Half a century of growth
McDonald’s
 Follow rigid and overdefined procedures
 Mixed service and product industry
 Subject to strict food and beverages laws
 Relatively mobile industry easily
expanded and contracted
 Small number of products
 Small facility
 Ltd number of suppliers
 Can and does franchise
 Emphasise on process standardisation
with indirect environmental footprint
 Focus on process detail
 Focus on:
o improving the product
o Establishing stronger supplier
relationships
o Creating customised equipment
o Developing franchise holders
 Cost & speed essentials
 Quality secondary
 Needs to adapt to rapid innovations
 Quality management important
 Process capacity must be flexible at
operational level as well as supply
network level
Demand characteristics:
1. Volume - high
2. Variety - low
3. Variation - high
4. Visibility – high
Customers seek “value” & “consistency”
Breakfast and discounts
Power Generation
 Follow rigid and overdefined procedures
 Relies on dependability, safety and cost
 Essential service industry
 Subject to very limiting regulatory laws
and binding regulations
 Very large immobile industry/facility
subject to progressive aging and
obsolescence
 One product/service
 Very large network of suppliers – global
reach in technologies
 Large environmental footprint and very
visible

 An essential element with a supply chain
network
 Quality and dependability essential
 Cost secondary but also very important –
monopoly

 Dependability essential
 Very difficult to adapt to new
technologies
 Shear inertia of original technology is an
inhibiting factor
 Quality management essential -
regulated
 Process capacity inflexible
 Supply network level traditionally
inflexible – becoming progressively
flexible
Demand characteristics:
5. Volume - high
6. Variety - low
7. Variation - low
8. Visibility - low
NOT a fine dining experience or menu full of
health foods
o Volume; High volume: because tasks are repeated frequently it often makes sense for staff to
specialize in the tasks they perform. This allows the systemization of activities. Because tasks
are systemized and repeated, it is often worthwhile developing specialized technology that
gives higher processing efficiencies. Low volume: low volume processes cannot specialize to
the same degree.
o Variety; Processes that produce a high variety of products and services must engage in a wide
range of different activities, changing relatively frequently between each activity. It must also
contain a wide range of skills, technology and inputs to the process. So, high variety processes
are invariably more complex and costly than low variety ones.
o Variation in demand; Processes are generally easier to manage when they only have to cope
with predictably constant demand. When demand is unpredictable, extra resources will have
to be designed into the process to provide a ‘capacity cushion’ that can absorb unexpected
demand. Lower variation will generally have lower costs than those with higher variation.
o Visibility; It indicates how much of the processes are ‘experienced’ directly by customers, or
how much the process is ‘exposed’ to its customers. High-­­visibility processes tend to have
higher costs than low-­­visibility processes.
Inventory: Inventory:
 Minimum inventory  Long lead spare parts - maximum
 Lean inventory
  Almost impossible to be lean – some
elements could be such as day today
consumables


