Supply Chain Performance Improvement Within McDonald’s
Introduction
To begin with, McDonald’s is a well-known global fast-food chain that has become famous for its affordable and good-quality hamburgers. The company was initially advanced from a small restaurant with a limited menu ran by the McDonald brothers. The businessman Ray Kroc was stunned by the service of their business and the quality of food and, therefore, decided to develop it into a restaurant franchise. Today, McDonald’s operates in more than 100 countries worldwide and is presented in 39000 restaurants (McDonald’s.com, 2021). However, more than 36500 branches are franchised in the USA, and the remaining amount across other continents.
The Organization’s Supply Chain: Engagement across Suppliers and Customers
The company’s core principles are service, quality, cleanliness, and value. Furthermore, these principles are followed in every operational process of every McDonald’s franchisee. Ray Kroc’s passion for ingredients quality is supported nowadays as well: all the supplies are “tested, tasted and perfected to fit the operating system” (McDonald’s.com, 2021). Therefore, he sought suppliers with the same vision regarding the restaurant he once purchased and advanced into McDonald’s franchise (McDonald’s.com, 2021). In addition, McDonald’s provision chain is a complex network that includes direct and indirect suppliers driven by the same passion for quality as Ray Kroc and, eventually, the whole franchise.
The partnership with direct suppliers is focused mainly on purchasing coordination and further distribution to branches. On the contrary, the indirect suppliers are associated with farmers who provide McDonald’s with wheat, vegetables, and ingredients essential for cooking fast food from menus (Khandelwal, 2020). The distribution centers are responsible for managing the processes regarding the delivery of supplies to the restaurants. Another critical point is that all the vehicles that the company uses for transportation are equipped with temperature-control mechanisms (Khandenlwal, 2020). Overall, the supplies are received in perfect condition, which stands for the first and foremost principle of McDonald’s franchise, quality.
McDonald’s is known for its strict environmental and ethical policies regarding its suppliers. For instance, they cooperate only with those businesses that ensure the health of animals by rejecting animal food with antibiotics (Khandelwal, 2020). Moreover, the company is harshly opposed to animal cruelty and carefully analyzes the suppliers operating before purchasing the ingredients. McDonald’s is moving to reduce the negative impacts on the environment by decreasing gas emissions along with air and water pollutions (Khandelwal, 2020). Besides, the franchise is focused on transporting the ingredients in ecological packages that do not harm nature in any way.
Overall, McDonald’s has achieved consistency in its supply chain by imposing strict rules regarding the ethics and environment that suppliers must follow. Otherwise, the company starts seeking new partners who focus on providing fresh and high-quality ingredients to approximately 70 million customers of the McDonald’s brand without endangering their health (Khandelwal, 2020). Furthermore, the suppliers are required to meet the standards regarding animal welfare and cruelty elimination.
Internal and External Factors of the McDonald’s Brand
Internal Environment
As for the company’s internal environment, the fundamental strength of the McDonald’s brand is its global presence and high recognition in the food industry, which attracts numerous potential customers. The organization is constantly developing its operations even though it is already exceptionally successful among rivaling fast-food chains. For instance, McDonald’s centers its funds on advertising to increase customer loyalty and brand recognition (Khandelwal, 2020). However, sometimes brand’s image is impacted by society’s negative opinions regarding the harm that food might bring customers. Such commentaries are based on the fact that fast food is commonly considered unhealthy.
Furthermore, the company’s core objectives are crucial for developing its franchisees in the local community. For instance, McDonald’s is strongly focused on providing clients with high-quality fast food in a short time (McDonald’s.com, 2021). In addition, the brand positions itself in the industry as a socially responsible one due to its awareness regarding ethical and environmental problems (McDonald’s.com, 2021). McDonald’s provides good returns to its stakeholders based on the 3-legged stool model of the supply chain, which associates franchisees, employees, and suppliers in one operating system.
External Environment
As for McDonald’s external environment, it also focuses on the advancement of its operations regarding the changes in the macro-environment. The company monitors critical aspects that contribute to the realization of needed alternations and their further implementation. Moreover, the brand constantly explores the influence of the environment on the customers to “adjust plans as appropriate and ensure to remain relevant to customer needs” (McDonald’s.com, 2021). Overall, McDonald’s is always open to accepting new changes and ideas to its processes to increase customer satisfaction with its services.
