A Value chain analysis of McDonalds

The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California. After that in year 1955 McDonald’s Corporation was founded by Raymond Kroc when he became national franchise agent and eventually bought out the McDonalds and became the CEO and the president.

It is ninth most valuable brand in the world and it is also the largest Job training organization in United States, it also surpassed US army in this field.

McDonalds is present in 120 countries and territories around the world and serve nearly 54 million customers each day.

McDonald’s mission is to be our customers’ favorite place and way to eat with inspired people who delight each customer with unmatched quality, service, cleanliness and

value every time we invite you to be the part of this winning team and give yourself

an opportunity to grow with the family of people striving to create smiles on the faces of millions of people everyday.

Logistics is a powerful management tool for a global organization because it is an approach to doing business that works everywhere. McDonalds saw the turnaround of logistics department few years back, now the franchise and corporate managers use an online operating system and plan exactly what to purchase, pack and ship and exactly how many trucks will be requires for the same.

The company saw dramatic changes in European operations after implementing this technology. They reduced raw waste and inventory stock by 30% and they were able to save 60 min per week when they were able to half the order time. Since product life cycle is getting more shorter and competition is becoming more intense. It is very critical to ship right amount to each restaurant therefore great deal of planning is required, and the company get its deliveries at night so that employees are not tied up dodging carts and inconvenience of parking large trucks in front of the restaurant.

Transport packaging makes up an important part of our packaging. As far as possible, McDonalds try to use re-usable containers. Salads, buns, frying oil and Coca-Cola syrup are supplied entirely or partially in re-usable containers.

Supply Chain Management of McDonalds in India

The McDonald’s Supply Chain “One Stop Shopping” processes and an automated water supply have a lot in common: “As demand arises on customers’ side, supply turns on and off automatically, but they need not care where the goods come from!”

This is worth noting that every year Rs 50000 crore worth of food is wasted in India, this is due to poor infrastructure of storage and transportation. Under supply chain, raw material flows as follows : suppliers-manufacturer-distributer-retailer-consumer whereas information and money flows in reverse direction. Now supply chain management is all about balancing these 3 flows. Supply chain operates at its best when there is a balance in finished product ordering.

McDonalds was the first brand to have left a strong imprint on QSR history of India. The company invested around Rs 400 Crores even before its first restaurant commenced business in India on its supply chain management and deployed state of the art food processing technology for having a sound supply chain.

McDonalds, India works with as many as 38 Indian suppliers on long term basis, the company was committed to source all its requirements from India itself therefore they developed Indian Businesses to supply them highest quality products.

The distribution center came in this order – Noida and Kalamboli (1996), Bangalore in 2004, and one in Kolkata 2007.

McDonalds entered its first distribution partnership agreement with Radha Krishna Foodland (Radha Krishna Group) engaged in food related service business. The Company was responsible for procurement, Quality Inspection Programme, Storage, Inventory Management, Deliveries to Restaurants, data collection , recording and reporting. The logistics and warehousing system of McDonalds, India is robust and delivers products at same temperature throughout.

McDonalds Suppliers in India:

Amrit foods

Cremica industries

Dynamix dairies

Trikaya Agriculture

Vista Processed foods(P) Ltd.

There is also technological know-how transfer for example Cremica industries worked with another McDonalds Supplier in Europe to develop technology and expertise to expand business.

The company goes with annual rate contract with suppliers to tackle price fluctuations. The company has set up cold chain distribution system by incorporating state of the art food processing technology. The company has imparted technical training to all its suppliers on how to operate imported machineries.

Under cold chain management , vegetables are placed in pre cooling room within half an hour of harvesting, then a large refrigerated van is used for transportation to the distribution centers.

McDonalds Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in cold chain system. Adherence to Indian Government rules and regulations on food, health and hygiene were also given top priority.

To keep tab on Quality control, McDonalds throws away burger puffs kept for more than 30 minutes after final preparation.

McDonalds Challenges

Full Supply chain responsibility

Multi Temp. Product-over 65% temperature controlled

Stores as far as 500-1000 kms

Drops per month-over 1000

Movement mainly by road

Regular movements of perishables by air

Routing challenges

No margin for error-Operation critical client

No Stock-outs at Store

On time delivery record-over 97%

Clean Delivery record-over 99%

Unfailing inbound supply chain

McDonald’s is another example of a JIT system wherein McDonald’s doesn’t begin to cook (well, I should probably say reheat and assemble what may or may not be actual food) its orders until a customer has placed a specific order.

