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TABLE OF CONTENT

1.

EXECUTIVE SUMMARY 1.1 1.2

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3 3

Introduction of Company Background Objective and Goal

2.

SUPPLY CHAIN MANAGEMENT IN MCDONALDS 2.1 What Is Supply Chain Management 4

2.2
2.3 2.4

Supply Chain Process

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6 7

The Importance of Supply Chain Management McDonalds Suppliers

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DISTRIBUTION CENTRE

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COLD CHAIN CONCEPT IN MCDONALDS 4.1 4.2 Temperature Controlled Supply Chain Cold Chain Management .. 8 9

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PUSH AND PULL STRATEGY 5.1 5.2 Push Process Pull Process .. .. 10 11

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ANALYSIS 6.1 6.2 Cold Chain Concept . Temperature Controlled Trucks .. 11 12

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RECOMMENDATION

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8.

REFERENCING

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1. EXECUTIVE SUMMARY McDonalds philosophy one world, one burger has a vast significance in delivering performance. The key ingredients in achieving productivity, such as having a systematic work process, collaboration and information sharing among team mates and suppliers, will be the main focuses of generating good quality, perfect customer services, and affordable prices in customer deliverance. 1.1 Introduction of Company Background In 1979 McDonald's opened its first restaurant in Singapore. The world's highest volume of hamburger was served on October day at Liat Tower. Today McDonalds is the most popular fast food chain in Singapore with over 110 outlets, hiring about 7,000 employees and serving 1.2 million customers every week. Their philosophy has been one world, one burger which means burgers must be consistent in term of tastes, cooking method, presentation, cost and quality.

1.2

Objective and Goal McDonalds objective is to provide its customer highest quality food and to be served in a fun and friendly environment. Their goal is to be the world best fast food chain and to achieve 100% customer satisfaction in terms of quality food, quality service and with affordable price.

2. SUPPLY CHAIN MANAGEMENT IN MCDONALDS

2.1

What Is Supply Chain Management The function of Supply Chain Management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer and lastly to end consumer. Supply chain management heavily involve coordination and integration work of this flow both within and among companies. The ultimate goal of an effective and efficient supply chain management system is to reduce inventory cost, rise productivity and timely delivery. Typical supply chain flow diagram:

http://www.clermiston.com.au/Supply2.gif

The raw materials will start off from the left, down the suppliers and ends up on the right of the diagram, the customers. It is shown as well that materials flows towards the customers, cash flows towards the suppliers and information flows both ways. Supply Chain includes purchasing, manufacturing, warehousing, transportation, customer service; demand planning, supply planning and Supply Chain Management. www.supplychaindefinitions.com

2.2

Supply Chain Process

A supply chain process consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. Within each organization, such as manufacturer, the supply chain includes all functions involved in receiving and filling a customer request. These functions include, but are not limited to procurement cycle, replenishment cycle and customer order cycle.

Supply Chain process integration involves collaborations work between the buyers and the suppliers with common information sharing.

http://www.sbaer.uca.edu/publications/supply_chain_management/pdf/01.pdf

http://www.scribd.com/doc/28339073/mc-donalds-supply-chain-management

2.3

The Importance of Supply Chain Management McDonalds supply chain network is made up of lean with no backup staffs and no frills. They believe in supplier expertise and that is why they adopted a 100% outsourcing strategy and monitors their supplier performance in a proper fashion so that Key Performance Indicators (KPIs) are not affected at all. In a fast food business, supply chain is the highest importance. It helps in minimizing cost, cut down delivery time, improve the profits and at the same time maintain the highest standards. McDonalds develop business relationship with local supplier which not only supply them the products but also product with highest quality and standard. As of today McDonalds have around 38 suppliers on long term basis.

2.4

McDonalds Suppliers In order for this strategy to work effectively, McDonalds work closely with its tier 1 and 2 suppliers. Tier 2 suppliers consists of farm that grows vegetables like lettuce and potatoes and poultry farm that supplies eggs, milk, etc. These ingredients are then supplied to McDonalds tier 1 suppliers. These tier 1 supplies will process the ingredients into products like meat patties, French fries and hash browns. McDonalds works hand in hand with their suppliers. Not bounding them by legal contracts, McDonalds offers a simple handshake relationship to their suppliers, assuring them that it does not matter if there is an inflation or recession in the economy, McDonalds will never review its terms with their suppliers. This act has lead to McDonalds suppliers supplying their products in good quality and punctuality.

3. DISTRIBUTION CENTRE The distribution center of McDonalds at first glance appears simple; its diverse components are both critical and multi-layered. Food ingredients are supplied by two categories, tier 1 and tier 2 suppliers. Tier 2 suppliers comprise growers that include iceberg 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 1 suppliers who process them, for instance, into vegetable and meat patties this is done by Singapore Foods Industries. All ready make potato products like French fries, potato wedges, curly fries and hash-browns which are expertly churned out by SFI Ltd.

McDonalds demanded its distribution partner to set its standards of cold, clean and ontime delivery. The distribution centre is required to store the products in a controlled temperature environment and have them distribute to McDonalds outlet on a daily basis. With 110 restaurants scattered across the country, lead times for delivery assume critical importance. But McDonalds supply-chain network is everything its cracked up to be each cog in the wheel is set precisely in place to ensure spot on distribution. Each and 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.

4. COLD CHAIN CONCEPT IN MCDONALDS

4.1

Temperature Controlled Supply Chain A temperature controlled supply chain is called Cold Chain. Cold chain is a series of storage and distribution activities that were kept in a specific temperature range which is unbreakable and uninterruptable. Cold Chain was generally used by different industries to extend the shelf life of products such as fresh agricultural products, process food, films, chemicals and pharmaceutical drugs.

