Operation Management: Evaluating McDonald’s Food Production Process

This report provides a detailed analysis of the food production process at McDonald's, evaluating inventory and asset management, illustrating the food production workflow, and identifying workflow problems. It explores the application of lean approaches to mitigate failings and discusses the extent to which these approaches can assist the production system. The analysis incorporates Porter's Five Forces model to assess McDonald's competitive environment and concludes with recommendations for improving the food production process, highlighting the role of operation management in enhancing efficiency and customer service. This assignment is available on Desklib, where students can access a variety of study resources including past papers and solved assignments.

Running head: OPERATION MANAGEMENT
Operation Management: Food Production Process in Restaurant- McDonald’s
Name of the Student:
Name of the University:

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Table of Contents
Introduction................................................................................................................................2
1.0 Critical evaluation of inventories and assets in the production system are currently
managed.....................................................................................................................................2
2.0 Food production workflow of McDonald’s.........................................................................3
3.0 Food production workflow problems...................................................................................6
4.0 Lean approach utilized in the production system to reduce failings....................................8
5.0 Three findings discussed the extent to which the lean approach may assist the production
system.......................................................................................................................................11
6.0 Conclusion..........................................................................................................................12
7.0 Recommendations..............................................................................................................13
References................................................................................................................................14

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Introduction
For conducting this assignment work, the current food production process in a fast food
restaurant, McDonald's will be studied. In this study, the critical operations of the food
production process will be discussed by presenting logical operational flow diagram. In order
to make improvement in the business performance and increase in business efficiency,
current food production system of the restaurant will be analyzed by applying concepts of
lean approaches.
1.0 Critical evaluation of inventories and assets in the production system
are currently managed
The selected organization in this business case is McDonald's, a fast food restaurant in the
US. The organization started by two of brothers, Dick and Mac McDonald. They had started
their first restaurant in California in the year 1940 (Corporate.mcdonalds, 2016). The primary
objective of this organization is to serve food at a faster pace that will be value for money
plus proper taste and quality. For this study, the role of the operation manager is identified as
an asset in the food production system and discussed how those resources are currently
operated in business operations.
Over the last nine of financial years, revenue of McDonald's was reached its peak at 28.11
billion U.S. dollars. There is a decrease in revenue on an annual basis over the last three
years, hitting about 24.62 billion U.S. dollars in the time 2016 (Corporate.mcdonalds, 2016).
Payne-Palacio (2016) stated that the current system of McDonald's is based on maximize
efficiency to lower the customer cost, increase in the entire organization's production and
utilize economic models. McDonald's has a self-order kiosk machine such that the customer
should order the food and only have to pick it up. Therefore, the company is cutting its labour
cost and let the customers work for their orders. In this way, McDonald's raises its minimum
wage by $1 over the local mandated minimum pay for the company-owned restaurants. This
raise is not affected by franchise-owned restaurants. Raise in $1 did not bring the minimum
wage of the company to $15 per hour level. Selling in the restaurant released in the least 13
months is raised to 6% internationally in the past quarter, which makes the company as a next
ninth period of the comparable store's sales growth (Corporate.mcdonalds, 2016).

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2.0 Food production workflow of McDonald’s
The organization is shedding new lights on heavily criticized sourcing of food plus
food processing practices. In the face of growth in customer demands for transparency, the
organization provides a good burger to their customers as per their expectations. The
organization consisted of right materials and suppliers for their restaurants (Slack, Chambers
and Johnson, 2007). They have paper and boxes to enfold the burgers, cups for the soda, hot
beverages plus straws, bags to take the food items, cutlery and other items. The role of the
operation manager is to work on financial success for the outlet as well as maintain a better
reputation of the company. The operation manager ensured that they served a higher quality
of food, drinks and provided better customer services. It helps the manager to better flow of
their food business operations throughout the restaurant, unable to plan the cash flow and
control of stockby launching a mobile app (Amorim et al. 2016). McDonald’s launched a
new mobile application which attracts more customers. The customers use the application
and buy food through online mode by the use of attractive coupons. This application also
provides nutrition information which will help to make healthier purchases. Mobile ordering
is an advanced food technology application which can mark food production
developmentwell-organized. McDonald's creates a reward loop for the customers which keep
the guests to come back. It started with free food after ordering a certain amount of money. It
encourages customers to order food through a mobile application.
The current food production process of McDonald is that their food items such as
beef, chicken and meets are being imported and delivered from different food delivery
partnership to the restaurant. McDonald’s is partnering with Uber Eats where the biggest
burger chain started testing delivery to 200 locations last year. Due to this partnership,
delivery is available to 5000 out of chain 37000 locations. UberEats is said to take 30% of the
food delivery transaction such that they can plan for future growth. The company is changing
the perception of food delivery around the world (Wang et al. 2016). Through these growing
partnerships, UberEats is helping the restaurants to scale the business as well as reach new
customers. The restaurants are offering delivery; now it is accounted for 10% of the sales of
food in locations. Therefore, it is seen that the delivery check size of McDonald's is 50%
higher than in-store check size.
McDonald's store has been updated with modern interiors as well as Wi-Fi, but there
are significant changes in the table services. The customers can order at cashiers and digital
kiosks in which they can make an order. In the UK, new restaurants result in sales growth of

