TM

Operations Management

McDonald's

KRISHNA RAJ N SMBA ABM

KERALA AGRICULTURAL UNIVERSITYmynameiskrishnaraj@gmail.com

TM

2

Overview

HISTORYSYSTEM OVERVIEWOPERATIONS MANAGEMENTWHAT MAKES MCDONALD’S DIFFERENT ?SUPPLY SIDEEXTRAS

TM

3

The Mc Way•Move Forward

• Contributions

• Develop

• Open Communications

• No Losers

• Actively Listen

• Leverage Diversity

• Deliver

• Support

TM

4

A Brief History of Time

• McDonald’s is the worlds largest chain of fast-food restaurants• Founder : Ray Croc• Founded: 1955 April 15 at Illinois , United States• CEO: Steve Easterbrook• Headquarters: Illinois, United States• Stock Price: * (NYSE)• Spreaded Over 36000 locations worldwide

TM

5

A Brief History of Time

• McDonald’s was started as a drive-in restaurant by two brothers, Richard and Maurice Mcdonald in California,US in 1937• They used assembly line procedures in their kitchen for

mass production• Speed Service Cleanliness were the critical succsess

factors• Prices were kept low

TM

6

A Brief History of Time

• Later, Ray Croc, distributor for Milkshake Machines interested in McDonald Business and finalized a deal with Mc Brothers in 1954• He established a franchising company, Mcdonald Inc.• In 1961, He brought out Mc Brothers’ share for $2.7

million and changed the company name to McDonald's Corporation

TM

7

From the very beginning, Ray Kroc's energy and vision formed the foundation of the McDonald's business

TM

8

Ray Kroc- Business Model

• Ray Kroc- Developed a business model known as “The Three Legged Stool.” Owner/Operator, Suppliers and Employees

• Just as all three legs of a stool need to be equal to support the weight, all three elements of the McDonald’s system are equally important partners in McDonald’s success.

TM

9

Brand Strategy

• 2003-2008 “I’m Lovin’ it” is an international branding campaign

• It was the company's first global advertising campaign.

TM

10

System BoundariesInput

Raw materials Energy

Labour Factories

Machineries Capital

TM

11

System Boundaries

• Raw materials acquisition•Manufacturing, Processing and Formulation•Distribution and Transportation•Use/ Reuse / Maintenance• Recycle•Waste Management

Throughput

TM

12

System Boundaries

•Usable products•Salary and Wages•Other Services (Pulse Polio etc.)•Water effluent•Airborne emissions•Solid wastes

Output

TM

13

Products

•Mc Donald’s sells Hamburgers, Chicken sandwiches, French fries, Soft drinks, Breakfast items and Deserts. •Mc Donald’s also offers salad and vegetarian

items, wraps and other localized fare• In India they sells McVeggie, Veg McCurry,

PanChicken McGrill ,Chicken Maharaja Mac etc.

TM

14

Competition

•McDonald’s is currently ranked second amongst its top competitors in the FFHR subsector.• # 1 – Burger King• # 2 – McDonald’s• # 3 - Wendy’s• Three competitors hold 71% of the FFHR

market

TM

15

Supply Side Operation Strategy

•Quality•Service•Cleanliness•Value

• How all those can be ignored !!?

QSCV

TM

16

Operation Technics

•McDonald’s Corporation’s operations management (OM) supports the company’s position as the largest fast food restaurant chain in the world• The 10 decisions of operations management

represent the various strategic areas of operations that must be coordinated for optimal productivity and performance.

TM

17

Design of Goods and Services

McDonald’s goal in this strategic decision area of operations management is to provide affordable products. As such, the serving sizes and prices of its products are based on the most popular consumer expectations. However, some McDonald’s products are minimized in size to make them more affordable.

1

TM

18

Quality Management

The company aims to maximize product quality within constraints, such as costs and price limits. McDonald’s uses a production line method to maintain product quality consistency. Consistency satisfies consumers’ expectations about McDonald’s and its brand in this strategic decision area of operations management.

2

TM

19

Process and Capacity Design

McDonald’s process and capacity design is centered on efficiency for cost-minimization that supports the company’s strategies. This strategic decision area of operations management focuses on maintaining process efficiency and adequate capacity to fulfill market demand. At McDonald’s, the production line method maximizes efficiency and capacity utilization

3

TM

20

Location Strategy

McDonald’s goal in this strategic decision area of operations management is to establish locations for maximum market reach. McDonald’s marketing mix includes restaurants, kiosks, and the company’s website and mobile app as venues. Through these locations/venues, McDonald’s reaches customers in traditional and online ways

4

TM

21

Layout Design and Strategy

McDonald’s uses practicality for this decision area of operations management. The strategy involves maximizing space utilization in restaurants and kiosks, rather than focusing on comfort and spaciousness.

5

TM

22

Job Design and Human Resources

McDonald’s human resource strategies involve training for skills needed in the production line in restaurant kitchens or production areas. For this decision area of operations management, individual and organizational learning are also emphasized to support McDonald’s organizational culture

6

TM

23

Supply Chain Management

The firm’s global supply chain supports its various locations around the world. McDonald’s has a strategy of supply chain diversification for this decision area of operations management. Such strategy involves getting more suppliers from different regions to reduce McDonald’s supply chain risks.

