About McDonald's

Is the leading global foodservice retailer with more than 30,000 local restaurants
serving 52 million people in more than 100 countries each day. More than 70% of
McDonald's restaurants worldwide are owned and operated by independent local men
and women

Is one of the world's most well-known and valuable brands and holds a leading share
in the globally branded quick service restaurant segment of the informal eating-out
market in virtually every country in which we do business.

Serves the world some of its favorite foods - World Famous French Fries, Big Mac,
Quarter Pounder, Chicken McNuggets and Egg McMuffin.

Our rich history began with our founder, Ray Kroc. The strong foundation that he
built continues today with McDonald's vision and the commitment of our talented
executives to keep the shine on McDonald's arches for years to come. To read more
about McDonald's history, vision and executives, click on their links in the left menu.

The business began in 1940, with a restaurant opened by siblings Dick and Mac
McDonald in San Bernardino, California. Their introduction of the "Speedee Service
System" in 1948 established the principles of the modern fast-food restaurant. The
present corporation dates its founding to the opening of a franchised restaurant by Ray
Kroc, in Des Plaines, Illinois on April 15, 1955, the ninth McDonald's restaurant
overall. Kroc later purchased the McDonald brothers' equity in the company and led
its worldwide expansion.

With the successful expansion of McDonald's into many international markets, the
company has become a symbol of globalization and the spread of the American way
of life. Its prominence has also made it a frequent topic of public debates about
obesity, corporate ethics and consumer responsibility.

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 Products

McDonald's predominantly sells hamburgers, various types of chicken sandwiches

and products, french fries, soft drinks, breakfast items, and desserts. In most
markets, McDonald's offers salads and vegetarian items, wraps and other localized
fare. This local deviation from the standard menu is a characteristic for which the
chain is particularly known, and one which is employed either to abide by regional
food taboos (such as the religious prohibition of beef consumption in India) or to
make available foods with which the regional market is more familiar (such as the
sale of McRice in Indonesia).

MCDONALDS IN INDIA

McDonald's opened its doors in India in October 1996. Ever since then, our 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 our customers, what the McDonald's experience is all
about.

Our first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A.
Almost 50 years down the line, we are the world's largest food service system with
more than 30,000 restaurants in 100 countries, serving more than 46 million
customers every day. Click here for more information on the history of
McDonald’s.

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 What is supply chain management

Supply chain management (SCM) is the process of planning, implementing, and

controlling the operations of the supply chain as efficiently as possible. Supply
Chain Management spans all movement and storage of raw materials, work-in-
process inventory, and finished goods from point-of-origin to point-of-consumption.

The definition one American professional association put forward is that Supply
Chain Management encompasses the planning and management of all activities
involved in sourcing, procurement, conversion, and logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners,
which can be suppliers, intermediaries, third-party service providers, and customers.
In essence, Supply Chain Management integrates supply and demand management
within and across companies. More recently, the loosely coupled, self-organizing
network of businesses that cooperates to provide product and service offerings has
been called the extended enterprise.[1]

Some experts distinguish Supply Chain Management and logistics, while others
consider the terms to be interchangeable.

Supply Chain Management is also a category of software product.

Supply chain event management (abbreviated as SCEM) is a consideration of all

possible occurring events and factors that can cause a disruption in a supply chain.
With SCEM possible scenarios can be created and solutions can be planned.

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 Supply chain management at MCDONALDS
Organizations increasingly find that they must rely on effective supply chains, or
networks, to successfully compete in the global market and networked economy.[2]
In Peter Drucker's (1998) management's new paradigms, this concept of business
relationships extends beyond traditional enterprise boundaries and seeks to organize
entire business processes throughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology

have enabled many organizations, such as Dell and Hewlett Packard, to successfully
operate solid collaborative supply networks in which each specialized business
partner focuses on only a few key strategic activities (Scott, 1993). This inter-
organizational supply network can be acknowledged as a new form of organization.
However, with the complicated interactions among the players, the network
structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not
clear what kind of performance impacts that different supply network structures
could have on firms, and little is known about the coordination conditions and trade-
offs that may exist among the players. From a system's point of view, a complex
network structure can be decomposed into individual component firms (Zhang and
Dilts, 2004). Traditionally, companies in a supply network concentrate on the inputs
and outputs of the processes, with little concern for the internal management
working of other individual players. Therefore, the choice of an internal
management control structure is known to impact local firm performance
(Mintzberg, 1979).

