Supply Chain Management SUPPLY CHAIN ASSIGNMENT ON SUBMITTED TO- MS HARLEEN SAHNI SUBMTTED BY- ANKKIT RAJ McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald and in 1948 they reorganized their business as a hamburger stand using production line principles.
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Drive-Thru, Auto-Mac, Pay and Drive, or "McDrive" as it is known in many countries, often has separate stations for placing, paying for, and picking up orders, though the latter two steps are frequently combined; it was first introduced in Arizona in 1975, following the lead of other fast-food chains. The first such restaurant in Britain opened at Fallowfield, Manchester in 1986. McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants.
Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder is operated by others through a variety of franchise agreements and joint ventures. The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales.
As a condition of many franchise agreements, which vary by contract, age, country, and location, the Corporation may own or lease the properties on which McDonald's franchises are located. In most, if not all cases, the franchisee does not own the location of its restaurants. The United Kingdom and Ireland business model is different than the U. S, in that fewer than 30% of restaurants are franchised, with the majority under the ownership of the company. McDonald's trains its franchisees and others at Hamburger University in Oak Brook, Illinois.
In other countries, McDonald's restaurants are operated by joint ventures of McDonald's Corporation and other, local entities or governments. As a matter of policy, McDonald's does not make direct sales of food or materials to franchisees, instead organizing the supply of food and materials to restaurants through approved third party logistics operators. McDonald's restaurants are found in 119 countries and territories around the world and serve 58 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1. million people. The company also operates other restaurant brands, such as Piles Cafe. Focusing on its core brand, McDonald's began divesting itself of other chains it had acquired during the 1990s. The company owned a majority stake in Chipotle Mexican Grill until October 2006, when McDonald's fully divested from Chipotle through a stock exchange. Until December 2003, it also owned Donatos Pizza. On August 27, 2007, McDonald's sold Boston Market to Sun Capital Partners. MCDONALDS INDIA INDIA AS A MARKET
In 1996, McDonald's opened in India for the first time, a country where the majority of the population was Hindu and vegetarian, and the cow was sacred. Many saw it as just another example of the relentless spread of Western corporations into every nation, creating a global system in which wealth was drained out of local economies into the hands of a very few, very rich elite. McDonald's opened its doors in India in October 1996, demonstrating what the McDonald's experience was all about. McDonald's in India was a 50-50 joint venture partnership between McDonald's Corporation (U.
S. A. ) and two Indian businessmen. Amit Jatia's company, Hardcastle Restaurants Pvt. Ltd. , owned and operated McDonald's restaurants in Western India, while Connaught Plaza Restaurants Pvt. Ltd. , headed by Vikram Bakshi, owned and operated the North Indian operationsi. These companies signed their joint-venture agreements with McDonald's in April 1995 and along with their Indian management team trained in McDonald's restaurants in Indonesia and the U. S. A. before opening the first McDonald's restaurant in India. The entry of McDonald's in India was perfectly timed.
The market had begun to open up. The economy of the country was growing stronger. The customer markets were eager to acquire newer products and use newer forms of services. Foreign brands were valued and perceived to be superior in quality. According to a report of AC Neilson, among the world's consumers, Latin Americans and Asians were the biggest supporters of globalisation and the value that it added to the various aspects of their livesii. It was a favourable situation for McDonald's because at the time when they entered, India, the Asian Tiger was awakening to the global call.
The Indian customer was enthusiastic about the market situation which provided them with numerous choices to choose and pick. In a way McDonald's revolutionized the food retailing business in India. It introduced the Indian customers to service standards which were available in the western world for years. These service standards were visible and noteworthy and hence triggered quick acceptance within the customers. McDonald's positioning in India as a family restaurant further fuelled its success. DIVERSITY IN THE INDIAN MARKET India as a market was a unique example of diversity.
Divided into 28 states and 7 union territories, the vegetation, climate, religion, language, clothing, and food varied from one state to another. With the combination of spices in a unique way, food of these states reflected their traditions and culture. Hence the biggest challenge to any food business in India definitely was about balancing the diversity and the product offerings. McDonald's got clearance from Foreign Investment Promotion Board (FIPB) of India in 1991. But it was only after five years of preparation, that the first restaurant became operational in 1996.
It worked on developing local relationships with local partners to facilitate the raw material. Indian companies for their operational convenience had divided the Indian subcontinent into four zones, the progressive West, the powerful North, the traditional and culturally rich, South and East. McDonald's opened their first restaurant in the capital of India which is Delhi. The second restaurant was opened in the financial capital of India, Mumbai. McDonald initially concentrated in the West and North regions.
