Supply Chain Management for Wesfarmers and McDonalds

This report analyzes the supply chain practices of two chosen organizations i.e. Wesfarmers and McDonalds. The report includes the summary of first assessment like description of organizations and comparison of their supply chain. Second assignment is focused on analyzing the supply chain models and processes of both organizations. There are some recommendations are given for both companies which can enhance their supply chain practices.

Running Head: SUPPLY CHAIN MANAGEMENT 1
Supply Chain Management

SUPPLY CHAIN MANAGEMENT 2
Executive Summary
In effective management of operations, it is very important for the companies to manage its
supply chain and product flow. This is the reason that companies need to look at how individual
processes are adding substantial value to their products and services. Under supply chain
processes, process flow can be defined as management of different areas such as information,
cash and products. The below report purposes to analyze the supply chain practices of two
chosen organizations i.e. Wesfarmers and McDonalds. The organizations were selected in the
first assessment. This report includes the summary of first assessment like description of
organizations and comparison of their supply chain. Second assignment is focused on analyzing
the supply chain models and processes of both organizations. There are some recommendations
are given for both companies which can enhance their supply chain practices.

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Table of Contents
Introduction.................................................................................................................................................4
Description of McDonalds...........................................................................................................................4
Description of Wesfarmers..........................................................................................................................4
Comparison of McDonalds and Wesfarmers Supply Chains........................................................................5
Literature Review........................................................................................................................................5
Analysis of McDonalds.................................................................................................................................6
Customer order cycle..............................................................................................................................6
Replenishment cycle................................................................................................................................7
Procurement Cycle..................................................................................................................................7
Recommendations and Conclusions........................................................................................................7
Analysis of Wesfarmers...............................................................................................................................8
Recommendations and Conclusions........................................................................................................9
References.................................................................................................................................................10

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Introduction
Supply chain management is the wide range of processes which are required to plan, control and
perform the flow of products from purchasing the raw materials and manufacturing through
distribution to end consumer in the cost effective manner possible (Fredendall and Hill, 2016).
The objective of below report is to conduct supply chain analysis and operations process of two
different organizations. For this report, two organizations are chosen i.e. McDonalds and
Wesfarmers. Among two, one of the companies is based in Australia. First part of this report
includes the summary of assessment 1 that describes business model, current supply chain,
suppliers and types of customers of each company. Furthermore, this report includes the existing
supply chain analysis of both of the chosen organizations. At the end, conclusion and
recommendations are given on supply chain systems of both companies. These recommendations
will help the organizations to improve their supply chain processes.
Description of McDonalds
McDonalds is an America based fast food organization that was established in the year 1940 as a
restaurant that is run by Maurice and Richard McDonald in California, United States. From the
previous assessment, it can be stated that McDonalds is operating its business by using
franchising business model. It is running its restaurants through franchising and it includes
conventional franchises which are under franchise agreements. The organization has
differentiated its customers by using demographic characteristic i.e. age. Primary customers of
this company are children, teenagers and business class people who love to eat fast food. In its
supply chain management system, the organization has different activities such as customer
order, replenishment cycle and procurement cycle. The major suppliers of McDonald are such as
Simplot, Martin Brower, OSI and McCain (Ovenden, 2018).
Description of Wesfarmers
Wesfarmers Limited is a conglomerate in Australia that is headquartered in Western Australia
with the interests in chemicals, coal mining, retail, hotels, fertilizers, safety and industrial
products (Wesfarmers, 2018). For its products, it is targeting an entire family as it offers a broad
variety of products. Under its supply chain management system, the company uses the Supplier

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Ethical Data Exchange to improve the efficiency of suppliers and monitor the ethical compliance
(Chkanikova and Mont, 2015). It is using continuous replenishment model whereby stock is
continuously replenished by working with its suppliers.
Comparison of McDonalds and Wesfarmers Supply Chains
From the analysis in previous assessment, it can be stated that both Wesfarmers and McDonalds
has almost same supply chains in which companies replenish their goods and services by
working closely with their suppliers. The major difference between both company’s supply chain
process is that McDonalds uses an additional strategy which is categorized into three process
cycles i.e. customer order cycle, replenishment cycle and procurement cycle. The major
operations of McDonalds are emphasized on offering its customers with delicious meals like
hamburger whereas operations of Wesfarmers includes like hotels, supermarkets, liquor and
convenience stores. Thus, both have managed their supply chain processes differently (Jacobs
and Chase, 2013).
The logistics objectives of McDonalds and Wesfarmers are to improve the movement of raw
materials and resources from the suppliers to their retail stores and ultimately to end consumers.
Both of the companies are practicing their supply chain processes using modern technologies and
complying with the ethical standards. Moreover, current material issues of McDonalds and
Wesfarmers consist of providing a clean and safe workplace environment, developing strong
relationships with suppliers, managing a strong corporate governance and making positive
contribution to the society (Wesfarmers, 2018). In this way, there are both differences and
similarities in the supply chain processes of McDonalds and Wesfarmers.
Literature Review
According to Stadtler (2015) Supply chain is one of the most important aspects for all the
organizations. Supply chain system may different as per the core business activities of a specific
company. Products form physical flow outside and inside of the firms. In the case of retailers, the
products can be inventoried, warehoused and shifted from one place of supply to place of
product demand (Stadtler, 2015). As a result of this, process flow management that limits
product consists of different activities such as order processing, inventory, transportation,
storage, handling of raw materials and packaging. As reviewed the literature in part A,

