McDonald's Supply Chain Strategy [PDF]

Zitiervorschau

McDonald’s Supply Chain Strategy

By: Annas Syaifullah Amin – 130414015 Mariza Kanti Wiryawan – 130414020 Louis Minotti Limantara – 130414024

I.

Introduction

Supply chain management (SCM) is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. Interconnected or interlinked networks, channels and node businesses are involved in the provision of products and services required by end customers in a supply chain. Supply chain management has been defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally." To gain further understanding into how SCM can be carried out in practice, it is important to find informative, advanced supply chains that have managed to implement SCM practices. This research therefore studies McDonald’s Indonesia, which since its establishment has worked with their supply chain in a way that reminds of what SCM literature recommends. Based on SCM literature, the purpose of this report is to describe and analyse McDonald’s Supply Chain Strategy.

II.

History of McDonald’s

The [[Business] began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald at 1398 North E Street at West 14th Street in San Bernardino, California (at 34.1255°N 117.2946°W). Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier. The first McDonalds with the arches opened in Phoenix in March 1953. The original mascot of McDonald's was a man with a chef's hat on top of a hamburgershaped head whose name was "Speedee". By 1967, Speedee was eventually replaced with Ronald McDonald when the company first filed a U.S. trademark on a clownshaped man having puffed-out costume legs, although Speedee is still used occasionally from time to time. On May 4, 1961, McDonald's first filed for a U.S. trademark on the name "McDonald's" with the description "Drive-In Restaurant Services", which continues to be renewed through the end of December 2009. On September 13 that same year, the company filed a logo trademark on an overlapping, double-arched "M" symbol. By September 6, 1962, this M-symbol was temporarily disfavored, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. Although the "Golden Arches" logo appeared in various forms, the present version as a letter "M" did not appear until November 18, 1968, when the company applied for a U.S. trademark. The corporation dates its founding to the opening of a franchised restaurant by businessman Ray Kroc in Des Plaines, Illinois on April 15, 1955, the ninth McDonald's restaurant overall; this location was demolished in 1984 after many remodels. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets ten years later. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast-food industry. Ray Kroc was known to have called the McDonald brothers sons of B word and also possibly cheated them out of millions if not hundreds of millions, Kroc and the McDonald brothers both feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The San Bernardino restaurant was demolished in 1976 (1971, according to Juan Pollo) and the site was sold to the Juan Pollo restaurant chain. This area now serves as headquarters for the Juan Pollo chain, as well as a McDonald's and Route 66 museum.[11] With the 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.

III.

McDonald’s Global Supply Chain

McDonald’s global supply chain is world-class. Thousands of supply partners globally (purchase food, packaging, equipment and other goods). There is also handsake agreement, and there is no complicated contracts. For example, this agreement focus on building long-term relationship suppliers. Strict guidelines ensure stores get the best products with high quality standards and product specifications. A quality leadership board (technical, safety, and supply chain specialist) provide guidance for all aspects of quality. Enforce compliance, quality centers and spot inspections (supplier workplace accountability and supplier code of conduct). Corporate publishers a list of approved all suppliers, stores choose local suppliers whenever possible such as product freshness is assured and minimize transport cost and time. IV.

Supplier Partners

McDonald’s defines six supplier attributes:  Assured supply of product  Low cost and best value  Technical competencies  System player  Shared player  Shared values  Management excellence Mutual transpatency is a success factor, build trust like information is openly shared between stores and vendors. McDonald also applied partnership culture and three legged stool.

McDonald’s work closely with suppliers to encourage them. To innovate, assure the best practices and continous improvment. Food safety is directly linked to traceablity and McDonald’s tracks of the origin of each product, which enables the company to control the links in its supply chain.

V.