In the 21st century, there have been a few changes in business environment that
have contributed to the development of supply chain networks. First, as an outcome
of globalization and the proliferation of multi-national companies, joint ventures,
strategic alliances and business partnerships, there were found to be significant
success factors, following the earlier "Just-In-Time", "Lean Management" and
"Agile Manufacturing" practices.[3] Second, technological changes, particularly the
dramatic fall in information communication costs, which are a paramount
component of transaction costs, have led to changes in coordination among the
members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new
organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
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Corporation", Global Production Network", and "Next Generation Manufacturing
System".[4] In general, such a structure can be defined as "a group of semi-
independent organizations, each with their capabilities, which collaborate in ever-
changing constellations to serve one or more markets in order to achieve some
business goal specific to that collaboration" (Akkermans, 2001).

Supply chain business process integration involves collaborative work between

buyers and suppliers, joint product development, common systems and shared
information. According to Lambert and Cooper (2000) operating an integrated
supply chain requires continuous information flows, which in turn assist to achieve
the best product flows. However, in many companies, management has reached the
conclusion that optimizing the product flows cannot be accomplished without
implementing a process approach to the business. The key supply chain processes
stated by Lambert (2004) are:

A. Customer relationship management

B. Customer service management
C. Demand management
D. Order fulfillment
E. Manufacturing flow management
F. Supplier relationship management
G. Product development and commercialization
H. Returns management

One could suggest other key critical supply business processes combining these
processes stated by Lambert such as:

• Customer service management

• Procurement
• Product development and commercialization
• Manufacturing flow management/support
• Physical distribution
• Outsourcing/partnerships
• Performance measurement

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a) Customer service management process

Customer Relationship Management concerns the relationship between the

organization and its customers.Customer service provides the source of customer
information. It also provides the customer with real-time information on promising
dates and product availability through interfaces with the company's production and
distribution operations. Successful organizations use following steps to build
customer relationships:

• determine mutually satisfying goals between organization and customers

• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are developed with suppliers to support the manufacturing flow
management process and development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome
is a win-win relationship, where both parties benefit, and reduction times in the
design cycle and product development are achieved. Also, the purchasing function
develops rapid communication systems, such as electronic data interchange (EDI)
and Internet linkages to transfer possible requirements more rapidly. Activities
related to obtaining products and materials from outside suppliers requires
performing resource planning, supply sourcing, negotiation, order placement,
inbound transportation, storage, handling and quality assurance, many of which
include the responsibility to coordinate with suppliers in scheduling, supply
continuity, hedging, and research into new sources or programmes.

c) Product development and commercialization

Here, customers and suppliers must be united into the product development process,
thus to reduce time to market. As product life cycles shorten, the appropriate
products must be developed and successfully launched in ever shorter time-
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schedules to remain competitive. According to Lambert and Cooper (2000),
managers of the product development and commercialization process must:

1. coordinate with customer relationship management to identify customer-

articulated needs;
2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and
integrate into the best supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process is produced and supplies products to the distribution

channels based on past forecasts. Manufacturing processes must be flexible to
respond to market changes, and must accommodate mass customization. Orders are
processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also,
changes in the manufacturing flow process lead to shorter cycle times, meaning
improved responsiveness and efficiency of demand to customers. Activities related
to planning, scheduling and supporting manufacturing operations, such as work-in-
process storage, handling, transportation, and time phasing of components,
inventory at manufacturing sites and maximum flexibility in the coordination of
geographic and final assemblies postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical

distribution, the customer is the final destination of a marketing channel, and the
availability of the product/service is a vital part of each channel participant's
marketing effort. It is also through the physical distribution process that the time and
space of customer service become an integral part of marketing, thus it links a
marketing channel with its customers (e.g. links manufacturers, wholesalers,
retailers).

f) Outsourcing / partnerships

This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of
this trend is that the company will increasingly focus on those activities in the value
chain where it has a distinctive advantage and everything else it will outsource. This
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movement has been particularly evident in logistics where the provision of transport,
warehousing and inventory control is increasingly subcontracted to specialists or
logistics partners. Also, to manage and control this network of partners and suppliers
requires a blend of both central and local involvement. Hence, strategic decisions
need to be taken centrally with the monitoring and control of supplier performance
and day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. By taking advantage of supplier
capabilities and emphasizing a long-term supply chain perspective in customer
relationships can be both correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage,
logistics measurement becomes increasingly important because the difference
between profitable and unprofitable operations becomes more narrow. A.T. Kearney
Consultants (1985) noted that firms engaging in comprehensive performance
measurement realized improvements in overall productivity. According to experts
internal measures are generally collected and analyzed by the firm including

• Cost
• Customer Service
• Productivity measures
• Asset measurement, and
• Quality.

