecasts, optimize promotional
placement, and effectively avoid stockouts.
- The entire process ensures that end customers ultimately receive products
that have moved through a supply chain designed to maximize freshness,
consistency, and sustainability—often achieving farm-to-shelf delivery in as little
as 48 hours during peak harvest season (Baking & Snacks, 2025).
2.2.3. Integration of Material, Information, and Financial Flows
Flow type
Direction & Mechanism
Material Flow
Forward: Tier 2 -> Tier 1 -> Frito-Lay Plants ->
Distributors/Wholesalers -> Retailers -> Consumers.
Reverse logistics handle defective returns and recycling
under pep+.
Information Flow
Bidirectional: Downstream data (demand forecasts, sales)
inform upstream planning; upstream data (crop yield,
quality reports) support procurement decisions. Managed
through integrated ERP and S&OP platforms.
Financial Flow
Payments move downstream to suppliers and logistics
partners; incentives, rebates, and sustainability credits flow
upstream. Contract farming ensures fair, performancebased compensation to growers.
In summary, Lay’s supply chain is a vertically integrated network
emphasizing speed, transparency, and sustainability. Each stage — from Tier 2
input suppliers to end consumers — is digitally connected through PepsiCo’s
global systems, supporting consistent quality, rapid replenishment, and reduced
environmental impact.
2.3. Lay’s Potato Chips Supply Chain Strategy
Lay's operates its supply chain using the Leagile model, regionalization and
sustainability as a strategic lever. The front end of the chain is optimized for Lean
(efficiency, cost savings, stability), while the market-facing end retains
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Agilecharacteristics (flexibility, rapid response). Simultaneously, PepsiCo
integrates its pep+ (Positive Agriculture) strategy and digitalization to enhance
adaptability and reduce risk.
Strategic pillars and implementation methods:






Leagile (Decoupling Point & Inventory Policy): Lay’s sets its decoupling
point at regional distribution centers (DCs), combining large-scale, Leanoriented production upstream with strategically held finished goods close to
key markets for rapid response. Raw materials are delivered to factories justin-time (JIT), while safety stocks of key SKUs are maintained at DCs.
Production changeover times are minimized through SMED and TPM
practices. The trade-off involves higher Days of Holding (DOH) at DCs,
which increases storage costs but significantly improves fill rates and
reduces stockout risks.
Sourcing Strategy (Contract farming + Supplier diversification): PepsiCo
works directly with tens of thousands of farmers through contract farming
programs, providing technical support, inputs, and agronomy training.
Multi-regional sourcing pools and supplier scorecards help reduce exposure
to seasonal risks, while regenerative agriculture practices are being
expanded to improve long-term sustainability and resilience.
Distribution Strategy (DSD + DC Hybrid Model): The Direct Store
Delivery (DSD) model ensures high on-shelf availability and merchandising
control in convenience retail channels, while DC replenishment serves
modern retail chains efficiently, optimizing cost-to-serve. Frito-Lay’s DSD
network in North America is a key competitive advantage, balancing service
quality with operational efficiency.
Digital Transformation and Data-driven S&OP Planning: Advanced
tools, including POS-driven forecasting, promotion optimization, digital
twin modeling, and intelligent quality control, support a tightly integrated
Sales & Operations Planning (S&OP) process. Monthly and weekly S&OP
cycles synchronize Sales, Operations, Purchasing, Production, and
Logistics, ensuring seamless operations and reducing information delays.
Sustainability as a Strategic Lever (pep+): Sustainability initiatives reduce
agricultural risks, comply with environmental regulations, meet green
consumer demands, and lower long-term costs. PepsiCo implements
regenerative agriculture programs, innovates in compostable and recyclable
packaging, and optimizes factory energy use. Results are reported annually
in PepsiCo’s ESG reports.
Risk Management & Contingency Playbooks: PepsiCo manages risks
through supplier scoring, scenario simulations (e.g., crop failures), backup
co-packers, cross-plant surge capacity, and dynamic routing. Satellite and
remote monitoring technologies provide early warning, and risk
management practices are integrated into the Global Food Safety Policy.
