K.J.

Somaiya Institute of Management Studies and Research (SIMSR)

OPERATIONAL MANAGEMENT PROJECT REPORT

McDonalds
SUPPLY CHAIN
9/24/2012 PGDM-RM TANVI ABBOTT (1) TAMANNA GODARA (15) PRIYA JAIN (17) SHEENA JAIN (18) RITIKA MEHTA (28) SHALAKA TIWARI (56)

McDonalds ACKNOWLEDGEMENT

Apart from the efforts of the Group Members, the success of any project depends largely on the encouragement and guidelines of many others. We take this opportunity to express our gratitude to the people who have been instrumental in the successful completion of this project. We would like to thank to our guide of this project, Mr. RAJESH PANDEY for the valuable guidance and advice. He inspired us greatly to work on this project. His willingness to motivate us contributed tremendously to our project. We also would like to thank him for showing us some example that related to the topic of our project.

TANVI ABBOTT (1) TAMANNA GODARA (15) PRIYA JAIN (17) SHEENA JAIN (18) RITIKA MEHTA (28) SHALAKA TIWARI (56)

McDonalds INDEX

S.NO

CONTENT
1 INTRODUCTION 2 McDonalds INDIA-A PROFILE 3 SUPPLY CHAIN 4 SUPPLY CHAIN IN INDIA 5 CONCEPT OF COLD CHAIN 6 HOW COLD CHAIN CONCEPT OPERATES 7 THREE LOGISTICAL DRIVERS 8 THREE CROSS FUNCTIONAL DRIVERS 9 PULL/PUSH PROCESS 10 SUPPLY CHAIN INTEGRATION 11 KEY LEARNINGS 12 CONCLUSION

PAGE NO.
4 5 7 7 8 8 13 13 14 16 17 17

McDonalds

INTRODUCTION McDonalds IS .
McDonalds is a name which is today synonymous with the fast food. Mc Donalds is the world largest chain of fast food restaurants with headquarters in oak brooks, Illinois, US.. It is serving nearly 54 million customers daily McDonalds primarily sells ham burger, cheese burger , chicken product, French fries, breakfast items ,soft drinks milks shakes and deserts but recently its also began to offer Salads, wraps and fruits. McDonalds are found in 120 countries of the world. It serves burgers and other fast food customized to local tastes. Its philosophy has been 'one world, one burger;' which meant that the burger must be consistent in terms of cost and quality. To meet such high standards, it was essential to have an excellent supply chain management system. In India, McDonald's had a very well orchestrated supply chain, called the 'Cold Chain'.

McDonalds

McDonalds India-A Profile:

McDonald's opened its doors in India in October 1996. Ever since then, the family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana, Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all the customers, what the McDonald's experience is all about. McDonalds in India is a 50-50 joint venture partnership between McDonalds Corporation [USA] and two Indian businessmen. Amit Jatias company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations. Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald's in April 1995, they trained extensively, along with their Indian

McDonalds
management team, in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonalds restaurant in India.

Respect for local culture McDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald's does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into our Indian restaurants. In addition, they've re-formulated some of their products using spices favoured by Indians. Among these are McVeggie burger, McAloo Tikki burger, Veg. Pizza McPuff and Chicken McGrill burger. They've also created eggless sandwich sauces for the vegetarian customers. Even their soft serves and McShakes are eggless, offering a larger variety to their vegetarian consumers.

International Standards McDonald's India's local suppliers provide them with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining their own recognized international standards. Fast, friendly service - the hallmark of McDonald's restaurants the world over is the mantra we abide them. Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitised several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant.

VISION To be the best & leading fast food providers around the globe.

MISSION To be the world's best quick service restaurant experience. 6

McDonalds
Being the best means providing outstanding - Quality - Service - Cleanliness - Value so that we make every customer in every restaurant smile.

VALUE To be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.

SUPPLY CHAIN
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

McDonalds
The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labor.

SUPPLY CHAIN IN MC DONALDS INDIA

In a fast food business, supply chain is of highest importance. It helps in minimizing cost, cut down the delivery time, improve the profits and at the same time maintain the highest standards.