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8% in stores as well as 4% in a drive-thru. McDonald's changed advertisements as they are
offering combo meals to their customers. It helps to save money by buying of combo meals
and special offers that can keep the customers updated in advertisements on television and
posters on the streets (Daviset al. 2018). The company is running local TV as well as
advertising to introduce the operation management concepts.
McDonald's has promoted happy meal toys program to attract the kids and focused on
selling of Happy Meal Toys in place of food products. The company made their
advertisements towards cartoon charters utilizing short funny stories. It is about minions
those are having fun eating the Happy Meals and kids those are happy as they are getting
Mini Minions from the Happy Meal. It leads to an increase in sales revenue to 28.11 US
dollars. The company is having a playground for the children in various locations, such that
they can make a place for the children to spend time and parents can buy more as they stay
longer at the restaurant (Katoet al. 2015). McDonald's spends most of 40% of multibillion-
dollar marketing budget on the marketing related to the kids.
In most of the countries, McDonald's is operated 24 hours food service policy.
Therefore there are more attractive to the customers as they can order or buy food at any
time. McDonald's has separated its store for McCafe where coffee, as well as the bakery
section, is completely separated from the leading store. The organization did so as those
customers who are coming for gossiping and relaxing should go there and take their time as
long as they want in the McCafe. In the store, the customers can get fresh coffee, tasty frappe
and mouth-watering desserts and cool smoothies (Kibleret al. 2018).In most of the locations,
McDonald’s provides free parking lot so that the customers are not worried about parking
when they visited the store.

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Figure 1: Porter five force model
(Source: Slack, Chambers and Johnson, 2017, pp-529)
CompetitiverivalryFacestoughcompetitionasmarketofMcDonald'sissaturatedLowswitchingcostHighaggressivenessofthefirmsBargainingpowerofthebuyersLargenumberofsuppliersandserviceprovidersHigheravailabilityofthesubstitutesEaseofchangefromonerestauranttootherBargainingpowerofthesuppliersThereislargenumberofsuppliersLowforwardverticalintegrationofthesuppliersHighersupplyofthefooditemsThreatofsubstitutesHigheravailabilityofthesubstituteLowercostofswitchingHigherperformancetothecostrationofthesubstitutesThreatofnewentrantsLowercostofswitchingHighervariablecapitalcostHighecostofthedevelopmentofbrand

