Strategic Sourcing Analysis: McDonald's Global Supply Chain

This report delves into the strategic sourcing practices of McDonald's, a globally recognized fast-food chain. It begins with an overview of McDonald's, detailing its history and global presence. The core of the report examines the role of strategic sourcing in the organization, emphasizing its imp...Read More

Strategic Sourcing

STRATEGIC SOURCING 1
Introduction
Strategic Sourcing is said to be an institutional approach that helps in continuously enhancing
and re-evaluating the company’s activities of purchasing. In the production environment,
strategic sourcing is mostly considered as one of the most important components of supply
chain management. (Presley, Meade, & Sarkis, 2016). Strategic sourcing is different from
the conventional purchasing since it provides priority to the entire product life cycle, and not
just to the initial purchase price.
The intent of this report is to discuss the role played by strategic sourcing in one of the most
recognized fast food chains i.e. McDonald's. As it is known that McDonald's operates its
business at a global level, so the emphasis of the report is being shifted to its activities and
operations involved in the global supply chain management. Furthermore, to conclude the
report, the contribution of the strategic sourcing in the success of McDonald’s has been
discussed.
Overview of the organization
McDonald's is one of the familiar names of the fast-food chain since it operates its business at
a global level. The fast-food chain was introduced in the year 1940 in America. Maurice
McDonald and Richard McDonald founded McDonald’s as the hamburger stand, in San
Bernardino, California, United States., but it later converted into a franchise. Today,
McDonald’s is considered as the largest restaurant chain in the world by serving around 69
million consumers every day in around 100 nations with 37,855 outlets as of 2018. The
restaurant chain is best known in the market for its cheeseburgers, French fries, and
hamburgers. In addition to this, they also feature breakfast items, milkshakes, desserts,
chicken products, and wraps. Furthermore, due to negative marketing of the chain related to

STRATEGIC SOURCING 2
the quality of the product, the chain has added smoothies, fruit, fish, and salads in its menu as
the healthy options. The McDonald’s Corporation majorly earns its revenue from royalties,
fees by franchisees, rent and sales from the restaurants. Company is also one of the largest
employers in the world by employing around 1.7 million employees (McDonald, 2018).
Role of Strategic Sourcing
Strategic sourcing allows businesses to take advantage of a whole host of benefits and it is
presently becoming the most favoured model among different businesses that are looking to
concentrate on their aptitudes as well as decreasing risk, enhancing the food quality, timely
delivery of the services, reducing cost, establish better relationship with the suppliers and
enhance the effectiveness and efficiency of the services and goods provided by the company.
McDonald's is presently emphasizing towards strategic sourcing in order to get rid of the
negative reviews and marketing of the brand in the market related to the poor quality of its
food products. Strategic sourcing has played an important role in the company as it is
comprised of detailed auditing of the supply chain procedure of the company and identifying
the loopholes in the system. Through this sourcing, the company has successfully identified
those suppliers that deliver unhealthy as well as poor quality food products to the business
and then ending the relationship with these types of suppliers. The strategic sourcing has been
incorporated into the system to encourage suppliers to provide high-quality products. This is
slowly supporting company in enhancing its image among customers by letting suppliers
understand the laws against the poor quality products. In addition to this, the model of
strategic sourcing helps in maintaining a strong relationship with the supplier (Basu, 2018).
In the year 2014, the sustainability framework was adopted by McDonald's to set the
standards and objectives of some products that are packaging, beef, fish, coffee and palm oil.
For setting the standards and guiding principles the company comes under contact with the

STRATEGIC SOURCING 3
non-governmental organizations, industrial groups, and different high-quality food suppliers.
The company is also emphasizing and encouraging suppliers to focus on sustainable beef
farming in order to have sustainable sourcing of beef.
Strategies and Techniques for sourcing
The strategies adopted by McDonald's for sourcing is to build a stronger bond with the
suppliers of different products and different raw material. Besides this, the company also
focuses on maintaining a good relationship with the farmers such that they can focus on
producing healthy and hygienic products and supply high-quality material that can support
company in attaining competitive advantage in relation to other competitors. The E-
Procurement system and social media strategies of the company support its expanding
operations at a global level. These strategies lead to reducing the cost of labor of the company
to around 85% (Vitasek, 2014). The eMac Digital also contributes to the effective operation
of the supply chain because the e-procurement platform is profitable for McDonald's as well
as for its suppliers.
Global supply chain management of McDonald
As discussed above, McDonald's operates its business at the global level through its 37,855
outlets, so it becomes very important for the business to analyze the organizational structure
in terms of how the company manages and work at all the stages of the global supply chain.
There are three stages that define the global sourcing activities of McDonald's:
Stage 1- International purchasing, Firms focused on leverage volume
While operating business at the international level, the company has collaborated with
different local suppliers of different countries to successfully operate the business.
McDonald's has spent years to set this unique cold chain in order to maintain the quality of