McDonald’s focuses on maintaining long-term relationships with its partners rather than looking for suppliers with more affordable prices. As a matter of fact, most partners are working with the brand since they first “started the business with a handshake from Ray Kroc” (McDonald’s.com, 2021). Furthermore, the McDonald’s brand has a unique philosophy initially developed by Ray Kroc and still embraced in the modern marketing of the organization (McDonald’s.com, 2021). Kroc aimed to combine both franchisees and suppliers to “work not for McDonald’s but for themselves” within the company (McDonald’s.com, 2021). In other words, he desired to create a mechanism that was driven by three engines: McDonald’s employees and franchisees and the company’s suppliers. This business model is designed to satisfy three parties that are equally committed to each other’s success, “In business for yourself, but not by yourself” (McDonald’s.com, 2021; McCorkle, 2017). Overall, the model enforced in the company’s supply chain is effective and productive and is considered the most innovative one in the food industry worldwide.
The Challenges within the Organization’s Supply Network
Growing Number of Competitors and Influence of Social Media on McDonalds
However, no matter how the company thrives, it still has numerous aspects that constantly pose threats to its operational structure. The McDonald’s brand faces challenges related to the growing competition in the fast-food industry. The franchisees similar to this company are developing their marketing strategy aggressively, which consequently affects McDonald’s restaurants’ chain (McCorkle, 2017). Moreover, it results in clients transfer to other fast food companies such as KFC, Wendy’s, or Burger King. Thus, McDonald’s is in need of focusing on the advancement of marketing strategy to be a strong competitor in the industry (McCorkle, 2017). In addition, it is vital to invest in advertisements and promotions on social media to increase the number of potential clients (McCorkle, 2017). However, to achieve that, McDonald’s needs to seek gripping and unusual ways of differencing from other rivaling fast-food chains.
The Impact of Environmental Problems on Companys Operations
Modern trends regarding battling ecological changes lead to companies adjustment to new environmental policies. As a matter of fact, such alternations in the business operating require a considerable amount of investment. For instance, McDonald’s positions itself on the market as a responsible company aware of environmental issues and contributes to tackling them (McCorkle, 2017). In other words, the company seeks various efficient methods to decrease transport emissions, distribute supplies in ecological packaging (McCorkle, 2017). Furthermore, the company is focused on waste recycling and reducing air and water pollution, decreasing the impact of climate change.
New Trends Regarding Healthy Food Intakes
However, at the same time, the McDonald’s brand is strongly impacted by the trend of maintaining a healthy lifestyle. Thus, customers have become more sensitive about their food intake and opt for natural, fresh, and high-quality food (McCorkle, 2017). Furthermore, people avert fast-food chains since they are believed to harm human bodies and sometimes lead to obesity development (McCorkle, 2017). Overall, this trend is highly unfavorable to the McDonald’s brand as it is a reason for declining numbers of customers eager to pay more for healthy food rather than harming their bodies with cheaper fast food.
Importance of Information in the Supply Chain
In addition, the McDonald’s brand has created an e-procurement platform that is designed to manage the company’s crucial functions with suppliers. For instance, such a system is valuable in managing orders, distributions, transactions, and information (Waterloo.com, 2015). This platform is developed to enable comfortable communication between franchisees and suppliers. Moreover, it allows McDonald’s chains to purchase anything needed across the globe. Overall, such supply chain management resulted in reduced labor costs by 85% and decreased supply prices by approximately 15% (Waterloo.com, 2015). In addition, the company uses analytics in its supply network to connect supply and demand effectively. However, the franchisee has the potential to enforce an AI system to advance its supply chain to increase the profit from the analytics implementation. For instance, AI might be valuable while using analytics to produce recommendations regarding increasing items’ profit and ways to cater to customer needs to improve their satisfaction within McDonald’s brand (FutureSupplyChain.com, 2021). Overall, implementing the AI system in McDonald’s operating might result in personalizing the supply chain network by synchronizing data from analytics performance.