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Competitive rivalry: It is strong for McDonald’s as the restaurant faces competition
among their competitors such as Jonny Rockets, Wendys Chickens, Burger King and others.
Each of the players is providing the same menus to the customers. The global informal eating
out segment is comprised of around 8 million outlets as well as generated USD 1.2 trillion of
revenues while McDonald's has 0.4% outlets and 7.5% of sales. McDonald’s tried to offer
better deals to the customers and tried to make more advertisement especially in social media
sites.
Bargaining power of the buyers: It is strong as the purchasers of McDonald’s have
various alternatives in the market. They can control to another restaurant if they are not
satisfied with their products (Swinket al. 2017). The buyers can complaint the price raises by
McDonald’s and then move to their competitors.
Bargaining power of the suppliers: It is weak as the raw materials like chicken;
potatoes that the restaurant uses for their products are available through various suppliers.
The suppliers are not in a position to bargain with the company and not force them to
increase the price (Thi, Kumarand Lin 2015). In this case, McDonald's many switches to
other suppliers with low switching cost.
Threat of substitutes: It is strong as the substitutes of meals of the restaurant are
meals of other dissimilar fast food restaurants such as KFC. The bakery products are also
considered as substitutes of McDonald’s products (Davis et al. 2018). Therefore, switching to
other substitutes does not provide any switching costs.
Threat of new entrants: It is moderate as at the international level, there are many
entry barriers. In order to become successful as McDonald's, the competitor should create
many outlets in the world that needs large capital investments plus times.
3.0 Food production workflow problems
In all over the world, there is a crisis of food due to rising population and increasing
usage of technology. There is massive wastage of food which can cost a considerable amount
of price. In the current food production process of McDonald's, there is a lack of forecasting
and planning which can lead to poor customer servicing (Hitt, Xu and Carnes, 2016). Due to
the lack of forecasting, the restaurant is facing quality problems in the food production
workflow. When the qualities of food items are not meet with customer's demands, then there
is a lack of customer services (Cotrim, Leal and Filho, 2017). Quality is an issue as it is

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characteristics of food items which is being accepted by the customers. Factors which can
contribute to quality issues are inappropriate agricultural practices, reduced hygiene at phases
of the food chain and deficiency of preventive controls in the handling of food (Wood, 2018).
When proper hygiene of items is not followed, it can lead to customer service failure. The
consumption of food is too high, and the problem with consumption is doing waste as well as
overeating. If those problems are fixed, then people would start to become hungry. Therefore,
it is required to produce food, but must be a focus on improving the environment.
The current food production is lead to unplanned work which leads to delay in the
production of food and delay and quality standards issues related to food items (Ford,
Paparoidamis and Chumpitaz, 2015).In McDonald’s, food production is considered as
inventory as the organization receives huge profit and makes about $8.5 billion of the
operating income. Therefore, delay in the production process can lead to massive loss in their
total annual revenue, profitability and operational incomes. There is no such inventory
control of food production. There is no proper optimization of food safety which can increase
health-related issues (Swink et al. 2017). The food production process is not efficient, and it
increases of food wastage. In addition to the problems of overstocking, spoilage as well as
waste, food inventory is predisposed to the cross-contamination. Lack of inventory control
can lead to dangers of the foodborne pathogens when it is not handled as well as
appropriately stored.
Following diagram shows the operational flow of the critical operations of the food
production system. The production system has consisted of goods which are produced based
on the orders made by the customers. On another hand, the goods are produced at a larger
scale for stocking plus selling to the customers. There are different products which are
produced, and the quality of the food items are controlled as well (Girotto, Alibardi and
Cossu, 2015). The design of products is going to change as per size of the food product.
Therefore, the food items are formed on prearranged quality standards.

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Sales Forecast
Production Budget
Detailed production
Production Planning
Serves to customers
Finished goods
Evaluation of
system
Quality control of
food items
Production control
ManagementCustomer
Figure 2: Operational flow of the critical operations of food production system
(Source: Thi, Kumarand Lin, 2015, pp-225)
4.0 Lean approach utilized in the production system to reduce failings
The primary purpose of the lean approach is to help people in the production of food
items to make improvements in business performance. Lean approach is used in McDonald’s
for increasing business efficiency, productivity as well as morale of the employee. The
primary objective of this lean approach is to achieve higher economic growth. It requires long
lead times and variability with various reasons as well as products. In the packaging lines, the

