Analytical Report on McDonald's: Supply, Operations, Information, Integration and Sustainability Issues

This report analyzes the supply, operations, information, integration, and sustainability issues of McDonald's. It covers topics such as inventory, transportation, facilities, design of goods and services, quality management, process and capacity design, location strategy, maintenance, information systems, triple A supply chain, and improvement programs.

ANALYTICAL REPORT ON McDonald’s
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TABLE OF CONTENT
Executive Summary 1
Introduction 2
Part A Supply issues 3
Findings of Supply Analysis 3
Inventory 3
Transportation 4
Facilities 4
Part B Operations issues 4
Findings of Operations Analysis 4
Design of goods and services 5
Quality management 5
Process and capacity design 5
Location strategy 5
Maintenance 5
Part C Information issues 5
Findings of Information Analysis 5
Part D Integration issues 7
Integration Analysis 7
Triple A Supply Chain 7
Part E Sustainability issues 8
Findings of Sustainability Analysis 8
Company’s Procurement and Supply Chain Management 9
Discussion of improvement programs 10
Improvement programs 11
Conclusion 12
References 13
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Table of figures
Figure 1 Supply chain model.....................................................................................................4
Figure 2 Three leg stool model..................................................................................................6
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Executive Summary
Business is a broad term where the companies are able to sell their products and
offerings to the customers and in return generates profitability. In other words, it is a place
where proper buying and selling take place. In this report, the business model has been
explained that helps in developing company’s mission, vision and strategic business tools.
The value preposition model has been explained that explains the importance of the product
for the customer and describes the reason for which they are buying the product. The supply
chain management has been taken into account that helps in making the product available to
the customers at the right time so that no difficulty would be faced by customers at the time
of consuming the product. Selection and innovation tools have been selected which provides
base for the overall business and explain the effectiveness of using them.
1

Introduction
McDonald’s is the only organisation in the world who has sustained their market
leader position in the fast food industry from so long. The organisation has a profound
consideration over its mission and vision statement as important policy and strategic goals of
the organisation to ensure continuous growth1.
McDonald’s Vision
The vision of the organisation pushes its strength to attain pre-set target and enhancement in
their products considering competitors as well smaller local or regional firms. Company’s
vision is– “to move with velocity to drive profitable growth and become an even better
McDonald’s serving more customers delicious food each day around the World”.
McDonald’s mission
The mission statement of the organisation focuses on the favourite food destination for
everyone. McDonald’s corporate mission is “to be our customers’ favourite place and way to
eat and drink.” 2
1 Christopher and et. al.,‘Hoek. Leading procurement strategy: driving value through the
supply chain’. (2018). Kogan Page Publishers,
2 Yan and et. al.,. ‘Green component procurement collaboration for improving supply chain
management in the high technology industries: A case study from the systems
perspective.’ Sustainability 8, no. 2 (2016): 105.
2

Part A Supply issues
Findings of Supply Analysis
Due to large supply chain, it becomes complex and difficult for companies to manage
it at the same time by considering zero margin error. Many outlets were closed in many cities
due to the shortage in raw materials for fries and burgers3. One of the largest selling item of
McDonald’s is Burger which plays an essential role in the profitability of company. Since,
the raw materials used to make those delicious burgers majorly comes from local market or
regional market there are many issues related to inventory, transportation and facilities.
Figure 1 Supply chain model
Inventory
It consists of raw materials, finished items and work in progress items in any supply
chain. Generally in any geographical area McDonald’s have minimum of two ware houses,
3 Mangla and et. al., Sustainable Procurement in Supply Chain Operations. (2019). CRC Press,
3

