Supply Chain Management of McDonald
Supply chain management is an important aspect of systems and operations management in an organization. The management of operations is essential in respect to every organization because it is the operational effectiveness that allows the organization in efficiently meeting out the requirements of their customers. There are various important areas that are included within the operations management in respect to an organization, and supply chain management is one such important area. Supply chain management as the name suggests is concerned with the management of flow of materials to the organization and their distribution to the final consumers after they are being processed to finished products. It is highly essential that the products must be reached to the final consumers on time. But the increasing complexities in the business processes because of higher level of globalization as pursued by them have resulted into higher difficulties in managing the supply chain process (Ballou, 2009).
There are various parties that are involved in the supply chain management process of an organization, and the efficient flow of information is essential from the point of view of managing the supply chain process in a highly efficient manner. Further, with the advancement in the field of technology is achieved, there has been higher overall application of information management systems to perform the management of supply chain process. The application of technology has resulted into the attainment of effectiveness in the process of managing supply chain. In performing the management of supply chain, the important activities that need to be carried out includes material management, and also the management of positive relationships across different important parties as involved within the supply chain of the company. Emerging technologies are also applied in performing the management of supply chain functions in an organization.
This report is aimed at performing an analysis of the supply chain function of McDonald Corporation which has been a fast food retail chain store based in US. The company operates at the international level, and it has its operations in majority parts of the world. This report initially discussed in brief about the organization and this is followed by performing an analysis of the supply chain management of the company through reviewing the approach to material management as undertaken at McDonald. The role of relationships to supply chain management would be assessed, and finally, the role played by emerging technologies in the process of successfully managing the supply chain function in the concerned organization would be assessed. Based on the findings, it would be summarized in the conclusion section of this report.
An analysis of McDonald Corporation indicates that it is a fast food retail chain store based in US. It is a multinational corporation that operates across all corners of the world, and it is known as world’s largest chain of hamburger fast food restaurants. It accounts for serving 68 million customers on daily basis across 119 countries with more than 35000 outlets. The company is known for its hamburgers that are offered to its customers, and apart from this, there are various other offerings made to the customers including French fries, burger, soft drinks and many more. The franchise mode of business expansion strategy that has been considered by McDonald, and this mode have allowed the business in achieving significant level of growth and recognition across international markets. As McDonald is operating at such a larger level, the management of supply chain function is crucial to the organization in efficiently meeting out the needs and requirements for fast foods items of its customers. The requirements for large number of company’s customers are met by highly efficient supply chain function that is managed by the company. The next section discusses about different important elements related to supply chain of McDonald (McDonald, 2014).
Approach to Material Management of McDonald
One of the key factors in respect to performing the management of supply chain function is mainly the material management. There are various kinds of materials needed depending on the nature of the organization with regard to the products and services delivered to its customers. An analysis of the case of McDonald indicates that the company is mainly indulged into delivering fast food products to its customers, and this requires the management of large range of materials needed in the production process. The major products that are included within the company’s offerings include burgers, sandwiches, breakfast, salads, beverages, McCafe, desserts and shakes etc. In providing these items, the company has a significant approach to material management. As for instance, an analysis of the case of McDonald indicates that the major requirements for its materials are met out through major distribution centers that are being operated across central locations. Each such distribution center is responsible for meeting out the material requirements of 250 to 700 restaurants. As a result, McDonald branches are not required to stock up the material, rather they are being distributed to them through the distribution centers (Cohen and Lee, 2011).
However, these distribution centers across different countries are also not owned by the company rather they are being managed by the distribution partners of the company with whom company has informal relations. These distribution partners account for meeting out the material requirements of the company which are then processed at the McDonald restaurants and they are being served as ready for consumption to the final consumers. This implies that McDonald does not own any factories or distribution centers, and the material management is therefore performed by these distribution centers which are being operated by the distribution partners of the company. This has been an efficient material management approach that has been followed at McDonald, and it is complete based on the informal relations with the suppliers i.e. distribution partners of the company. This approach to material management has been highly effective to the company in efficiently meeting out the requirements of its customers. A critical analysis of the supply chain function as followed by McDonald would indicate about the material management that has been carried out by the company.