The importance of supply chain can be understood by the fact that before setting up their first restaurant in India, mc donalds infused around Rs. 400 crores in the supply and delivery chain. Mc Donalds India sources all its products and its raw materials from India only. Mc donalds develops local businesses that supply them the products and that too of highest standards. Today Mc Donalds have around 38 suppliers and that too on the long term basis. MC DONALDS DISTRIBUTION CENTRES Noida and kalamboli(Mumbai)..1996 Bengaluru..2004 Kolkata2007 1st distribution agreement was done by Radhakrishana group, a group engaged in food business in the year 1993 and it was their 1st distribution centre.

CONCEPT OF COLD CHAIN

A cold chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a 8

McDonalds
given temperature range. It is used help extend and ensure the shelf life of products such as fresh agricultural produce, processed foods, photographic film, chemicals and pharmaceutical drugs.

This concept was unique in India and to start this concept, it took around 6 years. It benefited both farmers as well as the consumers, as they are getting the fresh, best quality and great value food. With this concept Mc Donalds cut down its wastage and able to maintain its freshness and nutritional value of raw material.

STEPS INVOLVED IN COLD CHAIN CONCEPT

Procurement Warehousing Transportation Retailing All the above activities took place in temperature controlled atmosphere. McDonald's finding the factor of cold room being vital ensured that even before vegetables from farms entered the refrigerated zones, they were locked in a pre-cooling room to remove field heat. Then a large cold room (a refrigerated van) was used for transportation to the distribution centers. In the van, the temperature and relative humidity of crop was maintained at 1-4C and 95 per cent, respectively and the flavors and freshness are locked.

McDonalds
At the suppliers' level, care was taken to guard against any possible contamination or interruption in the cold chain that can break the link and have a detrimental effect on the quality of our product.

By transporting the semi-finished products at a particular temperature, the cold chain ensured freshness and adequate moisture content of the food. The specially designed trucks maintained the temperature in the storage chamber throughout the journey. Drivers were instructed specifically not to switch off the chilling system to save electricity, even in the event of traffic jam.

HOW COLD CHAIN CONCEPT OPERATES

List of suppliers and the description showing how cold chain concept works and contribute towards efficiency. Dynamix dairy industry (cheese) Trikaya agriculture (iceburg lettuce) Vista processed food pvt ltd. (chicken and veg range of products) Radhakishana food land(distribution centre- delhi and mumbai) Amrit food(long life UHT milk and milk products for frozen desserts)

10

McDonalds

Below mentioned is the data about Refrigerated vans for McDonald's distribution Type National inbound Outbound North Outbound West Outbound South Route Suppliers to Distribution Center Distribution Center to restaurant Distribution Center to restaurant Distribution Center to restaurant Quantity 20 vehicles 13 vehicles 11 vehicles 1 Vehicle

DYNAMIX DAIRY INDUSTRY (SUPPLYING CHEESE)

Characteristics Product Differentiation: Separate product lines for Britannia and McDonalds as far as cheese is concerned. Customization based on requirement. All the suppliers are trying to expand their product portfolio based on expertise based on McDonald operations. Regional sourcing for the buns: Separate suppliers for North and West.

TRIKAYA AGRICULTURE (SUPPLYING ICEBURG LETTUCE)

Characteristics Magnitude of business: McDonalds procures 150 tonnes of Iceberg Lettuce from Trikaya Agriculture. Risk and dependency: Lettuce is highly vulnerable to weather conditions. It has to be maintained at the precise temperature of 2 degrees for maximum shelf life. Nurturing of Supplier: McDonalds guides and subsequently monitors Trikayas pest management and temperature management methods. Yield Maximization is the key for Trikaya, something that it has learnt from McDonalds.

11

McDonalds
VISTA PROCESSED FOOD PVT. LTD. (FOR SUPPLYING FROZEN CHICKEN AND VEG PRODUCTS)

Characteristics Magnitude of business: Vista, a joint venture, caters to 20-30% of the supply of processed foods to McDonalds. Supplies 12 products to McDonalds. Meticulous Quality Control: Vista implements quality control to the extent of having precision diameter of peas and color, taste and texture of the final patty. Minimizing Wastage and Cost: Raw material and intermediate products are checked for aberrations at every level to minimize rejections late in the supply chain. Automation and Differentiation of Veg/Non-Veg Processes are maintained so as to maintain separate and standardized quality levels.

