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McDonalds Corporation Case Study

1. Review the service delivery system. How does this meet the needs of
the business?
Introduction
The service delivery system in a McDonalds Restaurant is a comprehensive design that
includes an efficient layout of facilities and equipment and clearly defined procedures, roles,
responsibilities and standards. Increasing fierce competition and consumers demand for
quality and value within the fast food market has had a significant impact on every aspect of
the McDonalds organisation. At the same time; the recession has amplified the mutual need
to improve service delivery system as well as reduce cost. McDonald has set about achieving
this by adopting an increasing lean focus.
Elimination of waste
Lean philosophy can be defined as the quest towards meeting demand instantaneously, with
perfect quality and no waste. Sources of waste which the lean business must strike to
eliminate are overproduction, waiting time, transport, process, motion and defectives.
Overproduction
Historically, McDonald would prepared finished food in large batches ahead of time and kept
them heated in warming bins ready for sale. Whilst this ensured a quick & reliable service, it
also earned them a poor reputation for quality and waste. As market share began to diminish a
new system was introduced. Now, a limited stock of patties, salad ingredients and other food
items are pre-prepared but the restaurant only combines them into finished sandwiches as
they are ordered. The duration of this process is less than 3 minutes in total, which enables a
quick response to any unexpected change in demand (thereby reducing the risk of

overproduction).The production is guided by a computer package. The schedule manager

(either the restaurant manager or the first assistant manager) prepares a daily chart of
projected sales by hour throughout the day. The previous three weeks sales and the sales for
the same period last year are used as inputs to the schedule managers prediction. From the
sales forecast, the computer package generates proposed bin levels by product for the
production area. The resulting chart displayed on the wall is used by the production person as
a guide and to spot more precisely a surge or fall in demand. The lean organisation should
ultimately eliminate all inventories, as holding stock often incurs an opportunity cost and
wastage. However, McDonalds must also be able to meet demand at all times. Therefore in
addition to the processes, a sophisticated stock control system exists to manage this process
throughout the supply chain.
Waiting Time
Modern technology has facilitated the made to order process by slashing waiting time, both
in terms of production and for the customers. Computer based systems communicate the
customers order directly to the production staff, and the modern cooking equipment can
prepare a batch of hamburger patties in less than 1 minute. McDonalds have a multi-skilled
workforce, so they can also assemble other parts of the order during this time. These factors
enable the restaurant to adopt a lean strategy whilst providing a fast service- a key
performance measure within the industry. Collectively all of these factors produce an efficient
system that has predictable outcomes. That is a key aspect to the service delivery system that
ties in with the service concept. We cant have speed, consistency and low cost without
designing that into the service delivery system. Everything prepared in advance, everything
uniform. All geared to heavy volume in a short amount of time. The themes of knowing what
to expect in terms of product quality and speed of service at a reasonable price, in clean and
bright surroundings are also aspects of service delivery in McDonalds. If an item of food is
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not available in the production area, the counter persons calls the order to the production
person who calls the food order to the grill area. The item is then prepared as a priority. In
slack periods, certain standard items with low demand are only cooked to order. When an
order is not immediately available, the counter person takes the money for the order, ask the
customer to stand aside and wait, and starts to deal with the next person in the line. At the
servers discretion, the customer is requested to take a seat and the order is brought over by
the staff. This might apply to an elderly customer or a parent struggling with several children.
If a customer requests a non-standard item, the counter person identifies the non-standard
item when punching the order into the till. This causes a grill slip to be printed at a terminal
in the grill area. When the item of food is prepared, the grill slips travels with it to the
production area and then the production person then calls the counter person to indicate that
the order is available. The restaurant aims not to exceed a maximum time for customer
waiting in line of two minutes and a maximum waiting time of one minute from the order
being placed. Periodically, actual performance on waiting times is checked with a stopwatch.
Transport, Process & Motion
Transport waste occurs as a result of excess handling of goods around the operation.
McDonalds have become pioneers of the fast-food kitchen layout which lends itself well to
this aspect of lean philosophy. The Speedy System originally designed by the McDonald
brothers (and based on a car assembly line) is still in place today. This system unites the
entire operation so that all preparation facilities are linked in order of the assembly line in
which each worker has a specific task. Being in close proximity to the counter itself keeps
transport waste to a minimum. This ties in with the idea of process and motion waste; the
assembly line eliminates any unnecessary processes and each task is simplified to ensure that
value is added throughout. The counter person employs two selling techniques, the first is
known as selling up which involves augmenting the order by either suggesting a larger
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portion or an additional item, such as a drink. The other technique is called suggestive
selling. Here an order would be greeted by suggesting to a customer the nearest Extra Value
Meal alternative that would cost a little more the original order but give better overall value.
Suggestive selling aims to increase sales as the alternative offered includes additional items,
such as drinks or fries.
Staff Management
Lean production relies upon getting things right first time, with zero defects. McDonalds
invests heavily in staff training and motivating them to achieve the highest standards.
Simplified tasks also help reduce the amount of defective goods. The restaurant has a policy
of first in, first out ensuring that the customers receive fresh food every time.
It seems that McDonalds restaurants have the philosophy that "discretion is the enemy of
order". In simple words: they do allow many people to have discretion or decision making
authority. If there were too many people with decision making authority, there would be no
speed and consistency. Forms of waste underline the importance of total employee
involvement in a lean organisation. McDonalds place a huge emphasis on working as a team
and involves everyone from suppliers to crew members in order to foster a lean culture
throughout the business. The assembly line system fosters a high degree of personal
responsibility for each task, whilst multi-skilling enables staff to learn very stage of
operation. There are only effectively one or two people in a McDonalds that make decisions.
Everybody else reacts - the buzzer goes to take the burgers out, put French fries in a package
with a scoop that is designed to give just so many French fries in a package, mix something
up according to a recipe. Everyone there is controlled by equipment, standards and timers.
The decision making authority is centralized within one or two experienced people.

