Logistics and Supply Chain Management of McDonald's Corporation

This article discusses the supply chain and logistics management activities of McDonald’s Corporation. It explains the approach adopted by McDonalds to implement supply chain and logistics activities, issues impacting the decision, rationale for implementation and strategies, benefits and limitations, and future trends and direction.

Running head: Logistics and supply chain management
Logistics and supply chain
management
2018

Logistics and supply chain management
Table of Contents
Introduction.................................................................................................................................................3
Supply chain and logistics management of McDonalds..............................................................................5
Approach adopted by McDonalds to implement supply chain and logistics activities.................................7
Issue impacting the decision, rationale for implementation and strategies..................................................8
Benefits and limitations.............................................................................................................................10
Future trends and direction........................................................................................................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13
Appendices................................................................................................................................................16
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Logistics and supply chain management
Introduction
The primary motive of this task is to discuss about the supply chain and logistics management
activities of McDonald’s Corporation. Supply chain management is an essential and integrating
function which optimizes and coordinates all logistics activities including sales, marketing,
finance, manufacturing and technology. McDonald’s is the major player in fast food industry
who is maintaining effective supply chain management at the workplace. An approach which
helps in identifying and analyzing the supply chain activities in McDonald’s has been explained
in the task. Without supply chain activities, the company cannot flourish the business at
international level. Issues impacting the decision to initiate the supply chain activities, benefits,
limitations and future trends also have been drawn in the task briefly.
Mcdonald’s is an American fast food Company which is incorporated in 1940 in United States
by Richard and Maurice Mcdonald (McDonalds, 2018). The company serves approx 68 million
in more than 119 countries on daily basis. In today’s modern world, the company has grown to
have approx 36,000 restaurant across the globe (McDonalds, 2018). The main vision of
McDonalds is to respond to the quick changing demands, requirements and expectations of the
Filipino family. The mission of the firm is to serve the Filipino society by rendering great and
delicious food at reasonable prices. The core values of McDonalds include customer driven,
Malasakit, integrity, teamwork and excellence. All these core values help the organization to
meet the expectations and requirements of the business. The company serves the people by
providing various food items such as Big Mac, Big n’ tasty, Quarter pounder with cheese, French
fries, cheeseburger, Egg McMuffin, Sundae and Apple Pie. At McDonalds, excellent and
effective standards and code of conducts are in place for cleanliness, service and quality
(McDonalds, 2018).
The size of the company is unique and wider as it also helps the firm to be a player in the
competitive market. McDonalds has become the leader in the fast food industry with their strong
and constant focus on the customer service, use of marketing tool for development, and response
to competition in the global market. By monitoring and analyzing the choices, needs and wants
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Logistics and supply chain management
of key target auidence, the company has been able to make a dynamic and strong position in the
global market. The firm starts with rendering great and unique restaurant experience every time.
The company’s suppliers, employees, and operators work together to fulfill the needs and
requirements of target audience internationally.
In today’s modern world, McDonalds is expanding and exploring its business actions and
activities internationally. The statistics indicates the brand value of the precious and effective fast
food brands across the globe in 2018. The company is most valuable and significant brand
around the world with predicated brand value approx 126.04 billion U.S. dollars (Statista, 2018).
The market share of McDonald’s has been discussed below.
(Source: Statista, 2018)
It is stated that McDonalds which is one of the biggest and well known fast food chain network
across the world uses porter five forces analysis to compete with rivals. The porter five forces
analysis of McDonalds Corporation has been discussed below.
Competitive rivalry: It is noted that fast food restaurant is significant and leading competitive
business today. Thus, there is high and intense competition in the global market. The competitors
of McDonalds include burger king, Johnny Rockets and Wendy’s. Each player is spending
money on advertisement, promotion, innovation and menus to maximize the profitability and
outcomes (Adamkasi, 2017).
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Logistics and supply chain management
Threat of new entrants: It is noted that threat of new entrants is moderate in fast food industry.
To become a global competitor of McDonalds, the rivals will have to create or generate a large
number of outlets and stores throughout the global which needs more time and massive capital
investment in the competitive market.