External performance measurement is examined through customer perception

measures and "best practice" benchmarking, and includes 1) customer perception
measurement, and 2) best practice benchmarking.

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Supply chain management components integration

The management components of SCM

The SCM components are the third element of the four-square circulation
framework. The level of integration and management of a business process link is a
function of the number and level, ranging from low to high, of components added to
the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more
management components or increasing the level of each component can increase the
level of integration of the business process link. The literature on business process
reengineering,[5] buyer-supplier relationships,[6] and SCM[7] suggests various possible
components that must receive managerial attention when managing supply
relationships. Lambert and Cooper (2000) identified the following components
which are:

• Planning and control

• Work structure
• Organization structure
• Product flow facility structure
• Information flow facility structure
• Management methods
• Power and leadership structure
• Risk and reward structure
• Culture and attitude

However, a more careful examination of the existing literature[8] will lead us to a

more comprehensive structure of what should be the key critical supply chain
components, the "branches" of the previous identified supply chain business
processes, that is, what kind of relationship the components may have that are
related with suppliers and customers accordingly. Bowersox and Closs states that
the emphasis on cooperation represents the synergism leading to the highest level of
joint achievement (Bowersox and Closs, 1996). A primary level channel participant
is a business that is willing to participate in the inventory ownership responsibility
or assume other aspects of financial risk, thus including primary level components
(Bowersox and Closs, 1996). A secondary level participant (specialized), is a
business that participates in channel relationships by performing essential services
for primary participants, thus including secondary level components, which are in
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support of primary participants. Third level channel participants and components
that will support the primary level channel participants, and which are the
fundamental branches of the secondary level components, may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does

not lead us to the conclusion about what are the primary or secondary (specialized)
level supply chain components (see Bowersox and Closs, 1996, p.g. 93). That is,
what supply chain components should be viewed as primary or secondary, how
these components should be structured in order to have a more comprehensive
supply chain structure, and to examine the supply chain as an integrative one (See
above sections 2.1 and 3.1).

Baziotopoulos reviewed the literature to identify supply chain components. Based

on this study, Baziotopoulos (2004) suggests the following supply chain
components:

1. For customer service management: Includes the primary level component of

customer relationship management, and secondary level components such as
benchmarking and order fulfillment.
2. For product development and commercialization: Includes the primary
level component of Product Data Management (PDM), and secondary level
components such as market share, customer satisfaction, profit margins, and
returns to stakeholders.
3. For physical distribution, manufacturing support and procurement:
Includes the primary level component of enterprise resource planning (ERP),
with secondary level components such as warehouse management, material
management, manufacturing planning, personnel management, and
postponement (order management).
4. For performance measurement: Includes the primary level component of
logistics performance measurement, which is correlated with the information
flow facility structure within the organization. Secondary level components
may include four types of measurement such as: variation, direction, decision
and policy measurements. More specifically, in accordance with these
secondary level components, total cost analysis (TCA), customer profitability
analysis (CPA), and asset management could be concerned as well.

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 5. For outsourcing: Includes the primary level component of management
methods, and the strategic objectives for particular initiatives in key areas of
information technology, operations, manufacturing capabilities, and logistics
(secondary level components).

Reverse Supply Chain Reverse Logistics is the process of planning,implementing

and controlling the efficient, effective inbound flow and storage of secondary goods
and related information opposite to the traditional supply chain direction for the
purpose of recovering value or proper disposal. Reverse logistics is also referred to
as "Aftermarket Customer Services". In other words, anytime money is taken from a
company's Warranty Reserve or Service Logistics budget, that is a Reverse
Logistics operation.