STRATEGIC SOURCING 4
the food products and maintain the nutritional value and freshness in the products. The
company set the cold chain management system to provide a high quality of services with
drip-integration technology. It has been evaluated the best strategy of McDonald is that it
registered under the e-procurement platform. E-procurement is the website that allows
qualified and registered users to look for the buyers or sellers of goods and services. The
management of the company set its prices to purchase the material at the online platform. It
has been seen that suppliers and buyers may specify a cost or invite the bid online (Waterloo,
2016). McDonald's develop a strong relationship with the suppliers as they provide a discount
or special offers in order to buy the product.
E-procurement way to purchase the raw material is the main method which is followed by the
company as it helps to get the quantity with the low prices. It is beneficial for the
organization to gain the advantage as the suppliers provide the discount and special offers. It
has been observed that the company also tie up with the various companies to provide extra
services such as soft drinks and the other food. The company ties up with those companies
whose have a strong brand image such as Coca-Cola, Barbie, Cadbury, and Hot Wheels.
Stage 2 – Global sourcing. Firms focused on global opportunities
McDonald is the world largest fast food company in the fast food industry which does it
sourcing at the global level. Global sourcing is proving a strategic weapon of the organization
arsenal due to increasing the focus of the company on its core competence and the
competitive advantage by offering innovative services to consumers. The company having
several benefits with the sourcing but still, it has arisen many risk and constraints. The
emphasis on identifying the opportunities to improve quality, lower prices to earn the profit.

STRATEGIC SOURCING 5
(Source: Strategic sourceror, 2015).
The company implements the corporate culture to understand the suppliers blatantly
disregard regulation for laws. As the organization operates in different countries due to which
it has to spread its network at the wide areas to ensure the quality and prices. There are many
vendors are working with the organization due to which the organization has close eyes on its
operation. The company is shifting into the third party in order to handle the suppliers to
closely assess risk, compliances and relationship management. The global sourcing of the
organization helps to gain a competitive advantage (Strategic sourceror, 2015).
Stage 3 – Global supply management. Organizations optimize supply networks
McDonald has excellent supply chain management as its entire process of logistics and brand
management, maintaining control of every aspect, and delivering a great product on time. The
company is considered as the largest supply chain of hamburgers of fast food restaurants that
serves the 68 million customers on a daily basis across the world by establishing the various
outlets (Supplychain247, 2016). The company operates on the basis of three things such as
franchises, suppliers and employees of the organization. The deep-seated culture of the

STRATEGIC SOURCING 6
organization helps to build a strong relationship with the suppliers due to which they provide
the services. The company maintains its activities in different areas in an effective manner
such as storage, distribution, menu, beef, environmental considerations, and suppliers.
Contribution of strategic sourcing in the organization
There are many benefits gain by McDonald by implementing the strategic sourcing. As it
helps to maintain the cost management, supply stability, risk management, consideration
(Scout, 2018). The McDonald also uses this source to maintain a reputation in the market.
The quality of services provided by the company is effective and it is the first preference of
the consumers in the fast food industry. It also enhances the capability of the company to beat
the competitors in terms of quality and management.
Conclusion
From the limelight discussion, it is concluded that McDonald has a strong understanding of
strategic sourcing. As per the analysis, it has been observed that the strategic sourcing helps
to gain a competitive advantage in the market. The supply chain management of the
organization is highly effective as it helps to purchase the product at the competitive prices
with high quality.

STRATEGIC SOURCING 7
References
Basu, C. (2018). Importance of Strategic Sourcing Skills. Retrieved from:
https://smallbusiness.chron.com/importance-strategic-sourcing-skills-38123.html
McDonald. (2018). About Our Food. Retrieved from:
https://www.mcdonalds.com/us/en-us/about-our-food.html
Presley, A., Meade, L., & Sarkis, J. (2016). A strategic sourcing evaluation methodology for
reshoring decisions. In Supply Chain Forum: An International Journal (Vol. 17, No. 3,
pp. 156-169). Taylor & Francis.
Scout. (2018). Key Benefits of Strategic Sourcing. Retrieved from:
https://www.scoutrfp.com/2017/07/key-benefits-strategic-sourcing/
Strategic sourceror. (2015). McDonald's: The Path to Strategic (and Safe) Sourcing.
Retrieved from: https://www.strategicsourceror.com/2015/03/mcdonalds-path-to-
strategically-and.html
Supplychain247. (2016). McDonald’s “Secret Sauce” for Supply Chain Success. Retrieved
from:
https://www.supplychain247.com/article/mcdonalds_secret_sauce_for_supply_chain_s
uccess
Vitasek, K. (2014). Trust and Collaboration: McDonald’s Supply Chain Strategy. Retrieved
from: https://www.gscouncil.org/trust-and-collaboration-mcdonalds-supply-chain-
strategy/

STRATEGIC SOURCING 8
Waterloo. (2016). Mc Donald’s Supply Chain and E-Procurement Management. Retrieved
from: http://smbp.uwaterloo.ca/2015/10/mc-donalds-supply-chain-and-e-procurement-
management/