Bargaining power of suppliers: The bargaining power of the suppliers is a feeble force for
McDonald’s because the company has large number of suppliers. The raw material like potatoes
and chicken that the company’s uses for its fast food products are available through a wide range
of suppliers. It is analyzed that the suppliers are in no position to negotiate or bargain with
McDonalds to maximize its prices. The company may easily switch suppliers with little
switching cost (Adamkasi, 2017).
Bargaining power of buyers: It is seen that bargaining power is high and powerful in the hands
of purchasers. The buyers of the firm have several choices available in today’s competitive world
therefore; they can easily switch from one restaurant to another without any extra switching cost
if they are dissatisfied. Along with this, the customer loyalty and morale to fast food restaurant is
reducing constantly with so many rivals. Apart from this, the company uses innovative strategies
and policies to attract and retain its target audience globally (Adamkasi, 2017).
Threat of substitutes: It is portrayed that threat of substitute is high and strong in the global
market. Bakery products and KFC products are considered alternate of McDonald’s fast food
products. All these fast food substitutes are competitive in terms of quality, taste and consumer
dissatisfaction. It has been analyzed that threat of substitute is high and intense against the
McDonalds.
Supply chain and logistics management of McDonalds
It has been found that McDonalds uses strong and unique supply chain and logistics management
to compete with rivalries globally. Supply chain management may be defined as management of
the flow of service and goods, includes the storage and movement of raw material, finished
goods and work in progress of inventory (Ellram and Cooper, 2014). Logistics and supply chain
management both play a major and major role in determining and analyzing the overall success
and progress of the firm. In other words, supply chain is a structure of companies, technology,
people, information, actions and resources included in moving fast food product and service
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Logistics and supply chain management
from supplier or vendor to entire target audience. The management of McDonald’s supply chain
has to be able to fulfill the needs and requirements of approx 70 million daily customers of a firm
with 35,000 restaurants (Simonergrabner, 2015).
It is needed to calculate and analyze the daily orders well and effective to ignore that product
carried out. Supply chain and logistics management are needed to fulfill the future needs and
demands internationally. Every distribution centre supplies between 250 and 700 restaurants
where are managed and controlled with daily sales, transportation, marketing, promotions,
warehousing, and restaurant stocks and logistics services (Simonergrabner, 2015). McDonald’s
supply chain model is based on the “Three legged stool” model designed by Ray Kroc. The three
legged stool business model indicates that the company’s franchisees and vendors all work
together to manage the business activities and operations in a hassle free manner. Along with
this, fast food giant initiates the 5 vested outsourcing rules and principles which are mutually
effectively and successful to the company and its suppliers. The rules include:
Rule1: Monitor on outputs, not transactions
Rule2: Monitor on the what, not the how
Rule 3: Agree on evidently defined and evaluates outcomes
Rule4: Pricing model, service tradeoffs and benifits for cost
Rule 5: Govern for insight, not oversight
(Source: Amberosesmith, 2016)
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Logistics and supply chain management
Approach adopted by McDonalds to implement supply chain and logistics activities
It has been found that various approaches are being used by the company while planning and
implementing the supply chain and logistics activities at the workplace. With thousands of fast
food outlets, the company entrusts and believes upon a large and difficult supply chain. It uses
automation technique to implement supply chain activities effectively (Bosona and Gebresenbet,
2011). Improving and enhancing the supply chain needs, wants, expectations automation and
investment in supply chain resources and technology. Huge investment is done by McDonalds to
implement logistics and supply chain activities within the organization. This entails utilizing
computerized system for asset management, utilization of barcode labeling and the utilize of
difficult databases such as enterprise resource planning system, warehouse automation, inventory
planning, and data gathering to supervise and analyze the overall performance and productivity.
It is stated that the company has introduced new and innovative ways of functioning and
automation that has led to maximized performance, yield and a considerable and unique rise in
profitability. Automation is vital technique that used by McDonalds in order to stand out against
the rivalries in the international market.
