McDonalds 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 McDonalds 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 McDonalds Supply Chain Strategy.

II.

History of McDonalds

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 34.1255N 117.2946W). 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.

McDonalds Global Supply Chain

McDonalds 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

McDonalds 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.

McDonalds work closely with suppliers to encourage them. To innovate,

assure the best practices and continous improvment. Food safety is directly linked to
traceablity and McDonalds tracks of the origin of each product, which enables the
company to control the links in its supply chain.

V.

McDonalds Supply Chain Strategy

Its apparent that for strategies to be taken seriously involving Supply Chain
Management (SCM) and Business Process Outsourcing (BPO) a companys
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 McDonalds 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 companys 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.

McDonalds largest distributor, the Martin-Brower Company LLC, is tasked with

delivering supplies to nearly all of the companys 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, McDonalds 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 McDonalds restaurant. The company
can do this because of relationships theyve formed with their suppliers, many of
which still maintain the relationship that started with McDonalds Corporation
founder Ray Kroc.
Steps that McDonalds 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
sustainabilityalong with innovation, contingency planning, business
strategy and other topicsand helps McDonalds 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 McDonalds 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, McDonalds
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 McDonalds CSR path is not sustainability
goals this year or next, and what the companies can do by themselves: its about
sharing vision and collaboration to achieve a long-term culture of sustainable social
and environmental changeand how they go about it with their partners.
VI.

Social Media Strategy

McDonalds 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 sustainabilitys 3-Es: ethics, environment, and economics.