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3. Lay’s Potato Chips Supply Chain Risk and Mitigation Strategy
3.1. Identified Supply Chain Risk
One of the most significant risks to Lay’s supply chain lies in the impact of
climate change on agricultural production, particularly potato farming. According
to PepsiCo (2024), rising temperatures, droughts, floods, and other extreme
weather events have disrupted agricultural yields, damaged rural infrastructure,
and increased input costs across its global operations. As Lay’s relies heavily on
high-quality potatoes with specific moisture and starch content, any instability in
raw material supply directly threatens production efficiency, product consistency,
and cost structure.
Climate change affects not only crop yields but also the broader agricultural
logistics system that supports Lay’s manufacturing network. Droughts and
heatwaves reduce soil moisture, making it harder for farmers to maintain
productivity, while floods and storms can wash away fields or damage local
transport infrastructure. When rural roads or collection hubs are disrupted,
transporting fresh potatoes from farms to processing plants becomes slower and
more expensive. Unpredictable harvest cycles also force PepsiCo to store excess
potatoes during surplus periods or import raw materials during shortages, thereby
increasing cold storage and procurement costs.
Beyond immediate impacts on crop yield, climate change also causes
longterm structural disruptions in agricultural supply networks, forcing PepsiCo to
adapt its sourcing and logistics models. Furthermore, the regional distribution of
potato farming is shifting. Certain traditional growing regions are becoming less
viable due to water scarcity, compelling PepsiCo to identify alternative sourcing
zones located farther from its core production facilities. This expansion increases
logistics distances, fuel consumption, and carbon emissions. At the same time,
governments are tightening environmental regulations—such as carbon pricing,
water-use restrictions, and packaging mandates—which further elevate
compliance costs and pressure PepsiCo to redesign its supply and manufacturing
models.
Overall, these combined pressures create a reinforcing risk loop:
environmental disruption leads to agricultural instability, which triggers higher
operational costs, logistical complexity, and potential product shortages. This
systemic risk not only threatens supply continuity and profit margins but also
challenges PepsiCo’s ability to meet its ESG (Environmental, Social, and
Governance) goals and sustain consumer trust in Lay’s as a sustainable, highquality
brand.
3.2. PepsiCo’s Mitigation Strategy
PepsiCo has implemented a series of climate resilience initiatives to
mitigate agricultural and supply risks under its global sustainability framework,
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pep+ (PepsiCo Positive). To mitigate the agricultural and logistical disruptions
caused by climate change, PepsiCo has implemented a range of resilience-focused
initiatives under its global sustainability framework, pep+ (PepsiCo Positive).
 Regenerative Agriculture and Local Sourcing: Through the Sustainable
Farming Program (SFP) and the Climate Resilience Platform (CRP),
PepsiCo provides farmers with digital tools and data insights to enhance soil
health, improve water management, and adopt regenerative practices. These
initiatives aim to stabilize yields, increase carbon sequestration, and
strengthen local supply networks. According to the PepsiCo ESG Summary
Report (2024), over 90% of PepsiCo’s potato volume in key markets was
sustainably sourced, with regenerative agriculture programs covering over 3
million acres globally. In 2025, Baking & Snacks reported that PepsiCo
expanded its regenerative potato farming initiative across Latin America,
directly involving Lay’s supply network (Baking & Snacks, 2025).
 Renewable Energy and Sustainable Manufacturing: PepsiCo reduces its
carbon footprint and energy risk by investing in solar and wind power,
signing Power Purchase Agreements (PPAs), and converting potato byproducts into biogas to fuel manufacturing facilities. New factories are
designed under the “Sustainable Operations from the Start” principle,
ensuring energy efficiency and low emissions from day one. The PepsiCo
ESG Report (2024) highlights that 100% of PepsiCo’s U.S. direct operations
are powered by renewable electricity, and the company’s Frito-Lay Modesto
plant became its first fully renewable-powered manufacturing site using
solar, wind, and biogas (PepsiCo, 2023; PepsiCo Press Release, 2023).
 Climate-Resilient Logistics and Digital Monitoring: The company employs
IoT-enabled cold chain systems to monitor temperature and humidity in real
time, minimizing spoilage and transport delays. Predictive analytics and
route optimization algorithms further enhance logistics efficiency during
extreme weather events. PepsiCo partnered with Infor and Microsoft Azure
to digitize its cold chain, improving real-time visibility of temperaturesensitive logistics, as documented in Infios (2024), PepsiCo’s Cold Chain
Success Story.