Structure of Supply Chain at McDonald: This section of analysis is now concerned with analyzing the structure that has actually been followed at McDonald in performing the management of its supply chain function. An analysis of the supply chain of McDonald indicates that the core suppliers of the company can be categorized into two major types including tier 1 suppliers and tier 2 suppliers. In respect to tier 1 category, there are suppliers that provide processed products such as potato, vegetable, chicken, hashbrowns etc. The tier 2 comprises of suppliers that are mainly growers and processors such as potato, poultry items, chicken etc. Both these suppliers accounts for meeting out the requirement for materials in respect to McDonald. These supplier accounts for providing needed materials to the company in serving its customers. The materials are being shipped through logistics services providers to the distribution centers. Upon requirements for such materials at restaurants, they are being ordered to the distribution centers which lead to their transportation via logistics management systems across the company. There is a fleet of refrigerated trucks that accounts for supplying fresh materials in the form of processed foods items to the company’s distribution centers. There are multi-temperature trucks that account for providing the delivery of all kinds of products to the restaurants. The processed foods as delivered to the company are then processed finally for their consumption by the final consumers through McDonald outlet. This is the entire supply chain structure that is prevalent in respect to the operations of McDonald across majority of the countries across the globe. This structure of supply chain is evident from the diagram as indicated below:(Source: McDonald Supply Chain, 2014).
The structure of supply chain at McDonald above indicates the inclusion of two tier suppliers who transports the products to the centralized distribution centers and they are then transported to McDonald outlet via transportation and tracking mechanism. In these ways, the management of supply chain is ensured at McDonald with a view to achieving timely delivery of finished products to final consumers. In this process, the centralized management accounts for managing the distribution centers but they are not owned by the company as well. Although the supply chain management above indicates about the process that is being followed in performing its management, yet an analysis of McDonald indicates that this supply chain is not applicable in respect to all the materials that are required by the company. As for instance, materials such as buns and coke are being transported to the retail outlets directly by the suppliers.
Approach to Intermediaries: The role of intermediaries is crucial in respect to performing the efficient management of supply chain function in an organization. The intermediaries in the form of logistics management companies, distribution centers, suppliers etc accounts for playing a significant role in timely meeting out the needs and requirements of its customers. Intermediaries are mainly the third parties that account for meeting out the needs of two trading parties through providing intermediation services. As in respect to McDonald supply chain, the role of intermediary is played by the suppliers that undertake the responsibility of delivering the materials needed to McDonald restaurants by way of operating their own distribution centers.
An analysis of the approach of McDonald towards its intermediary i.e. the distribution partner implies that the company has maintained informal relations with their distribution partners. The approach of McDonald restaurant has been positive towards their distribution partners and this positive approach is the resulting factor of timely delivery of products and services across McDonald stores across the globe. Although these distribution centers are not owned by the company, rather they are being operated through the application of strong distribution partners. However, the approach in managing them as utilized by the McDonald company implies that there has been complete control being ensured by centralized McDonald operations over the distribution centers that accounts for meeting out the requirements of large number of McDonald restaurants. The administration is mainly aimed at achieving efficiency with respect to the performance of distribution centers so that the customer requirements on timely basis, and also in fresh quality can be met efficiently (Arntzen, Brown, Harrison and Trafton, 2008).
This approach to managing distribution centers is aimed at achieving warehouse efficiency, efficient truck utilization etc. In the entire management process, the role of company is minimal with respect to managing materials, as this is completely managed by the distribution centers of the company. The approach of the centralized operations of McDonald is mainly to monitor and control the functioning of distribution centers so that timely meet out of organizational needs with regard to materials can be achieved, and the final consumer can ultimately be served with best quality products and services. This approach to material management is highly efficient because it proves to be successful for McDonald in satisfying their customers efficiently. An important factor in their approach to managing the distribution centers is that McDonald require them to not only warehouse the supplies efficiently, but their transportation is also performed through refrigerated trucks that maintains requisite level of temperature that suited best to such processed foods.
