Project Report on

McDonalds Supply
Chain
Management
PPTTemplate.net

History

1948 McDonald brothers open the first McDonalds and

names Speedee as their company image.

1954 Ray Krock, a Multimixer salesman becomes the

franchising agent.

1955- Ray Kroc opens the Des Plaines restaurant. The 1st
days revenues - $366.12

1957 Ray Kroc hands out free hamburgers to Salvation

Army guests

1958 Sales grow 151%

1961 Ray Kroc buyout the McDonalds brothers for $2.7

million

1963 Ronald McDonald is introduced

THE STRATEGIC DIRECTION

Think global act local
McDonald's customer-focused Plan to win ("Plan")
provides a common framework that aligns their
global business and allows for local adaptation.

Plan's five pillars

Plan's five pillars - People, Products, Place, Price
and Promotion - to enhance customers' experience
and build shareholder value over the long term

MCDONALDS IN PAKISTAN
McDonald's Pakistan opened its doors in
September 1998 at Lahore .
There are now 35 restaurants in 10 major
cities of Pakistan. Karachi, Hyderabad,
Lahore, Faisalabad, Kala Shah Kaku,
Sialkot, Gujranwala, Islamabad, Sahiwal,
Multan and Rawalpindi.
McDonald's Pakistan is a part of the Lakson
Group of Companies, with a Head Office in
Karachi and a regional office at Lahore.

MCDONALDS AMBITION

MCDONALDS COMPETITIVE
STRATEGY
Act like a retailer and think like a brand
McDonalds focuses not only on delivering sales for
the immediate present, but also protecting its long
term brand reputation.

McDonalds Competitors

Its major competitors are as follows:

Subway Kentucky
Fried Chicken (KFC)
Mr. Burger
Burger King

McDonalds Market Share in

Pakistan
25% 30%15% 10% 5% 15% Market Share
McDonalds KFC Subway Mr. Burger, Burger King
Others.
Respect for local culture
International Standards
Complete adherence to the Pakistan
Government regulations on food, health and
hygiene is ensured, while maintaining their own
recognized international standards.

SUPPLY CHAIN MANAGEMENT

McDonald's, arguably, one of the first brands that left
a strong imprint on the Pakistan QSR (quick service
restaurants) history, has much to do with this. And its
success is credited to its well-established supply
management chain.

According to managing director of McDonald's, the

company invested about Rs 40 crore even before its
first restaurant commenced operations in October
1996. "We had to ensure that we had the back-end
linked up to the farm level for delivery commitment.

 McDonalds System First philosophy stands

the test of time
Krocs System philosophy is often described
as a three-legged stool.
One of the legs is McDonalds employees, a
second leg is the owner/operators that run the
restaurants, and the third leg is McDonalds
supplier partners. The stool is only as strong as
the three legs.
Each support the weight of McDonalds equally.

SUPPLY CHAIN MANAGEMENT

The unique supply chain model is based on an
exceptional set of operating principles that create
long-term wealth and competitive advantage for
the entire System by mitigating costs, preventing
safety issues, and producing quality and
innovative products that delight customers in a
uniquely McDonalds way
McDonalds and its suppliers closely follow the
rules to find mutual success under the golden
arches.

MCDONALDS SC STRATEGIES
One stop shopping
concept
Central file
management
Inventory
management
Restaurant
simplification

Synchronizing the
perishable Supply
Chain
1. Demand forecasting
Promotional + Continuous
Supply

Restaurant and DC level

2. Supply Planning
Restaurant and DC level
3. Visibility and
Collaboration across
the chain

THREE LOGISTICAL DRIVERS

Inventory:
Venus distributor usually keeps the stock for 1
month and 45 days.
There are 2 ware houses 1 in Lahore and 1 in
Karachi.
They usually keep McDonalds supply in Frozen (18 to 22 degree), chilled (0 to 4 degree) and dry
rooms as required by the product.
At McDonald's, all raw materials, work-inprogress and finished products are handled on a
First In, First out (FIFO) basis.

THREE LOGISTICAL DRIVERS

Transportation:
Venus provides the transfer of all the goods of McDonalds
from the port to their ware house and then they are
responsible to provide the retail outlet with all the supplies
on time.
They use 40 ft and 20 ft fleet which they use in
transferring containers from port to their ware house.
They have a reefer express fleet which they use for
transferring McDonalds food ingredients to their retail
outlet in order to maintain a good 22degree temperature
while delivering.

THREE LOGISTICAL DRIVERS

Facility:

Production site
Storage site
(warehouse)
(12o000 sq ft) Karachi
Lahore(60000 sq
ft)

The company generates its own power by

way of 2 x 390 KVA generators at each
location thus ensuring a constant
temperature of 22c

ruhab

THREE CROSSFUNCTIONALDRIVERS
Information:
They used American software which was used by
McDonalds globally now they have made their
customized inventory control software which is not
having any specific name for them.