that keeps the stock for around one month and forty five days and all supply is kept frozen
and in dry rooms as required by the products4. All products in the inventory are handled on
first in first out basis. It is very important because products that have come first must be used
first and then the rest and so on.
Transportation
The process of transportation allows inventory to move from one place to another
through refrigerated vans. In different regions different fleet is choose to transport inventory
from ports to the warehouses but on the other hand when delivering finished items at the
restaurants they refer express fleet in order to maintain a good temperature of the food while
delivering5. The suppliers are responsible for delivering raw materials from port to ware
house and from ware house to retail outlets of McDonald’s.
Facilities
They are the actual physical sites where the products are stored until they have to
transport. These physical locations must be of standard condition because the products are
stored, assembled and fabricated in these facilities. The temperature is the most important
factor for these facilities because if the temperature is not maintained then the products will
damage.
Part B Operations issues
Findings of Operations Analysis
The operations management of McDonald’s supports the top position of the company
in its category. The following decision areas of operation management must be coordinated
for optimal productivity and performance, these decisions also represents the strategic areas
of operations. The operation management meets a wide area of strategic requirements such as
strategic HRM and supply chain management.
4 Monczka and et. al., Purchasing and supply chain management. (2015). Cengage Learning,
5 Glas, Andreas H., and Florian C. Kleemann. ‘The impact of industry 4.0 on procurement
and supply management: A conceptual and qualitative analysis.’ International Journal of
Business and Management Invention 5, no. 6 (2016): 55-66.
4

Design of goods and services
The main goal of the organisation in this area is to provide affordable and good
quality products. It also includes the expected size of the products in the mind of consumer or
some products whose size are minimised keeping in mind the affordability criteria of the
consumers.
Quality management
The organisation aims to excel product quality by also keeping in mind the cost and
price limits of its products. In terms of quality, consumer only satisfies if the consistency of
the product is maintained in this area of strategic decision under Operations management6.
Process and capacity design
The main focus of this strategic decision is to minimize cost. This process is mainly
about maintaining quality, process efficiency and fulfilling market demand while keeping
cost at minimum levels. To deal with this situation, line method is used by the company and
its management to enhance their productivity and efficiency over time.
Location strategy
The main goal of this decision in the operation management is to select the location
which has maximum market reach7. Through these strategies the organisation reaches to its
customers through retail outlets and traditional or online ways.
Maintenance
In this organisation the mangers of the outlets are responsible for the selection of the
maintenance service provider. But for kitchen equipment’s the organisation certified
maintenance providers. Therefore, the organisation strategically handles this part through
local and corporate control.
Part C Information issues
Findings of Information Analysis
There many types of information systems that are being used;
6 Bag, Surajit. ‘Green strategy, supplier relationship building and supply chain performance: Total interpretive
structural modelling approach.’ (2016): International Journal of Procurement Management 9, no. 4. 398-426
7 Emmett, Stuart, and Barry Crocker. The relationship-driven supply chain: ‘creating a culture of collaboration
throughout the chain’. (2016). Routledge
5

 Transaction processing system
 Decision support system
 Management information system
 Expert system
 Point of sale system
 Hyperactive Bob system
 Touch interface operating system
By using advanced technology for management purpose does not guarantee problem free
or challenge free solution. The major component that can disrupt the whole information
system of the restaurant is electricity. If the power fails it brings down every electronic device
operating in the restaurant. It has a very bad influence on customers as well as employees.
In the occurrence of such an event the managers are advised to stop taking any more orders
but deliver the ones which are pending and meanwhile they should identify the source of
problem and try to resolve it. The main problem comes in the identification of the source of
the problem if the problem is related to a technical error then it requires technical ability to
solve it.
McDonald’s need to upgrade their systems which run on out dated software and also
to replace with more powerful systems8. This will definitely save time , because old systems
and software get stuck in the middle of the rush hours and the whole restaurant has to suffer
because of long waiting lines.
It is very important to understand the information system of McDonald’s is very
effectively helping and maintaining the operations of the restaurants. As the organisation is
growing and it is open to adopt new technologies and tools in order to meet its goals and
objectives9. Every decision made each day at every restaurant has an impact on the
performance of the over-all organisation.
8 Wang and et. al., ‘Big data analytics in logistics and supply chain management: Certain investigations for
research and applications.’ (2016): International Journal of Production Economics 176. 98-110
9 Birou and et. al., ‘Current state of the art and science: a survey of purchasing and supply management courses
and teaching approaches.’ (2016): International Journal of Procurement Management 9, no. 1 .71-85
6

