Operations at McDonald’s: Analysis and Recommendations

This report analyzes the operations at McDonald’s and provides recommendations for improving its operations during internationalization. It focuses on key processes such as product manufacturing and customer order servicing, and identifies challenges and solutions. The report also discusses the 4V’s of McDonald’s and its performance objectives.

McDonald’s

Executive Summary
This report is intended in analysing the operations at McDonald’s and providing
recommendations for improving its operations during internalization process. McDonald’s as
part of its growth strategy has internalized its key operations to more than 100 countries
across the world. Analysing the key processes such as product manufacturing and customer
order servicing has identified several issues faced by this organization. Some of the issues
identified are related to changing the menu to meet needs of local customers, inventory
management decisions to offer product customization, employee training to provide
innovative customer service and selecting reliable suppliers and third party delivery
organizations as part of its supply chain network. To deal with these challenges and improve
its productivity level, McDonald’s is recommended to implement standard sequencing rules,
supplier selection questionnaire and predictive analytics for inventory management practices
during internationalization of its operations.

Table of Contents
McDonald’s 1
Executive Summary 2
Introduction 4
Operational Activities at McDonald’s 4
Figure 1: Transformation model at McDonald’s 5
4V’s of McDonald’s 8
Performance Objectives of McDonald’s 10
Supply Chain Network 13
Feasible recommendations for McDonald’s 15
Conclusion 16
References 16

Introduction
McDonald’s started as small restaurant in the year 1954 has currently become one of the
leading fast food restaurant brands in the world. At present, McDonald’s consists of nearly
36000 restaurants across 100 countries in the world (McDonald’s, 2019a). In spite of being a
large organization, the business model of McDonald’s involves in offering franchisees for
entrepreneurs showing high commitment towards the organization values. This fast food
restaurant provides number of fast food items and innovative services like quick-serving,
home delivery, take away and mobile app delivery services. McDonald’s serve millions of
customers who are interested in having fast food with high quality and innovative service
options (McDonald’s, 2019b). McDonald’s tend to serve its customers through its several
restaurant outlets located across the world, its e commerce website, mobile app and UberEats
(Ashe, 2018). As part of its growth strategy, McDonald’s has expanded into various countries
in the world like US, UK, Malaysia, India, Hong Kong, China, Serbia and so on. As part of
this expansion, McDonald’s has taken various operational decisions related to product
variety, quality, suppliers, capacity and so on (McDonald’s, 2019c).
In this report McDonald’s company is considered and its operation activities are analysed in
international context. In spite of McDonald’s being a multinational organization it has made
several operational decisions during its process of internationalization. All these operational
activities and operational choices are analysed by applying theoretical frameworks of OM
such as four V model, transformation model, supply chain network and the performance
objectives. In order to overcome the identified critical issues, this report provides
operationally feasible solutions for McDonald’s.
Operational Activities at McDonald’s
McDonald’s being a fast food restaurant , the key operation involves in transforming the
inputs provided In the form of raw materials to outputs like the fast food items , drinks that
are served by McDonald’s. Figure 1 shows the transformation model of McDonald’s.

Figure 1: Transformation model at McDonald’s
The transformation process of McDonald’s involves in the manufacturing process to prepare
the fast food items and then serve it to the customers. In this transformation process, input
resources are provided which are raw materials, skilled work force, manufacturing facilities
and the information. The raw materials such as fruits, vegetable, meat, bread and sauces are
the transformed resources as they are converted to the fast food items while staff, information
and facilities manufacturing machines and cutlery are the transforming resources. The outputs
include preparing the fast food items, serving to the customers and completing the bill
payment. This transformation model of McDonald’s is adopted across all its stores both
locally and globally in order to manufacture the required products and services according to
the customer needs.
However, internationalization has made McDonald’s to change the inputs and transformation
process because of the need of manufacturing different products by sourcing from, local
suppliers to meet the needs of local people. Despite adopting the same transformation model,
McDonald’s is facing the challenge in implementing ‘think globally and act locally’ aspect.
For instance McDonald’s menu in UK consists more of non-vegetarian products like chicken,
meat and fish (McDonald’s, 2019d). Some of the key operational processes that are
implemented at McDonald’s in the process of transforming inputs to outputs are food
preparation and customer servicing. Figure 2 and Figure3 specifies the different activities
that are implemented at McDonald’s as part of these two processes.