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Traditional and Supply Chain Management Approaches Compared

______________________________________________________________
Approach
Element Traditional Supply Chain
Inventory management Independent efforts Joint reduction in
approach: channel inventories
Total cost approach: Minimize firm costs Channel-wide cost
efficiencies
Time horizon: Short-term Long-term
Amount of information Limited to needs of As required for
sharing and current transaction planning and
monitoring: monitoring processes
Amount of coordination Single contact for the Multiple contacts
of multiple levels in the transaction between between levels in firms
channel: channel pairs and levels of channel
Joint planning Transaction-based Ongoing
Compatibility of Not relevant Compatible at least for
corporate philosophies: key relationships
Breadth of supplier Large to increase Small to increase
base: competition and spread coordination
risk
Channel leadership: Not needed Needed for coordination
focus
Amount of sharing of Each on its own Risks and rewards
risks and rewards: shared over the long-
term
Speed of operations, “Warehouse” “Distribution Center”
information and orientation (storage, orientation (inventory
inventory flows: safety stock) interrupted velocity)
by barriers to flows; interconnecting flows;
Localize to channel JIT; Quick Response
pairs across the channel.

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Supply chain management at McDonalds (India)

Did you know that every year, Rs. 50,000 crore worth of food produce is wasted in
India? This is mainly because of the lack of proper infrastructure for storage and
transportation under controlled conditions. McDonald's is committed to providing
quality products while supporting other Indian businesses. And so, we spent a few
years setting up a unique Supply Chain, even before we opened our first restaurant
in India.

A Supply Chain is a network of facilities including - material flow from suppliers

and their "upstream" suppliers at all levels, transformation of materials into semi-
finished and finished products, and distribution of products to customers and their
"downstream" customers at all levels. So, raw material flows as follows: supplier -
manufacturer – distributor – retailer – consumer. Information and money flows in
the reverse direction. The balance between these 3 flows is what a Supply Chain is
all about.

When there is a balance in the finished product ordering, the Supply Chain operates
at its best. Any major fluctuation in the product ordering pattern causes excess /
fluctuating inventories, shortages / stock outs, longer lead times, higher
transportation and manufacturing costs, and mistrust between supply chain partners.
This is called the Bullwhip Effect.

Depending on the situation, the Supply Chain may include major product elements,
various suppliers, geographically dispersed activities, and both upstream and
downstream activities. It is critical to go beyond one’s immediate suppliers and
customers to encompass the entire chain, since hidden value often emerges once the
entire chain is visualized. For example, a diesel engine manufacturer may be able to
integrate a GPS locator system into its engine control system. Its immediate
customer, a heavy truck manufacturer, may see no need for this functionality.
However, the downstream customer, a trucking company with a large fleet, may be
very interested in a locator system. Understanding the value to the downstream
customer is part of the supply chain management process.

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 Supply Chain Management Problems

Supply chain management must address the following problems:

• Distribution Network Configuration: Number, location and network missions

of suppliers, production facilities, distribution centers, warehouses, cross-
docks and customers.
• Distribution Strategy: Including questions of operating control (centralized,
decentralized or shared); delivery scheme (e.g., direct shipment, pool point
shipping, Cross docking, DSD (direct store delivery), closed loop shipping);
mode of transportation (e.g., motor carrier, including truckload, LTL, parcel;
railroad; intermodal, including TOFC and COFC; ocean freight; airfreight);
replenishment strategy (e.g., pull, push or hybrid); and transportation control
(e.g., owner-operated, private carrier, common carrier, contract carrier, or
3PL.
• Information: Integration of and processes through the supply chain to share
valuable information, including demand signals, forecasts, inventory and
transportation etc.
• Inventory Management: Quantity and location of inventory including raw
materials, work-in-process and finished goods.
• Cash-Flow: Arranging the payment terms and the methodologies for
exchanging funds across entities within the supply chain.

Supply chain execution is managing and coordinating the movement of materials,

information and funds across the supply chain. The flow is bi-directional.

Activities / functions

Supply chain management is a cross-functional approach to managing the

movement of raw materials into an organization, certain aspects of the internal
processing of materials into finished goods, and then the movement of finished
goods out of the organization toward the end-consumer. As organizations strive to
focus on core competencies and becoming more flexible, they have reduced their
ownership of raw materials sources and distribution channels. These functions are
increasingly being outsourced to other entities that can perform the activities better

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or more cost effectively. The effect is to increase the number of organizations
involved in satisfying customer demand, while reducing management control of
daily logistics operations. Less control and more supply chain partners led to the
creation of supply chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among supply chain partners, thus
improving inventory visibility and improving inventory velocity.