Part D Integration issues
Integration Analysis
McDonald’s backbone which is their supply chain management is based on three leg stool
Figure 2 Three leg stool model
The organisation has spent years in establishing a very unique SCM, and it is essential
to sustain the quality of items and maintain their freshness and nutritional values. This system
provides help in the process of selection of different items picked from different geographical
region in order to make a final product.
McDonald’s food procurement, warehousing, transportation, storage and retailing are
done under controlled temperature. It makes sure that the freshness and nutrition value of the
food is intact and minimum wastage is done.
In terms of supply chain management, distance is a big factor which in deteriorating
supply chain requires cold chain support throughout the supply chain from suppliers to
consumers. Hence, at worldwide level it requires a lot of research and implementation in
selecting and confirming the storage place, distribution strategy, process, and maintaining
temperature throughout the whole process. It helps in maintaining the quality of the food
which is the most concern for McDonald’s brand image.
Triple A Supply Chain
Core function of supply chain management is to be fast and cost-effective but in
today’s global market these two points are not sufficient enough for a company to sustain its
top position10. But by adapting Triple A technique many companies and organisations have
been able to transform their supply chain management and retain their top position.
10 Meindl, Sunil Chopra Peter. ‘Supply Chain Management--Strategy, Planning and Operation’. (2016).
Tsinghua University Press. wheat soybean others land for no use
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Suppliers Company Franchisees

Triple A includes:
Agility
Agility means how fast can company changes its business operations according to
external environment. It can be achieved through keeping a clear communication throughout
the process of supply chain, having collaborations with suppliers and consumers, finishing
products only when having complete information of customer preference and keeping a small
inventory to prevent manufacturing delays.
Adaptability
It focuses on adjusting supply chain to compensate market changes. The process of
adaptability works by tracking economic changes, using cold chain in an unfamiliar location,
by creating flexibility so that multiple products can be made out of single raw material and
also through creating different supply chains for different products.
Alignment
By introducing incentives in the supply chain management for the vendors can
increase their performance and maintain good relationship in the future. It includes providing
access to forecast, planning, and sales data, by providing clear roles and responsibility
conflicts can be avoided11
Part E Sustainability issues
Findings of Sustainability Analysis
McDonald’s uses outside-in approach in its SCM in order to sustain at the top
position. This approach considers final product or end user to build a supply chain
accordingly. To this extent company continuously take feedbacks through its staff, consumers
and marketing staff, and this gave the term ‘three leg stool’ supply chain management.
McDonald’s always kept their focus on rooted innovation in SCM as it assist them in
maintaining market leader position from past many decades. Sustainability is as a balance of
social, economic and environment which is very essential in sustaining business12.
11 Chin, Thoo Ai, Huam Hon Tat, and Zuraidah Sulaiman. ‘Green supply chain management, environmental
collaboration and sustainability performance.’ (2015): Procedia Cirp 26 695-699
8

Environmental issues is related to global warming which is a result of greenhouse gas
emissions from animals and also by damaging rainforest for raising beef cattle and grains,
methane emission from cattle is the major issue in causing global warming.
Social issues are concerned with restaurant to restaurant in any region, based on its
surroundings, people and resources.
Economic issues are related to the country’s economic growth and depending upon
the buying capacity of the consumers. This resulted in decreasing the size of some products
so as to cut down its pricing in some regions or countries.
Company’s Procurement and Supply Chain Management
Procurement in general means purchase and sale of materials, work and services
through internet or other source of information. McDonald’s also uses E-procurement to
facilitate buying of every item needed by the franchisee across the world. This is very fast
and convenient method for buying supplies and materials at a discounted rate through online
portal. The organisation is focusing on more sustainable supply chain to extend responsibility
for the better quality of the product into social and environmental performance. Through
building strong relationship with regional farmers and food suppliers, the organisation is
building more sustainable and responsive supply chain through interpersonal trust and
working to standards.
Collaboration is very essential from everyone who is involved in SCM in order to
create worth in their products for consumers. A focus on the long term relationship ensures
that the supply chain is responsible and has strong bonding that provides long term business
growth in the coming future13.
Since, Procurement and Supply chain both plays an essential part in the success of an
organisation. Issues found in supply chain, even from a small variance in supply chain can
leads to take effective and responsive measures in logistics to ensure the balance and it is
necessary in all organisations. To gain more opportunities in untapped markets, organisations
12 Bam and et. al., ‘Reducing stock-outs of essential tuberculosis medicines: a system dynamics modelling
approach to supply chain management.’ (2017): Health policy and planning 32, no. 8. 1127-1134
13 Oelze and et. al., "Sustainable development in supply chain management: ‘The role of organizational learning
for policy implementation.’ (2016): Business Strategy and the Environment 25, no. 4 , 241-260
9