7

TM

24

Inventory Management

McDonald’s goal for this strategic decision area of operations management is to minimize inventory costs while supporting restaurant operations. The company does not directly sell products and ingredients to its restaurants. Instead, local and regional intermediaries and distributors coordinate with McDonald’s restaurant managers to manage their inventory

8

TM

25

Scheduling

McDonald’s uses corporate conventions for scheduling, based on local market conditions and laws, as well as supply chain needs. For example, the company’s strategy involves regular and seasonal schedules to address fluctuations in local market demand. Thus, in this decision area of operations management, McDonald’s is flexible and adapts to local market conditions

9

TM

26

Maintenance

McDonald’s lets restaurant managers or franchisees select maintenance service providers. However, for kitchen/production equipment, McDonald’s Corporation also has certified/approved maintenance providers. Thus, the company addresses this strategic decision area of operations management through local and corporate control

1010

TM

27

Productivity at McDonald’s

McDonald’s works toward maximum productivity in all of its business areas

Order fulfillment rate (McDonald’s restaurant productivity)

Stockout rate (Intermediary/distributor productivity) Timely delivery rate (McDonald’s delivery productivity)•  

TM

28

How Do McDonalds Kitchens Operate?

From the second you order, the McDonald’s people at different preparation stations around the kitchen begin toasting the buns, adding ingredients and packaging your food so that your meal arrives fresher, hotter and tastier, every time. They prepare food only after you have ordered it, not before !

JIT INVENTORY OPERATION MEANING "JUST IN TIME”

TM

29

Source of Ingredients• Ingredients comes through global network of suppliers

• According to growing season, availability and choices

• Suppliers strictly meets strict quality and safety standards

WHAT MAKES MCDONALD’S DIFFERENT ?

TM

30

WHAT MAKES MCDONALD’S DIFFERENT ?

Crunchy Farm-fresh Vegetables

They select the best of the best vegetables that are continuously monitored for freshness, high nutrients and safety, to maintain top quality standards. They use regional/local suppliers to ensure that the freshness and high quality are delivered to you in all their products.

TM

31

WHAT MAKES MCDONALD’S DIFFERENT ?

High Quality Baked Buns

They source their buns from suppliers who use only high quality wheat. All the buns are subject to strict quality and safety controls all through the production process.

TM

32

WHAT MAKES MCDONALD’S DIFFERENT ?

Meat With 100% Purity

They are made from halal beef cuts with no additives or preservatives. Chicken that the serve is carefully deboned breast meat only, with seasoned batter and a choice of sauce portions, while their Spicy McCrispy Chicken Deluxe uses only muscle cuts. All relevant authorities monitor their high quality standards of halal chicken.

TM

33

WHAT MAKES MCDONALD’S DIFFERENT ?

High Energy Wholesome Dairies

To maintain the high quality standards of the world famous McDonald’s cheese, shakes, Mcflurry and Sundaes, they ensure that the fresh milk comes from the approved regional and local suppliers. Quality control procedures are followed throughout the supply chain

TM

34

WHAT MAKES MCDONALD’S DIFFERENT ?

Fries-Naturally Crisp

Their fries are crispy and far from the ordinary. The secret lies in the harvesting of high quality potatoes that come from trusted suppliers. The potatoes are then cooked using only 100% vegetable oil with no fats or flavours and only some salt is added after cooking.

TM

35

SUPPLIERS

McDonald’s works closely with suppliers to encourage

Innovation Assure best practices Continuous improvement Risk management

TM

36

Responsible Suppliers

• “Only purchase from suppliers who meet our stringent food safety standards, but who also share our commitment to social responsibility and sustainability”

• rain forest and antibiotics policies• supplier social accountability program

TM

37

Packaging

• Set of procedures for wrapping the food were developed

• Introduced thinner paper based wrap consisting f 3 layers of tissue

• Less pollution, less costly

TM

38

Two Level Safety Food Method

Routine Food Safety Inspection Mechanism&

SGS(Internationally recognized independent accreditation company, leader in inspection testing and certification)

* In the past 18 months, over 350* McDonald's ingredients have undergone food testing conducted by SGS, results of which are all satisfactory. 

TM

39

Reducing Food Wastage

Since 2009 all McDonald’s kitchens have operated via a system called “Made For You”

• Food production only after order

• Automated Cooking Facilities

• Cooking time and temperature controlled

• So wastage reduced to less than 1%

TM

40

How Do McDonalds Process Food?

• All McDonald's products

comply with the most stringent food safety and quality standards. Every procedure is monitored thoroughly

HACCP (Hazard Analysis and Critical Control Point)

Systematic, preventive approach to ensure food safety that identifies, evaluates and controls all hazards

GMP (Good Manufacturing Practice)

monitors food preparation locations, processes, environments and hygiene

TM

41

Problems in Operations

Location Planning

• McDonalds Restaurants have their location in such a way that maximum customers visit their restaurants

*No parking facility for the customers

Some customers may have no waiting time to eat in, but there is no drive thru facilities

TM

42

Problems in Operations

• Improper capacity planning * failure to deal with peak hours

• Inventory management * inappropriate ordering or miscalculation of stock

• Batch processing * numbers of sandwiches are made at the same time with the

same condiments.. Waiting needed for new batch in case of a need of variety.

TM

43

Sample Product- Delivery System(Beef Burger)

TM

44

Hamburger UniversityIn 1993, McDonald’s invested $40 million in Hamburger University, a 130,000- square foot facility on an 80-acre campus located at McDonald’s Corporate in Oak Brook, IL.

TM

45

Nutrition Information

•1st restaurant to place its information in an easy-to-read graphic format on their packaging

TM

46

McCafe

• Features a relaxed adult atmosphere. Offers customers a variety of specialty coffee drinks along with muffins, pastries and sandwiches

TM

47

GO GREEN

In several countries across the McDonald’s System, restaurants are recycling their used cooking oil to sell to companies that specialize in refining the product into clean burning diesel for consumer use.

In 2006, McDonalds in the U.S has began developing green restaurants.

• Floor Tiles with a high recycled content

• Efficient Lighting Products, Skylights and Daylight controls

• High efficient rooftops

• Water conserving toilets

McDonald’s has taken the initiative to incorporate used cooking oil into their operations

TM

48