The Effectiveness of the Organizations Current Supply Chain Network
The organization’s current supply chain network is proved to be efficient, though it still is in the process of advancement. McDonalds expects to achieve more success by following the objectives stated in the annual reports. The financial aspects of the McDonald’s supply network are practical; however, they are still being enhanced. For instance, the company plans on considerably increasing the profitability and revenue by just opening new restaurants in new cities across the globe (McCorkle, 2017). As for customer satisfaction, people visiting McDonald’s are content with the service and food they purchase (Lock, 2020). Nonetheless, to advance clients experience, the organization is addressing their needs, such as ensuring the high quality of supplies, proper transportation, and cooking.
The company’s internal processes are productive and do not strongly require improvement (McCorkle, 2017). For instance, the company is thoroughly controlling its distribution processes, the storage of supplies and is responsible for reducing damage to nature. Furthermore, the capacity of McDonald’s is high since its employees are skilled, hardworking, and trustworthy. Nevertheless, employers are expected to contribute to the development of staff knowledge through various training and courses (McCorkle, 2017). Eventually, it might lead to the enhancement of meal cooking processes and other crucial operational processes of the business.
However, due to the growing competition in the fast-food industry, McDonald’s might lose numerous potential customers to its rivals (McCorkle, 2017). Thus, the company focuses on enforcing and embracing new ideas regarding new menus, promotions, and technology implementation (McCorkle, 2017). This way, the McDonald’s brand has more opportunities to outshine its competitors, such as Wendy’s, KFC, or Burger King, and therefore, has the potential of becoming the leading fast-food franchisee worldwide.
Recommendations for Supply Chain Performance Improvement within McDonald’s
Advancement of Engagement across Companies, Suppliers, and Customers
McDonald’s is focused on productive and efficient engagement with its suppliers and franchisees. Therefore, it is vital to advance means for fruitful communication with partners concerning collaborative problem solving and strategy advancement (McCorkle, 2017). For instance, the organization might conduct video calls on the Zoom platform to discuss overall performance and analyze statistics to improve or alternate specific processes for their more efficient functioning within McDonald’s. In addition, these online meetings can help tackle issues regarding production and transportation with suppliers and franchisees.
As for customers engagement, McDonald’s focuses on presenting itself as a responsible business in terms of environmental, social, and ethical policies. The customers are engaged in the company’s social media and portals across the globe (McDonald’s.com, 2021). Nevertheless, the organization’s desires can be implemented beneficially to keep clients updated through promotions. For instance, McDonald’s may create advertisements that present its policies and processes and their lack of harm to nature. Moreover, it is reasonable to include clips from its production to show the company’s internal operations. Such a connection with customers might attract more potential clients as the company would be viewed as a reliable and open one yielding trust to society.
Relationship Management for Supply Chain Improvement
McDonald’s values its partnership with franchisees and suppliers and therefore works closely together with them. Such a collaboration is crucial for shaping corporational strategy to move towards productive activities within the supply chain. For instance, the organization works with suppliers to “develop more sustainable agriculture practices and leverage its insights” (Governance & Stakeholder Engagement, 2021). However, this partnership can be enhanced by the enforcement of the AI model, which might contribute to the advancement of the provision supply on the whole (FutureSupplyChain.com, 2021). Moreover, such a system is valuable in close communication with branches and suppliers regarding addressing customer needs and increasing profit from items. In addition, through AI, McDonald’s might be able to analyze the statistics of its operational processes to alternate actions of the supply chain to achieve fruitful results (FutureSupplyChain.com, 2021). Overall, AI model implementation may lead to the personalization of the provisioning system by synchronizing information from performance statistics.
Tackling Issues in Supply Chain Management in Context of Global Environment
The company actively addresses the challenges regarding the impact of the supply chain on environmental conditions. For instance, McDonald’s has already implemented strict policies for its suppliers to examine their performance in terms of yielding harm to nature (Khandelwal, 2020). Furthermore, they cooperate with businesses that oppose animal food with antibiotics or animal cruelty in general. As stated previously, the organization recycles waste and minimizes gas emissions from transportation. McDonald’s also focuses on producing eco-friendly packages that decompose faster with less harm to the environment.