focus on building and aligning their available resources to minimise cost and improve
efficiency14.
Supply chain basically manages set of activities and procedures undergone in order to
move materials from start to end. Many organisations do not perform the process of
procurement by themselves but they outsource this task to other companies so they can
efficiently and experienced manner can handle the transport while the organisation can
concentrate on its core operations. Companies mainly hire third party or contract logistics to
look after their warehousing, material handling and many other related functions of logistics.
Also structuring the supply chain management requires a deep knowledge and understating of
the demand pattern, cost consideration, storage facilities, distance and other related
parameters. Transporting materials inwards is considered as upstream and outwards is
downstream. The inward activities consist of or divided into several tires of suppliers, first
tier supplier are those who provides materials to the operation and on the other hand, those
who provides material to first tier supplier is known as second tier supplier.
Discussion of improvement programs
In regards with continuous improvement McDonald’s has recently implemented
‘lean’ method so that they no longer have to prepare abundance of food even when there is no
rush hours which saves waste and also labour hours. Total quality management holds the key
to properly train and develop employees for McDonald’s fast and responsive services. By
applying lean method the organisation has experienced decrease in waste and time of
employees.
Another critical factor affecting organisations sustainable growth is Human resource,
as the organisation’s human resource department is playing its role very efficiently in
analysing job responsibility, job analysis, employee selection process and employee training
process. It can also improve its efficiency through recruiting more experienced employees
and allocating job according to their individual skills 15.
14 Grant, David B., Alexander Trautrims, and Chee Yew Wong. ‘Sustainable logistics and
supply chain management: principles and practices for sustainable operations and
management ‘. (2017). Kogan Page Publishers,
15 Hugos, Michael H. ‘Essentials of supply chain management’. (2018). John Wiley & Sons
10

Since, new technologies are introducing every day, the organisation must adapt latest
technology and automate its various operations in order to minimise errors which occurs at
individual levels.
Improvement programs
Improvement programs assist organisation to get better in their on-going procedures
whether it is operation, supply chain, inventory or procurement. Keeping in mind the vision ,
mission and strategic goals of McDonald’s the improvement programs will assist the
organisation to move in the direction of vision of the organisation 16.
By implementing improvement programs the organisation will improve its operations
and get closer to its achievements. It increases productivity of employees, management and
supply chain. Improvement programs are necessity in every organisation so as to gain their
top position and continuous growth in today’s emerging market place 17. These programs also
gives an opportunity to compare past performance with the present scenario and based on
which strategic decisions can be made, which will assist the organisations to meet their goals
and objectives short term as well as long term.
It also can assist the organisation to make a common thread among various
departments and diverse activities to convert the vision of organisation into action. In
operations department vision and mission of the organisation plays a very important role by
providing opportunity for meaningful leadership in the department to openly and rationally
assess the strategic decisions made by the top management18.
Conclusion
It can be said that company needs to focus on zero margin error in supply chain
management as even a minute error can affect company’s performance in a negative way.
The control on third party or logistic control companies is must and regular monitoring is
16 Johnsen, Thomas E., Mickey Howard, and Joe Miemczyk. ‘Purchasing and supply chain
management’: A sustainability perspective. (2018). Routledge
17 De Angelis, Roberta, Mickey Howard, and Joe Miemczyk. ‘Supply chain management and the circular
economy: towards the circular supply chain.’ (2018): Production Planning & Control 29, no. 6, 425-437
18 Pelton, Rylie EO, and Timothy M. Smith. ‘Hotspot scenario analysis: Comparative streamlined LCA
approaches for green supply chain and procurement decision making.’ (2015): Journal of Industrial Ecology 19,
no. 3, 427-440.
11