This approach to the intermediary has been quite successful from the point of view of efficiently carrying out the operations by McDonalds.
Material Management Resulting into Competitive Advantage: From the point of view of achieving competitive advantage, the material management process as carried out by the company has been highly effective. This is evident from the fact that material management is completely entrusted to third parties and it leads to higher level of effectiveness on the part of organization in focusing mainly towards its core services of providing high quality fast food items. Further, the management of materials for the entire outlets in an economy is being entrusted to a few of the distribution centers, and this allows for achieving economies of scale in the process. An analysis above indicates that each distribution centers account for meeting out the requirements for processed materials for 250 to 750 outlets of McDonalds.
This implies that a single distribution center has the responsibility of meeting out the requirements of large number of outlets, and this ultimately allows for achieving economies of scale in the process. This provides competitiveness to McDonald in receiving its requirement for material at minimal cost, and thereby, it allows the restaurant in meeting out its customers’ requirements at cheaper rates for its products and services. Further, the management of supplies as entrusted to a single distribution partner results into higher level of commitment on their part in maintaining smooth relationships, and they thereby focuses towards achieving efficiency with respect to their roles and responsibilities in timely and efficiently meeting out the requirements of retail outlets of McDonalds. All these aspects ultimately account for achieving competitive advantage within the company’s operations.
Overall, the analysis of the material management approach of McDonald above indicated that the company has a specific process that is aimed at meeting out the needs and requirements of all its McDonald outlets in an economy through an efficient distribution process handled by its distribution partners. It allows for timely meeting out the needs and requirements of all the McDonald retail outlets, and thereby in achieving competitiveness throughout the process.
Role of Relationships in McDonald’s Approach to Material Management and Logistics
The supply chain management of an organization involves large number of parties in the process including the suppliers, logistics management companies, distribution handling, and the retailers. An efficient management of relationships with these parties is crucial from the point of view of meeting out the customer requirements on timely basis. The importance of efficient supply chain management is identified from the fact that modern day customers are highly demanding in nature and they expects timely and good quality services from the service providers. With regard to organizations such as McDonalds that accounts for delivering fast food items to its customers, the role of supply chain management is crucial. This is mainly because the products that are being transported to the McDonald outlets are highly perishable in nature, and as a result, a higher overall effectiveness needs to be accomplished in the process. This can be ensured through efficient management of relations across different parties as involved within the supply chain process.
As in respect to McDonald, the role of relationship management is significantly higher in respect to its material management process that is being carried out. The analysis above indicated that the material management has been carried out by way of distribution partners appointed across countries, and they are entrusted with the responsibility of meeting out the material requirement of all the outlets of the company that are operational within the economy. A single distribution partner is entrusted with the responsibility of meeting out the requirements for material for large number of McDonald outlets operating across a region. As for example, McDonald’s largest distribution partner i.e. Martin-Brower Company LLC accounts for meeting out the material requirements across 15000 locations in North America. Each distribution center as run by Martin Brower Company LLC is accounts for handling 250 to 700 restaurants and they aims at providing warehousing, transportation and logistics services to each unit (What are the Ingredients in a McDonald's Supply Chain, 2014).
Similar is the case of McDonald in respect to its operations in India which shows that the company has a distribution partner known as Radhakrishna Foodland Pvt Ltd and it account for handling four major distribution centers across four different corners of the company such as Noida, Mumbai, Bengaluru and Kolkata. These distribution centers account for meeting out the requirements of all the McDonald outlets across the entire economy. As the McDonald operations indicate about the maintenance of a single distribution partner in managing the distribution of large number of its franchisees, it is highly essential that there is strong relationship that is prevalent with its distribution partner. This is mainly because the management of such retail operations at large level can be ensured through the application smooth relationships with all the parties associated with its business.