McDonalds adopt this cold chain concept as it benefits both consumers and farmers. Consumers are getting fresher, higher quality and greater value food. Most important, cold chain concept helps to minimize food wastage, spoilage and it is able to maintain the freshness and nutritional value of raw material.

4.2

Cold Chain Management Cold chain management is one of the critical components in McDonalds supply chain operations. In order to maintain highest quality of its products and reduces the danger of food contamination, they have to ensure proper storage conditions from the point of origin to point of sales and frequent monitoring of temperature at each stages of storage and transportation. The products are transported using either multi-temperature or single-temperature trucks to the respective distribution centers and from the distribution centers to each and every restaurant.

The iceberg lettuce were placed in a pre-cooling room within half an hour of harvest where rapid cooling decreases field temperature of an iceberg lettuce to 2 C within 90 minutes. Then a large refrigerated truck was hired for

transportation to the distribution centre. In the refrigerated truck, the temperature and humidity of vegetables was maintained at 1 4 C and this helps to lock the flavors and freshness of the crops. All McDonalds suppliers were instructed to deliver the iceberg lettuce, meat patties, sesame seed buns to their appointed distribution centre by using either multi or single refrigerated trucks.

As for semi-finished products, a special designed refrigerated truck with temperature control measures were use throughout the journey. By using cold chain, freshness and moisture content of the food were being ensured. Drivers are not allowed to switch off the chilling system even in an event of traffic jam.

In an event if there is an absence of cold chain management, there will be potential danger of food contamination. Suppliers have the responsibility to safe guard any possible food contamination risk as well as any interruption that could breach the cold chain link resulting in detrimental the quality of the products.

By adopting this unique cold chain system, McDonalds is able to eliminate its operational wastage and maintain it freshness and nutrition value on both raw and process food. It has to be an involvement of procurement, logistics, warehousing, transportation and retailing of perishable food products.

This is how a temperature control truck look like :

5. PUSH / PULL STRATEGY 5.1 Push Process Push Process can be found in the communication of buyer and seller. McDonalds uses both interactive and non-interactive methods to push the information to the consumer. Interactive ways like through internet where people could have response with comments and non-interactive ways like television advertising where no communication could be engaged with customer. Inventory need to be change drastically with the position of push-pull boundary as some of the product must be available in order to be processed and delivered when orders are received.

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5.2

Pull Process After orders are received, the product is pulled by demand and speed and reliability are needed to satisfy customer requirements. The place where something pushed begins to be pulled by demand should be positioned to balance the costs of holding inventory against the need to serve customers quickly and reliably. McDonalds method of keeping burger lanes full during peak periods is a recognizable example of a pull system in a service application.

6. ANALYSIS

6.1

Cold Chain Concept Cold chain concepts do provide benefits for both consumers and farmers. If there is an immerse emphasize of high quality food standards, an alternate option for consideration is to grow their own crops and have poultry farm at the back of their restaurant, this will assure 100% freshness directly from farm to the table. However, this option may not be feasible as property price has been sky rocketing, it is impossible to have their own piece of land at the back of every restaurant they owned. The cost of setting up poultry farm and training their staffs to fulfill the roles is also another area of consideration. Since McDonalds adopted 100% outsourcing strategy, they should have trust in their suppliers area of expertise.

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6.2

Temperature Controlled Trucks

In an event when there is an absence of cold chain management, example chilling system is faulty, there will be a potential danger of food contamination. Supplier must have a contingency plan in place to tackle such an event. The supplier is recommended to establish contacts with other service providers in a few main cities of the country with multi-temperature truck available for deployment when there is an emergency.

7. RECOMMENDATION In conclusion, McDonalds has successfully implemented Cold Chain Management. This cold chain system not only helps them to eliminate food contamination risk, its also reduce wastage and spoilage. Most important, this system enable them to retain the freshness and the nutritional value of their food products. With all these benefits, McDonalds is able to balance between its food quality and operational cost. They have accomplished the organization objective and goals.

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8. REFERENCING

McDonalds Singapore Profile (n.d.) Retrieved 2012 from http://www.mcdonalds.com.sg/companyinfo_profile.html N Shetty. (2010, Dec 29). Supply Chain Management of McDonalds. (Forums). Retrieved from http://www.managementparadise.com/forums/elements-logistics/211392supply-chain-management-mcdonalds.html Bisht, A. S. (2009). McDonalds India Supply Chain. Retrieved from http://www.articlesbase.com/marketing-articles/mcdonalds-india-supply-chain729402.html Foodland The Supply Chain Solutions Specialists. (n.d.) Retrieved 2012 from http://www.rkfoodland.com/case-studies.html Ashutosh a.k.a. friendscorner_aks. (2010). McDonalds Supply Chain Management, 117. Retrieved from http://www.scribd.com/doc/28339073/mc-donalds-supply-chainmanagement Distribution Centre Design (n.d.) Retrieved 2012 from distributioncentredesign.com Absolute Astronomy (n.d.) Retrieved 2012 from www.absoluteastronomy.com/topics/Distribution_center Cheema, A. (2011). The Big Idea; McDonalds Unravels its Supply Chain. Logistic Week. Retrieved from http://logisticsweek.com/feature/2011/07/the-big-idea-mcdonaldsunravels-its-supply-chain/ Harrison, T. P., Lee, H.L., & Neale, J.J. (n.d.). The Practice of Supply Chain Management. Retrieved from http://books.google.com.sg/books?id=xT8_GAaVl4YC&printsec=frontcover&redir_esc=y #v=onepage&q&f=false chedelarosa. (n.d.). Kanban Pull System, 1-12. Retrieved from http://www.scribd.com/doc/17113493/Kanban-Pull-System

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