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Brandenburg, et al. (2014) stated that supply chain strategy of a company is created by its
framework, its internal supply chain procedures, exclusive value proposition and managerial
emphasis. The authors explained that there are various examples of supply chain models which
can be used by the organizations in real life business environment. The literature review shows
that one of the most ideal models is continuous flow model that can be used by the companies
which have higher demand for stability. It is more useful for the mature sectors which have little
changes in the demands of customers. On the basis of responsiveness, another model is agile
supply chain model that is ideal for the companies which manufacture the products as per the
unique specifications of their targeted customers (Brandenburg, et al 2014).
Analysis of McDonalds
Supply chain of McDonalds is complex network of indirect and direct suppliers. The company
manages this complex system by working with direct suppliers who share vision and values for
making the supplies sustainable. The company holds them clear standards safety, efficiency,
sustainability and quality. In its current operations, McDonalds is using continuous flow supply
chain model. The major features of continuous –flow supply chain model are demand and supply
stability with the practices scheduled in such a manner as to ensure constant flow of products and
information. This model is for mature supply chain with the demands of customers which have
fewer changes (McDonalds, 2018). Thus, the workload of production can meet the demands via
a continuous-replenishment model on the basis of “make to stock”. The supply chain activities of
McDonalds are categorized in different steps i.e. customer order cycle, replenishment cycle and
procurement cycle. The supply chain processes of McDonalds are described below:
Customer order cycle
At McDonalds, Customer order cycle is developed when the customers communicate with the
staff in restaurant and gives his order, prior to paying money for meal. After that, order taking
process has been completed and orders from counter will give back to kitchen area where the
kitchen employees will collect different materials like cheese, beef patty lettuce, buns to put
them together so that they can develop final product. In this order cycle of McDonalds’s supply
chain, demand is external (New, 2015).

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Replenishment cycle
This cycle connects the retailer and distributor and it is generally started due to needs of retailers
to replenish the shortage of goods in restaurant for the future demands. This type of cycle may be
generated at McDonalds when they are running out of stock of cheese and buns (Touboulic and
Walker, 2015). The replenishment cycle is same as customer order cycle except that retailers are
now customers.
Procurement Cycle
In the supply chain model of McDonalds, procurement links the supplier and distributor, for
distributor requires receiving supplies from suppliers to distribute the products to many
restaurant outlets in United States. Generally, the order scale increases whereas order frequency
declines in supply chain when moving from the consumer. This cycle can be exemplified the
example, of how an individual just orders meal daily form retailer. Retailer orders lots of lettuce
weekly for its burgers (Gattorna, 2015). Distributors receive larger orders from over one retailer
monthly and suppliers receive larger scale of order to serve the needs of distributor every 3
months.
Recommendations and Conclusions
The above paragraph shows that McDonalds is managing its supply chain processes by using
continuous–flow supply chain model. It makes its processes and order delivery system smoother.
It is hereby recommended that management team of McDonalds should emphasize on supply
chain collaboration. As the demands of customers is hardly stable, so there is requirement for the
businesses to estimate the expected demands to hold sufficient supplies to fulfill future needs.
The company should use effective supply chain strategies so that it can know about the periods
in which it will require more stocks. Moreover, it should adopt technical forecast system that will
assist the organization in preventing the fluctuations in sales lead time. By understanding about
how to prepare for spike in the demands, McDonalds can save the time and reduce the funds
spent on avoidable losses. These modes will help the company to make improvements in its
supply chain management system.
Thus, it can be concluded that McDonalds is using effective techniques and processes for
implementing its supply chain processes. Current health of company’s supply chain is good
which can help it to attain its overall objectives. All the practices of company match with the