Pricing: McDonald's also believes in value to the

customer, that is, why prices are value oriented as
Amin Mohammad Lakhani put it in his word, nothing
sells forever unless it is value for money

THREE CROSSFUNCTIONALDRIVERS
Sourcing:
National
International
Unilever
(Malaysia)
Dawn bread
(America)
K&Ns
Nestle
Siza foods

Palm oil
Machinery

PULL/PUSH PROCESS
McDonalds is using both pull as well as push
process, to a certain extent push is created and
after that level the pull created by the firm did its
task.
The products will be pushed to the restaurants
where the customers automatically demand that
Big Mac and hence a pull is created. The
boundary of pull and push; push last till the
product reaches the restaurant and pull starts
when a customer orders the product.

SUPPLY CHAIN PROCESSCYCLE

Procurement cycle

Replenishment cycle
demand

Push

Customer order cycle

Pull
demand

MCDONALDS E-PROCUREMENT
McDonalds franchise restaurant places an
order through E-MAC digital website.
The order is sent to the suppliers.
Suppliers order is processed and managed
by the logistics.
The logistics sends the order of the
products to the franchise restaurants.

MCDONALDS LOGISTICS
McDonalds has selected Venus Pakistan as its
logistic partner after careful and thorough evaluation.
They are responsible for the procurement, imports,
clearing, warehousing and distribution of all products
to all McDonalds restaurants in Pakistan. McDonalds
logistic involves 3 phases:
Inbound logistic
Operations
Outbound logistic

Inbound Logistic
It is the movement of materials from suppliers and
vendors in to production processes and storage
facilities.
Based on the demand forecast by the Restaurant
Manager, the First Assistant orders the Venus
Distributors on daily basis.
Venus group companies providing different facilities
to McDonalds like warehousing, transportation,
shortage, quality inspection process and central
inventory management.

McDonalds Logistics Operations

Venus Pakistan established its dedicated McDonalds
Logistics Operations in 1997.
They have own cold storage in main branch and they
have planted a pilot farm in Lahore.
The products are transported in a dedicated fleet of
refrigerated trucks to the companys Distribution Centres.
McDonalds have the largest refrigerated movement of
products. An interesting and innovative feature of this
cold chain is that the same truck can carry products at
different temperatures.

Outbound Logistic
When customers enter the restaurant, they go to
the counter, give their order, which they are
served within a single minute. Now customers
take away the tray in which the order is served,
and take their seats themselves, in the big hall
with a sitting capacity of 200 persons.
Cooking procedure and recipe is documented so
that the products become standardized and
customers get the similar taste, quantity and
quality to whichever restaurant they go.

MCDONALDS TRANSPORTATION
The specially designed trucks maintained the temperature
in the storage chamber throughout the journey.
Matching supplier production with deliveries to meet
schedules and restaurant needs.
Centralized distribution centers.

Emphasis on economies of scale High storage volumes.

QIP (Quality Inspection Program).

HACCP (Hazard Analysis Critical Control Point)

MCDONALDS DISTRIBUTION
SYSTEM
McDonald uses three types of Distribution strategy:
Franchising
Licensing
Joint venture
The companys operations are designed to assure
consistency and high quality at every restaurant.
When granting franchises or licenses, the
company is selective and generally does not
franchise to passive investors. McDonalds has
franchised about 80% of its restaurants, while the
remainder is owned and operated by the company.

EXPIRY
There are 2 types of freezers:
One is a freezer room in the basement and
is just like a room. The expiry date of the
products in this room is 90 days.
The freezer which is on the operational
floor is having an expiry of some hours

HOME DELIVERY
McDonalds also provide home delivery
service and delivery phone number is
111244622
They have 12 bike and riders for home
delivery
They deliver within the radius of 8 km
They take 30 minutes to deliver
Home delivery is only used in Pakistan
because of competition

SOFTWARE
Previously they used American software which
was used by McDonalds globally and these were
provided by McDonalds international to them.
Later on they found out that Siza foods need to
customize the software because the previous
softwares not meeting their demand.
So now they have made their customized
inventory control software which is not having
any specific name for them.

WHETHER THE SUPPLY CHAIN IS

EFFIECIENT OR RESPONSIVE?

The supply chain is responsive as

McDonalds is a fast food serving chain
The supply chain drivers indicate that the
supply chain is responsive.
They maintain inventory to keep
responding.
They have decentralized facility and
multiple suppliers.
They have their own customized software.

ACHIEVING STRATEGIC FIT

They claim to give quality food for that
they adjust the following:
At McDonalds its always like coming
home
Meat with 100% purity
High quality bun
Farm fresh vegetables
No compromise quality
The whole supply chain is designed to
provide quality food and standardize
taste.

MCDONALDS SUPPLY CHAIN

CHALLENGES AND PROBLEMS
Freshness
Innovation
Fluctuation in demand
Bull whip effect
Cannibalization
Decentralized structure

CONCLUSION AND
SUGGESTIONS
Ask anyone at McDonalds and they will tell you they
could not do it alone. Through effective Supply Chain
McDonalds operates in a famously competitive market
and delivers good value for consumers.

It sources only from dedicated suppliers.

It operates an extremely strict auditing regime.

It believes in a policy of paying for performance and long term

sustainability for suppliers.

The secret is a Lean and efficient chain via rigorous measurement,

the spreading of knowledge and a real sense of teamwork.