As in respect to the case of McDonald, an in-depth analysis about the company’s operations indicates that it aims at maintaining stronger relationships within its distribution partners. However, an important factor in respect to the approach of McDonald in managing the distribution partner is mainly in respect to relationships, as there is no such contractual agreement that exists between McDonald and its distribution partners. The relationship is based on informal relations between McDonald and its distribution partners. However, the approach of managing the distribution partners by McDonald indicates that the company exerts sufficient level of control on its distribution partner in terms of meeting out its standards of cold, clean and on-time delivery to its customers. This implies that even though the supply chain management process in being managed by the organization through third party vendor, it still exerts control over their management. All this has been possible because of the existence of informal relations between McDonald and its distribution partners (Cohen and Lee, 2011).
Any items that are required by the company are directly sourced from the distribution center. In managing its relations with its suppliers, McDonald has no legally documented service level agreement with its distribution partners or even with suppliers. There are certain important key performance indicators that are set up by the company in managing its distribution partners. The most important factors that are considered for the purpose of evaluating the relations with its suppliers or distribution partners are administration efficiency, warehouse efficiency, total number of cases managed per man hour, number of cases handled per trip, truck utilization, and many more. Based on these factors, the evaluation of the distribution partner of the company is performed by the company (Boyer and Verma, 2009).
The ability of the company in exercising sufficient level of control over the distribution centers is mainly because of the fact that the distribution centers of the company are entrusted with higher responsibility in terms of meeting out the requirements of all the franchisees operating across a major region. As the responsibility has been significantly larger in meeting out the needs and requirements of McDonald retail chain stores, this provides the company with necessary authority to affect the performance level of its distribution centers by interrupting them in their process. Thus, there is the existence of informal relationship between McDonald and its distribution partners, and it is mainly this informal relation that allows the company in putting sufficient level of control over its distribution centers.
It is mainly the impact of informal relations within the distributors that McDonald ensures the efficient and timely delivery of materials at its stores. The distributors are required to observe various such factors that allow McDonald restaurants in providing quality food on timely basis to its customers. As for instance, the distribution partners are aimed at performing the refrigerated movement of products at different temperatures suited to particular category of products and services. In addition to this, the activities such as demand forecasting are also required to be carried out in a highly efficient manner at McDonald because the distribution partner is required to manage the lead time and other factors to ensure continuity with respect to the retail operations of the company. Apart from this, the aspects of food safety along with quality assurance are other moral responsibilities on the distribution partner of the company. Thus, the entire supply chain management with partners of McDonald is based on the informal agreement with them (Cohen and Lee, 2011).
Thus, on the basis of analysis of the entire supply chain function of McDonald, it has been evaluated that the role of relationship is significantly higher because the entire supplies to such a stronger network of McDonald franchise systems is being managed through its distribution partners.
Role of Emerging Technologies in Managing Supply Chain
This section of analysis is focused towards examining the role of emerging technologies in performing the management of supply chain function within organization. With the increasing advancement as achieved in the field of technology, the implication of highly advanced and emerging technological systems is higher in respect to businesses. In performing the management of supply chain, there are emerging technologies that are applied by businesses in the process. The application of technology in performing the management of supply chain is also evident in respect to the case of McDonald whereby the company applies highly emerging technological systems in ensuring that they have sufficient level of stocks in meeting up the needs and requirements of its customers. The entire supply chain of the company is powered with highly efficient technological systems so as to make the process as highly smooth and effortless (Collier and Evans, 2009).
The important of technological systems is also realized by management at McDonald and this leads to the higher overall application of such systems being performed by it in managing the entire operations of the company at the international level. An analysis of the case of McDonald’s supply chain especially in respect to India, it is assessed that there are specific technological systems and software that are being utilized by the company in managing its supply chain function. Suppliers of McDonald make use of SAP technological platform whereas the distribution company applies RAMCO Marshall ERP with Cobra Software. The application of this software in the supply chain process is performed with a view to automize the upload of store orders (Sharma, 2014). The store orders as uploaded over the systems allows the distribution centers in identifying the requirements across different McDonald units and this is turn allows for meeting out the requirements of the organization on timely basis.