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chosen model i.e. continuous –flow supply chain model. By analyzing the needs and demands of
customers in any specific season, the company is able to manage the demand and supply of its
products. In today’s mature and competitive market, it is very important for McDonalds to stay
highly responsive to the orders of its customers (Hugos, 2018).
Analysis of Wesfarmers
As mentioned above, Wesfarmers Limited is using effective practices for managing its supply
chain operations and processes. In Australia, the company is operating its business under
different brand names like Coles, Target and Kmart (Wesfarmers, 2018). These firms have
managed their commitment to the transparency in supply chain by publishing the details of
factories which directly manufacture their products. During last year, Wesfarmers focused on the
supply chain transparency as the key to ensuring modern oppression is not happening in its
supply chain. Wesfarmers is operating its supply chain management system and related practices
by adopting agile supply chain model that is useful for the firms which produce the products
under exclusive features for every customer on the basis of order (Devin and Richards, 2018). To
become agile, the model generates the demands for surplus production capacity and products are
prepared for smallest possible batches.
Supply chain agility is utilized to measure the supply chain’s capacity of to respond the changes
in market so that an organization can gain competitive advantage. After facing losses before
2007, Wesfarmers has emphasized by designing its supply chain to fulfill the needs of business
planning. Instead of decreasing the costs, Wesfarmers made investment is logistic chain to
enhance its profitability. Under agile supply chain, this company uses effective techniques to
become more responsive and efficient. It utilizes Supplier Ethical Data Exchange (Sedex) to
streamline the monitoring and ethical compliance and to improve efficiency to its suppliers. This
technique accelerates the assessment of risks and sharing of information across its platform for
the social audits (Göbel, et al, 2015). It assists Wesfarmers in maintaining the visibility and
produces consistency over its supply chain.
Target and Kmart of Wesfarmers have implemented an ethical sourcing program roadmap for
improve the efficiency of its supply chain operations. This identifies different strategic areas and
related risks to be practiced over the timeframe of next three years (Wesfarmers, 2018). It is

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shifting this program from compliance and audit approach to a model with more emphasis on
supplier compliance ownership, industry partnership and factory capacity building. Moreover,
the firm is using the continuous replenishment model where stock is continuously replenished by
collaborating with the suppliers. However, the use of Supplier Ethical Data Exchange matches
with company’s chosen model but other things like manufacturing as per order did not match to
its supply chain model (Rushton, Croucher and Baker, 2014).
Recommendations and Conclusions
As one of the largest groups in Australia, Wesfarmers Limited is using various impactful
techniques and processes so that it can deliver its products to final customers smoothly. Still,
there is room for improvement in the supply chain practices so that it can stay competitive in
highly competitive retail industry in Australia. The company should enhance its current logistic
process so that it can attain maximum results. Like its Kmart brand, Wesfarmers should
incorporate Dematic cross belt sorting system in other brand also to improve its supply chain
system. In order to grow in domestic market, the company has to develop strong bond and
relationships with the suppliers to attain desired outcomes.
From the above analysis, it can be concluded that Wesfarmers Limited is practicing an effective
supply chain management system that can help it to approach a larger group of customers. In
order to enhance its supply chain, the company has managed the information flow effectively.
The above report shows that company’s supply chain operations are very effective in the growth
of success of organization.

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References
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for
sustainable supply chain management: Developments and directions. European Journal of
Operational Research, 233(2), pp.299-312.
Chkanikova, O. and Mont, O., 2015. Corporate supply chain responsibility: drivers and barriers
for sustainable food retailing. Corporate Social Responsibility and Environmental
Management, 22(2), pp.65-82.
Devin, B. and Richards, C., 2018. Food waste, power, and corporate social responsibility in the
Australian food supply chain. Journal of Business Ethics, 150(1), pp.199-210.
Fredendall, L.D. and Hill, E., 2016. Basics of supply chain management. UK: CRC Press.
Gattorna, J., 2015. Dynamic supply chains: How to design, build and manage people-centric
value networks. US: FT Press.
Göbel, C., Langen, N., Blumenthal, A., Teitscheid, P. and Ritter, G., 2015. Cutting food waste
through cooperation along the food supply chain. Sustainability, 7(2), pp.1429-1445.
Hugos, M.H., 2018. Essentials of supply chain management. US: John Wiley & Sons.
Jacobs, R. and Chase, R., 2013, Operations and supply chain management, US: McGraw-Hill
Higher Education.
McDonalds, 2018, Sustainable Supply Chain, Available from
https://corporate.mcdonalds.com/mcd/sustainability-old/our_focus_areas/
sustainable_supply_chain.html [Accessed on 1 October 2018].
New, S., 2015. McDonald’s and the challenges of a modern supply chain. Harvard Business
Review.

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Ovenden, J. 2018, McDonald's’ Supply Chain Success Shows The Benefits Of Collaboration,
Available from https://channels.theinnovationenterprise.com/articles/mcdonalds-supply-chain-
success-shows-the-benefits-of-collaboration [Accessed on 1 October 2018].
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management: Understanding the supply chain. UK: Kogan Page Publishers.
Stadtler, H., 2015, Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28), Springer Berlin Heidelberg.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a
structured literature review. International Journal of Physical Distribution & Logistics
Management, 45(1/2), pp.16-42.
Wesfarmers, 2018, Increasing supply chain transparency, Available from
https://sustainability.wesfarmers.com.au/our-principles/sourcing/ethical-sourcing-and-human-
rights/increasing-supply-chain-transparency/ [Accessed on 1 October 2018].
Wesfarmers, 2018, Sourcing, Available from
http://www.wesfarmers.com.au/our-impact/sourcing/about-sourcing [Accessed on 1 October
2018].