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processes are being streamlined. In McDonald’s, the operation manager is responsible for
daily coordination, improvement as well as an implementation of the food manufacturing
processes, supervising the production, development, controlling of quality besides
maintenance. The manager handles the customer's complaints, works with staffs to ensure
that the customers are getting enjoyable experiences and works the floor at mealtime to
interact with the customers. They identified to reduce the number of employees on the
production line and use them in the factory. Reduction of waste is applicable in the handling
of food and amount of time required over various production of food on same line (Kibler et
al. 2018). The CEO of the company identified elimination of the wastes which is considered
as the most effective way to increase in organizational profitability and business efficiency
(Martin-Rios et al. 2018). Following are the lean approaches which are used to reduce
failings in the operations such as:
1) Quality control
2) Production levelling
3) Proper inventory control
4) Reduction of defects in the system
After analysing the entire current food production system of McDonald's, it is
determined that the current system is wasteful as it is consumed by the Operation Manager
and managed the problems by use of lean approaches. McDonald’s has continued its position
in the marketplace by adopting of following lean approaches.
Quality control: The operation manager should improve the quality of the food items
as it helps to maintain customer services (Pham et al. 2015). The manager can check for the
hygiene of the food products from which the food items are made up. They can also serve a
nutritious, higher quality of food products like fruits besides vegetables. McDonald's started a
feedback procedure where they succeed to take feedback from the customers to improve the
quality of food as well as food services. They also tried to provide solutions against health
issues among kids(Cotrim, Leal and Filho, 2017).McDonald's made changes in its Happy
Meal Menu Thursday, as part of their plan to provide healthier food options for the children
so that they can get fresh fruits and organic drinks. The company started to include apple
slices in each kid's meals. The chain also added another squeezable option yogurt consisted of
45 calories with 25% less sugar as compared to yogurt options geared for the kids.

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Waiting time: Usage of modern technology can reduce the waiting time of the
customers. The computer system can communicate the order placed by the customers to the
production staffs as soon they have placed the order (Ma, Yin and Liu, 2017). Modern
cooking equipment's plus skilled workforces prepare the food in less time, and therefore the
processing of the order takes very few minutes to be ready. Mobile ordering application is
next to food technology which can make the food production process more efficient.
Proper inventory control: As per the lean manufacturing principles, McDonald's is
getting free of the inventory as it gains opportunity cost. The organization is always meet
with their customer's demands, but there is also wastage of food items. By applying inventory
management principles, it is required to access raw materials used for producing food. Just-
in-time is required to reduce inventory issues as well as develop the production of food and
reduce quality defects in the food equipment’s (Cotrim, Leal and Filho, 2017). It has a stock
control system which helps to manage the process and eliminate the wastage caused due to
overstocking.
Reduction of defects in the system: There are some key improvements in the
production process of food. The best way is to create the role of Operation Manager and
make their position instrumental in the food production line. There is high number of quality
issues of food due to non-hygienic food supply and agricultural issues. The quality standards
are maintained for producing food so that there are no health-related issues.
Figure 3: Lean production
Leanproduction

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(Source: Amorim et al. 2016, pp-803)
Lean manufacturing aims to help McDonald's to make improvements in its
operational performance. Improved performance of operations lead to lower the cost of
business, and it retains and invests the business on to the customers to gain extra sales
volume due to lower in the price of business (Kato et al. 2015). When there is an increase in
the volume of production, then it becomes a huge profit option for McDonald. The business
will buy more products and materials to prepare the food items so that they can meet with
their customer’s demands in addition to their needs. Based on the food quality, the reputation
of a company is judged.
5.0 Three findings discussed the extent to which the lean approach may
assist the production system
This section will help to identify three key findings which can argue the level to
which the lean approach selected in previous section can help out the food production system
with supporting the operational performance processes. The primary objective of McDonald's
is to deliver best quality of food items and provide better customer services by considering
the added value in the current food production process (Davis et al. 2018). By addressing the
following three findings, the capacity of Operation Manager is analyzed to focus on the
strategic activities based on quality delivery and better customer services.
Quality control: By applying quality management principles, the goal of this
approach is to reduce the cost, quality maintenance and better customer services (Girotto,
Alibardi and Cossu 2015). The lean tool is useful to optimize the manufacturing as well as
food production. Over past years, the restaurant has started a journey to improve the quality
of food through the menu by using fresh food items in place of frozen foods and removing
artificial ingredients from the classic burgers. Cheeseburgers were removed from the food
option, and bottle water was added as beverage options, while chocolate milk is reformulated
to reduce extra sugars (Stevenson, 2009). Therefore, 100% of happy meal combinations are
offered menu boards of 600 calories or less than that.
Proper inventory control: By applying the inventory management principles to an
ongoing food production process of McDonald's, it will be possible to assist the food
production system with aligning of operational performance measures (Holweget al. 2018).
The lean approach helps to get better control in an inventory of McDonald which is a result to
yield less waste. It results to achieve higher profit margins for the business organization