Although the application of technology is performed in respect to managing the supply chain function of McDonald, yet an analysis indicates that there are difficulties being faced by the company in performing the successful integration of technology in its supply chain function. This is mainly because the management of the branches of McDonalds is performed by franchisee and its management is completely undertaken by them which limit the application of technology in the process. This is mainly because of complete management is within the hands of the franchisee and they limits the application of technological systems. As per the information technology director of McDonald’s global supply chain Robert Bauer, it is difficult to them in getting information about the franchisee performance because of lack of adequate information system support on their performance. An analysis of the entire supply chain of the company indicates that it is outsourced completely ranging from hamburger to French fries that are being prepared and delivered to customers.
As each and every item as prepared in mainly received through the outsourcing process, it is highly essential that there should be complete support of technological systems in performing the management of its requirements. Since few distribution centers account for meeting out the requirements of large number of franchisee, it is essential that their requirements should be well supported over information systems. In this context, it has been evaluated that McDonald also performs the ordering of its requirements to the distribution centers over the technological systems and this allows for timely replenishment of the stock needed in meeting out the requirements of customers.
Thus, the application of technology is performed at McDonald with a view to achieve higher level of effectiveness in meeting out its requirements for inventory. The emerging technologies in the form of SAP system and ERP systems are being applied for the purpose of managing the supply chain function at McDonald.
Technology in Material Planning and Systems Development: There are various important information systems that are being applied in performing the management of operations at McDonalds which in turn allows for managing the supply chain function in a positive manner. The role of technology is the organization’s management process can be identified from the fact that it makes use of management information system which allows for efficient decision making process within the organization in terms of stock replenishment, order performing to distribution centers, providing managers with information in taking timely decisions etc. The application of management information systems is therefore highly crucial from the point of view of performing the planning with respect to the materials required in managing organization’s processes (McDonald Information Systems, 2014).
Apart from this particular system, the system development is also ensured at McDonalds in the form of transaction processing systems. There are significant level of transactions that are being carried out in performing the management of operations at McDonalds and this is being positively ensured by way of applying technological systems aimed at management operations. The transactions as recorded over the systems allows for the identification of inventory levels across the franchisee, and their orders are placed based on the lead time that is required by the distribution centers. In these ways, the management of the supply chain function is being positively ensured by way of applying different important systems in performing the management of company’s operations.
Overall, systems development and the application of information systems is being positively ensured by the company in meeting the requirements of its operations in an efficient manner and thereby in achieving higher level of effectiveness with respect to managing its operations in a positive manner.
In this report, a critical assessment has been carried out in respect to the supply chain management as carried out at McDonald. The analysis indicated that supply chain is an important function in an organization and it is mainly concerned with meeting out the needs and requirements of its customers in an efficient manner. The application of supply chain is performed in respect to every kind of organizations in meeting out the requirements of their customers in a positive manner. This is also applied in the context of McDonalds as assessed from a critical analysis that has been carried out in this report. Based on the performance of analysis, it is assessed that the approach to material management has been highly flexible at McDonald which allows for efficiently backing up necessary requirements in meeting out the customers’ need. The structure of supply chain as reviewed has resulted into identification that the McDonald has specific distribution centers across all the economy, and few such distribution centers are responsible for meeting out the material requirements of the company. They performs the warehousing, logistics management etc on behalf of the franchisee and these materials are then distributed to the franchisee based on their requirements.
In performing the management of materials, McDonald ensures efficient relationship management with the intermediaries especially the distribution centers. A positive relationship enables the management in achieving higher level of efficiency in achieving timely delivery of products which in turn enables the management of customer’s demand in a highly efficient manner. The contractual agreement as assessed in respect to McDonald with its distribution partner indicated that there is no such contractual agreement that actually persists within them, and the management of the entire delivery process is being ensured based on informal relationships with its distribution partner. The analysis also indicated about the implication of technological systems in performing the management of operations of the company, and based on the analysis, it is evaluated that there has been the application of emerging technological systems that have been carried out by the management in performing the efficient management of requirements at different franchisee of the company.