required. To get success in SCM, company must need to modify their operations according to
external demand and internal capabilities. Many other fast food chains have complimented
McDonald’s for transforming the fast food industry at an exponential growth. Through
procurement and supply chain management the organisation is successfully competing in the
today’s emerging market and also delivers good value to the consumers.
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References
Bag, Surajit. ‘Green strategy, supplier relationship building and supply chain performance:
Total interpretive structural modelling approach.’ (2016): International Journal of
Procurement Management 9, no. 4. 398-426.
Bam, L., Z. M. McLaren, E. Coetzee, and K. H. Von Leipzig. ‘Reducing stock-outs of
essential tuberculosis medicines: a system dynamics modelling approach to supply chain
management.’ (2017): Health policy and planning 32, no. 8. 1127-1134.
Birou, Laura, Heather Lutz, and George A. Zsidisin. ‘Current state of the art and science: a
survey of purchasing and supply management courses and teaching approaches.’ (2016):
International Journal of Procurement Management 9, no. 1 .71-85.
Chin, Thoo Ai, Huam Hon Tat, and Zuraidah Sulaiman. ‘Green supply chain management,
environmental collaboration and sustainability performance.’ (2015): Procedia Cirp 26 695-
699.
Christopher, Martin, Carlos Mena, and Remko van ‘Hoek. Leading procurement strategy:
driving value through the supply chain’. (2018). Kogan Page Publishers,
De Angelis, Roberta, Mickey Howard, and Joe Miemczyk. ‘Supply chain management and
the circular economy: towards the circular supply chain.’ (2018): Production Planning &
Control 29, no. 6, 425-437.
Emmett, Stuart, and Barry Crocker. The relationship-driven supply chain: ‘creating a culture
of collaboration throughout the chain’. (2016). Routledge,
Glas, Andreas H., and Florian C. Kleemann. ‘The impact of industry 4.0 on procurement and
supply management: A conceptual and qualitative analysis.’ International Journal of Business
and Management Invention 5, no. 6 (2016): 55-66.
Grant, David B., Alexander Trautrims, and Chee Yew Wong. ‘Sustainable logistics and
supply chain management: principles and practices for sustainable operations and
management ‘. (2017). Kogan Page Publishers,
Hugos, Michael H. ‘Essentials of supply chain management’. (2018). John Wiley & Sons,
Johnsen, Thomas E., Mickey Howard, and Joe Miemczyk. ‘Purchasing and supply chain
management’: A sustainability perspective. (2018). Routledge
Mangla, Sachin K., Sunil Luthra, Suresh Kumar Jakhar, Anil Kumar, and Nripendra P.
Rana. Sustainable Procurement in Supply Chain Operations. (2019). CRC Press,
Meindl, Sunil Chopra Peter. ‘Supply Chain Management--Strategy, Planning and Operation’.
(2016). Tsinghua University Press. wheat soybean others land for no use,
Monczka, Robert M., Robert B. Handfield, Larry C. Giunipero, and James L.
Patterson. Purchasing and supply chain management. (2015). Cengage Learning,
13

Oelze, Nelly, Stefan Ulstrup Hoejmose, Andre Habisch, and Andrew Millington.
"Sustainable development in supply chain management: ‘The role of organizational learning
for policy implementation.’ (2016): Business Strategy and the Environment 25, no. 4 , 241-
260.
Pelton, Rylie EO, and Timothy M. Smith. ‘Hotspot scenario analysis: Comparative
streamlined LCA approaches for green supply chain and procurement decision making.’
(2015): Journal of Industrial Ecology 19, no. 3, 427-440.
Wang, Gang, Angappa Gunasekaran, Eric WT Ngai, and Thanos Papadopoulos. ‘Big data
analytics in logistics and supply chain management: Certain investigations for research and
applications.’ (2016): International Journal of Production Economics 176. 98-110.
Yan, Min-Ren, Kuo-Ming Chien, and Tai-Ning Yang. ‘Green component procurement
collaboration for improving supply chain management in the high technology industries: A
case study from the systems perspective.’ Sustainability 8, no. 2 (2016): 105.
14