Figure 2: Food preparation process at McDonald’s
Figure 3: Customer servicing process at McDonald’s
Internalisation of McDonald’s operations to other countries like India, China certainly
requires the need of changing some activities such as the raw materials, food items prepared
and the different ways of delivering it to the customers. For instance, McDonald’s in UK
make its food items delivered to customers through UberEats and Drive thru options
(Pemberton, 2018). However, in India McDonald’s is facing the challenge of selecting the
reliable delivery provider among various options available such as UberEats, Zomato,
Swiggy and so on (Smarther, 2018). Considering the volume and variety of these operational
processes at McDonald’s, the food preparation is ‘batch process’ and customer servicing is
‘service shops’ as given in Figure 4. As McDonald’s in implementing this batch process
across all its international operations, it is important to have proper planning across the food
preparation activities especially for some of the activities that are implemented in common.

Figure 4: Manufacturing process characteristics at McDonald’s
Figure 5 specifies that customer servicing process is ‘service shop’ process, which helps the
company to offer highly flexibility in serving the customers. This depends on McDonald’s
choosing the reliable delivering parties like UberEats and skilled workforce in order to serve
the customers in highly effective and innovative manner. When McDonald’s has planned to
internationalise its operations to other countries like India and China, the company faced
challenges in recruiting the appropriate workforce and train them, who can help in serving the
customers in innovative manner.
Figure 5: Customer serving process characteristics at McDonald’s

4V’s of McDonald’s
In order to have deeper analysis of operation management at McDonald’s during
internationalization, 4V model specified in Slack et al (2010) is utilized. 4V model specifies
four dimensions of process output such as Volume (V), Variety (V), Variation (V) and the
visibility.
Volume: Volume refers to number of customers that are being served by McDonald’s
Company (Slack et al, 2010). In other words it specifies the volume of product that must be
produced to satisfy the demand. During internationalization of McDonald’s operation,
identifying the demand in the new market and deciding on the volume of products that must
be manufactured is certainly a challenging issue. More over this identification of the volume
required in the new markets is important as it ensures repeatability of tasks that must be
performed, systematization of certain activities involving standard procedures.
For instance, when McDonald’s has entered into Indian market, initially this company has
faced a great challenge in identifying the volume of products that must be manufactured to
meet the demand in this new market. Only after proper estimation of demand McDonald’s
was able to systematize some operational activities and use specialized manufacturing
equipment like grills and stove to meet the needs of the local people in India (Trefis Team,
2017). On the other hand McDonald’s also faces difference in its product demand across
various countries and is required to manage the inflexible demand by making appropriate
decisions for capacity and inventory management so as to minimize the unit costs.
Variety: This dimension specifies the range of products that are manufactured by an
organization (Slack et al, 2010). McDonald’s is known for offering a huge variety of products
in its menu that include fast food items, kids menu, coffee, ice creams, drinks and so on. Due
to the involvement of producing huge variety of products, McDonald’s certainly require
employing highly skilled people. During the process of internationalizing McDonald’s'
operations to other countries, one of the great challenges faced by this company is related to
the change of its menu. Even though McDonald’s is known for implementing the aspect of
‘think globally and act locally’, it is facing a number of challenges associated with it.
For example McDonald’s offer beef products in western countries like UK and USA but has
completely removed those products in India because of the cultural values in that country
(Indian Express, 2016). Moreover, McDonald’s has introduced more number of vegetarian

products in its menu when it entered India and added only non-vegetarian items as part of its
operations in European countries like France. With respect to the variety dimension,
McDonald’s not only faced challenges related to identification of products that must be
manufactured in the new market but also in recruiting the skilled work force for producing
these varieties of products. When the type of products to be produced has changed at
McDonald’s located in different countries, matching supply and demand has also been
another challenging issue faced by this company. The company had to look for new and
reliable suppliers in the new market for producing the food items according to the needs of
local people.
Variation: The variation dimension specifies the extent at which demand is changed over a
period of time (Slack et al, 2010). The variation in demand for McDonald’s is relatively less
during a day in case of the countries where it has been already established. However, this
company faces variation in the demand over a year because of the company manufacturing
variety of products such as hot food, cold drinks, hot chocolates, ice creams based on the
seasons.
During the process of internationalizing its operations to new markets like European
countries, McDonald’s has faced the challenge in deciding the productive capacity of the new
store to meet the customer demand. Even though the company is known as a leading fast food
restaurant, tracking of previous sales data can help business organizations identify trends in
the demand. When McDonald’s enter new markets, identification of these previous trends is
difficult which made the company deals with challenges associated with capacity planning
and there by inventory management.
Visibility: This dimension specifies the extent at which company operations are visible to the
end users (Slack et al, 2010). For this fast food restaurant McDonald’s, most of its product
manufacturing activities is made visible to the end users. Despite the concept of maintaining
transparency in its manufacturing activities has not only acted as great advantage but also
acted as a great challenge for this company especially during internationalization (Kane,
2015).
In spite of its manufacturing activities visible to the customers, McDonald’s ensured in
adopting high quality standards during the product manufacturing. However, the quality
controls and food quality regulations differ from one country to the other country which made
McDonald’s face the challenge of matching its manufacturing activities to the local quality