Later the company exhibited ambitious plans for expansion in Eastern and Southern regions. McDonald's real influence had been in establishing organizational systems of complete control at every stage from raw product to factory, from worker to consumer - backed by incessant media hype. McDonald's had been a successful global food corporation at refining, co-coordinating, standardizing and developing such processes into a total system. It had set up these practices in every country it had moved into, and many other companies followed their suit.
What Ford Motor Company did for cars, travel and the urban environment; McDonald's had done for food and eating habits. McDonald's expansion was criticized and resisted by trade unionists, local residents, nutritionists and many others in almost every town and country where they planned a new store - despite their highly developed and expensive marketing effort about being a benefit for the community. They were resisted for what they represented, and remained a focus of controversy. CHALLENGES FACED BY MCDONALDS IN INDIA Vegetarianism: The major issue was beef.
Cow being sacred and worshipped, beef could not be served. Muslims did not eat pork. The challenge was to change the form of the worldwide popular Hamburger to make an entry into India. With 25-30% of the population being lacto vegetarian and a large majority eating meat, an alternative to beef and pork was necessary. Competition from Local Food Retailers: The competition from the local food retailers was intense. The food retailers had been doing business for years. Their familiarity with the market and the understanding of the local taste gave them a competitive edge.
There were numerous eating joints which offered snacks and meals with affordable price tags. Target Marketing: Operation Excellence Food Innovation Value propositions had to be directed to the right target market to establish a new product. An interesting question was who would eat at McDonald's? In order to develop the marketing strategy, it was important for any company to understand the consumer market. The more one knew and understood about consumers, the more effectively one could communicate and market to them Brand Trust Pricing MCDONALDS SUPPLY CHAIN
An effective supply chain is an intricate network of suppliers, distributors and customers who share carefully managed information about demand, decision and performance, and who recognize that success for one part of supply chain means success for all. McDonald’s is the single largest food chain service retailer in the world. It serves around 45 Million customers everyday in 121 countries. It has 29,000 restaurants worldwide. It is also the single largest real estate owner. In India, McDonald’s made its presence felt in the year 1996.
It has 30 restaurants in 5 different cities In India. 95% of the ingredients/products used by them are sourced locally. McDonald’s restaurants in the south and west of India function under Hardcastle Restaurants Private Limited which is a Development Licensee. Amit Jatia is the Vice-Chairman of the company. For the north and east of India, McDonald’s has formed a joint venture with Connaught Plaza Restaurants Private Limited of which Vikram Bakshi is the Managing Director. These two companies monitor, scrutinize and judicially promote the brand of McDonald’s in the country.
The main business comes from Delhi, Mumbai, Jaipur, Pune and Mathura. McDonalds had been working on its supply chain even before it opened its first joint in the country. McDonalds, an international brand which was trying to make inroads into the country, developed its Indian partners in such a manner that they stayed with the company from the beginning. McDonald’s spent around 6 years in setting up its supply chain in India. The philosophy of its supply chain is nothing but partnering with its suppliers, so that a win-win situation can be achieved and both can earn evenue, the total logistics and other cost can be lowered, expertise of the supplier will give an advantage etc. The main factors to focus here are supplier partnering elements - shared information, expectations, risks and payback, long term commitment, periodic reviews, compatible culture and the most important mutual understanding. The success of McDonalds India was achieved by sourcing all its required products from within the country. To ensure this, McDonalds developed local businesses, which can supply it highest quality products.
Today, McDonalds India works with 38 different suppliers on a long term basis and several other stand alone restaurants for its various other requirements. McDonald’s distribution centres in India came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in Kolkata (2007). McDonald’s entered its first distribution partnership agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service businesses. The association goes back to July 1993, when it studied the nuances of McDonald’s operations and requirements for the Indian market.
As distribution centres, the company was responsible for procurement, the quality inspection programme, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, re-packing of promotional items continued since then at the centres playing a vital role in maintaining the integrity of the products throughout the entire ‘cold chain’. While the supply chain of McDonald’s at first glance appears simple, its diverse components are both critical and multi-layered. Food ingredients are supplied by two categories, Tier-I and Tier-2 suppliers.
Tier-2 suppliers comprise growers and processors who include importantly, lettuce and potato growers, poultry farms and companies which manufacture coating systems that coat the vegetable and chicken patties. The ingredients are supplied to Tier-I suppliers who process them, for instance, into vegetable and chicken patties — this is done by Vista Processed Foods Pvt. Ltd. or potato products like French fries, potato wedges and hashbrowns which are expertly churned out by McCain Foods India Pvt. Ltd. The products are then transported in a dedicated fleet of refrigerated trucks to the company’s Distribution Centers.