Distribution and communication approach: One of the significant approaches that being
initiated by the company is distribution and communication approach that help to uplift its
outcomes and improves its performance globally. It is stated that McDonalds uses innovative and
unique distribution and communication approach to maintain good and strong relationship with
suppliers and customers to a large extent. The most well-known and unique place McDonald’s
fast food products could be fount are at its cafe. Other location where the firm utilizes to sell its
products are McDonald’s mobile app, Kiosks and postmates websites and app. It is seen that the
company uses selective distribution channels and sources to maintain pull and push marketing
communication (Christopher, 2016). The firm is undertaking this approach to maintain strong
relationship with dealers, suppliers, customers and other outsiders in the global market. This
approach is further needed to improve and enhance the overall company’s supply chain. This
procedure also looks to engage and involve all the workers; the firm is distributing the roles and
responsibilities of success and progress around operators, suppliers, employees and strategic
resourcer (Fernie and Sparks, 2014). The supply chain of McDonald’s is becoming more unique
and transparent with the help of distribution and communication approach. It is further elucidated
that McDonald’s launched a effective campaign and programs to showcase consumer where its
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Logistics and supply chain management
fast food products come from and how they are made and change people’s expectations and
awareness of the farming industry. Along with this, the firm has announced its plan to minimize
and eliminate the regular use of antibiotics in its supply chain. This entails the implementation of
new strategies, approaches and timelines for minimizing the routine utilization of antibiotics in
all food animals (Sandle, 2018). Distribution channels help the firm to reach its current and
potential customers in the global market.
McDonald’s uses effective and unique integrated marketing communication to supply its
products to the customers across the globe. The customers of the firm are the adults, teens who
need meal quickly and family with young children (Lindalidan, 2016).
(Source: Lindalidan, 2016)
After the various studies it has been reported that the company has invested huge amount on the
distribution and communication approach to implement supply chain activities and logistics (Cao
and Zhang, 2011).
Issue impacting the decision, rationale for implementation and strategies
While implementing the logistics and supply chain activities, ample of issues affect the business
activities. Various reputational challenges include bad environmental practice, long time space
and bad health issues could impact the business operations adversely (Oke and Gopalakrishnan,
2009). Improper and poor communication is another big issue that put direct impact on the
decision regarding the implementation of supply chain and logistics activities (New, 2015).
Along with this, the distribution channels, and practices which used by the company are not
uniform and effective. Thus, it can affect the financial position and brand image of the firm
adversely. Global operations and supply chain activities need global principles and standards.
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Logistics and supply chain management
Despite the excellent the great strides that the company’s has made in various markets, strategies,
policies and practices have not been unique and effective (Businessmirror, 2015). Globalization
is another major issue that may affect the fast food products and services in the competitive
market. Apart from this, consumer behavior is influenced by social, cultural, personal, and
psychological elements that are quickly changed by globalization and technology. It may affect
the supply chain of McDonald’s as it also affects the needs, expectations and demands of the
customers internationally (Rushton, Croucher and Baker, 2014). Natural disasters, rising food
prices, cyber security, contract violations and adverse weather are the top and unique supply
chain risks and issues plaguing the food industry today. Product quality and compliance issues
further are being faced by the McDonalds while implementing the supply chain and logistics
activities internationally (Rothaermel, 2015). The firm needs to focus on these issues and
challenges to make unique decisions in regards to implementation of logistics and supply chain
activities (Boumans, 2017). Lack of supplier visibility is other major issue in McDonald’s supply
chain and logistics management that could influence the outcomes and returns of the firm
adversely.
Logisticsbureau (2016) investigated that supply chain is the significant factor that helps in
satisfying the needs and requirements of the customers globally. Investing and analyzing the
costs of serving consumers is one manner to understand and analyze the manner supply chain
costs influence the business progress and achievement. The company implements supply chain
activities to fulfill long term demands and tastes of the customers globally. It is stated that
logistics and supply chain activities are crucial and significant components for McDonald’s to
attain competitive edge (David, 2011).
It is noted that the company can uses ample of strategies to overcome the supply chain and
logistics issues at the workplace. Some of the issues that faced by McDonald’s have been
detailed below.
Supplier relationship management strategy: The significance of supplier relationship is
flourishing and growing day by day. Thus, it is significant to create, follow and understand
mutually agreed upon rules and standards. This will allow McDonald’s to better understand and
evaluate opportunities for enhancement and improvement (Parmigiani, Klassen and Russo,
2011).
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Logistics and supply chain management
Talent management strategy: It is vital strategy that can be used by the company to overcome
the various issues and challenges while functioning and working. In today’s globalization world,
it is quite complex to find interested, talented and qualified employee for handling the supply
chain activities at the workplace. Supply chain leaders or managers need an extensive and unique
understanding of the key capabilities, duties and roles needed for supply chain management
roles.