The majority of employees at McDonalds are very young and most of them have not yet
finished high school. How does this fit with the service concept? It fits in a sense that
McDonalds serves affordable food. In order to have affordable food, you have to have
affordable labour. By employing young people and probably giving them their first job in
life, they are achieving a low cost of production. McDonald's would logically have a high
turnover of staff as employees will move on to university or higher paying jobs.
Consequently they do not give these young people a lot of high level decision making
authority.
It is essential that the staffs are familiar with good teamwork and familiarity with the set
routines so that they are well equipped to deal with customers, storage of food and food
preparation. The staff are expected to reach a set-level of expertise, designated 5-star, within
5 months for a full timer and 10 months for a part-timer. Basically an employees
performance is assessed against a given task using the appropriate Observation Check List
(OCL). Each OCL detail precisely the steps to prepare a product. To gain 5-star status,
employees must undertake 2 satisfactory OCLs for each area of operation. The restaurant
manager and each area leader carry out one OCL each day. The first section covers food
preparation and second general issues, such as neatness and cleanliness of uniform. All OCLs
are filed. In this and other ways, the corporate tradition of managing all outlets under the
motto QSC&V (Quality, Service, Cleanliness and Value) is reinforced.
Continuous Improvement
Lean philosophy is fundamentally based on a set of ideals such as perfect quality and no
waste. It would be unrealistic to suggest that McDonalds has achieved them in full, however
the belief is that the organisation should strive to get closer to them over time. Therefore
continuous improvement, as opposed to transitory is a vital element on which the company

places a constant focus via regular audits and sharing best practices. As result of competition
in the fast-food industry and increasing consumer preference for healthier food, McDonalds
has steadily expanded the range of food and drinks provided from the original offering of
burgers, drinks and fries to include breakfast, sandwiches and salads. In addition to being
sold as individual items, many of the products are packaged into special offers, listed as Extra
Value Meals as well as special promotional items are also added from time to time.

2. Review the recent changes in the business. What has been their
impact?
For years, critics have been taking on McDonalds, questioning its practices in an
increasingly health-conscious time. The most famous assault on the companys reputation
was probably Morgan Spurlocks Super-Size Me, the 2004 Oscar-nominated documentary
that suggested a month of eating only McDonalds meals might hasten your death. But that
has hardly been the only grenade lobbed in the companys direction. Now McDonalds is
fighting back, quietly launching a major counteroffensive of its own. And it isnt simply
trying to keep its current customers happy; its also hoping to convince McDonalds skeptics
that theyre wrong.
Healthier Food Selection
Consumer tastes and preferences are changing and the fast-food industry need to be able to
adapt to them. There is a huge opportunity to develop new products that appeal to the health
conscious customer. To be more specific, they developed new products that appeal to young,
health conscious generation. Because consumer tastes are changing there is an opportunity to
develop new healthier product lines that appeal to the new tastes of consumers that satisfied
their tastes. It seems only logical to at least attempt to develop a new product that has the
potential to be a very successful product in an ever growing industry. In its attempts to turn to
turn the tide, one of the more straightforward strategies has been to revamp the menu to
include items such as chicken, pancakes, sandwiches and salads. There is so much potential
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for generating high sales from the development of a new product because consumer trends
and tastes change faster than ever. Once a new product is developed and is successful, then
McDonald's can focus on increasing production in their functional areas of the heavy user
segment. Also, McDonald's should want to peruse other alternative once a new product have
been developed and has become successful; it's more of a long-run alternative.
New Service Delivery System Theme
However, to restore the glory days it takes much more than a new menu and some additions
to the portfolio. A more fundamental development was the introduction of made for you
service delivery system. This was launched to increase sales by improving product quality in
the face of stiffening competition from other fast food outlets. The new thinking was to do
away with those precooked slabs of meat and prepare sandwiches to order, with freshly
toasted buns too. In order to make this happen, each store installed an array of equipment.
Pentium III computers