 Supplier Diversification and Risk Monitoring: PepsiCo maintains a
geographically diverse supplier base to reduce dependence on any single
climate-sensitive region. Its Sustainable Sourcing Guidelines require
ongoing risk assessment of supplier exposure to weather and geopolitical
disruptions, enabling proactive mitigation. PepsiCo’s Global Fiber Supplier
List (2024) and Sustainable Sourcing Guidelines outline regular supplier risk
evaluations tied to climate and ESG performance, ensuring diversification
and traceability across agricultural tiers (PepsiCo, 2024).
=> By integrating regenerative farming, renewable energy, digital logistics, and
diversified sourcing, PepsiCo has strengthened Lay’s resilience against
10
climaterelated agricultural disruptions. These initiatives not only secure raw
material availability but also reinforce PepsiCo’s long-term sustainability goals
and reputation as a leader in responsible supply chain management.
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CONCLUSION
In today’s volatile and interconnected business landscape, a company’s
competitive edge is no longer determined solely by product quality or market
reach, but by the resilience and sustainability of its supply chain. PepsiCo’s Lay’s
brand exemplifies this principle through a sophisticated, globally integrated, and
sustainability-driven supply network that bridges efficiency and agility. Its leagile
model — combining lean upstream production with agile downstream
responsiveness — enables Lay’s to balance cost optimization with market
adaptability across diverse regions.
However, this study reveals that even the most advanced supply chains are
vulnerable to external shocks. Climate change has emerged as a defining risk
factor, directly threatening the agricultural foundation of Lay’s potato sourcing.
Unpredictable weather patterns, rising temperatures, and resource scarcity have
created volatility in crop yields, transportation routes, and production costs. These
pressures not only disrupt PepsiCo’s operational continuity but also test its
commitment to sustainability and corporate responsibility in a rapidly evolving
global context.
In response, PepsiCo has adopted a forward-looking mitigation strategy
under its pep+ (PepsiCo Positive) framework, integrating regenerative agriculture,
renewable energy, smart logistics, and supplier diversification. These initiatives,
backed by real-world implementation and measurable impact, transform
sustainability from a cost factor into a strategic advantage. By empowering
farmers, digitalizing its logistics, and decarbonizing operations, PepsiCo builds a
more climate-resilient and ethically grounded supply ecosystem.
Ultimately, Lay's case demonstrates that the future of supply chain
management lies in synergy — where efficiency meets sustainability, and
innovation meets responsibility. PepsiCo’s holistic approach not only safeguards
its agricultural supply but also strengthens its brand equity and leadership in
sustainable value creation. This model stands as a benchmark for how global
corporations can turn risk into resilience and purpose into performance in the 21st
century.
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REFERENCES
Harvard Business Review (2020), Great Companies Are Built on Great Supply
Chains.
McKinsey & Company (2023), Resilient Supply Chains in Consumer Goods.
Deloitte (2024), Sustainability and Agility in Global Food Supply Chains.
PepsiCo ESG Report (2024); Baking & Snacks (2025).
PepsiCo. (2024). ESG Summary Report 2024. PepsiCo, Inc.
Baking & Snacks. (2025). Lay’s unveils global rebranding: Transparency and
farm-to-table storytelling. William Reed Ltd.
PepsiCo. (2023, April 13). Frito-Lay North America completes first third-party
electric vehicle shipment in continued effort to decarbonize supply chain.
PepsiCo, Inc.
PepsiCo. (2024). Global fiber supplier list. PepsiCo, Inc.
Baking & Snacks. (2025). Lay’s unveils global rebranding: Transparency and
farm-to-table storytelling. William Reed Ltd.
Infios. (2024). PepsiCo’s cold chain success: How digital transformation
enhanced logistics resilience.
McKinsey & Company. (2023). Resilient supply chains in consumer goods.
McKinsey & Company.
PepsiCo. (2023, April 13). Frito-Lay North America completes first third-party
electric vehicle shipment in the U.S.PepsiCo, Inc.
PepsiCo. (2024). Sustainable sourcing guidelines. PepsiCo, Inc.
PepsiCo. (2024). Our impact: Agriculture and regenerative farming. PepsiCo,
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