Risk management and planning: In order to stay as efficient and effective as possible,
redesigns and periodic assessments are required. Creating and implementing a risk management
plan is needed to overcome various supply chain and logistics issues in the international market
Parmigiani, Klassen and Russo, 2011).
Benefits and limitations
It has been analyzed that supply chain and logistics activities provide ample of benefit to
McDonald’s by boosting and enhancing their outputs and revenue (Schlosser, 2012). The
following are the benefits of strong and effective supply chain and logistics activities:
Higher efficiency rate: Effective and unique supply chain helps in maximizing the efficiency
rate of the workers. The strong supply chain further would able to adjust more effectively and
efficiently to the variable economies, shorter product life cycle and emergency markets (AIMS,
2018).
Decrease cost effects: It improves inventory system of McDonald’s by reducing the costs and
further adjusts the storage space for finished products which prevents bad quality resources.
Along with this, it improves and enhances McDonald’s relationship with vendors and
distributors.
Increases output: The strong and unique supply chain further helps in improving and enhancing
communication and collaboration in McDonald’s Corporation. This adds up to the collaboration
and coordination with transport and shipping corporations, suppliers and vendors.
Enhanced supply chain network: The effective and efficient supply chain and logistics
activities further are needed to maintain and enhance strong supply chain network in the
competitive market (AIMS, 2018).
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Logistics and supply chain management
The paper is emphasized and concentrated on the supply chain and logistics activities of
McDonalds Corporation that essential to focus on the performance and effectiveness of the firm.
But at the same time, it is further stated that McDonald’s faces ample of issues and challenges
while implementing the supply chain and logistics activities. Therefore, it can be said that
McDonald’s could also need to concentrate and focus on the inventory and transportation issues
to attain high level of satisfaction of the customers globally. It could help the organization to
make a unique image and reputation among the customers (Schlosser, 2012).
Future trends and direction
Some of the future trends and direction in areas of supply chain activities are discussed below.
Firstly, the logistics and supply chain activities are needed to be a player in the fast food industry
globally. Proper and effective analysis of supply chain data can efficiently and significantly
improve and enhance business decision making and forecasting. It can also optimize the use of
various resources included in transport, storage and inventory management. Thus, the firm needs
to focus on the strong and effective supply chain activities and operations to develop a brand
reputation globally (Min and Kim, 2012).
To address customer demands and needs in an effective manner, McDonald’s must segment
them into groups. These groups must be based on what triggers, and consumer purchasing
behavior as opposed to a wider generalization (Spina et al, 2013). In this way, McDonalds can
take ample of benefits or advantages in the near future. The logistics and supply chain activities
are vital and essential for McDonald’s in terms of supply of transport, raw material, effective
manufacturing process and storage of the finished products and services (AACB, 2018).
On the other hand, new direction on supply chain and logistics activities could be brought about
by the expansion and growth of technology and economy. A difficult example is the information
technology that leads to the research on commerce, internet, e-business and related distribution
channel choice. In today’s era, the general usage of RFID, cloud method and big data could be
significant study for the future (Vanany, Zailani and Pujawan, 2009).
The logistics and supply chain activities would continue to be a big and serious issue. With the
steady rise in universal population, resource crisis, economies scale, ecological damage,
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changing needs and requirements of the customers, and other concerns have shown global
challenge. Logistics and supply chain issues are significant and unique research direction. In the
future, wide range of this topic would not only be just reverse and remanufacturing logistics and
closed loop supply chain (Ganesan et al, 2009).
Conclusion
It is concluded from the above mentioned analysis that McDonald’s is one of the growing and
leading fast food brand in the global market which is delivering fast food products and services
to the customers around the world. The analysis shows that how the company implement
effective logistics and supply chain activities in the organization. Supply chain management is
crucial part of each and every organization. McDonald’s initiates innovative supply chain
activities to cope up with rivalries and to determine adequate supply of food in the international
market. Ample of challenges and issues are being entertained by the firm while taking decision
of implementing the supply chain activities. Supply chain management also is needed to uplift
revenue and returns of the firm as well as its productivity in the international market.
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Appendices
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18