was installed to coordinate the orders, rapid toasters, and

temperature- controlled launching zones to replace the old heat lamps and holding bins.
McDonald has also developed a high-profile partnership with Disney, targeting families with
Happy Meals, introducing play areas for children and even inviting senior citizens to some
restaurants to play bingo.
Developments & Renovations
As well as the more straightforward menu changes, other regional development has taken
place. In certain countries like France, the restaurants are remodelled on contemporary
architecture. There also has been on-going attempt in the United Kingdom to create menus
more suited to local tastes. For United States, the plan is to renovate every restaurant older
than 15 years and this has meant that some have been created with a Diner inside to provide
two different experiences in a single store. In recent years, 3,000 McDonalds in the United
States have been redesigned, including 900 just recently, another 1,000 or so are slated to be

rebuilt or renovated. On average, these restaurants experience 6 to 7 percent sales growth

over the markets increase, according to McDonalds. The new buildings have helped burnish
McDonalds image. This is change directed at everyone (and customers have reported that the
food actually tastes better in a remodeled McDonalds).

Public Conscious Projects

The company is also trying to improve its image and reputation through involvement and
sustained investment in projects such as sports coaching and its commitment to social
responsibility like Free Sport Coupon. This strategy is made for the existing consumers who
like to consume less healthy food in Mc. Donald: after the fifth time they come to McDonald,
they deserve for swim free coupon. This free coupon will give the consumers a chance
to exercise themselves and change their behaviour toward exercise. McDonald has to
collaborate with the existing sport centre to build this strategy. This strategy is a form of
positive reinforcement with reward. The consumers expected to learn that exercise is really
good for their life style balance.With their remodeled restaurants, additions to the menu and
at least one nontraditional ally ,executives are trying to present a greener, more healthful
McDonalds. And in some ways the company is indeed changing. For the first time last year,
McDonalds sold more pounds of chicken than pounds of beef, a seismic shift that would be
like Starbucks selling more tea than coffee. Beverages, thanks to smoothies and espresso
drinks, are now a $9 billion annual business for McDonalds in the United States. The
restaurants themselves are changing, too, adding Wi-Fi, colorful chairs, tables that wouldnt
be out of place in an IKEA catalog and, in some West Coast test markets, flat-screen TVs
Extensive Advertising
For McDonalds psychographic segmentation and the need of passing different messages, the
HEALTH campaign focuses on advertising on TV or radio or magazines, print such as
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brochures, posters, scientific reports and Public Relations such as event, endorsements, and
some new channels like internet and cell phone, etc. Introducing of a new clown, Ronald is
now familiar with white-face, in a canary-yellow jumpsuit, and a fire-engine red wig. Ronald
is still being strategically re-fashioned. In 1998, refashion Ronalds hair and increase the
width of the red stripes on his socks. The idea is to introducing the new endorser into Mc.
Donald, called Ronnie. With this product line extension (in this case, the new product
represented by the new character), we would like to represent the healthier food with Ronnie.
Ronnie is the same exact character like Ronald; the only things that differentiate the two of
them are their colour. If Ronald has red to dominate his cloth, Ronnie has green. The colour
green represents life; Abundant in nature, green signifies growth, renewal, health, and
environment. The strategy is to put them together in every occasion so that people will notice
that here in Mc. Donald; they have different approach in public health awareness.
Encouraging Donations
People will feel good when they generate their money for other people who need it. With this
consumers behaviour they can create the donation program. For every healthy food that they
buy from McDonald, they will generate 1% from the total amount of the transaction. This
program expected to create a good buzz about McDonald especially the healthy menu in
McDonald. This event can change McDonald image in the society, they will notice that
McDonald do have healthy menus.

Conclusion
However, despite McDonalds claim that the quality of its products has indeed improved,
waiting times in the restaurant have doubled to an average of 2-3 minutes per order, slowlane performance in the cut- throat fast- food business. The McDonald Corporations
management however have argued that the doubled time promises a better offer for customers
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as the Value Meals offers a variety mix of main course meals with drinks and side orders
which proves to be more economical for the customers rather than purchase separately.

Reference
1. How McDonalds came Back Bigger Than Ever. The New York Times. Retrieved
from http://www.nytimes.com
2. McDonalds New Communication Strategy on Changing Attitudes and Lifestyles
International Journal of Marketing Studies.Retrieved from http://www.ccsenet.org
3. The Effect of Changing Tastes on McDonalds. McDonald Market Share. Retrieved
from http://www.123helpme.com

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