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Business Model of McDonald, India

Franchise model

Product Consistency

Act like a retailer, think like a brand

The 4Ps

Product

Products need to have some strategic idea as the customers need to be provided with the idea of how and when to spend their money. Keeping that in mind McDonald places considerable emphasis on developing a menu which customers want based on market research and market testing. Marketing team needs to continuously monitor the changes that take place in the market as the food industry is a highly volatile market. What the customers like today might not be their want tomorrow. The type of marketing undertaken and the resources invested will be different depending on the stage a product has reached. For example, the launch of a new product will typically involve television and other advertising support. At any time a company will have a portfolio of products, each in a different stage of its cycle. Some of McDonald’s options are growing in popularity while arguably the Big Mac is at the ‘maturity’ stage. While offering new and differentiated products, the product cycle should also be kept in mind.

Promotions

Key objectives of advertising are to make people aware of an item, feel positive about it and remember it. Since McDonalds know about the customers it is serving, it is able to communicate well and achieve its marketing goals. Messages should gain customers’ attention and keep their interest. The next stage is to get them to want what is offered. Showing the benefits which they will obtain by taking action is usually sufficient. The right messages must be targeted at the right audience, using the right media. McDonalds has come up with punch lines like ‘I am loving it’ to keep audience engrossed and excited towards company’s brand image.

Price

Price was an important consideration that was to be kept in mind. While entering India McDonald’s had to target the middle class of India. People in India prefer to eat food which is more of an Indian style. Therefore McDonald’s came up with many economic meals in India which people could very easily afford. There are many segments of food and the prices at which they are sold are quite reasonable. McDonald’s also introduced the Mc Aloo Tikki burger and used an assortment of base’s which matched the taste of the market.

Place

India is a vast country; styles and taste of food vary from North to South and from East to West. McDonald’s kick started in the North initially and after it was widely accepted in the North it started venturing down south. McDonald’s

Human resource management

Control at McDonald’s is achieved by direct supervision, machines, the physical layout of the restaurant and the detailed prescription of rules and procedures and through recruitment since human resource form the backbone of any organization. If ‘us and them’ is still recognised, it is reinterpreted to mean ‘us’ as the management and crew and ‘them’ as the customer. Workers are encouraged to think of themselves as part of a team and managers are encouraged to equate restaurant management with coaching a team and inculcating the thought of ownership.

Employee training at McDonald’s is highly structured. Ends-level workers are first taken through the basic Crew Training System. The program consists of on-the job- training and is largely vocational, this programme is beneficial in grooming the employees and integrating their energy and effort towards the vision and mission of the organization.

Every stage after the crew level then starts a new training program, with the skills becoming more complex and generalized. At one end of the spectrum, restaurant managers are disciplined to accept tough work schedules and must prove themselves ‘up to the challenge’ of punishing schedules. Long hours and loyalty are locked in together, with young managers being persuaded not only to accept as the norm many hours of unpaid work but also to gain satisfaction from surviving these tough and uncompromising work routines, since it is a part and parcel of the job culture at McDonalds at any hierarchial level of management.

Once a crew trainer has been promoted to swing manager and performed successfully at the job, he or she is eligible for the Management Development Program (MDP).

It provides technical and functional management skills for employees at the swing manager level and above to perform management level tasks and take decisions accordingly. The first step is the Basic Operations Course, which takes several months to complete and which covers fundamental restaurant opinions.The nab in the sequence is the Basic Management Course which teaches leaderships, time planning, and crew recognition. In the intermediate Operations Course, students are trained on crew recruitment and retention, store leadership and decision-making. The final course in this sequence is the Regional Equipment Course.

Once a front-line crew member has progressed to the position of assistant managed, he or she is eligible to attend Hamburger University , the Company’s world wide training center for management personnel. Approximately 2,500 managers and potential franchisees take part in the Advanced Operations Course, or AOC. To reach to this level, one has to survive the stringent job requirements at different levels and have patience since it takes a long time to prove one’s promotion at any level in Food service Industry.

SWOT Analysis