standards. Changing the manufacturing activities according to the local quality standards
existing in different countries is certainly difficult for McDonald’s there by showing the need
of identifying the most effective and suitable approach for quality management.
Performance Objectives of McDonald’s
Performance objectives indicate the different tools utilized to evaluate and judge
performance of the operations carried out by an organization in daily basis (Barnes, 2018).
According to Slack et al (2010), there exist 5 performance objectives namely quality, speed,
cost, dependability and flexibility. These five performance objectives are applied to evaluate
the operational performance of McDonald’s during the process of internationalisation of its
operations.
Quality
Quality refers to the way in which an organization is able to serve the customers based on
their expectations. In other words, Slack et al (2010) indicates quality as process of doing
things right. For McDonald’s both in local and global markets, customers expect the
following.
1. A friendly and neat environment to consume food
2. Good quality, tasty and huge variety of products
3. Friendly and supportive staff serving customers
Performance
McDonald’s is known for meeting its customer expectations by introducing new items based
on customer requirements and expanding its store to serve the customer needs. The high user
rating for McDonald’s in UK shows the high customer satisfaction because of good quality
maintained by this company. Innovative customer service in serving the customer orders very
quickly and offering the products according to the needs of local people has helped
McDonald’s to achieve this high customer satisfaction (Cantor, 2016). However, during
internationalization of its operations to other countries, meeting customer expectations both
in terms of introducing new products and recruiting people to offer quick servicing has
become great challenge for this company.

Speed
This refers to time elapsed between order placed y customers and staff serving the order
(Slack et al, 2010). McDonald’s customers expect the following with respect to speed,
1. To be served in less than 3 minutes
2. Quick availability of all items in menu
3. Quick delivery of ordered items through third party delivers like UberEats
Performance
McDonald’s has achieved the name as ‘quick-service restaurant brand’ (McDonald’s, 2019e).
This shows the ability of the company in serving the customers very quickly such as 90
seconds for a drive-thru customer and less than 33 minutes for an in-store customer.
Implementing this speed in serving customer becomes challenging for the organization in the
stores having high demand.
During the internationalization of its operations, maintaining the quick service brand of
McDonald’s has become very challenging. This is mainly because of the challenge involved
in recruiting and training people who tend to have different culture than the managers of
McDonald’s in developed organizations. Coordination of people management practices by
McDonald’s can help in making the employees at new markets aware of the importance of
ensuring providing quick service for the customers.
Flexibility
This objective specifies company’s ability in changing the operational processes for dealing
with any kind of unexpected situations (Slack et al, 2010). In terms of flexibility, the
customers at McDonald’s expect
1. Product Customization Option
2. Wide range of fast food products and the drink products for the customers
McDonald’s is known for implementing product customization option by introducing
innovative product items like customizable burgers. The concept of ‘create your taste
restaurant’ ‘create your kiosks’ implemented at McDonald’s indicate the ability of its
organization to provide opportunity to customize its products (Johnson, 2016).

During internationalization of its operation, McDonald’s has faced challenges related to
capacity planning and inventory management while implementing this customization option.
Before having any proper idea of the way in which customers wish to customize, the
company has to make decisions on the stock levels and capacity which was highly
challenging.
Dependability
This objective indicates the company ability in doing things appropriately as promised to the
customers (Slack et al, 2010). In terms of dependability McDonald’s customers expect,
1. Quality and taste off products as promised
2. Healthy value of the items as promised
3. Quick delivery of food product across all its distribution channels
Performance
In the process of improving McDonald’s performance, in terms of its dependability, the
company has faced challenges related to quality management, inventory management,
capacity planning and the process technology when entering into different country. For
instance, McDonald’s to provide its products and services as promised in Indian market has
required making appropriate decisions regarding the capacity of McDonald’s stores, volume
of products to bee manufactured and the decisions of sourcing either from local or global
suppliers (Food Service, 2017).
Cost
This objective refers to company’s ability in offering lower cost in order to be competitive
(Slack et al, 2010). The customers of McDonald’s expect the company offering reasonable
prices when compared to the competitors.
Improving cost performance of McDonald’s has become a great challenge for the
organization while internationalizing its operation. This is mainly because of the variation in
the costs of raw materials, labour cost, equipment costs and also due to the difference in the
exchange rates.
The polar diagram given in figure 6 shows the performance objectives of McDonald’s

