Fried Up - McDonald's Supply Chain Decoded | Learning IRL By ABGLP

And now onto the case study!

 

Introduction - Our Protagonist

McDonald’s is one of the largest fast-food chains in the USA and the world. There are more than 32,000 McDonald’s restaurants serving in more than 119 countries. More than 75% of McDonald’s restaurants all over the world are owned and operated by independent owners, serving more than 42 million customers daily.

McD’s aims to be the most loved quick service restaurant in the world. They aim at providing outstanding quality, cleanliness, service and value to their consumers. Their core competencies include providing quick and efficient service to customers at the drop of a hat, especially when people need fast food at competitive prices, thus providing the best value for the customer’s money.

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They basically aim at focusing on quality, production of food and use of raw materials all over the world. When McDonald’s entered India, they were able to gain a large portion of the market share and dominate the competition successfully. Other fast food chains like Subway, Burger King, etc are still playing catch up. The question is, how did McDonald’s, an American fast food chain make such an impact on the Indian psyche? How did McDonald’s become a market leader in the Indian fast food market? Let’s have a look at McD’s India strategy, especially their operations and supply chain arm, to understand this.

McDonald’s India Entry

McDonald’s India entry was divided into 4 main stages:

• Entry
• Building the Supply Chain
• Aggressive Growth
• Penetration

In 1993, McD’s entered India through a 100% subsidiary, MIPL (McDonald’s India Private Limited) which formed 50:50 joint ventures with Vikram Bakshi of Connaught Plaza Restaurants to manage the North and East zones, and Amit Jatia of Hardcastle Restaurants to manage West and South zones. The staff were trained in India, USA as well as Indonesia to understand the intricacies of the business. 

There were a few challenges McDonald’s faced when entering the Indian market. These involved adapting the McDonald’s menu to the Indian palate, being perceived as a mass brand that was accessible to people of all economic classes, as well as catering to India’s vegetarian population and the non-beef eating population too!

For this, McDonald’s came up with vegetarian options on the menu, burgers with chicken instead of beef, and they also championed competitive pricing with lots of offers. 

 

Streamlining Operations At McDonald’s Outlets

A restaurant management system (RMS) was created for efficient order management. Separate food lines for vegetarian and non vegetarian options were maintained at the outlets. The kitchens too were kept separate. 

 

Supply Chain Management At McDonald’s

Objectives: 

• To operationalise its globally practised QSCV (quality, service, cleanliness and value) ideology. 
• To provide and enjoy flexible pricing for products.
• To launch new products when necessary.

McDonald's gets a supply of raw materials and local products from local and small scale farmers. These are the indirect suppliers for McD’s. These suppliers are sourced by distinctive sourcing carried out by various small scale and mid-scale raw material suppliers themselves. These are McDonald’s direct suppliers. From them the raw materials are stored at McD’s warehouses. Finally, they’re distributed to stores from here.

 

Problems Faced By The Supply Chain 

Despite having various processes in place, McDonald’s dd face certain issues when it came to their supply chain. Poor transportation and storage infrastructure was a serious issue. Lower quality of agricultural products was also a problem for the chain. 

To battle these, McDonald’s initiated a few programs:

Local sourcing: By 2014, McDonald’s was sourcing 50,000 metric tonnes of potatoes from McCain Foods India Pvt. Ltd. McCain has been working with more than 800 farmers on approximately 4000 acres of land across Gujarat under contract farming potatoes.

Keeping Spending Down: McDonald’s managed to keep their prices down by strategies like bulk buying, long term vendor contracts and manufacturing efficiencies. 

Logistics play a huge role in the home deliveries segment that McDonald’s operated in. Which is why, the first outlets were opened only within a 500km radius of their distribution centers.

All of these lead to a direct result in McDonald’s revenues and profits as brand perception and sales skyrocketed. With more and more McD’s outlets popping up in Tier 2 and 3 cities as well, we can say that the company managed to achieve their objectives successfully.

 

Based on the above case study, answer the following questions:

1. How can McDonald’s strengthen their in store operations?

2. How can McDonald’s streamline their supply chain operations to derive maximum benefit?

3. Which strategies do you think McD’s use to achieve sustainability and be seen as an environmentally aware company?

4. If you were the COO at a zonal HQ at McD’s, how would you change your supply chain and operations to better benefit your vendors and suppliers?

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