NO FRILLS LOGISTIC
The supply-chain network of McDonalds is 100 percent outsourced, lean with no back-up staff and no frills. Before McDonalds launched its first outlets in India in 1996, much groundwork was done to ensure the smooth efficiency of its restaurants. From 1990 onwards, special teams arrived from the United States to check the effectiveness of Indias logistics industry, the reliability of its transport sector, etc.
Much work was done to put together a supple and efficient supplychain which, despite Indias crumbling infrastructure, would work at an optimal level.
Food ingredients are supplied by two categories, Tier-I and Tier-2 suppliers.
Tier-2 suppliers comprise growers and processors who include importantly, 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-I suppliers who process them into vegetable and chicken patties this is done by Vista Processed Foods Pvt. Ltd. or potato products like French fries, potato wedges and hashbrowns which are expertly churned out by McCain Foods India Pvt. Ltd. The products are then transported in a dedicated fleet of refrigerated trucks to the companys Distribution Centers.
Multi-temperature and single temperature trucks then transport the fast food swiftly to the 217 McDonalds restaurants across the country. The supply-chain of McDonalds has also been expertly devised to include the significant aspect of return logistics. The buns are packed in plastic crates to ensure their quality. These crates have to go back to logistics facilities, thats where return logistics comes in. From there they are sent to the bakeries.
DISTRIBUTION CENTRES
The supply-chain of the fast food chain is in effect a hub-and-spoke model because the DCs act as hubs. It has four Distribution Centers across the country to serve its 217 restaurants.
The company owns DCs in Noida and Mumbai which are primary Distribution Centers.
The other two Distribution Centers are in Bengaluru and Kolkata and are housed in leased properties. The transportation of McDonalds has been completely outsourced and since 80 percent is refrigerated truck movement, the company has a dedicated fleet which transports their goods.
McDonalds also believes in a culture of partnership and transparency with its suppliers.
Most of the employees are 12th standard pass, they know nothing about food so it is expected by suppliers to be absolutely accountable to ensure that the quality delivered to the customer is absolutely perfect.
Suppliers like Coca Cola which is McDonalds beverage partner also, for instance, take water management classes in its restaurants to ensure potable quality of drinking water.
TERMS OF AGREEMENT
The fast food chain has no legally signed agreements with its suppliers. The company has only a simple handshake relationship with them! When this idea was first proffered to them, McDonalds faced a barrage of criticism from its suppliers.
McDonalds expects its distribution partner to meet its standards of cold, clean and on-time delivery.
There are only two products, buns and Cokes, which are sent directly to the restaurants. Buns have a limited shelf life, hence they are sent directly to the outlets, while Coca Cola has a well-oiled distribution system which ensures quick dispatch of its products.
An interesting and innovative feature of this cold chain is that the same truck can carry products at different temperatures, ranging from frozen products at -18C to -25C, chilled products from 1C to 4C and dry products at ambient temperatures. Apparently, McDonalds is the only company whose supply-chain network is characterized by this successful experimentation.
FORECASTING DEMAND
McDonalds works on forecast system.
McDonalds adheres to the Hazard Analysis Critical Control Point (HACCP) system which ensures food quality. This is an industry level certification which officially approves all the suppliers of the fast food chain. McDonalds has also devised its own food safety systems, the Supplier Quality Management Systems (SQMS) and the Distributor Quality Maintenance Program (DQMP).
The SQMS is a worldwide mandate for all McDonalds suppliers and includes essentials of the HACCP control system, while also contriving several principles of its own. These systems are applicable to processing and manufacturing plants. The DQMS audits and checks the warehouses of the chain.
Another level of control is that every month members of the suppliers and McDonalds Quality Assurance teams select an outlet at random and carefully inspect the quality of the food products.
Also, every quarter or half year, members of the management do a product cutting with key suppliersfry a product, check its taste and allot scoresto check if the product scores are moving in the right direction northwards. And lastly, samples of the products that are manufactured in the country are shipped to the central laboratory at Hong Kong which evaluates the products.
USE OF IT
The supply-chain network of McDonalds, which appears to work effortlessly, is powered by various IT systems which enhance its effectiveness. They use SAP.
Their Distribution Centers are on RAMCO Marshall ERP with Cobra software. These systems are used to directly upload store orders. At the restaurant level, the fast food chain has in-house developed technologies which track day-to-day sales, enables restaurants to schedule staff and send forecast orders to DCs.
OUR SUGGESTIONS
The terms of agreement does not have any written document & is based on simple handshake. We would suggest, with increase in volatility of economic scenario globally, the fast food giant should pen down the terms of agreement. The one product-one supplier relationship can also backfire McDonalds, hence it should not depend on sole supplier for any product. With a 100% outsourced supply chain and small team of 4 members taking care of the entire supply chain, the fast food chain can lose control of its entire supply chain at any given point of time. It should have a more elaborate team at its end to oversee the functioning of the entire system.
REFERENCES
http://logisticsweek.com/feature/2011/07/the-bigidea-mcdonalds-unravels-its-supply-chain/ http://smallb.in/sites/default/files/McDonalds%20Foo d%20Chain_0.pdf http://www.aboutmcdonalds.com/mcd/sustainability/ our_focus_areas/sustainable_supply_chain.html
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