Strategic

• Strategic network optimization, including the number, location, and size of

warehouses, distribution centers and facilities.
• Strategic partnership with suppliers, distributors, and customers, creating
communication channels for critical information and operational
improvements such as cross docking, direct shipping, and third-party
logistics.
• Product design coordination, so that new and existing products can be
optimally integrated into the supply chain, load management
• Information Technology infrastructure, to support supply chain operations.
• Where-to-make and what-to-make-or-buy decisions
• Aligning overall organizational strategy with supply strategy.

Tactical

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, locations, scheduling, and
planning process definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of
best practices throughout the enterprise.
• Milestone payments

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Operational

• Daily production and distribution planning, including all nodes in the supply
chain.
• Production scheduling for each manufacturing facility in the supply chain
(minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving
inventory.

v/s Buy Decisions

Make Buy
• Manufacturers produce in house • Manufacturers outsource
• Cost of acquisition > cost of • Cost of manufacture > cost of
manufacture acquisition
• Company has the capacity to • Company cannot afford to block
invest huge capital
• Company has no plans to divest • Company plans to divest and focus
or focus to core competencies on core competencies
• L & T forges ahead into LTITL • SBI out sources its 17 functions
• Requires 5 M's • Not Required
- Men
- Material
- Machinery
- Method
- Money
• When secrecy in involved • No secrecy involved

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 Findings of study

Every organization, no matter how big or small in size , has its own forecasting
techniques. This is because without forecasting the demand and supply
requirements, the orders can’t be fulfilled. Similarly, for order processing, Mc
Donald’s forecast its requirements on a daily basis.

 The study that we did in Indore, where there are three outlets of Mc Donald’s,
each one in a multiplex, revealed that their forecasting depends on a few
factors like the upcoming movie release in that week and its response.

o Mc Donald’s has its outlets in different parts of the globe.

 In India too, Mc Donald’s has numerous outletsin different cities, but they do
not have any local vendor.
 They have a fixed vendor, that is The Radhakrishna Foodland, which caters
the range of 230 products that Mc Donald’s require.
 The Radhakrishna Food land not only process the food items but also
handle the logistics partially. The delivery center is at Mumbai where from
the required stock is transported to different locations.
 The concerned person told us, that due to the ephemeral shelf-life of
tomatoes, it is the only commodity that they make purchase from local
markets; specifically of four to five inches diameter which undergoes a
thorough sanitization process, only after which it is used.

o Every organization has its inventory cycle. The Mc Donald’s outlets do

keep a safety inventory.
 They keep the buffer stock for a period of three days, and their stock is stored
at the outlets itself. Every product used in preparing the menu items come
with an expiry date, like the French-fries served in Mc Donald’s has a life of
two hundred and seventy days. But once the menu items are cooked, they are
not kept for more than
 Ten minutes, after which they are dumped as waste.
 There is daily product safety checklist which is maintained manually as well
as with the help of computer software too, helping the staff in assessing the
stock quantity at the end of each day.

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 Radhakrishna Foodland had been working with Mc Donald’s for the past ten
years and the terms & conditions for choosing the network design was
decided by the headquarters of Mc Donald’s itself. The food items are
transported via air conditioned trucks having different chambers. Each
chamber is designed for the different kind of stock at different temperature
levels, as per the suitability and requirements of the stock. All the raw
material comes in a frozen form. The trucks have pre-defined destinations to
reach each day. The sources at Mc Donald’s told us that the trucks from
Mumbai reach Indore on Monday, Pune on Tuesday, Hyderabad on
Wednesday and so on at Bangalore and Gujarat too.
 The items which are to be procured from foreign territories comes to India
via ships, like the french fries are obtained from new Zealand via shipments.

 They do assess their daily requirements via safety checklists. The rounding
and scheduling of ouput and input is done manually and through computer
based software’s too.

 Mc Donald’s does not have any third party logistics.

 With the evolvement of the new technologies and convenient softwares, the
conventional methods of maintaining suplly chain records are now a passe`.
 Mc Donald’s too use a standardized visual FoxPro based program via which
the outlets are linked with the head office and the Radhakrishna Foodland
too.

 Mc Donald’s believe in the saying "Customer is the King" and thus the
complaints , if any, from the customers end are duly heard and resolved as
per the need of the situation.

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 BIBLOGRAPHY

 www.scribd.com
 www.managementguru.com
 www.wikipedia.com

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