High visibility and hence high emotional mapping
needed to ensure positive customers judgements
 Customers experience very important
 Services effectiveness and measuring
continuously all the touchpoints between
the customer and the process
 Emotional mapping of customer becomes
important
 Sustainability and corporate
responsibility seen as essential in
promoting the brand
 Use of renewables and eliminating
packaging that are seen to damage the
environment
 chain announced it was funding
sustainable beef pilot programs in the
U.S. and Brazil, testing new cattle-grazing
methods to cut down on its carbon
footprint; it also vowed to eliminate
deforestation from its supply chain by
2020. This year the company revealed a
 Social license in terms of the power
generation
 Distinct difference between generation
and retail – retail arm mirrors
McDonald’s
 Sustainability strategy and corporate
strategy alignment
 Company vision on sustainability
 Moving away from coal fired power
stations
 Growing demand for low-cost sustainable
energy strategy
 Leader of science
 Sets the new standards
 Carries institutional uncertainties
 plan to switch to renewable or recyclable
materials for all its packaging, eliminating
all styrofoam by the end of 2018.
 More healthy menus – fresh beef, salad
bar, McCafe, A move away from
preservatives (In another move
emblematic of the chain’s push toward
relatively fresher and/or seemingly
healthier food, in August 2016 it nixed
artificial preservatives from McNuggets.
The company later reported that
McNugget sales rose 10 percent as a
result.)
 Follower of science
 Follows the new standards
 Does the operation have a strategy?
Internal stakeholders (Employees) and external stakeholders (Customers, Company’s stakeholders). In
any kind of organization, it is a responsibility of the operations function to understand the objectives
of its stakeholders and set it objectives accordingly
 The relative priority of performance objectives differs between businesses; the relative
importance of the five performance objectives depends on how the business competes in its
market. Businesses that compete in different ways should want different things from their
operations functions.
 Does operations strategy make sense from the top and the bottom of the business?
o Top down – customers choices and desires
o Bottom-up – customer advocacy
 Focus:  Focus on:
o Innovation in process and o Productivity
products (new technology for o Efficiency
ordering and delivery, including a o Minimizing waste
mobile order-and-pay-ahead app o Lean thinking and operational
and a delivery partnership with agility
UberEats)  efficient distribution of
o build-your-own burger kiosks – information or materials
efficiency drive and not to internally and externally
replace workers  elimination of
o New products and customised unproductive regular
products for different markets internal meetings
o Exceptional customer experience  continuity within the
through : team due to shifting
 People, product, place , workloads or turnover
price and promotion  knowledge management
o return of the dollar menu, an system
emphasis on fresher ingredients, o New shift patterns
o more environmentally friendly o Addressing asset strategies to
packaging reflect the realities of operational
o new push into China issues dealing with 50 years old
 o introduced all-day breakfast,
capitalizing on its most profitable
menu (new kitchen equipment to
allow all items to be cooked
simultaneously
o aligning pace of change from
within the business to the pace
of change to the outside
 Process technology leader/follower
 Process design evolving to address new
products and menus
 Recognise process variability
 Employer:
o Educator of people
o Low skill workforce
o Normal tenure is measured in
years (2- 3)
o Bad image for low wages
($15wage)
o the company insists the Kiosk
technology is merely designed to
speed up the ordering process
and reduce errors
 Demand:
o Combination of Chase and
manage demand through
promotions
 Surviving strategies:
o More franchises, fewer company-
owned stores
o McDonald’s owns properties and
leases them to franchisees, the
chain has been described as
more of a real estate company
than a fast-food restaurant.
o Faster and more adaptable
o Reconcile low prices with rising
customer desire for quality
assets that are no longer
supported by OEM
 Process technology taker
 Process design to assist productivity
Are process tasks and capacity configured
appropriately?
o Task precedence
o Series and parallel configurations
o Cycle time and process flow
o Process balancing
o Throughput, cycle time and work-in­
progress.
 Activity time variability
 Employer:
o Very highly skilled personnel
o Need for retention high as
replacement very difficult
o Normal tenure measured in
decades (20- 30)
 Demand
o Level but reliable
 Surviving strategies:
o Phasing out of the coal fired
power generation
o Investment in renewables and
gas fired power stations
o More productivity and better
operational efficiencies
o Innovations in digital
transformation of the business
preparing it for the new era of
power generation reliant on
micro-grid technology
 o High-speed, low-cost supply chains are unable  Major equipment suppliers are not agile
to respond to unexpected changes in demand enough because of nature of the product
or supply
o Companies' obsession with speed and costs
 The consumables are a major area that
also causes supply chains to break down through digitisation can reap benefits –
during the launch of new products lean thinking
o Supply chain:  Customer advocacy in demonstrating the
Agility (Respond to short-term changes in demand or supply will to transition the company to a more
quickly; handle external disruptions smoothly) – sustainable power generating company
o Fostering Agility – the company fosters  Cost and dependability at the core of the
true relationship with their supply chain new drive
where they see themselves there for the
long terms sharing innovative ideas with
the whole network in the supply chain The impact that operations and process
ensuring value adding ideas is carried management can have on the businesses:
through the whole supply chain o Cost; It can reduce the cost of producing
 Promote flow of products and services by being efficient.
information with suppliers o Revenue; It can increase customer
and customers.
satisfaction through quality, services and
 Develop collaborative
relationships with innovation.
suppliers. o Risk; It can reduce the risk of operational
 Design for postponement. failure, because well­designed and run
 Build inventory buffers by operations should be less likely to fail.
maintaining a stockpile of o Investment; It can ensure effective
inexpensive but key
investment to produce its products and
components.
 Have a dependable services.
logistics system or o Capabilities; It can build capabilities that
partner. will form the basis for future innovation
 Draw up contingency by building a solid base of operations
plans and develop crisis skills and knowledge within the business.
management teams.
Adaptability (Adjust supply chain's design to meet
structural shifts in markets; modify supply network to
strategies, products, and technologies.)
o Adapting Your Supply Chain
o McDonald’s ensures that their
supply chain network are
adaptable to the market
uncertainties and build necessary
buffers
o Local suppliers for their
international markets
Alignment
o Creating the Right Alignment
o Also ensure that the firms in their
supply chain have the same
interests as McDonald’s
o Share the success and the rewards
o 