In addition, the company must start moving towards using electric vehicles for transportation to reduce carbon emissions. However, it is vital to optimize international, local, and national distribution routes to decrease the negative impact on the environment (Khandelwal, 2020). Furthermore, McDonald’s needs to advance international shipping by combining the items and products from different franchises into one container that should be transported to the same destination. Overall, by implementing stated processes, the company might achieve more sustainability in its supply chain management by reducing the negative impact on nature.
Developing Effective Technological and Data-Driven Supply Chain Communications
The McDonald’s supply chain lacks technological advancement, and therefore, it should be considerably improved. For instance, the company must start developing shipping processes in the provision chain by implementing an IoT system (Raj & Singh, 2021). It might assist in tracking the problems with transportation, weather conditions, traffic patterns that affect the safe distribution of products (Raj & Singh, 2021). AI and analytics are also beneficial in identifying risks regarding refrigerated products and their quality reduction due to the possible shipping delays (FutureSupplyChain.com, 2021). Furthermore, with the enforcement of AI systems, IoT, and predictive analytics, McDonald’s might more efficiently manage the supply storage, organizational operations, and customers experience.
In addition, with significant technological advancement in the modern world, the organization has the potential to implement robots and automotive machinery. As a result, it might lead to more effective storage of products as they will be managed after distribution by robotic technology (Dilip et al., 2021). Moreover, such an improvement might be valuable in the restaurants of the McDonald’s franchise in cooking processes. However, it might also result in a shortening of employees since they will be replaced by robots and automation (Jacobs, 2018). The funds saved up from managing staff can be invested in further technology advancements and improvement of organizational and operational structures.
Perspectives in Supply Chain Strategy
Having researched McDonald’s current supply chain, it seems evident that it requires crucial alterations. As for the financial aspects of chain management, the company must reduce energy costs to decrease the price of products distribution (Raj & Singh, 2021). Moreover, the organization can increase its revenue from waste recycling to contribute to developing a more profitable transportation and storage system (Raj & Singh, 2021). However, McDonald’s must also provide the customers with 24/7 available support to address their concerns and improve the experience with the brand. Consequently, such a change might lead to the advancement of customer satisfaction that also affects the supply chain by identifying the demand.
The company’s internal processes can be enhanced by maintaining partnerships with only certified suppliers who distribute high-quality products. Furthermore, the minimized packaging volumes are also valuable for decreasing the transportation costs and harm to the environment due to the considerable amount of waste (Raj & Singh, 2021). The organizational capacity of McDonald’s additionally depends on employees, and therefore, it is crucial to maintain their high satisfaction with the workplace (Raj & Singh, 2021). Consequently, they will be more motivated to show better and more efficient performance. For instance, the company can increase investment in fringe benefits and material rewards (Raj & Singh, 2021). In addition, employers might enhance the employees’ content by providing them with training to ensure their safety in the working settings.
Reference List
Dilip, D., Sinha, R., Wei, O. L., Kee, D. M. H., Leei, O. J., Shuang, P. K.,… & Saifi, J. (2021). Effective/Differentiating marketing strategies of McDonald’s in Malaysia and Indonesia. Journal of the Community Development in Asia (JCDA), 4(1), 16-33.
FutureSupplyChain.com, (2021). McDonald’s is using AI and Data to optimize its supply chain [online] Web.
Jacobs, K. (2018) Efficient, bold and sustainable: McDonald’s supply chain secrets. Web.
Khandelwal, R. (2020) McDonald’s supply chain: A must-know for investors. Web.
Lock, S. (2020) American customer satisfaction index: McDonald’s restaurants in the U.S. 2000-2020. Web.
McCorkle, K. C. (2017) McDonald’s all day breakfast launch: The strategic value of McDonald’s supply chain. Purdue University.
McDonald’s.com, (2021). As a company what is your macro environment and how do you relate to it? [online]. Web.
McDonald’s.com, (2021). Governance & Stakeholder engagement [online] Web.
McDonald’s.com, (2021). Our history [online] Web.
McDonald’s.com, (2021). What are the business aims and objectives for McDonald’s in the U.K.? [online] Web.
Raj, S. K., & Singh, N. K. (2021). Strategizing of fast food industries using a balanced scorecard approach: A case study of McDonald’s corporation. International Journal of Humanities, Arts and Social Sciences, 6(6), 258-273.
Waterloo.com, (2021). Mc Donald’s supply chain and E-Procurement management [online] Web.