Figure 6: Polar diagram of McDonald’s operational performance
Supply Chain Network
The supply chain diagram of McDonald’s is shown in Figure 7. This supply chain diagram
provides the various upstream and downstream activities involved in manufacturing its
products.

Figure 7: McDonald’s supply chain
As McDonald’s started to internationalize its operations, it faced challenges in its supply
chain network during selecting the reliable suppliers through multi sourcing approach,
decisions related to facilities needed for product manufacturing and requirement of the work
force to serve the customers. McDonald’s is known for using multi-sourcing approach on
local suppliers for manufacturing different products according to the taste of customers. The
global supply chain network of McDonald’s has expanded as a result of its
internationalisation. However, as McDonald’s uses multi-scouring approach (Barnes, 2018)
as part of its supply chain, it has become challenging for the company to select the reliable
and quality based supplier in order to improve its performance objectives. This supply chain
of McDonald’s reveals the adoption of combining both make and buy decisions.

Feasible recommendations for McDonald’s
The analysis of operational management at McDonald’s identified the different challenges
that are faced by this company during internationalising its operations. In order to deal with
these challenges effectively and improve its operational performance, following feasible
recommendations are provided for the company.
1. Standard Sequencing Rules
To ensure McDonald’s to maintaining its brand as quick service restaurant, it is suggested for
the organization to implement standard sequencing rules (Nielsen et al, 2018). Standard
sequencing rules like FIFO (First in First Out), maximum 90 seconds and 2 minutes to serve
customers in drive thru and in-store respectively must be set. This enables all the employees
of McDonald’s both locally and globally ensure in meeting the customer expectations related
to quick service by following these standard sequencing rules.
2. Suppliers Selection questionnaire (SSQ)
Considering the challenge faced by McDonald’s in selecting reliable supplier in the new
markets and there by affecting its quality performance objective, this recommendation is
made. Implementation of SSQ tool (Lee et al, 2015) must be made as compulsory to all the
stores of McDonald’s across the world. When this tool is designed with a list of questions that
verifies reliability, quality and cost effectiveness of each supplier, it helps in selecting the
most suitable supplier under the multi-sourcing option that is currently adopting by
McDonald’s. In this way the cost performance objective of McDonald’s Company can also be
improved.
3. Internal Knowledge Transfer
Considering the challenges faced by McDonald’s during people management and the need of
coordinating the people management practices, this company is recommended to adopt an
internal portal for all the employees existing in different countries of the world. Allowing all
these employees to access the portal for sharing knowledge on customer servicing can help
them to be motivated towards serving the customers in an innovative manner. This way of
getting knowledge from peers rather than expatriate managers, help McDonald’s to minimize
the impact of nature culture differences on work force recruitment and training.

4. Inventory Management
One of the feasible recommendations that are made for McDonald’s is to use predictive
analytics as part of its inventory management and capacity planning activities. As
McDonald’s is known for adopting big data analytics, implementation of predictive analytics
is certainly a feasible recommendation for this organization. As McDonald’s will not have
any information about product demand in the new markets, usage of predictive analytics can
help the company to make proper prediction about the demand. Based on this, predictive
inventory management technique like predictive analytics as indicated in Matthews (2018) is
recommended to be used by this company.
Conclusion
The analysis of operational management at McDonald’s has identified that food
manufacturing and customer order serving as the two key processing existing in this
organization. Analysing operation management activities from customer and operation
perspective has identified McDonald’s facing several challenges during internalization of its
operations. Some of these issues are related to people management, inventory management,
supply chain network, product innovation, capacity planning and the inventory management.
To address these issues effectively and improve its operations, McDonald’s is recommended
to adopt standardized scheduling rules, predictive analytics for inventory management and
standard tool for selecting suppliers.
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