Multi-temperature and single temperature trucks then transport the fast food swiftly to the 217 McDonald’s restaurants across the country. The supply-chain of McDonald’s has also been expertly devised to include the significant aspect of return logistics. They have a large component of return logistics. The buns are packed in plastic crates to ensure their quality. These crates have to go back to the logistics facility, that’s where return logistics comes in. From there they are sent to the bakeries. Supply of Ingredients Special vegetarian sauce Quaker, Cremica, Phillaur, Punjab
Sesame seeds Ghaziabad, UP Iceberg Lettuce Ferrocoa Farms, Dehradun Buns Shah & Sons,Khopoli,MH & Cremica Industries, Noida Vegetable Patty Kiltran Foods, Taloja, Maharashtra Batter & Breading Cremica Industries, Ludhiana, Punjab Ingredients from across the country DISTRIBUTION CENTRES The fast food chain has four Distribution Centers across the country to serve its 217 restaurants. The DCs have segued seamlessly with the vision of the company which has embarked on a period of roller coaster growth, with one McDonald’s outlet being launched every ten days in the country!
The company owns DCs in Noida and Mumbai which are primary Distribution Centers. The other two Distribution Centers are in Bengaluru and Kolkata and are housed in leased properties. The supply-chain of the fast food chain is in effect a hub-and-spoke model because the DCs act as hubs. The transportation of McDonald’s has been completely outsourced and since 80 percent is refrigerated truck movement, the company has a dedicated fleet which transports their goods. OUTSOURCING The success of the supply-chain model of McDonald’s can be directly attributed to its unique concept of outsourcing work.
Unlike other corporate heavies, the company has a 100 percent outsourced supply chain. McDonald’s believes that they should outsource everything to a company who are experts in their subject matter and then monitor their performance in a proper fashion so that Key Performance Indicators (KPIs) are not affected at all. This is how McDonald’s operates not just in India, but everywhere. Underlying the suppleness of its supply-chain are three principles to which the company adheres unwaveringly, the principles of trust and collaboration between the brand, the owners or operators, and the suppliers. It’s like a three-legged stool. Each leg (principle) has to be equally strong so that there’s no collapsing foundation. McDonald’s also believes in a culture of partnership and transparency with its suppliers. They have 100 percent transparency in everything that they do which is very critical for them when they work with their suppliers. McDonald’s has 14 core suppliers who supply directly to the fast food chain and they are known as Tier-I suppliers. Examples of Tier-I suppliers are Vista Processed Foods Pvt. Ltd. , the Dynamix Group, Mrs Bectors, etc.
The other suppliers forward ingredients to the Tier-I suppliers first and they are termed Tier-2 suppliers. The fast food chain has a total of 40 suppliers from whom it sources its ingredients. Most of the suppliers are local, but some are internationally famous foreign brands like McCain Foods India which set up shop in India when McDonald’s ventured into the fast food business in the country. For a McDonald’s supplier the terms of work are rigorous. A company’s stellar credentials are not enough; the supplier’s job does not end when the product leaves his premises, rather it ends only when the customer consumes it.
McDonald’s expects its suppliers to personally ensure the quality of their products to skirt the risk factor. Suppliers like Coca Cola which is McDonald’s beverage partner also, for instance, take water management classes in its restaurants to ensure potable quality of drinking water. Sole Distribution Partner McDonalds’ products are distributed by Radhakrishna Foodland Pvt. Ltd which is the only distribution partner of the fast food chain. RK Foodland manages the four DCs and since it has a transport division, handles the truck movement in the supply-chain right through the country.
McDonald’s expects its distribution partner to meet its standards of ‘cold, clean and on-time delivery ’. RK Foodland expertly manages the mundane day-to-day activities of the fast food chain like raising purchase orders to suppliers, invoicing, keeping an astute eye on working capital management, timely delivery, payments, etc. They are like a one-stop shop for the restaurants. Anything that is required, from a bulb that needs to be changed in a restaurant to training material, is sourced directly from RK.
There are only two products, buns and Cokes, which are sent directly to the restaurants. Buns have a limited shelf life, hence they are sent directly to the outlets, while Coca Cola has a well-oiled distribution system which ensures quick dispatch of its products. As with its suppliers, McDonald’s has no legally documented Service Level Agreements (SLAs) with RK Foodland. The fast food chain carefully calibrates the performance of its distribution partner, measuring it against its own KPIs to ensure its performance does not dip below its own exacting standards.