RADHA KRISHNA FOODLAND (DISTRIBUTION CENTRE) Specialized in handling large volumes. Activities involved are procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. One stop shop for all distribution management services. Both dry and cold storage facility.

AMRIT FOODS An ISO 9000 firm Supplies long life UHT milk/ milk products for desserts.

DIFFERENT ITEMS ARE SOURCED FROM DIFEERENT GEOGRAPHY IN INDIA..

12

McDonalds

BUNS-shah bector &sons, Maharashtra and cermica, ludhiyana BATTER & BREADING- cremica, ludhiyana VEGETABLE PATTY- kitran foods, taloja, Maharashtra CHEDDAR CHEESE- dynamix dairy, baramati, Maharashtra SEASAME SEED- Gaziabad, UP SPL VEG EGGLESS SAUCE- Quaker, cermica, ludhiyana

THREE LOGISTICAL DRIVERS.

1. Facilities- they are the actual physical location in the supply chain network where the product is stored, assembled, or fabricated. The two main facilities are production sites and the storage sites. In McDonalds, because the products are perishable, storage time was minimal so as to reduce the wastage.

13

McDonalds
2. Transportation- it is the process where the inventory is moving from place to place. Refrigerated vans are used here in this case.

3. Inventory- it includes raw materials, work in progress, and finished goods within a supply chain. THREE CROSS-FUNCTIONAL DRIVERS

1. Sourcing- who will perform which activity ( production, storage, transportation, and distribution) in a supply chain. This activity was taken care by mcdonalds corporation.

2. Information- it includes data and analysis related to facilities, inventory, transportation, cost, prices and customers in the whole supply chain. This activity was done by Radhakrishana food land that acts as their distribution centre.

3. Pricing- how much a firm could charge for a particular goods and services that it makes available in the supply chain. Here it was done by the McDonalds only.

PULL/PUSH PROCESS
Pull processes are initiated by a customer order while the push processes are initiated by the anticipation of customer order.

Mcdonalds use both pull as well as push process, to a certain extent push is created and after that level the pull created by the firm did its task. One important question can be asked to what level that push can be applied.The products will be pushed to the

14

McDonalds
restaurants where the customers automatically demand that product and hence a pull is created.

Various Suppliers supplies the materials

Products delivered to Distribution centres

Products delivered to restaurant Push stops , pull starts here Customer order at restaurant,

showing the boundry of pull and push, push last till the product reaches the restaurant and pull starts when a customer orders the product.

SUPPLY CHAIN PROCESS CYCLE..

The processes in the supply chain are divided into a series of cycles, each performed at the interface between 2 successive stages of supply chain

15

McDonalds

customers

Customer order cycle

Retailer/ McDonalds restaurants

Replenishment cycle

distributor

Procurement cycle suppliers

SUPPLY CHAIN INTEGRATION

16

McDonalds

Horizontal Integration: under this integration McDonalds purchase competition with differing target markets. They develop into activities that are competitive to current activities. Vertical integration: We think that is a Backward Vertical Integration because McDonalds expand their operations into industries that produce inputs to the McDonalds products. Outsource: McDonalds outsourced some products like Ketchup by Heinz, milk by nestle, and mores. This also depends on countries where McDonalds are located. McDonalds has signed a five year extension to its global IT outsourcing agreement with Affiliated Computer Services.

Key Learning:

17

McDonalds
Supplier Development: McDonalds nurtures its suppliers and helps them grow stronger with continuous guidance to achieve the highest quality in its final product i.e the burger. Winning commitment: McDonalds has been capable of winning the dedication and loyalty of its suppliers and distributors by sticking to just one/few vendors. Cost Cuts with High Volume: The suppliers indulge in their own endeavor to cut costs and increase efficiencies since they operate on the large volumes of orders.

Conclusion
McDonalds fast food business has an expected a Supply Chain model of one of the highest precisions. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with maintaining highest quality standards of its products. MacDonalds initiative to set up an efficient supply chain and deploy state-of-art technology changed the entire Indian fast food industry and raised the standards of performance to international levels. As distribution centers, the company was responsible for procurement, the quality inspection programmed, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting.

18