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Half a century of growth

McDonald’s Power Generation

 Follow rigid and overdefined procedures  Follow rigid and overdefined procedures
 Relies on dependability, safety and cost
 Mixed service and product industry  Essential service industry
 Subject to strict food and beverages laws  Subject to very limiting regulatory laws
and binding regulations
 Relatively mobile industry easily  Very large immobile industry/facility
expanded and contracted subject to progressive aging and
 Small number of products obsolescence
 Small facility  One product/service
 Ltd number of suppliers  Very large network of suppliers – global
 Can and does franchise reach in technologies
 Emphasise on process standardisation  Large environmental footprint and very
with indirect environmental footprint visible
 Focus on process detail 
 Focus on:  An essential element with a supply chain
o improving the product network
o Establishing stronger supplier  Quality and dependability essential
relationships  Cost secondary but also very important –
o Creating customised equipment monopoly
o Developing franchise holders 
 Cost & speed essentials  Dependability essential
 Quality secondary
 Needs to adapt to rapid innovations  Very difficult to adapt to new
 Quality management important technologies
 Shear inertia of original technology is an
inhibiting factor
 Quality management essential -
 Process capacity must be flexible at  Process capacity inflexible
operational level as well as supply  Supply network level traditionally
network level inflexible – becoming progressively
Demand characteristics: Demand characteristics:
1. Volume - high 5. Volume - high
2. Variety - low 6. Variety - low
3. Variation - high 7. Variation - low
4. Visibility – high 8. Visibility - low
Customers seek “value” & “consistency”
Breakfast and discounts
NOT a fine dining experience or menu full of
health foods
o Volume; High volume: because tasks are repeated frequently it often makes sense for staff to
specialize in the tasks they perform. This allows the systemization of activities. Because tasks
are systemized and repeated, it is often worthwhile developing specialized technology that
gives higher processing efficiencies. Low volume: low volume processes cannot specialize to
the same degree.
o Variety; Processes that produce a high variety of products and services must engage in a wide
range of different activities, changing relatively frequently between each activity. It must also
contain a wide range of skills, technology and inputs to the process. So, high variety processes
are invariably more complex and costly than low variety ones.
o Variation in demand; Processes are generally easier to manage when they only have to cope
with predictably constant demand. When demand is unpredictable, extra resources will have
to be designed into the process to provide a ‘capacity cushion’ that can absorb unexpected
demand. Lower variation will generally have lower costs than those with higher variation.
o Visibility; It indicates how much of the processes are ‘experienced’ directly by customers, or
how much the process is ‘exposed’ to its customers. High-­­visibility processes tend to have
higher costs than low-­­visibility processes.
Inventory: Inventory:
 Minimum inventory  Long lead spare parts - maximum
 Lean inventory
  Almost impossible to be lean – some
elements could be such as day today