The DCs are assessed on several factors like administration efficiency, the total number of cases managed per man hour, warehouse efficiency, overtime as a percentage of the total number of hours worked and in the case of transportation, the number of cases handled per trip, truck utilization, etc. McDonald’s constantly scrutinizes the performance of RK Foodland against these KPIs; if its distribution partner is unable to meet certain benchmarks, together they devise solutions which would enable them to achieve set goals. COLD CHAIN
A marked feature of McDonalds’ supply-chain is that the entire network consists of movement of goods through a cold chain. In effect, the suppliers are also a part of this cold chain and in certain cases, for instance, the lettuce growers, the cold chain begins with the Tier-2 suppliers. McDonald’s have the largest refrigerated movement of products in India. An interesting and innovative feature of this cold chain is that the same truck can carry products at different temperatures, ranging from frozen products at -18C to -25C, chilled products from 1C-4C and dry products at ambient temperatures.
Apparently, McDonald’s is the only company whose supply-chain network is characterized by this successful experimentation. The inbound supply chain of McDonald’s now consists of dedicated reefer trucks supported by dedicated and trained manpower. As the store numbers and distances increased, they decided to come out with a design of multi-temperature vehicles which could carry all three temperature products. They are installed with automatic temperature controller. Truck containers were made with two side doors in addition to the rear door.
The side doors are used to unload products without disturbing the products in the other temperature zones. The delivery window is +/-2 days. The products are of three types i. e. frozen products, chilled products and dry products. The frozen products need the temperature from -15 to -25 deg C, the chilled products from 1 to 4 deg C and the dry foods from 24 to 30 deg C. This finesse and attention to detail has helped McDonald’s achieve its own USP of ‘quality, standards of service, cleanliness and value. McDonalds’ efficiency and effectiveness are also due to the fact that it has a ‘pull-supply’ chain. The restaurant issues orders to the Distribution Center which, in turn, routes the order to the supplier and only then does the supplier produce it. The supplier thus maintains barely any extra stocks; only if there is a contingency, like the overhaul or servicing of machinery, will the supplier produce surplus stocks. Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent more than six years to get the system into place.
This system brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value. Through its unique cold chain, McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures.
The following list of suppliers, who build up the major supply chain of McDonalds, reveal how this ‘Cold Chain’ works and contributes towards the efficiency of McDonalds. * Dynamix Dairy Industries (Supplier of Cheese): Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk.
The factory has: * Fully automatic international standard processing facility * Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food. * Stringent quality control measures and continuous Research & Development From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs 262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra, manufactures cheese slices for McDonald’s at 10 metric tonnes per month.
Dynamix has helped set up 15 bulk cooling centres throughout the district from which it purchases milk. Each cooling centre, which is equipped with modern measuring and testing equipment and a large cooling tank, is not more than a few kilometers away from local dairy farms. A farmer can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which also lists the quality of the milk supplied by him as per fat content, colour and solids content. If the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can vary from one litre to 10 litres, or more.
Each batch is mixed in one large stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness. From this point onwards, until just before the burger is actually served in a McDonald’s restaurant hundreds of kilometers away, the temperature is never allowed to increase. When the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The sophisticated testing lab can check fat content with an accuracy of 0. 1 per cent.
It can even detect minute traces of pesticides or antibiotics administered to cows. This instant feedback and the rejection of the entire tanker-load forces farmers to follow the best practices in terms of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and animal medicines and completely stop even the slightest attempts at adulteration. * Trikaya Agriculture (Supplier of Iceberg Lettuce): Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables.
Farm infrastructure features: * A specialized nursery with a team of agricultural experts. * Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant. * Pre-cooling room and a large cold room for post harvest handling. Refrigerated truck for transportation. Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald’s India, is one such enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural management practices and sharing of advanced agricultural technology by McDonald’s has made Trikaya Agriculture extremely conscious of delivering its products with utmost care and quality.
Initially lettuce could only be grown during the winter months but with McDonald’s expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to grow this crop all the year round. McDonald’s has provided assistance in the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, high-quality lettuce to McDonald’s urban restaurant locations thousands of kilometers away.
Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of the crop is maintained between 1? C and 4? C and 95% respectively. Vegetables are moved into the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid vacuum cooling to 2? C within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage.
With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald’s Middle East and Asia Pacific operations. McDonald’s expertise in packaging, handling and long-distance transportation has helped Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald’s assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated hotels, clubs, flight kitchens and offshore catering companies all over India. * Vista Processed Foods Pvt.
Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies) A joint venture with OSI Industries Inc. , USA, McDonald’s India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd. , produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has: * Separate processing lines for chicken and vegetable foods. * Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness. * International standards, procedures and support services. Vista Processed Foods Pvt. Ltd. McDonald’s suppliers for the chicken and vegetable range of products, is another important player in this cold chain. Technical and financial support extended by OSI Industries Inc. , USA and McDonald’s India Private Limited have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as – 35° C. This is vital to ensure that the frozen food retains it freshness for a long time and the ‘cold chain’ is maintained. The frozen product is immediately moved to cold storage rooms.
With continued assistance from its international partners, Vista has installed hi-tech equipment for both the chicken and vegetable processing lines, which reflect the latest food processing technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the vegetable products do not mix with the non-vegetarian products.
Now, at Vista, a very wide range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in the parent companies, work towards innovation in taste, nutritional value and convenience. These products, besides being supplied to McDonald’s, are also offered to institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service establishments and coffee shops. Today, production of better quality frozen foods that are both nutritious and fresh has made Vista Processed Foods Pvt.
Ltd. a name to reckon within the industry. * Radhakrishna Foodland (Distribution Centres for Delhi and Mumbai) An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are: * A one-stop shop for all distribution management services. * Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Celius. Effective process control for minimum distribution cost. McDonald’s local supply networks through Radhakrishna Foodland, which operates distribution centres (DCs) for McDonald’s restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald’s expectation of ‘Cold, Clean, and On-Time Delivery’ and plays a very vital role in maintaining the integrity of the products throughout the entire ‘cold chain’. Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country.
These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald’s restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22? C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state. * Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts) Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh.
The factory has: * State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene. * Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High Temperature) processed milk and milk products. * Strict quality control supported by a fully equipped quality control laboratory. All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald’s recognized standards.
As the ingredients move from farms to processing plants to the restaurant, McDonald’s Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to cut down on operational wastage Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within its suppliers’ facility and restaurants rather than detection through inspection of illness or presence of microbiological data.
Based on HACCP guidelines, control points and critical control points for all McDonald’s major food processing plants and restaurants in India have been identified. The limits have been established for those followed by monitoring, recording and correcting any deviations. The HACCP verification is done at least twice in a year and certified. The relationship between McDonald’s and its Indian suppliers is mutually beneficial. As McDonald’s expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export.
There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald’s India. Pictorial Description McDonalds India sources its ingredients from local suppliers who are an integral part of the cold chain. Refrigerated trucks with multi temperature facility divided into 3 zones –freezer, chiller and ambient to ferry product demanding varying temperature from supplier’s location to the distribution centre.
Distribution centre is also divided into multi-temperature zones like trucks with freezer at 0 degree F to 33 degree F. Restaurants have in-built cold storage units subdivided into same aforesaid zones- freezer, chiller and ambient. IN A NUTSHELL Forecasting Demand Equally impressive is the accuracy of the demand forecasts. The restaurants give a three-day to one-week forecast to the Distribution Center. The DC, in turn, has a three-month rolling forecast with the suppliers which enable them to plan their production schedules meticulously.
For extensive long-term planning, McDonald’s has devised the 31Q system—3 stands for the three years that the fast food chain will keep checking its plans, 1 represents the detailed forecast of the next year and Q symbolizes the quarterly monitoring of these forecasts. While preparing the annual budget, they include their suppliers in the budgeting process, briefing them on the new products and restaurants to be launched. Using this information, the suppliers roll out their production schedules. The schedule for the next year is carefully fixed and then stringently monitored.
Once the forecasts are closed and the budgets fixed, the plan schedules and performances are monitored every quarter, also to ensure that there is no dip in performance. With 217 restaurants scattered across the country, lead times for delivery assume critical importance. But McDonalds’ supply-chain network is everything it is supposed to be to ensure spot on distribution. Every restaurant manager knows the exact time of arrival of each product which enables the supply chain team to work backwards to ensure timely distribution. They have fixed locations of suppliers and restaurants and their own fleet of dedicated trucks and cleaners.
They can predict the amount of time it takes for a product to reach from an X location to a Y location. If a truck takes four or five days to travel between a supplier’s premises in Taloja, Maharashtra, to Noida in the National Capital Region, dedicated McDonalds’ trucks will accomplish it in two days due to non-stop running of the fleet. This ensures that the lead times for their trucks and deliveries are pretty much predictable. With a maximum inventory of ten days in its system, McDonald’s maintains an efficient inventory turn ratio of 36.
Tech Prowess The supply-chain network of McDonald’s, which appears to work effortlessly, is powered by various IT systems which enhance its effectiveness. Vista Processed Foods Pvt. Ltd use SAP, Tier-1 supplier of the chain. Distribution Centers of RK Foodland are on RAMCO Marshall ERP with Cobra software. These systems are used to directly upload store orders
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