McDonald’s Supply Chain Strategy

It’s apparent that for strategies to be taken seriously involving Supply Chain Management (SCM) and Business Process Outsourcing (BPO) a company’s Corporate Social Responsibility (CSR) plan must be an integral part. All of the moving parts must work together in an ethical and socially responsible way. This is especially true for service provider, IT outsourcing and supply chain relationships. Just look at the huge and ongoing work regarding human and labor rights that the apparel and footwear industry is doing to correct unsafe, low-pay, sweatshop conditions that have come to light recently in countries. Driven by globalization, supply chains are rapidly evolving and gaining in complexity across every industry sector, and the vendors in those supply chains are often a moving target as multinational corporations search for low cost suppliers. Concerns also center on how labor standards and working conditions can best be monitored and enforced throughout the chain. These are business processes and serious issues that CSR plans must account for clearly and realistically. Fortunately, there is good news: companies are catching on to the fact that their supply chains must be anticipatory, adaptive and environmentally aware to be sustainable. They know that suppliers need to be brought into the corporate sustainability discussion in real ways, not just as P.R. frosting. Managing McDonald’s supply chain requires filling the needs of corporations with more than 36.000 restaurants serving 69 million customers each day in 100 countries together to meet company’s objective, have never been outside items that customers order. Aside from making sure that a surprising number of items from the beef supply is operating a restaurant to each location, supply chain McDonald also had to fill the company's desire to tailor the menu to suit local customer preferences and source local produce. The company owns no factories or distribution centers so communication with suppliers is a necessity. The company constantly tracks everything from daily pointof-sale data for each item, restaurant stock levels and its marketing plans for promotional items or local menus to distribution center shipments and inventories. The company handles 16 major suppliers. The operation requires knowing who is responsible for planning each task and carrying out those plans. The supply chain also needs to anticipate future demands and changes in sales volume.

McDonald’s largest distributor, the Martin-Brower Company LLC, is tasked with delivering supplies to nearly all of the company’s 15,000 locations in North America. Each distribution center handles 250 to 700 restaurants, providing warehousing, transportation, and logistics services to each. Most restaurants get two or three deliveries per week, with one delivery truck able to completely stock the establishment. Delivery times are coordinated to not interrupt breakfast or lunch service because customers may not pull in if they see the truck in the parking lot. Drivers call in route to be sure the restaurant has workers there to take delivery when it arrives, reducing the time trucks are in the parking lot by up to 30%. The company also switched from roller and stand to delivery carts that move from the truck into the restaurant. With its sprawling and complex supply chain, McDonald’s and Martin-Brower maintain plans to deal with disasters. Each summer, both companies plan for hurricanes and tornadoes and communicate emergency procedures. Inventory is turned over every four days at a McDonald’s restaurant. The company can do this because of relationships they’ve formed with their suppliers, many of which still maintain the relationship that started with McDonald’s Corporation founder Ray Kroc. Steps that McDonald’s has taken to strengthen supply chain sustainability, include partnerships with nongovernment organizations (NGCs), a Supplier Code of Conduct, and increasing supplier capacity in emerging economies. It has initiated supply chain goals and protocols for measuring, identifying and scaling sustainable beef production; sustainable logistics through system-wide continuous improvements in logistics efficiency, including the increased use of biofuels; promoting environmental best practices at supplier facilities through a Global Supplier Performance Index and the Supplier Code of Conduct.  The Performance Index tool includes corporate social responsibility and sustainability—along with innovation, contingency planning, business strategy and other topics—and helps McDonald’s evaluate suppliers on a variety of measures including environmental, social and other metrics. This helps clarify what CSR & SUSTAINABILITY leadership means. The formal evaluation, which takes place every 1 to 3 years, is complemented by quarterly reviews.  The Supplier Code of Conduct is the cornerstone of McDonald’s Supplier Workplace Accountability program and sets clear guidelines that help suppliers understand its expectations and how to live up to them. Every supplier is required to sign the Code. In November 2012, McDonald’s launched an enhanced Supplier Code of Conduct, the result of a two-year

process that included benchmarking with a number of organizations that lead in this area, consultation with external experts in supplier workplace accountability, a human rights gap analysis and dialogue with suppliers. The resulting system is one of unparalleled connection, collaboration, and mutuality. What is noteworthy along the McDonald’s CSR path is not sustainability goals this year or next, and what the companies can do by themselves: it’s about sharing vision and collaboration to achieve a long-term culture of sustainable social and environmental change—and how they go about it with their partners. VI.

Social Media Strategy

McDonald’s use facebook to bolster brand recognition, marketing promotions, promoting theirs nutrition in theirs foods. These 2 factors have a major impact on product demand. VII.

Conclusion

In addition, the company oversees the level of its supply chain: raw material production, processing, and distribution. Among other things, this means working with suppliers to innovate and implement best practices for sustainable ingredients, requiring that our suppliers protect human rights in the workplace, and safeguarding food quality and safety through best practices in animal health and welfare. Innovating sustainability’s 3-E’s: ethics, environment, and economics.