High visibility and hence high emotional mapping  Social license in terms of the power
needed to ensure positive customers judgements generation
 Customers experience very important  Distinct difference between generation
 Services effectiveness and measuring and retail – retail arm mirrors
continuously all the touchpoints between McDonald’s
the customer and the process  Sustainability strategy and corporate
 Emotional mapping of customer becomes strategy alignment
important  Company vision on sustainability
 Sustainability and corporate  Moving away from coal fired power
responsibility seen as essential in stations
promoting the brand  Growing demand for low-cost sustainable
 Use of renewables and eliminating energy strategy
packaging that are seen to damage the  Leader of science
environment  Sets the new standards
 chain announced it was funding  Carries institutional uncertainties
sustainable beef pilot programs in the
U.S. and Brazil, testing new cattle-grazing
methods to cut down on its carbon
footprint; it also vowed to eliminate
deforestation from its supply chain by
2020. This year the company revealed a
plan to switch to renewable or recyclable
materials for all its packaging, eliminating
all styrofoam by the end of 2018.
 More healthy menus – fresh beef, salad
bar, McCafe, A move away from
preservatives (In another move
emblematic of the chain’s push toward
relatively fresher and/or seemingly
healthier food, in August 2016 it nixed
artificial preservatives from McNuggets.
The company later reported that
McNugget sales rose 10 percent as a
 Follower of science
 Follows the new standards
 Does the operation have a strategy?
Internal stakeholders (Employees) and external stakeholders (Customers, Company’s stakeholders). In
any kind of organization, it is a responsibility of the operations function to understand the objectives
of its stakeholders and set it objectives accordingly
 The relative priority of performance objectives differs between businesses; the relative
importance of the five performance objectives depends on how the business competes in its
market. Businesses that compete in different ways should want different things from their
operations functions.
 Does operations strategy make sense from the top and the bottom of the business?
o Top down – customers choices and desires
o Bottom-up – customer advocacy
 Focus:  Focus on:
o Innovation in process and o Productivity
products (new technology for o Efficiency
ordering and delivery, including a o Minimizing waste
mobile order-and-pay-ahead app o Lean thinking and operational
and a delivery partnership with agility
UberEats)  efficient distribution of
o build-your-own burger kiosks – information or materials
efficiency drive and not to internally and externally
replace workers  elimination of
o New products and customised unproductive regular
products for different markets internal meetings
o Exceptional customer experience  continuity within the
through : team due to shifting
 People, product, place , workloads or turnover
price and promotion  knowledge management
o return of the dollar menu, an system
emphasis on fresher ingredients, o New shift patterns
o more environmentally friendly o Addressing asset strategies to
packaging reflect the realities of operational
o new push into China issues dealing with 50 years old
o introduced all-day breakfast, assets that are no longer
capitalizing on its most profitable supported by OEM
menu (new kitchen equipment to
allow all items to be cooked
o aligning pace of change from
within the business to the pace
of change to the outside
 Process technology leader/follower  Process technology taker
 Process design evolving to address new  Process design to assist productivity
products and menus Are process tasks and capacity configured
o Task precedence
o Series and parallel configurations
o Cycle time and process flow
o Process balancing
o Throughput, cycle time and work-in­
 Recognise process variability  Activity time variability
 Employer:  Employer:
o Educator of people o Very highly skilled personnel
o Low skill workforce o Need for retention high as
o Normal tenure is measured in replacement very difficult
years (2- 3) o Normal tenure measured in
o Bad image for low wages decades (20- 30)
o the company insists the Kiosk
technology is merely designed to
speed up the ordering process
and reduce errors
 Demand:  Demand
o Combination of Chase and o Level but reliable
manage demand through
 Surviving strategies:  Surviving strategies:
o More franchises, fewer company- o Phasing out of the coal fired
owned stores power generation
o McDonald’s owns properties and o Investment in renewables and
leases them to franchisees, the gas fired power stations
chain has been described as o More productivity and better
more of a real estate company operational efficiencies
than a fast-food restaurant. o Innovations in digital
o Faster and more adaptable transformation of the business
o Reconcile low prices with rising preparing it for the new era of
customer desire for quality power generation reliant on
micro-grid technology
o High-speed, low-cost supply chains are unable  Major equipment suppliers are not agile
to respond to unexpected changes in demand enough because of nature of the product
or supply
o Companies' obsession with speed and costs
 The consumables are a major area that
also causes supply chains to break down through digitisation can reap benefits –
during the launch of new products lean thinking
o Supply chain:  Customer advocacy in demonstrating the
Agility (Respond to short-term changes in demand or supply will to transition the company to a more
quickly; handle external disruptions smoothly) – sustainable power generating company
o Fostering Agility – the company fosters  Cost and dependability at the core of the
true relationship with their supply chain new drive
where they see themselves there for the
long terms sharing innovative ideas with
the whole network in the supply chain The impact that operations and process
ensuring value adding ideas is carried management can have on the businesses:
through the whole supply chain o Cost; It can reduce the cost of producing
 Promote flow of products and services by being efficient.
information with suppliers o Revenue; It can increase customer
and customers.
satisfaction through quality, services and
 Develop collaborative
relationships with innovation.
suppliers. o Risk; It can reduce the risk of operational
 Design for postponement. failure, because well­designed and run
 Build inventory buffers by operations should be less likely to fail.
maintaining a stockpile of o Investment; It can ensure effective
inexpensive but key
investment to produce its products and
 Have a dependable services.
logistics system or o Capabilities; It can build capabilities that
partner. will form the basis for future innovation
 Draw up contingency by building a solid base of operations
plans and develop crisis skills and knowledge within the business.
management teams.
Adaptability (Adjust supply chain's design to meet
structural shifts in markets; modify supply network to
strategies, products, and technologies.)
o Adapting Your Supply Chain
o McDonald’s ensures that their
supply chain network are
adaptable to the market
uncertainties and build necessary
o Local suppliers for their
international markets
o Creating the Right Alignment
o Also ensure that the firms in their
supply chain have the same
interests as McDonald’s
o Share the success and the rewards
o 